1. 2012 National Extension and Research Administrative Officers’ Conference Session #20, May 22, 2012 8:30 a.m. – 9:45 a.m. Morgantown, West Virginia Time & Effort Reporting Edward Nwaba, CPA Branch Chief, Policy and Oversight Division Office of Grants and Financial Management, NIFA-USDA

2. Agenda Definitions Two Types of Effort Mandatory Committed Effort Voluntary Committed Effort Voluntary Uncommitted Effort Certification Sanctions for Improper Effort Reporting Legal Implications of Erroneous Reporting Recent Cases of Audit Disallowance Audit Red Flags Regulatory Requirements Payroll Distribution

3. Definitions Effort –Amount of time spent on a particular activity –Time spent working on a sponsored project in which salary is directly charged or contributed (cost-shared effort) –Total amount of time spent on work related activities – instruction, research, administration etc – for which the university compensates an individual

4. Two Types of Effort Mandatory committed effort – effort which is: –Required by the program as a condition of the award and –Included in the written program announcement Voluntary committed effort – effort which is: –Offered by the recipient, but not required by the sponsor Two types: Voluntary committed effort Voluntary uncommitted effort

5. Mandatory Committed Effort: Must be –Reported – required by sponsor as condition of award –quantified and included in the proposed budget –Documented in the financial system and auditable Stated in a written announcement, guidance or policy statement

6. Must be reported. Not required by the sponsor, but is offered by the university Once committed in the proposal it must be treated in the same manner as mandatory effort i.e., –must be reported and auditable –Must be quantified and included in the proposed budget –Must be documented in the university’s financial system In practice - generally discouraged by institutional policy, but may be justified in certain situations: –Sponsor may “strongly encourage” institutional support / partnership –PIs perceived Increased prospect for an acceptable proposal –Joint mission between institution and sponsor (AES and commodity groups) Voluntary Committed Effort:

7. Effort above and beyond what is committed and budgeted for, in the award documents (donated effort) Treated differently from committed effort: –Does not need to be documented, tracked or certified –Should not be part of the organized research base –Excluded from effort reporting requirements in OMB A-21 section J.8 NOTE: The total number of effort reported must always equal 100% - regardless of the time assigned to the appointment. Voluntary Uncommitted Effort:

8. Must be certified within 30 days of being issued Important that effort be certified for two reasons: –University external auditors review effort reports for compliance with effort reporting requirements –Sponsoring agencies – fed. and state may perform audits at any time to determine whether the effort reports are: Timely Accurate Complete Effort Reports – Certification:

9. key employees paid from federal funds are required to certify their own effort The certifier must have first-hand knowledge of the work performed The certifier must have the ability to estimate the effort expended on each sponsored project Effort report for other employees must be certified by a responsible official or PI PI should NOT certify the effort report of other faculty members, even if the faculty member worked on one or more of the PI’s projects – must be certified by a person with first-hand knowledge of all the activities of the person for whom certification is made Supervisory signatures are required when: -Employee assigned to work in a lab in which multiple projects are conducted -Employee assigned to multiple labs that conduct multiple projects Employee with split appointment in two or more units – the responsible official or PI for each unit should certify the effort for their project Responsibility - Who can certify effort reports?

10. Sanctions for Improper Effort Reporting Violation of award terms and conditions – sponsor can take one or more enforcement actions - Place special conditions on awards – require closer monitoring Preclude grantee from obtaining future awards for a specified period Take actions designed to prevent future noncompliance – closer monitoring Share sanctions info with other awarding agencies – includes debarment University’s reputation may suffer, resulting in loss of confidence to handle federal funds – public info

11. Legal Implications of Erroneous/ Fraudulent Reporting: Violation of federal False Claims Act (31 U.S.C. sec 3729 et seq.) Inaccurate or fraudulent reports may give rise to – –False Claims Act Lawsuit –Subject to civil penalties between $5,000 to $10,000 for each violation –Criminal sanctions if willful violations Imprisonment up to 5 years and fines of up to $25,000 Restitution up to three times the damages sustained to the federal government Individual PIs and the university are liable when involved in improper effort reports - Sanctions may include – Payment of costly settlements Debarment from participating in federally funded research

12. Recent Cases of Audit Disallowances: Johns Hopkins University - paid $2.6 million – settle a number of overbilling issues on research grants: –Faculty effort overstated on NIH grants –Fringe benefits overstated; cost share requirements not met Harvard University/Affiliated Hospital - paid $3.3 million – Govt. billed for salaries and exp, unrelated to federal grants –Paid PI’s/scientists who did not work on the grant and/or meet citizenship requirements –Misused federal research and training grants –Equipment and supplies not used on grant projects Northwestern University - paid $5.5 million – settle overbilling issues – for inflated billings; overstated faculty base salaries in grant applications –salaries and supplies that did not cover research projects

13. Recent Cases of Audit Disallowances Contd.: Florida Int’l University - paid $11.5 million – settle a number of overbilling issues and violations over a ten year period resulting from: –Improper billing for scientists’ time, travel admin exp. From 1993-2003 University of Connecticut - paid $2.5 million – –Settle whistleblower false claims issues –Overstated expenses on grants / salary cap issues –Payments for items not covered on federal grants –Cost share issues University of Alabama at Birmingham - paid $3.4 million – settle – Double billing to medicare and federal research projects –Salaries for employees not associated with grant research –Now required to adhere to new compliance programs led by a Compliance Officer for 3 years New code of conduct for employees OIG shall access to all records to monitor compliance

14. Audit Red Flags: Late, unsigned or missing effort reports Effort reports that appear to have been signed in batches – stamp signatures Retroactive adjustments or retroactive cost transfers –Not supported by letter of justification –Not made in a timely manner – more than 90 days after the fact “Corrected” effort reports and unusually large number of payroll cost transfers “Corrected” effort reports near the end of a contract to capture unused funds Very small effort percentages on many grants Research effort certifications that appear not to include accounting for actual administrative and/or teaching effort as part of total effort

15. Regulatory Requirements: 2 CFR Part 220 (OMB Circular A-21) – Cost Principles for Colleges, Univ. and Institutions of Higher Education: Components of effort reporting system: Effort reporting must be part of the official records of the university Timesheets – must document time worked and the distribution of activities to funding sources The effort reporting system should address the following: –Description of timesheet or personnel activity report and how to complete it –Policy for vacation, sick, and leave time accruals –Policy for salary increases and bonuses (if applicable) – Process for approval of timesheets –How time and effort reporting system validates payroll –How changes in time allocation are managed and communicated to employees and documented at the university –Retention of records – depending on funding Must produce equitable distribution of charges for all employee activities – payroll distribution system

16. Criteria for Reporting Effort – Payroll Distribution: Must be part of the official records of the university Reflect the activity for which the employee is compensated by the university Cover both sponsored and all other activities on an integral basis – but may include use of subsidiary records Total effort for all projects must equal 100% during the period per individual researcher – Research, Teaching, Admin. etc –Numerator is the researcher’s time/effort on the project –Denominator is both sponsored and all other activities. i.e., must include Research Teaching Administration, etc Must reflect after-the-fact confirmation or determination: –Ensure costs distributed represent actual costs –Estimates can be used initially – significant changes must be later identified, adjusted and entered into the system –Must provide for independent internal evaluations

17. Acceptable Methods of Payroll Distribution / Effort Reporting: Two types Plan confirmation – under this method: –Salaries and wages are initially distributed based upon budgeted percentages –Estimates are later updated to reflect actual or significant changes in work distribution –At least ANNUALLY a statement will be signed by the employee or responsible official stating: That the work was performed and Charges are reasonable in relation to work performed After-the-fact Activity Reports – under this method: –Reports must reflect after-the-fact payroll distribution activity of employees. –For professorial and professional staff - report prepared at least each academic term, but no less frequently than six months –For other employees - prepared at least monthly and will coincide with one or more pay periods –Must be signed by employee and/or responsible official

18. Acceptable Methods of Payroll Distribution / Effort Reporting: Two types Contd. General Note: Special Exception: Federal Regulations allow a special exception of the effort reporting requirements in special circumstance and on grant specific basis: Smith Lever 3(b) and (c) Extension programs –Single funded employees (if 100% extension) – effort reporting not required. – if single funded and one activity /project ONLY –In practice recommended to follow one of the two acceptable methods Plan confirmation OR After-the-fact activity report –Consistency desired for grant funded employees - since system is incorporated into the official record of the university -(See sample time sheet)

19. Sample Time Sheet

20. Acceptable Methods of Payroll Distribution /Effort Reporting: 2 CFR Part 230 (OMB A-122) – Non-Profits Must use after-the-fact confirmation for all employees – budget estimates not allowable Salaries and wages must be supported by timesheets or payroll activity reports Timesheets must be maintained for all employees charged in whole or in part to awards The timesheet must meet the following standards: –Must use after-the-fact determination for all employees – budget estimates not allowable –Account for total activity for each employee –Signed by the employee Or supervisory official having first-hand knowledge of all activity of the employee –Prepared at least monthly and must coincide with one or more pay periods

21. Acceptable methods; 2 CFR Part 225 (OMB A-87) - States, Local Governments, Indian Tribal Governments) Similar to colleges and universities - Single funded employees must be supported by periodic certifications – –Certification should be prepared at least semi-annually –must be signed by individual employee Or responsible supervisory official Split funded employees - must be supported by personnel activity reports that meet the following standards: –Reflect an after-the-fact determination of actual activity for each employee –Account for total activity of the employee –Prepared at least monthly and must coincide with one or more pay periods –Signed by the employee –Budget estimates are not allowable but may be used for interim accounting purposes, provided that: They produce a reasonable approximation of actual activity They are revised at least quarterly if necessary to reflect actual

22. Acceptable Methods: (OMB A-110) – General Administrative Requirements, Hospitals Similar to other non-profits - Non-professional staff must use: –After-the-fact confirmation - charges for salaries and wages must be supported by daily time and attendance AND payroll distribution records Professional staff may complete: –At least monthly estimates of payroll distribution in the absence of actual time records –Estimates must be prepared by individual employee Or responsible individual having first-hand knowledge of the services performed –Budget estimates – must later be revised to reflect actual

23. Thank you