Sponsored Projects Compliance Certification Program

1. Sponsored Projects Compliance Certification Program Sponsored Projects Effort Reporting

2. Sponsored Projects Compliance Certification Program Welcome to the University of Pennsylvania’s Sponsored Projects Compliance Certification Program. The Program is designed to facilitate compliance with sponsored programs administrative requirements by addressing concepts critical to proper management. The purpose of effort reporting is to provide a reasonable basis for distributing salary charges among direct activities (e.g., sponsored projects and non sponsored activities such as instruction, administration, and clinical activity). This module examines the requirements for charging salary costs to sponsored programs.

3. What is Effort Reporting? • Effort reporting is a method for documenting activity expended in support of all sponsored projects • OMB Circular A-21 requires that the University document the distribution of activity to each individual sponsored project • The method for documenting must: • Reasonably reflect the activity for which an individual is paid by the University • Reflect all of these activities performed by the individual • Include after-the-fact confirmation to ensure that initial salary charges reasonably approximate actual effort • Be performed by the individual or a responsible individual who has a “suitable means of verification that the work was performed”

4. Activities Included in Effort Reports • Sponsored Projects Activities: Includes effort devoted to grants, contracts, and cooperative agreements sponsored by non-University entities, i.e., state, local, federal governments, foundations, corporations, etc., for purposes of training, clinical trials, and research • Non-Sponsored Activities • Administration: Includes effort devoted to departmental business activities, curriculum development, proposal and bid preparation, sponsored projects administration, serving on human, animal subjects, recruiting, or radiation safety committees, and supervising administrative staff • Instruction and Unsponsored Scholarly Activity: Includes effort devoted to teaching and training activities where the employee is the instructor. Includes classroom and course preparation, grading exams, and academic advising of students, effort of those individuals assigned to approved University service centers, and effort devoted to a sponsored instructional project, i.e., training grant. Unsponsored Scholarly Activity is effort for research, development and scholarly activities that are not sponsored by an external organization

5. Activities Included in Effort Reports cont’d • Clinical Activities (Direct patient care, education of house-staff, and administration as it relates to Health Science only in Medicine, Nursing, Dentistry, and Veterinary Medicine): Includes the direct treatment of clinical patients for which a professional bill would ordinarily be rendered; teaching and/or supervising clinical personnel, residents, and interns when such persons are enrolled in an accredited Intern and Residency Program, including the preparation of lectures which does not properly belong under the Instructional and Unsponsored Scholarly Activity above; and the administration of ancillary or inpatient areas, including activities such as budget management, and supervision of technical and clerical personnel, related committees, in-service education programs, and activity of general benefit to clinical patient care, i.e., quality control • Other Activity: Includes only that effort specifically devoted to the activities/functions of the Abramson Institute, ICA, Museum, or Morris Arboretum that does not fit into any of the categories of effort defined above

6. Why Effort Reporting? • Federal audit personnel rely on effort reporting to evaluate whether the salary paid on an award is reasonable relative to the effort expended on the award • Principal Investigators and the University are ultimately responsible for ensuring that all charges to an award are appropriate, including salary charges

7. Why Effort Reporting? • Federal agencies are accountable to Congress and to the public for the use of these funds • Salary and wage charges typically represent more than half of all direct costs • Effort reports document and account for the use of those funds

8. Effort Reporting @ Penn • Effort reports are required for all individuals working on sponsored projects • When effort reports are printed they include the current payroll distribution as a starting point • There is a general presumption that the individual is paid based on their distribution of activities, but… • In many cases, work may occur differently than planned, so… • Salary adjustments may need to be made to reflect effort • (As required by Sponsored Projects Policy No. 2113 salary reallocations must be made within 90 days of month end in which the expense was incurred) • The completed effort report must represent a reasonable approximation of how effort was devoted

9. Effort Reporting @ Penn The effort process begins well before the effort report is generated.. Pre-Award Post-Award Preparing the Proposal Budget Appointing Faculty & Staff Charging Salary Relating pay to the effort Salary is charged contemporaneous with activity Effort is attested to after activity has occurred Employment terms are established including # months (contract period), % full time, salary base Effort is proposed, a commitment is made to the sponsor

10. Effort Reporting @ Penn • For faculty with 9 month appointments certification of sponsored projects effort can occur 3 times a year: • Spring Semester (January – June) • Summer Semester (June – August)* • Fall Semester (July – December) • Summer effort reports do not overlap with Spring and Fall activities –Summer research activity is separately charged and reported *Faculty receiving 3 full summer months of salary must consult the June 21, 2004 Policy Memorandum and Sponsored Projects Policy No. 2139

11. Effort Reporting @ Penn • All other Faculty and staff (except weekly paid staff) certify effort twice a year: • Spring Semester (January – June) • Fall Semester (July - December) • Weekly paid staff certify effort quarterly • 1st Quarter (July – September) • 2nd Quarter (October – December) • 3rd Quarter (January – March) • 4th Quarter (April – June) • Temporary Hourly Employees • These employees must fill out a weekly time sheet with the requisite effort certification

12. Key Points in Effort Reporting See http://www.upenn.edu/researchservices/effortreporting.html • The effort form must represent, in percentages totaling 100%, a reasonable estimate of an employee's University compensated effort for the period. • Faculty must certify their own individual effort report form. Effort reports for other employees must be completed and signed either by the employee, the principal investigator, or a responsible official (business administrator or chairperson) using a suitable means of verification that the reported effort was expended.

13. Key Points in Effort Reporting See http://www.upenn.edu/researchservices/effortreporting.html • University compensated effort includes all research, teaching, administration, clinical activity, and any other activity for which an individual received compensation from the University and/or CPUP. Excluded from effort reporting is any bonus pay, clinical faculty variable pay (CVP), overload compensation (see OMB Circular A-21 Section J. 10), compensation received from sources other than the University, such as compensation from the VA, CHOP, or outside consulting work permitted by the University.

14. Key Points in Effort Reporting See http://www.upenn.edu/researchservices/effortreporting.html • Effort distributions should be reasonable estimates of activities, recognizing that research, instruction, and clinical activity are often inextricably intertwined and estimates will be necessary in most cases • The effort report form must account for all effort for which the University compensates the individual. Even where the number of hours of effort the individual expends each week substantially exceeds the "normal" workweek of 35, 37.5 or 40 hours, effort percentages must be based on total effort, not hours.

15. Key Points in Effort Reporting See http://www.upenn.edu/researchservices/effortreporting.html • Effort and payroll distributions are not the same thing. The effort reporting process is a method for certifying charges made to sponsored awards and for certifying that the effort expended is at least equal to the salary paid. Payroll distributions are used initially as a proxy for effort distributions and serve as a convenient reminder about activities on which the individual worked. Therefore, the payroll-based effort report form should be adjusted to report effort distributions that are less than the shown payroll distributions. Appropriate salary reallocations must be made in concert with the changed effort report.

16. Key Points in Effort Reporting See http://www.upenn.edu/researchservices/effortreporting.html • Mandatory or voluntary committed cost sharing must be reported. Where some or all effort an individual expends on a specific sponsored research project is not funded by the project sponsor but is mandated by the sponsor or where the individual has clearly committed to uncompensated effort to the project in the application, that effort must be reported in a separate cost sharing account on the effort form. If an effort report form is not generated in Effort Reporting System due to the lack of any payroll activity, the effort form template available on the ORS web site must be completed and certified.

17. Key Points in Effort Reporting See http://www.upenn.edu/researchservices/effortreporting.html • Certain sponsors impose a limit or “cap” on the annual rate of salary reimbursement. Nevertheless, investigators must still devote the full committed effort as proposed and awarded without regard to the salary reimbursement limitation. • Department responsible officials and/or principal investigators are required to complete appropriately certified effort report forms within 45 working days of availability of the forms. • Cost disallowances on sponsored projects resulting from a department's failure to complete effort report forms or the certification of inaccurate effort report forms to Research Services will be charged to the department's unrestricted budget.

18. Key Points in Effort Reporting See http://www.upenn.edu/researchservices/effortreporting.html • Faculty receiving three full summer months salary from sponsored projects must devote all their effort accordingly and comply with Sponsored Projects Policy No. 2139.

19. BA Role is Critical • Review the effort report to: • Ensure mathematical accuracy • Ensure that payroll distributions are correctly established, reviewed regularly, and adjusted as required by Sponsored Projects Policy Nos. 2113 & 2114 • Ensure that mandatory & voluntary committed salary cost sharing obligations are met (Review Sponsored Projects Policy No. 2119) • Assist the certifier to meet his/her commitment to the sponsor

20. Jan Feb Mar Apr May Jun 0% 0% 0% 50% 50% 50% 30% 30% 30% 20% 10% 0% Activity Average DOD Award A 25% NIH Award B 20% BA Role is Critical • Communicating the meaning of payroll distributions • Example: • The above demonstrates why the Payroll % column shown on the effort report will not necessarily equate to the correctly entered salary distribution • To certify an effort form, one must verify the effort expended on all activities; therefore, effort forms must be certified by the individual or a supervisor, not the BA

21. What is Salary Cost Sharing? • Salary cost sharing reflects work on a sponsored project that is not paid by the sponsor • Mandatory salary cost sharing is required by the sponsor (e.g., conditions of the program, NIH salary cap) and must be shown on the effort form • Voluntary committed salary cost sharing is promised in the proposal, is required by the award and must be shown on the effort form • Voluntary uncommitted salary cost sharing is “extra” work performed after the award is received that was not included as part of the proposal and award

22. What is Cost Sharing? • Salary Cap Cost Sharing • NIH and certain other sponsors limit the salary that can be charged on awards • Charged salary must be prorated with respect to the cap If the cap were $175,700 annually and the individual spends 50% effort on the project during the Spring, the maximum salary that can be charged during the semester is $43,925 (50%  $175,700/2) • Cap cost sharing must be reflected on the effort report • If salary > cap, effort must > pay distribution on the award • Assume cap = $175,700, salary = $195,000, effort = 47% Cap cost sharing = 5%

23. A Salary Cap & Cost Sharing Example • Salary = $195,000 annually • Sponsor Salary Cap = $175,700 • Total Committed Effort = 47% • Actual Effort Expended = 50% • Questions: • What should be set up in Salary Management? • What will the effort report pre-printed distribution show assuming reporting period & award period coincide? • What should the effort report look like?

24. 42% A Salary Cap & Cost Sharing Example • Salary = $195,000 annually • NIH Salary Cap = $175,700 • Salary to be paid from Award = 47% • Cost Shared Salary = 5% • Total Committed Effort = 47% • Actual Effort Expended = 50% • Questions: • What should be set up in Salary Management? • 42% Salary charged to the NIH Award • What will the effort report pre-printed distribution show? • 42% Effort charged to the NIH Award • What should the effort look like? • The difference between Actual Effort Expended and Total Committed Effort is volunteered uncommitted effort; the total effort reported is 47%

25. A Salary Cap & Cost Sharing Example

26. ORS Salary Cap Tool

27. Sponsored Projects Examples

28. Non-Sponsored Activities

29. Not Included on Penn Effort Report

30. “Mixed” Examples

31. Yes • No Case Study #1 Dr. Spruce spends the vast majority of time on research with some time spent teaching. She teaches one course in her department to graduate students. She also has three awards which take up 75% of her time and her effort is distributed evenly among the awards (25% on each). The remaining 25% of her effort covers the time spent teaching her course. Last semester Dr. Spruce made an important discovery on one of her awards. In order to confirm her belief she will need to spend significantly more time on that award and she expands her work week (working nights and weekends) so that she can pursue this discovery. She still spends the same amount of time fulfilling her other obligations to teach her course and on the on the other two awards. Q: Does her effort report need to change?

32. Yes • No Case Study #1 Dr. Spruce spends the vast majority of time on research with some time spent teaching. She teaches one course in her department to graduate students. She also has three grants which take up 75% of her time and her efforts are distributed evenly among the grants (25% on each). The remaining 25% of her effort covers the time spent teaching her course. Last semester Dr. Spruce made an important discovery on one of her grants. In order to confirm her belief she will need to spend significantly more time on that grant and she expands her work week (working nights and weekends) so that she can get more data on this discovery. She still spends the same amount of time fulfilling her other obligations to teach her course and on the other two grants. Q: Does her effort report need to change? 

33. Case Study #1-Analysis • The extra effort devoted to the project on weekends and evenings is considered “voluntary uncommitted cost sharing” and therefore does not need to be reported. See Clarification of OMB A-21 Treatment of Voluntary Uncommitted Cost Sharing Memorandum Dated January 5, 2001

34. Yes • No Case Study #2 Same facts as Case Study #1 except rather than spending additional time on one of her awards, Dr. Spruce will be working 4 nights a week teaching departmental courses to students. As in the previous case study she will be spending the same amount of time on her other obligations (the three awards and the course for graduate students). Q: Does her effort report need to change?

35. Yes • No Case Study #2 Same facts as Case Study #1 except rather than spending additional time on one of her awards, Dr. Spruce will be working 4 nights a week teaching departmental courses to students. As in the previous case study she will be spending the same amount of time on her other obligations (the three grants and the course for graduate students). Q: Does her effort report need to change? 

36. Case Study #2-Analysis • Because Dr. Spruce expanded her time on non-sponsored project activities, proportionately her effort on sponsored research projects was reduced. Therefore, she must reduce the % effort shown on the effort report as devoted to her sponsored projects.

37. Yes • No Case Study # 3 Dr. Smith, a new clinical faculty member would like to pursue a career in research. As a first step toward this goal he applies for and is awarded an NIH Career Development Award (commonly referred to as a “K” award) which requires that he devote 75% of his effort in research activities. Currently, Dr. Smith has an extremely heavy patient work load and routinely attends departmental rounds in the early morning (est. 30% effort), seeing patients during office visits during the workday (est. 40% effort) and working the ICU in the evenings (est. 30% effort). To make room in his schedule for his research activities he plans to stop seeing patients during the workday but plans to keep his long work week and still attend morning rounds and work in the ICU. Q: By making these changes to his schedule, will Dr. Smith meet his obligation to the NIH?

38. Yes • No Case Study # 3 Dr. Smith, a new clinical faculty member would like to pursue a career in research. As a first step toward this goal he applies for and is awarded an NIH Career Development Award (commonly referred to as a “K” award) which requires that he devote 75% of his effort in research activities. Currently, Dr. Smith has an extremely heavy patient work load and routinely attends departmental rounds in the early morning (est. 30% effort), seeing patients during office visits during the workday (est. 40% effort) and working the ICU in the evenings (est. 30% effort). To make room in his schedule for his research activities he plans to stop seeing patients during the workday but plans to keep his long work week and still attend morning rounds and work in the ICU. Q: By making these changes to his schedule, will Dr. Smith meet his obligation to the NIH? 

39. Case Study # 3-Analysis • No. In order to meet the requirements of the sponsor, Dr. Smith would have to devote even less effort to other activities. If not, the award may be in jeopardy and the sponsor must be contacted. Practically, Dr. Smith should reduce the amount of time devoted to his non-sponsored activities to assure that sufficient % effort can be devoted to meet the sponsor’s requirements.

40. Yes • No Case Study # 4 Dr. Smith is a well funded researcher with three awards from the NSF, AFOSR, and American Chemical Society (ACS). In addition, Dr. Smith is a director of a newly created center for which he receives an additional 1/9 as salary support from the University for this 12 month appointment. During the academic year Dr. Smith receives salary support from his departmental funds, the AFOSR and ACS awards. As proposed to the NSF, Dr. Smith intends to work two full summer months on his NSF award and expects to receive 2/9 salary. Q: When completing his summer effort form does Dr. Smith need to adjust his effort to accommodate for his effort devoted to his director role?

41. Yes • No Case Study # 4 Dr. Smith is a well funded researcher with three awards from the NSF, AFOSR, and American Chemical Society (ACS). In addition, Dr. Smith is a director of a newly created center for which he receives an additional 1/9 as salary support from the University for this 12 month appointment. During the academic year Dr. Smith receives salary support from his departmental funds, the AFOSR and ACS awards. As proposed to the NSF, Dr. Smith intends to work two full summer months on his NSF award and expects to receive 2/9 salary. Q: When completing his summer effort form does Dr. Smith need to adjust his effort to accommodate for his effort devoted to his director role? 

42. Case Study #4-Analysis • Dr. Smith does not need to change his effort form to reflect the effort devoted to his role as director. The effort for the director role is certified in his six month effort reports. However, Dr. Smith did not actually devote 100% of his compensated effort during the two summer months to his NSF award because of his administrative responsibilities. The salary received from the NSF award reflects approximately 92% effort {(1/9 + [1/9]/12)=100% salary for a month}.

43. Question & Answer • If a PI is paid from non-federal awards and University funds, she is not required to complete an effort form. • True • False

44. Question & Answer • If a PI is paid from non-federal awards and University funds, s/he is not required to complete an effort form. • True • False  Explanation: Anytime a faculty member is paid from a sponsored project s/he is required to complete an effort form.

45. Question & Answer • Only Faculty members are required to report effort expended in support of sponsored projects. • True • False

46. Question & Answer • Only Faculty members are required to report effort expended in support of sponsored projects. • True • False  Explanation: Effort forms must also be certified by all personnel – including hourly and monthly paid staff – charged to sponsored projects. An administrator may help review effort and pay distributions but generally is not the appropriate person to certify effort.

47. Question & Answer • Who is the most appropriate individual to complete and certify an effort report? • The Departmental Business Administrator • The Chair of the Department • The individual whose effort is being reported

48. Question & Answer • Who is the most appropriate individual to complete and certify an effort report? • The Departmental Business Administrator • The Chair of the Department • The individual whose effort is being reported  Explanation: The effort report must be completed by the individual whose effort is being reported or by a responsible person using a suitable means of verification that the work was performed. Ordinarily the individual must sign his/her own effort form. Faculty must certify their own forms.

49. Question & Answer • Which of the following are true? The purpose of an effort form is to: • Confirm, after the fact, that the paid effort reported for each activity is a reasonable estimate of the work performed. • Allow for the inclusion of external consulting. • Distribute effort based on the remaining funds in the award(s). • Distribute paid effort based on work performed on the projects during the reporting period.

50. Question & Answer • Which of the following are true? The purpose of an effort report is to: • Confirm, after the fact, that the paid effort reported for each activity is a reasonable estimate of the work performed. • Allow for the inclusion of external consulting. • Distribute effort based on the remaining funds in the award(s). • Distribute paid effort based on work performed on the projects during the reporting period. 