Effort Reporting Understanding the Effort Certification Process
Why Do We Have to Do Effort Certifications? • OMB Circular A-21 • State of Arkansas Series 22 report • DHHS Indirect Cost Proposal • Other Federal, State, and Accreditation reports
OMB Circular A-21 • Section J. General provisions for selected items of cost • Item #10 Compensation for personal services
OMB A-21 Section J.10 General Rule • Compensation for personal services (salaries, wages, and fringe benefits) paid for services of employees rendered during the period of performance under sponsored agreements… are allowable to the extent that the total compensation conforms to established policies of the institution, consistently applied, and provided that the charges for work performed directly on the sponsored agreements are determined… and are supported by an acceptable method of payroll distribution.
What? • Salaries, wages, and fringe benefits are allowable expenses on a grant, only if you have a system in place that supports an acceptable method of distributing payroll expenses to a grant. • The government recognizes 3 acceptable methods of payroll distribution.
3 Methods of Payroll Distribution • Plan-Confirmation • After-the-Fact Activity Records • Multiple Confirmation Records • The effort reporting system at UAMS meets the requirements of the Plan-Confirmation method.
What is Plan-Confirmation • The plan-confirmation method of payroll distribution mandates that a grant is charged personnel costs for an individual, based on a plan, and then the individual certifies (confirms) that the amount charged is correct. • This is what our payroll and effort certification systems do.
UAMS Effort Definitions • 100% Effort – Total University-compensated effort. Includes teaching, research, public service, administrative, and other University-related activities. 100% effort does not equate to any set number of hours. Expense associated with effort is based on institutional base salary. • Institutional Base Salary – The guaranteed salary paid to the employee in 1/12th increments for the 12 months of the fiscal year.
How does the effort system support the expenses on the grant? • Every employee has an institutional base salary that supports 100% of their University compensated time. • The effort reporting system identifies the portion of that 100% that was contributed to a grant. • That portion of time, multiplied by the institutional base salary, determines the allowable charge to the grant.
How does that work? • Employee John Smith has an annual salary of $100,000. His salary distribution shows that 25% of his time should be assigned to grant G1-10001-01.
Allowable Cost Example • Therefore, the payroll system will have charged $12,500 to the grant for the six month period. Inst. Base Salary (6 mos) $50,000 % effort .25 Amount to charge grant $12,500
Allowable Cost Example (cont.) • However, if John Smith certifies on his effort reporting form that he only worked 15% on the grant, then the payroll charges to the grant cannot be supported.
Allowable Cost Example (cont.) • Amount charged to grant - $12,500 • Effort contributed by John Smith: Institutional Base Salary $50,000 % effort spent on grant .15 Allowable charges to grant $ 7,500
Allowable Cost Example (cont.) • The grant was charged $12,500 for the six month period, however, there is only supporting documentation for $7,500. • The institution will have to make payroll corrections to reduce the charges on the grant.
What if the effort changes during the six month period? • Our effort certification forms are based on a six month reporting period. If the percentage of effort changes during the six months, the effort certification form will show an average percentage for the six month period.
Change in % example • Investigator A works on a project at 20% for January and February. On March 1, he changes his effort to 50%. For the six month reporting period ending in June, his effort to certify will be 40%. (Jan+Feb+Mar+Apr+May+Jun) (.20+.20+.50+.50+.50+.50)/6 months 2.40/6 = .40
Change in % example (cont.) • To show how this works with the allowability of the expense, let’s assume Investigator A’s annual salary is $120,000. • For January & February the grant was charged $2,000 each month. ($120,000/12)*.20 • For March-June the grant was charged $5,000 each month. ($120,000/12)*.50
Change in % example (cont.) • The total expenses charged to the project for the six month period were $24,000. • The certification period is for six months, (1/2 of a year) so the six month institutional base salary calculation is $120,000*1/2 = $60,000. • $24,000 / $60,000 = .40.