Time & Effort ReportingHow to Manage Compliance

NCURA Region VI/VII Meeting, Newport Beach, California, April 19, 2010

Steve LichtensteinSteve LichtensteinAttain LLC, Sr. ManagerAttain LLC, Sr. ManagerCedars-Sinai Medical CenterCedars-Sinai Medical CenterDirector, Sponsored Research & Director, Sponsored Research & Funds AdministrationFunds Administration

Ryan SchroederRyan SchroederAttain LLC, ManagerAttain LLC, ManagerCedars-Sinai Medical CenterCedars-Sinai Medical CenterManager, Time & Effort ReportingManager, Time & Effort Reporting

Time & Effort Reporting

Agenda

Time & Effort Reporting Regulations

Overview of T&E Reporting Models•Plan Confirmation System

•After the Fact System

•Multiple Confirmation System •Effort Based Payroll Distribution

Capturing and Managing Effort Commitments•Key Personnel vs. Non-Key Personnel

Tracking Commitment Variance

T&E Management Reports

Compliance Resolution Strategies

Introduction to Time & Effort Regulations

What is Time & Effort Reporting?

The percentage of effort that a Time & Effort (T&E) Reporter warrants as his/her reasonable estimate of actual effort spent on any reportable activity. Certified effort may not be determined on the basis of budgeted effort, committed effort, or dollars available. The purpose of Effort Reporting is to assure that benefit is received relative to salary expenditures on federal awards.

Why do we have to do this?

Time & Effort reporting is a federally mandated requirement regulated by Sec. J.10 of A-21, NIH Grants Policy Statement dated 12/03, and OASC-3 (Appendix E of HHS CFR Title 45, Part 74).

Salary and wage charges to sponsored agreements are allowable only if supported by an Effort Reporting System.

Key Personnel on federal awards must perform within allowable limits relative to their committed effort. T&E Systems should track performance against these commitments.

Compliance Management – Salary & Effort

Allowable/Allocable/Reasonable:

Salary charged to federally funded grants must be allowable, allocable and reasonable in accordance with federal cost principles and sponsor specific requirements.

Salary charged to federal projects must be fully supported by proper certification.

Effort Reporting Common Questions

Effort % vs. Hours:

It is important to understand that effort is not calculated on a 40-hour workweek. Effort reports must account for all effort for which the campus compensates the individual and, as such, should equal 100%

Effort Reporting vs. Payroll Distribution:

Question: Is Effort Reporting and Salary Distribution the same thing?

Answer: No. Salary distribution is the allocation of an individual’s payroll and benefits in the accounting records while Effort Reports document an individual’s activity allocation.

Who Certifies and How Often?

Who is required to complete effort reports?

Under Federal regulations, all faculty and staff who are paid in part or in full by more than one federal grant and/or cost objective or more than one budget category/activity within the same grant, whose efforts are used to satisfy either a required or a voluntary match or are used in the determination of indirect costs, must report 100% of their effort.

How Often Must T&E Reporters Certify?

Based on type of Research Institution and T&E System

• Research Hospitals - Monthly

• Educational Institutions – Varies by Academic Term and/or T&E System

T&E Reporting Models

Employee Categories:

Professional – Includes part-time and full-time exempt employees who are not eligible for overtime.

Professorial – Includes tenured, non-tenured/ part-time and full-time faculty. Classified – Includes overtime eligible part-time and full-time staff who are not

exempt employees (hourly).

T&E Reporting Models:

There are 3 federal examples of Time & Effort Reporting models under A-21 which are limited by the category of employees who may use them:

Plan Confirmation – Professional/Professorial

After the Fact – All

Multiple Confirmation – Professional/Professorial

Overview of T&E Reporting Models

Plan Confirmation:

Under this method, the distribution of salaries and wages of professorial and professional staff applicable to sponsored agreements is based on budgeted, planned, or assigned work activity, updated to reflect any significant changes in work distribution.

Frequency: At least annually a statement will be signed by the employee, principal investigator, or responsible official(s) verifying that the work was performed, stating that salaries and wages charged to sponsored agreements as direct charges, and to residual, F&A cost or other categories are reasonable in relation to work performed.

Certification: Must be signed by either the employee or other responsible person with first hand knowledge.

Plan Confirmation T&E System – Life Cycle

Pay to $

Payroll

T&E ApplicationT&E User – Certification/Confirmation of Effort Relative to Salary Across All Activities/Cost Centers- Completed at

Least Annually

Research Accounts

Operational Accounts

Donor Accounts

Externally Funded Commitment Data in $ & %

Salary Adjustments as Necessary

Human Resources Faculty Profile Data w/Operational Budgeted Effort in $ & %

Projected Salary Allocation Across All Activities/Cost

CentersAccounting System T&E Application

Overview of T&E Reporting Models (cont’d)

After the Fact:

Under this system the distribution of salaries and wages by the institution will be supported by effort reports and any unsupported salary will be adjusted accordingly.

Frequency: For professorial and professional staff, the reports will be prepared each academic term, but no less frequently than every six months. For other employees, unless alternate arrangements are agreed to, the reports will be prepared no less frequently than monthly and will coincide with one or more pay periods.

Certification: Must be signed by either the employee or other responsible person with first hand knowledge.

After the Fact T&E System – Life Cycle

Pay to $

Payroll Distribution

T&E Application

T&E User – Certification – Completed at the lesser of Academic Term or Every 6

Months

Research Accounts

Externally Funded Commitment Data

Operational Accounts

Donor Accounts

Accounting System

Salary Adjustments as Necessary

Overview of T&E Reporting Models (cont’d)

Multiple Confirmation Records:

Under this system, the distribution of salaries and wages of professorial and professional staff will be supported by records which certify separately for direct and F&A cost activities as prescribed below.

Frequency: The reports will be prepared each academic term, but no less frequently than every six months.

Certification: Must be signed by either the employee or other responsible person with first hand knowledge.

Multiple Confirmation T&E System – Life Cycle

Pay to $

Payroll

T&E ApplicationT&E User – Certification/Confirmation

of Effort relative to Salary - Completed at the lesser of Academic

Term or Every 6 Months

Research Accounts

Operational Accounts

Donor Accounts

Externally Funded Commitment Data in $ & %

Salary Adjustments as Necessary

Human Resources Faculty Profile Data w/Operational Budgeted Effort in $ & %

Projected Salary Allocation on Grant/Project/Activity

BasisAccounting System

Certification on a Grant/ Project/Activity Basis

Grant 1

Grant 2

OpsTeaching

OpsAdmin

Grant 1

Grant 2

OpsTeaching

OpsAdmin

T&E Application

After-the-Fact/Plan & Confirm – Scorecard

Pros:

Less frequent certification requirements depending or organization type and academic term (monthly/quarter/semester/every 6 months/annually).

Number of commercially available products based on After-the-Fact reporting.

Cons:

Delays due to reconciliation and approval of cost transfers, which could push into the 90 day cost transfer allowability limit.

Plan Confirmation projected effort allocation based on award start/end dates and may be inaccurate.

Less frequent certification may generate more cost transfers.

Commitment Variance reconciliation impacted by delays related to processing corrections.

Fewer Internal Controls.

Features to look for:

Automated Notifications

Automated Effort & Salary Reconciliation

Commitment Performance Monitoring

Overview of T&E Reporting Models (cont’d)

Cedars-Sinai Medical Center:

Cedars-Sinai has developed a Time & Effort Reporting Application based on the After the Fact model. However, unlike other models, Effort Certification drives payroll distribution, assuring no variance between certified effort and allocation of labor charges.

Frequency: Weekly

Certification: Must be signed by the employee.

Effort Based Payroll Distribution – Life Cycle

Pay to $

Payroll

T&E ApplicationT&E User - Certification

Labor Suspense Accounts – Non-

Certification

Research Accounts

Donor Accounts

Operational Accounts

Payroll Distribution

PeopleSoft Commitment/Accounting Data T&E Corrections

Human Resources (Lawson) Faculty Profile Data (Dept/Div/FTE%)

Salary Adjustments as Necessary

Effort Based Payroll Distribution – Scorecard

Pros: No discrepancy between effort certified and salary charged.

High certification frequency.

Requires Labor suspense accounts with reconciliation and monitoring.

Features/Highlights:

Automated Notifications

Internal Controls

Automated Effort & Salary Reconciliation

Automated Journal Creation for Effort/Salary Variances

Automated Effort Correction and approval routing

Commitment Performance Monitoring

Cons:

Compliance Management – Effort Commitments

Which Commitments are Monitored?

Key Personnel: Only those named in the federal Notice of Award (NOA) or named specifically in the contract/subcontract as key to the project, (requiring approval for replacement) shall be considered “Key Personnel.”

Non-Key Personnel: These are faculty members who are not specifically named in the NOA or the contract/subcontract, but have made effort commitments to the sponsor funded portion of the award and/or to the internally funded cost sharing activity within the proposed budget.

Effort Committed vs. Effort Certified

Effort Committed:

Committed effort is the amount of effort proposed in a grant or other project application that is accepted by a sponsor, regardless of whether salary support is requested for the effort.

Allowable Variance:

For federal projects, Key Personnel must receive prior approval for reductions to proposed effort commitments of 25% or more from the level in approved application, as stated in the NIH Grants Policy Statement dated December 2003. Variance equal to or less than 25% of committed levels is a compliance issue.

No Cost Extensions: It’s important to note that commitment levels during a No-Cost Extension period are equal to the awarded commitments unless a formal request is presented to and agreed upon by the sponsoring agency to reduce the commitment.

Original Commitment Allowable Variance Unallowable Variance

20% > 15% ≤ 15%

Commitment Variance Report - Sample

Start Date End Date Start Date End Date Start Date End DateTotal No. of

WeeksWeeks

CompletedWeeks

Remaining

Research

2152155xxx Cancer Study - 1 NIH 08/01/05 7/31/2010 08/01/08 07/31/09 08/01/08 07/31/09 52 52 0 Y 5.00% 5.00% 0.00% n/a n/a

Research 2155xxx Cancer Study - 2 NIH 08/01/05 7/31/2010 08/01/09 07/31/10 08/01/09 04/10/10 52 36 16 Y 5.00% 5.00% 0.00% 5.00% 0.94%

Research

2162163xxx Cancer Study - 3 NIH 02/01/07 1/31/2011 02/01/09 01/31/10 02/01/09 01/31/10 53 53 0 N 10.00% 3.64% -63.58% n/a n/a

Research

2162166xxx Cancer Study - 4 NIH 09/01/08 8/31/2009 09/01/08 08/31/09 09/01/08 08/31/09 53 53 0 Y 25.00% 9.89% -60.45% n/a n/a

Research

2162166xxx Cancer Study - 5 NIH 09/01/09 8/31/2010 09/01/09 08/31/10 09/01/09 04/10/10 53 32 21 Y 25.00% 14.69% -41.25% 40.71% 24.94%

Variance %Norm Rate

100%Norm Rate

75%

Commitment Period to Date

Key Personnel Comm. %

Average Work %Sponsor

Account / Activity Commitment ProfileAverage Work

Calculation

Activity

Act. ID / Cost Center

Activity Description

T&E Management Reports

Simply having a Time & Effort System in place does not guarantee compliance. Research institutions must have adequate Time & Effort systems, policies, procedures, training and monitoring in order to effectively manage the confirmation of activities. The development and distribution of critical reporting tools is primary to effectively monitor Time & Effort.

Certification Completion Reports – It is essential that Time & Effort Reports are completed and collected within established deadlines and that institutions have a process to monitor submission.

Over-Committed Effort – There should be controls in place to track whether total commitments are greater than 100%. An individual who is 100% committed may be required to seek reductions of existing commitments if/when new awards are granted.

Commitment Variance Reports – The Commitment Variance Report is a critical tool for monitoring the variance between effort committed for Key Personnel and actual effort certified.

Effort Reporting Risk Exposure

In recent years, the federal government and its auditors have become more active in the review of effort reporting requirements. A number of institutions have paid large settlements as a result of whistleblower complaints or voluntary disclosures:

Northwestern University received audit disallowances related to problems with effort reporting of $5.5 M in FY01.

University of South Florida returned $4.1 M to the federal government to settle a number of charging issues including effort reporting.

Johns Hopkins agreed to pay back $2.6 M to settle an effort reporting finding in 2004.

Harvard voluntarily paid back $3.3M in 2004 to resolve accusations related to effort and other accounting management issues.

Compliance Resolution Strategy

Audit/Documentation: Perform internal audit to document issues and extrapolate findings to total population. If applicable, collect supporting data to show that benefit was received.

Disclosure: Work with counsel (internal and/or external) on disclosure strategy with sponsoring agency to show a good faith effort to notify and correct weaknesses within Institution’s T&E policies, procedures and/or systems.

Corrective Action Plan: Develop a comprehensive corrective action plan with sponsoring agency to correct all identified areas of weakness.

On-Going Audit/Monitoring: Once implemented, ongoing monitoring and status updates with sponsor to confirm successful implementation of corrective action plan.

Questions?

Steve LichtensteinCedars-Sinai, Director - SRFA &Attain, Sr. Manager(323) 866-6885 steven.lichtenstein@cshs.orgsmlichtenstein@attain.com

Ryan SchroederCedars-Sinai, Manager - Time & Effort & Attain, Manager(323) 866-6949ryan.schroeder@cshs.orgraschroeder@attain.com