Effort Reporting and the UG Leading Excellence in Research Costing Practices Conference October , 2015

2 Topics  How does the implementation of the Uniform Guidance impact my institution  As an institution do you need to change or upgrade your current effort reporting system  Changes to Certification Frequency  New Certification Methodologies (Project Certification, Payroll Certification, FDP Pilot)  Policy Updates

3 Effort Reporting Basics  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.

4 Effort Reporting Life Cycle

5 The Basic Idea In a grant proposal, we offer effort At award time, we make a commitment of effort Throughout the project, we charge salary to the sponsor 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?

6 What Changed with the UG? 1. Requirements and standards have been streamlined across most entities that receive Federal awards. 2. Specific frequency and methodology requirements have been eliminated. 3. New standards for documentation of personnel expenses have been defined.

7 What are the New Standards of Documentation? Charges to Federal awards must be based on records that accurately reflect the work performed (2 C.F.R.§ (i)(1)). In addition, the records must:  Be supported by a system of internal contro l that provides reasonable assurance about the accuracy, allowability, and proper allocation of the charges  Be incorporated into the entity’s official records  Reflect the total activity for which the employee is compensated by the entity, not exceeding 100% of compensated activities, or Institutional Base Salary

8 What are the New Standards of Documentation? Charges to Federal awards must be based on records that accurately reflect the work performed (2 C.F.R.§ (i)(1)). In addition, the records must:  Encompass both federally assisted and all other activities compensated by the institution on an integrated basis, i.e. reflect 100% of the employee’s activities  Comply with the entity’s established accounting policies and practices  Support the distribution of the employee’s salary and wages among specific activities or cost objectives if the employee works on multiple activities

9 Additional Guidance  Phrases “suitable means of verification” and “first hand knowledge” are no longer in the regulations.  Budget estimates continue to be considered insufficient support for charges  Charges for non-exempt personnel must be supported by records indicating the total hours worked each day.  Charges for cost sharing or matching requirements must be supported in the same manner as direct charges for personal compensation.  The new guidance also encourages cognizant agencies to consider and approve alternatives to traditional effort reporting, such as milestone- or performance-based approaches for compensation.  These alternatives must be approved by the cognizant agency in advance

10 What are Other Institutions Doing?  Confirm effort reports on a schedule that works for your institution.  Reflect 100% of the individual’s activities, including IBS  Determine exactly who reviews and confirms effort statements  Audit trail capabilities and management reports supporting internal controls

11 Quiz Which of the following have specific federal mandates? Which are Institutional Options? Mandated? 1. Must be certified by individual with first-hand knowledge 2. Medium of certifying/documentation (paper vs. electronic) 3. Exact frequency of effort certification/review/documentation 4. Report on each individual federal awardYES 5. Results must be incorporated into institution’s official recordsYES 6. Level of detail regarding non-sponsored effort categories 7. Records must be supported by system of internal controlsYES 8. Based on institutional base salaryYES

12 Audits and Settlements

13 Contact Information Jennifer Miles; Director, Sponsored Programs Accounting University of Kentucky; Marty Bergerson; Manager, Huron Consulting Group