Managing Effort: Truth or Consequences

1. 1 Managing Effort: Truth or Consequences NCURA PRA Conference July 19-21, 2010 Providence, RI

2. 2 Today�s Presenters: Patrice Carroll Associate Director, Office of Sponsored Projects, Brown University Patrick Fitzgerald Associate Dean for Research Administration, Faculty of Arts and Sciences, Harvard University Brenda Kavanaugh Assistant Director, Office of Research & Project Administration, University of Rochester

3. 3 Regulations Governing �Effort Reporting� OMB Circular A-21 Cost Principles for Educational Institutions Section J. 10: �Compensation for personal services� OASC-3 HHS Cost Principles for Hospitals �Compensation for personal services� OMB Circular A-122 Cost Principles for Non-Profit Organizations �Compensation for personal services� 

4. 4 A-21 Section J.10 �Compensation for personal services� Covers amounts paid by the institution for services rendered during the period of performance under sponsored agreements, including salaries, wages & fringe benefits Costs are allowable to the extent they conform to the established policies of the institution, are consistently applied and are determined and supported per J.10. Reliance is placed on estimates in which a �degree of tolerance� is appropriate

5. 5 A-21 Requirements After-the-fact confirmation of personnel costs charged to sponsored agreements Signed by the employee, principal investigator or responsible official(s) using suitable means of verification that the work was performed Must be incorporated into institution�s official records Reports will reasonably reflect the activities for which employees are compensated by the institution

6. 6 A-21 Requirements The institution�s effort reporting system must provide for modification of an individual's salary distribution commensurate with a significant change in the employee's work activity A-21 doesn�t define �significant� change Time is expressed in terms of percent of total activity (�effort�)�not hours Frequency of reporting varies depending upon method of certification

7. 7 A-21 Requirements Effort reporting system should be part of institution�s official records System will provide for independent internal evaluations to ensure compliance Government rationale: Labor charges are majority of direct costs of research and other (non-university) recipients of federal funds have much more stringent requirements

8. 8 A-21 Requirements Examples of Acceptable Methods for Payroll Distribution: Plan-Confirmation After-the-fact Activity Records Multiple Confirmation Records Since these are examples, we should be able to choose other methods which satisfy the General Principles in J.10.b.(1)

9. 9 A-122: Compensation for personal services Allowable when compensation (salary and benefits) is reasonable for the services rendered and conforms to the established policy of the organization consistently applied to both federal and non-federal activities Compensation must be reasonable: Compensation for federally-sponsored work is reasonable if it�s consistent with that paid for: work in the organization�s other activities Similar work in the labor markets in which the organization competes for the kind of employees

10. 10  A-122: Compensation for personal services  Support of salaries and wages: The distribution of salaries to awards must be supported by personnel activity reports Reports reflecting the distribution of each activity of each employee must be maintained for all staff members whose compensation is charged directly to awards. In addition, to support the allocation of indirect costs, such reports must also be maintained for employees whose work involves two or more functions if a distribution of compensation between functions is needed in the determination of the indirect cost rate

11. 11 OMB A-122: Compensation for Personal Services Reports must meet the following standards: Reflect an after-the-fact determination of the actual activity of each employee. Budget estimates do not qualify as support. Report must account for the total activity for which employees are compensated Must be signed by the employee, or by a responsible supervisory official having first hand knowledge of the work performed and represent a reasonable estimate of the actual work performed Must be prepared monthly Charges for nonprofessional employees must be supported by records indicating # of hours worked Salaries used as cost sharing must be supported in the same manner as wages direct-charged

12. 12 OASC-3:Compensation for Personal Services Supplemental data on time or effort required for individuals whose compensation is chargeable to two or more research agreements, or two or more (direct) categories Salaries and wages of individuals other than professional staff will be supported by daily time and attendance and payroll dist. Records Professional staff��current and reasonable� estimates of % distribution may be used Estimates must be made no later than one month after the month in which the services were performed.

13. 13 OASC-3:Compensation for Personal Services Estimates of effort for professional staff: Prepared by individual who performed the services or by a responsible official (e.g. dept. head or supervision) having first-hand knowledge of the services performed on the research Estimates determined before the performance of services don�t qualify as estimates of effort spent Where policies do not define permissible extent of consultantships and non-hospital activities, the government may require the effort of professional staff working on research agreements be allocated between hospital activities and non-hospital activities

14. 14 Consequences: Recent Examples National Endowment for the Arts OIG Report (September 2008) : �SHORTCOMINGS TO AVOID� Cornell �Audit of effort reporting system by NSF � (June 2009) University of Delaware SUNY Stony Brook University of Wisconsin-Madison

15. 15 NEA OIG Audit Report Audits, evaluations and other reviews conducted by the Office of Inspector General have disclosed some common deficiencies in the administration of NEA grants. Among these were: Personnel costs charged to grant projects were not supported by adequate documentation. (For example, personnel activity reports should be maintained that show the actual activity of each employee, whose compensation was charged, in whole or in part, to NEA projects.)

16. 16 NSF Audit of Cornell* �These weaknesses occurred because Cornell�s policies and procedures did not:� Adequately define what constitutes suitable means of verification, require certifiers to document how they obtained suitable means of verification, or hold certifying officials accountable for following certification policies and procedures; *NSF OIG, Semiannual Report to Congress, March 2010

17. 17 NSF Audit of Cornell* (cont�d) �These weaknesses occurred because Cornell�s policies and procedures did not: Require the training or involvement of key grants management personnel, namely principal investigators (PIs), in the effort certification process; and, Identify the use of group certifications whereby one administrative manager certifies multiple employees effort for an entire year with a single signature without supporting documentation from the employee or the PI.� *NSF OIG, Semiannual Report to Congress, March 2010

18. 18 University of Delaware (NSF)* 6 employees lacked an understanding of their responsibilities for effort reporting Labor charges were certified up to 600 days after the University�s mandated turn around time Lack of policy defining what constitutes suitable means of verification Administrative time or excess salary charged to NSF grants *NSF OIG, Semiannual Report to Congress, March 2010

19. 19 More Examples SUNY Stony Brook* Employees did not have first hand knowledge when they certified effort reports University of Wisconsin-Madison* Inadequate oversight of the effort reporting process and inadequate training of personnel involved in the labor effort reporting process *NSF OIG, Semiannual Report to Congress, March 2010

20. 20 �Potential for Monetary Damages�: UC Berkeley* � Failure to meet these requirements puts the University at risk for audit disallowances resulting in significant financial penalties. In recent years, several major universities have been assessed large penalties and/or agreed to settlements due in part to effort reporting violations: Northwestern University for $5.5 million; University of Southern Florida, for $4.1 million; Johns Hopkins for $2.6 million; Harvard University for $3.3 million; and University of Alabama Birmingham for $3.39 million.� *NSF OIG, Semiannual Report to Congress, March 2010

21. 21 Effort Reporting � Areas of Risk Reporting Faculty Effort Faculty instructional effort and research effort are often inseparable (�inextricably intermingled�) Faculty �research� effort often includes administrative (indirect) activities, e.g., proposal development Impossible to have effort >100% How do faculty differentiate between their compensated effort and uncompensated effort?

22. 22 Effort Reporting � Areas of Risk Faculty effort based on 100%, not hours Standard for reporting = �reasonable� Institutional Base Salary: 12 months 9 months 10 months How do we deal with consulting effort? VA, Hospital, Clinical compensation Part-time appointments

23. 23 Effort Reporting � Areas of Risk Proposals with no effort commitment OK for equipment grants, travel grants, conference grants only Personnel with no effort commitments Clinical Trials Prospective vs. Retrospective Prospective = best guess for budgeting Retrospective�Basis to report effort Actual effort charged, not estimated After-the-fact certification required

24. 24 A-21 Section J.10d. Salary rates for faculty members Charges for work performed on sponsored agreements by faculty members during the academic year will be based on the individual faculty member�s regular compensation�. In no event will charges to sponsored agreements exceed the proportionate share of the base salary for that period

25. 25 A-21 Section J.10d. Salary rates for faculty members �Since intra university consulting is assumed to be undertaken as a university obligation requiring no compensation in a addition to full time base salary, the principle also applies to faculty members who function as consultants or otherwise contribute to a sponsored agreement conducted by another faculty member of the same institution�.�

26. 26 A-21 Section J J.10.d.(2) Periods outside the academic year Work performed during summer months will be paid a rate not in excess of the base salary divided by the period to which the base salary relates. NSF policy change; maximum of two months summer salary may now be paid over calendar year as �supplemental� salary

27. 27 Accounting for Cost Shared Effort Whether mandatory or voluntary, a commitment in a proposal become a condition of the award A commitment of effort in a proposal triggers a requirement to track and certify the actual effort Cost sharing expenditures must be verifiable from recipient�s records Cost-shared effort should be identified to the appropriate project

28. 28 Managing Effort Salaries = Actual, not Estimated, Effort What Effort is Committed in the Proposal? Direct-charged salary Cost shared salary Adjustments/reductions? Reduced Budget = Reduced Effort? Scope of work No cost extension

29. 29 Managing Effort�Other Issues Tracking Effort Reconciling Communicating Prior Approval Salary Caps Cost Transfers K Awards

30. 30 Effort Certification Certification = Verification that Effort Commitment was Fulfilled Whose effort is certified? Who can sign the certification? How frequently do we certify? When do we certify?

31. Summary Confirm Appointment of Faculty & Staff employment term established (9,10, 12 months), % time, base salary Prepare Budget using appointment data modified to reflect anticipated effort on the project � adjust current/pending support 31

32. Summary Salary is charged during the project and effort is certified after the activity has occurred. 32