Effort Reporting and Certification on Sponsored Programs What is it? Why is it? Do I have to do it?

What is it? Effort reporting is the process by which the salary charged to a sponsored project is reviewed after-the-fact to assure that the salary charged was reasonable in relation to the effort expended on that project. Effective December 26, 2014, the OMB Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (the Uniform Guidance) regulates effort reporting requirements for recipients of federal funding. Like Circular A-21, the Uniform Guidance requires an after-the-fact review of charges made to Federal awards that were based on budget estimates. However, the new rules are not prescriptive, but instead focus on internal controls.

Effort Effort is the portion of time spent on a given professional activity and expressed as a percentage of the total professional activity for which an individual is employed by CSU. Important points: The government recognizes that it is a “reasonable estimate” Must be performed with “suitable means of verification” Total effort must equal 100% Effort is not based on a standard (e.g., 40-hour) work week, instead it is based on whatever time is worked “100% Effort” considers all professional activities related to the individual’s CSU appointment (teaching, research, service) Effort does not include outside activities (e.g., external consulting)

The Context of Effort Reporting Appointing Faculty & Staff Preparing the Proposal Budget Charging Salary Certifying Effort Employment terms are established. Effort is proposed; a commitment is made to the sponsor. Salary is charged (or cost shared), consistent with activity. Adjustments may be made, timely after-the-fact. Effort is attested to, after activity has occurred (adjustments to salary distribution may be made if effort does not equal salary %)

In a Nutshell In a grant proposal, we PROPOSE effort At award time, we make a COMMITMENT of effort by staffing on a project Throughout the project, we usually CHARGE SALARY to the sponsor which represents the effort COMMITMENT If we do NOT charge salary, we must show the effort in another way Periodically, sponsors want to know: Have we devoted enough effort to justify the salary charges? Even in cases where we are not charging salary to the sponsor, have we fulfilled our commitments?

PI – Principal Investigator The Principal Investigator is the steward of the sponsored project and accompanying funds. The University is legally responsible to the sponsor, but the PI is held accountable for the proper fiscal management and conduct of the project. PI responsibilities include: Scientific performance of the work related to the project. Management of the project within funding limitations and in compliance with Federal regulations, sponsor requirements, and institutional policy. This includes effort certification for all personnel on the project. Sponsor notification when significant conditions related to the project change. Responsibility for the day-to-day management of project finances may be delegated to administrative or other staff. However, accountability for compliance with Federal regulations, sponsor requirements, and institutional policy, ultimately rests with the PI.

False Claims Act Those who knowingly submit, or cause another person or entity to submit, false claims for payment of government funds are liable for three times the government’s damages plus civil penalties of $5,500 to $11,000 per false claim.

The Effort Ecosystem

Ecosystem: IBS IBS – Institutional Base Salary IBS and Effort Institutional base salary (IBS) is the annual compensation paid by the University for all professional responsibilities of the position, including research, instruction, administration, service, or other institutional activities. IBS is the annual salary of the employee’s base appointment, plus any additional supplements for recurring, long-term activities (e.g., department chair). IBS excludes fringe benefits, reimbursed expenses, and supplemental compensation for additional work. IBS cannot be increased as a result of replacing institutional salary funds with sponsored project funds. IBS and Effort IBS should be used when proposing, charging, and cost sharing salaries to sponsored projects.

Ecosystem: Effort Commitments Proposal budget preparation Sponsor salary caps Mandatory cost sharing Voluntary committed cost sharing Financial reporting Progress reporting Project financial projections

Ecosystem: Cost Sharing Payroll allocations Sponsor approvals Institutional approvals Proving it all

Ecosystem: Salary Cost Transfers (PPDAs) Timing is appropriate (before effort card signed) Determination of appropriate funding sources Robust justifications for transfers Even MORE robust justifications for late transfers Not acceptable: ‘To correct an error – should have been on another account’ ‘PI has money left in this account and wants to spend it out’

PPDA Justifications Must include documentation that clearly shows: How the expense directly benefits the receiving account How the expense is allowable The reason the expense was charged incorrectly to the first account That any systematic reasons which might cause this problem to be repeated have been addressed The reason for any delay in the timely processing of the transfer Large transfers, or transfers within the last 90 days of the project, or transfers that do not meet the timeliness criteria receive additional review and need even more justification

Tips for Writing the Justification A good justification will allow anyone reviewing the cost transfer to understand how the expense benefits the receiving account. It should be easily understood by anyone reviewing the journal, and provide enough detail to inform approvers and auditors about the action taken. Think, "if I leave, will an auditor be able to understand this two years from now?" it should answer: who, what, where, when, and why.  Who: the person, organization, or department name(s) that caused or played a role in the journal What: what events or circumstances are causing the journal When: the month of occurrence or the key date related to the cause Where: the location of the event or occurrence (if it is significant) Why: why a change is required The trick to writing a complete justification is to try to answer all possible questions. It is important to state explicitly how the project which will pay this expense benefits from the transfer. Include a statement like: “The direct benefit to Project XXX of this expense was __.’ Indicate whether the sponsor approved the transaction. If you wonder if you have included enough information, you probably haven't. Do not use abbreviations or acronyms in a justification. Above all, remember, you cannot transfer expenses to a different account just because it has money!

Ecosystem: Certification Statements Reasonable estimate of time spent Period of performance considered Certification period observed Certification report verified by account manager (PI) Effort funded by sponsor and committed cost share shown Voluntary uncommitted cost share NOT shown Changes made if needed before certification Sponsored and non-sponsored effort shown Person with suitable means of verifying signs

Ecosystem: Service Center Accounts Personnel billed to proper accounts Personnel billed at proper rates 5-3 accounts billed at least bi-monthly Business plan reviewed and updated at least bi-annually

Top 10 Things a P.I. (and you) Should Know about Effort Effort is your work on a project, whether the sponsor pays your salary or not. When you write yourself into a grant proposal, you are committing your effort to the sponsor. If you reduce your effort, paid or unpaid, on a federal grant by 25%, you must have agency approval. This is cumulative over the life of the project. If you reduce your paid effort, you may choose to document cost-sharing so that the total effort does not decrease.

Top 10 Things a P.I. (and you) Should Know about Effort Many activities cannot be charged to a federally sponsored project. For example, the time you spend on these activities cannot be charged: Writing a proposal Serving on an IRB, IACUC or other research committee Serving on a departmental or university service committee

Top 10 Things a P.I. (and you) Should Know about Effort If you work on a federally sponsored project, you must currently certify your effort. Certifying effort is not the same as certifying payroll. Certification must reasonably reflect all the effort for all the activities that are covered by your University compensation.

Top 10 Things a P.I. (and you) Should Know about Effort Effort is not based on a 40-hour work week. It’s not based on hours at all. Effort must be certified by someone with suitable means of verifying that the work was performed. Auditors look for indications that certification was based on factors other than actual, justifiable effort.

Effort Certification Effort reports may pre-populate total percentages of payroll distributions to be used as a starting point, since it is often assumed that payroll distribution is monitored and revised based on effort expended. However, these percentages may need to be revised during certification based on actual expended effort. This after-the-fact confirmation is necessary for compliant effort reporting

How Does it Work at CSU? Quarterly Certification reports are run in Oracle by Payroll approximately 1 month after each quarter end Oracle feeds data to Vista reports Email sent to effort coordinators via Effort Certification Listserv Reports pulled from Vista and distributed (either electronically or paper) If report is correct, Certifier signs and returns to Payroll If report is not correct, department updates labor distribution in Oracle, creates PPDA and routes for signatures HR updates process in Oracle Quarterly report initiates recertification process

The Certification Process Follows a Schedule The ‘grace period’ is to allow for any PPDAs prior to running the certification process The departments then have around 30 days to return the forms. Recertifications are not available in Vista and must be printed by Payroll manually

Regular Certification Process

Re-Certification Process

What Internal Audit says: In a memo to a department that asked: “Account review and reconciliation are required by CSU Financial Rule 1: 1.9.6. Review and Reconciliation: Routine examination and reconciliation of transaction records to official University records is required to verify the accuracy of the records, the appropriateness of the transactions, and their compliance with policy; I agree that written guidance is not easily available as to the specific reports to use (or procedures to use) to comply with the Rule.  Keep in mind that the goal of financial reconciliation is to assure that official University records are accurate.  Your department may have specific expectations for the reconciliation and the documentation of it.  From the standpoint of Internal Audit, we look for a documented procedure that achieves the objective of ensuring accuracy, and timely completion and approval of the reconciliations.”

What it means….

MIP Staffing Sheet

Questions to consider What is the Institutional Base Salary (IBS)? Are we capturing what we need to in this report? Are we capturing things that don’t need to be in the report? How do we know what the IBS is? How much effort was committed in the awards? Can we tell from this report how much effort is being committed? Can we tell what was originally committed? Do we know if agency approval was obtained? Is there any cost-sharing that is not showing up? Why would it matter?

Questions to consider Is any of the certifier’s payroll coming through a 22 account? How is it allocated back to the sponsored account? Why would that matter? Is there 100% total commitment/payroll on federal accounts? Can we justify 100%? What can or cannot a PI do with a 100% commitment? Who should sign the report?

Questions to consider What do you do if the effort form is incorrect?

Changes to the Uniform Guidance In the UG, new standards for documentation of personnel expenses have been defined Specific frequency and methodology requirements have been eliminated Charges to Federal awards must be based on records that accurately reflect the work performed, including: Encompass both federal and all other activities (100% of effort) Support the distribution of salary and wages among specific activities or cost objectives (for multiple grants) Comply with the institution’s accounting policies and procedures Charges for cost sharing or matching must be supported in the same manner as the direct charges

Where are we headed – short term? Ensuring that needed policies are developed or updated Developing training (like this one!) Redesigning current effort card to make more sense to the PI Examining effort reports to make sure they are capturing what is needed Determining who reviews and confirms effort statements Moving responsibility of effort reporting from Payroll to OSP Moving approval of PPDAs related to 5-3 accounts to OSP

Where are we headed – long term? Move from quarterly effort certifications to project-based verification of expenses Possibly a hybrid model whereby verification that expenses have been reviewed will be required quarterly but actual certification only 1x/year PI verifies/certifies for all employees on a project at once Changes to effort automatically trigger PPDAs Greater use of cost-share accounts and advance start accounts All PPDAs that affect sponsored projects approved by OSP

NSF Audit The NSF data analytics audit will be held to A-21 standards This audit could lead to an audit specific to time and effort NSF OIG expects 100% compliance on returned effort reports Auditors expect that they can follow effort from: IBS (Institutional Base Salary) Proposal document Awarding document PPDAs Effort Reports Other internal fiscal reports PI understanding of fiscal health of project Technical and fiscal reports

Pop quiz An Effort Report is: An accurate estimation of the effort someone devotes to their various activities based on payroll A report only required by CSU for internal checks An exact account of the time devoted to a sponsored project A real pain

Pop quiz Inaccurate effort reporting affects: The potential research opportunities for the PI The future funding for the University None of the above A and B

Pop quiz Individuals who are paid on a sponsored project are obligated to complete an effort report: True False It depends

Pop quiz Per current CSU policy, effort reports are certified: Weekly Monthly Quarterly Semester-ly Yearly

Pop quiz If you are paid in whole or in part from federal funds, a grant or sponsored project, or have part or all of your salary as cost-share: CSU requires that you certify your effort reports You are responsible for tracking and recording your hours The Federal Government mandates that your effort is tracked All of the above A and C only

Pop quiz Effort reports are based on Actual CSU payroll data Cost share only Neither of the above Both of the above

Pop quiz If I am not paid on a grant but part of my time is contributed as cost share, I have to complete an effort report: True False It depends

Pop quiz Currently, Effort Reports can be certified by: The employee The employee or the employee’s direct supervisor The employee or someone with direct knowledge of the project OSP Payroll All of the above A, B, and C

What if I have questions? For assistance with Effort Reporting, contact one of us at the moment. If we don’t know the answer, we will make one up: Diane Barrett Diane.barrett@colostate.edu Doug Leavell Doug.leavell@colostate.edu