H OW TO T RACK E MPLOYEES ’ S ALARIES AND B ENEFITS U NDER THE N EW EDGAR MIKE BENDER, ESQ. BRUSTEIN & MANASEVIT, PLLC FALL FORUM 2015

 Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed  How staff demonstrate allocability  If employee paid with federal funds, then must show that the employee worked on that specific federal program cost objective (p. 132) 2 DOCUMENTATION FOR PERSONNEL EXPENSES (i) (p. 139) Brustein & Manasevit, PLLC © All rights reserved.

 Must be maintained for all employees whose salaries are:  Paid in whole or in part with federal funds  Used to meet a match/cost share requirement  NOT contractors 3 WHO MUST PARTICIPATE? (i)(1) AND (i)(4) (p ) Brustein & Manasevit, PLLC © All rights reserved.

Semi-Annual Certifications  If an employee works on a single cost objective:  After-the-fact  Account for the total activity  Signed by employee or supervisor  Every six months (at least twice a year) Personnel Activity Reports (PARs)  If an employee works on multiple cost objectives:  After-the-fact  Account for total activity  Signed by employee  Prepared at least monthly and coincide with one or more pay periods 4 T HE P RIOR A-87 R ULE (SEA S AND LEA S ) Brustein & Manasevit, PLLC © All rights reserved.

Plan Confirmation  Budgeted allocations for professional/professorial staff  Updated to reflect any significant changes in actual work After-the-Fact Activity Reports  Professional/Professorial staff keep records every six months  All other employees keep monthly records  Signed by employee, principal investigator, or responsible official using suitable means of verification  Must reflect activity applicable to each sponsored agreement and to each category needed to identify F&A costs 5 T HE P RIOR A-21 R ULE (I NSTITUTIONS OF H IGHER E D.)  Variety of records kept in combination at least monthly Multiple Confirmation Records Brustein & Manasevit, PLLC © All rights reserved.

 After the fact  Account for total activity  Signed by employee or supervisor with firsthand knowledge  Prepared at least monthly and coincide with one or more pay periods 6 T HE P RIOR A-122 R ULE (N ON - PROFIT O RGANIZATIONS ) Personnel Activity Reports Brustein & Manasevit, PLLC © All rights reserved.

 These records MUST:  Be supported by a system of internal controls which provides reasonable assurance charges are accurate, allowable, and properly allocated  Be incorporated into official records  Reasonably reflect total activity for which employee is compensated  Percentages may be used for distribution of total activities  Not to exceed 100% 7 PART 200 STANDARDS (i)(1) (p ) Brustein & Manasevit, PLLC © All rights reserved.

Encompass all activities (federal and non- federal) Comply with established accounting policies and practices Support distribution among specific activities or cost objectives 8 PART 200 STANDARDS (i)(1) (p ) Brustein & Manasevit, PLLC © All rights reserved.

 Budget estimates alone do not qualify as support for charges to Federal awards  May be used for interim accounting purposes if:  Produces reasonable approximations  Significant changes to the corresponding work activity are identified in a timely manner  Internal controls in place to review after-the-fact interim charges based on budget estimates 9 USE OF BUDGET ESTIMATES (i)(1)(viii) (p. 142) Brustein & Manasevit, PLLC © All rights reserved.

There has always been confusion regarding cost objectives  What is a cost objective?  Program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc.  Categories include: set-aside, caps, etc.  Examples: schoolwide, administration, program costs, parental involvement, professional development 10 PART 200 COST OBJECTIVES (P. 89) Brustein & Manasevit, PLLC © All rights reserved.

 Do you track funding source or track what employee is working on?  For example, Project Director of 21 st CCLC after school program working 100% of her time on the 21 st CCLC program but is paid 75% with 21 st CCLC funds and 25% with State funds. Unclear guidance in the past from various Federal agencies. 11 NEED FOR CLARIFICATION Brustein & Manasevit, PLLC © All rights reserved.

12 HELP! Time and Effort Guidance by OCFO!!! (p. 231) /guid/gposbul/time-and-effort- reporting.html Brustein & Manasevit, PLLC © All rights reserved.

 It is possible to work on a single cost objective even if an employee works on more than one Federal award or on a Federal award and a non-Federal award.  The key to determining whether it is a single cost objective is whether the employee’s salary and wages can be supported in full from each of the Federal awards on which the employee is working or from the Federal award alone if the employee’s salary is also paid with non-Federal funds. 13 OCFO GUIDANCE Brustein & Manasevit, PLLC © All rights reserved.

 “It is recognized that teaching, research, service, and administration are often inextricably intermingled in an academic setting. When recording salaries and wages charged to Federal awards for IHEs, a precise assessment of factors that contribute to costs is therefore not always feasible, nor is it expected.” 14 FOCUS ON IHE S (i)(1)(x) (p. 142) Brustein & Manasevit, PLLC © All rights reserved.

 States, local governments and Indian tribes encouraged to adopt “substitute systems” if approved by cognizant agency for indirect cost.  Still acceptable to allocate sampled employees’ supervisors, clerical and support staffs, based on the result of the sampled employees 15 SUBSTITUTE SYSTEMS (i)(5) (p. 142) Brustein & Manasevit, PLLC © All rights reserved.

 Cognizant agencies for indirect costs are encouraged to accept alternative proposals based on outcomes and milestones for program performance.  These plans are acceptable as alternatives to the UGG’s standards. 16 ALTERNATIVE PROPOSALS (i)(6) (p. 142) Brustein & Manasevit, PLLC © All rights reserved.

 A non-Federal entity may submit performance plans that incorporate funds from multiple Federal awards and account for their combined use based on performance-based metrics, if approved.  Must submit a request for a waiver that includes certain information, including the method of charging costs. 17 BLENDED FUNDING (i)(7) (p. 142) Brustein & Manasevit, PLLC © All rights reserved.

 NEW: All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. 18 RECONCILIATION (i)(1)(viii)(C) (p. 142) Brustein & Manasevit, PLLC © All rights reserved.

 NEW: If records meet the standards, the non- federal entity will not be required to provide additional support or documentation for the work performed.  DOL regulations for Fair Labor Standards Act must still be met (i.e., charges must be supported by records indicating the total number of hours worked each day) 19 COMPLIANCE (i)(2) (p. 142) Brustein & Manasevit, PLLC © All rights reserved.

 BUT, if records of grantee do not meet new standards, awarding agency may require PARs, including prescribed certifications or equivalent documentation that support the records as required by Part 200.  However, PARs are not defined!!! 20 NON-COMPLIANCE (i)(8) (p. 142) Brustein & Manasevit, PLLC © All rights reserved.

21 NOW WHAT??? Brustein & Manasevit, PLLC © All rights reserved.

 Strong internal controls are key!  No matter what system you use, must have strong, reliable internal controls  “Be supported by a system of internal controls which provides reasonable assurance charges are accurate, allowable, and properly allocated.” 22 BASELINE FOR ALL TIME AND EFFORT SYSTEMS Brustein & Manasevit, PLLC © All rights reserved.

By focusing more on internal controls, the rule “mitigates the risk that a non-Federal entity… will focus on prescribed procedures...which alone may be ineffective in assuring full accountability.”  Uncovering weaknesses in internal controls or instances of fraud is goal. Not audit findings. 23 COFAR COMMENTS ON NEW RULE Brustein & Manasevit, PLLC © All rights reserved.

 Safe Harbor of the Prior Circulars  Includes flexibility described by the OCFO guidance  Explicit Regulatory Flexibility  Substitute Systems  Alternative Proposals – Outcomes and Performance  Alternative Proposals – Blended Funding  Examples of Blended Funding: Schoolwide Funding Consolidation and ESEA Consolidated Admin 24 DEFINITE OPTIONS Brustein & Manasevit, PLLC © All rights reserved.

 Modified Methods (based on Prior Circulars)  Non-profits using semi-annual certifications for single cost objective employees  PARs signed by supervisors  Extended Certification Periods  Annual certifications for single cost objectives; and  Also applies to professional and professorial staff at IHEs  Quarterly (or Every Other Month) PARs  Quarterly certifications for all other employees at IHEs  Electronic Signatures/Click The Box 25 MOST LIKELY Brustein & Manasevit, PLLC © All rights reserved.

 Allocating Effort on Basis Other than Time  Example – An accountant’s salary could be allocated based on the number of transactions processed under each funding source  If the work performed by an employee benefits multiple cost objectives in a way that is inextricably intermingled, the non-federal entity may determine an appropriate method to allocate using any reasonable basis (d) (p. 143)  Also, ED 1992 Guidance (but unclear if still applies)  Remember, strong internal controls are a must! 26 MOST LIKELY Brustein & Manasevit, PLLC © All rights reserved.

 Annual PARs?  New Ideas Moving Forward ….  Districtwide Activities as single cost objective??  Statewide Activities as single cost objective??  Using Job Descriptions??  State-level blended funding??  Any other ideas??? 27 UNSURE (UNLIKELY??) Brustein & Manasevit, PLLC © All rights reserved.

Disclaimer This presentation is intended solely to provide general information and does not constitute legal advice or a legal service. This presentation does not create a client-lawyer relationship with Brustein & Manasevit, PLLC and, therefore, carries none of the protections under the D.C. Rules of Professional Conduct. Attendance at this presentation, a later review of any printed or electronic materials, or any follow-up questions or communications arising out of this presentation with any attorney at Brustein & Manasevit, PLLC does not create an attorney-client relationship with Brustein & Manasevit, PLLC. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances. 28 Brustein & Manasevit, PLLC © All rights reserved.