The Numbers Behind Effort Reporting

1. The Numbers Behind Effort Reporting Keith A. Graff Grants Management Practice LeaderPricewaterhouseCoopers Telephone: +1 312 952 5753 keith.graff@us.pwc.com Ryan Schroeder Manager, Industry Sponsored Research Cedars-Sinai Medical Center Telephone: +1 323 866-6949 ryan.schroeder@cshs.org PricewaterhouseCoopers LLP

2. Agenda • Regulatory Requirements • Institution’s Policies & Procedures • FDP Expanded Authorities Summary • Practical & Compliance Considerations for a Sound Effort Reporting System • From the Institution’s Perspective • The Solution: Effort Reporting Systems • Important References PricewaterhouseCoopers LLP

3. Effort Reporting Purpose From the Government Perspective • Ascertain that payroll charges are consistent with actual performance on the project • Verify that committed effort, which includes committed cost sharing, was fulfilled by the PI and other research personnel • Verify that sponsored research space are properly classified, and space related costs are properly allocated in the F&A cost rate proposal From the Institution’s Perspective • Monitor that PI and other key research personnel are performing research activities in accordance with the scope of work & award terms and conditions • Verify that payroll charges to sponsored awards are allowable • Verify that effort and Base salary are consistently applied • Provide feedback for determining training needs • Provide data for space survey and F&A cost rate proposal preparation PricewaterhouseCoopers LLP

4. Regulatory Requirements:Effort Reporting OMB Circular A-21, Section J.8 (J.10 as of 6/8/2004): • Covers faculty, professional and non-professional staff when their distribution of effort is charged either directly to a sponsored project or to more than one activity category • After-the-fact confirmation of personnel costs charged to sponsored awards • Incorporated into University financial records • Labor charges must reasonably reflect activity • Frequency: • Plan-Confirmation (annual); after-the fact activity records (biannual for PIs and professional staff, and monthly for all other employees) • Certification; Provide for evaluation • Federal agencies require accurate documentation • Support charges to sponsored agreements are reasonable with effort expended • See also A-110, Subpart C_.50 PricewaterhouseCoopers LLP

5. Regulatory Requirements:Effort Reporting OMB Circular A-122, Attachment B (Update as of 6/8/2004): • After-the-fact confirmation of personnel costs charged to sponsored awards • Coverage: all employees must report 100% effort. • Certification: signed by PI or a person who knows all employee’s activities • Frequency: monthly CFR Part 74, Appendix E (OASC-3), Section IX.B.7 • Coverage: all employees charged to sponsored awards • Effort must add up to 100% • Certification: signed by PI or a person who knows all employee’s activities • Frequency: monthly; quarterly or biannual may be permitted PricewaterhouseCoopers LLP

6. Regulatory Requirements: Cost Sharing OMB Circular A-110, Section Subpart C, Item _.23 • Covers all contributions, including effort, when such contributions meet all of the following criteria: They are.. • Verifiable from the recipient records • Not included as contributions for any other federally funded project • Necessary, reasonable, and allowable (per recipient’s applicable cost principles: _.27) • Not paid by the federal government Considerations for Cost sharing effort: • Should be consistent with, or be incorporated into, the Effort Reporting System • Should cover: faculty, staff, non institutional scientists and volunteers • Should be incorporated into University financial records • Should be reasonable: Labor costs reflect activity • Other requirements: Frequency, Certification & Evaluation PricewaterhouseCoopers LLP

7. Regulatory Requirements: Revision of Budget & Program Plans OMB Circular A-110, Section Subpart C, Item _.25 The budget plan is the financial expression of the project or program as approved during the award process • It shall be related to performance • It requires prior approval if change in the scope of the project • Change in key personnel • A 25% reduction in time devoted to the project • Absence for more than 3 months PricewaterhouseCoopers LLP

8. Federal Compliance Driving Issues • S&W and related fringes represent about 80% of Federal support • DHHS has been auditing Effort Reporting systems • Payroll distribution, cost transfers, total professional effort, actual effort, committed effort • Certification process, authorized signers • Institutional policies and procedures • Most federal investigations related to fiscal mismanagement involve inquiries of labor costs, and the lack of appropriate documentation, timeliness of certification, undocumented cost transfers, mismatch of salary base and effort reported. • Programmatic compliance, most often involve a connection to effort reporting, e.g. project staff, timing, period, work performed Regulations: • CAS; OMB Circulars A-21, A-133, A-110 PricewaterhouseCoopers LLP

9. Risks of Non-Compliance Awarding Agency may take the following actions: • Cost Disallowances & penalties • Withholding of Payments • Withholding of Future Awards • Designation as High Risk Organization • Special Monitoring • Corrective Action Plans See also: Enforcement Clauses in OMB Circular A-110, Section Subpart C, Item _.62 PricewaterhouseCoopers LLP

10. Institution’s Policies and Procedures Institutional Base Salary (IBS) • Academic Base Salary & Faculty Appointments • Administrative Supplements for department chairs and other faculty with admin appointments • NIH Guidance for IBS: guaranteed, in appointment letter, accounted for in Effort Reports NIH Salary CAP & Cost Sharing Issues (CS) • Unallowable Cost Sharing • Allowable Cost Sharing: Committed Project Effort, Committed CS, • Voluntary Uncommitted CS (VUCS) Cost Transfers: • Timely (within 90 days?); Allow for re-certification of effort • Administrative & Clerical Salaries: OMB Circular A-21, Section F.6.b. PricewaterhouseCoopers LLP

11. Institution’s Policies and Procedures cont’d Special considerations: Affiliated Institutions & Practice Plans • Total professional effort versus Institutional Effort • Institutional Base Salary vs. Total Salary • Total Salary • Test for Over-commitment of Effort: • Absolute vs. Relative Effort; • Total effort vs. Institutional Effort Special Cases: • Faculty Practice Plans • VA Agreements • Other Agreements • The X+Y+Z salary formulation PricewaterhouseCoopers LLP

12. Institution’s Policies and Procedures cont’d • Effort Adjustments: • Method for downward adjustment when awarded budgeted effort is lower than proposed budgeted effort: implications to effort in general • Procedures for retroactive salary adjustments • Monitoring procedures for compliance, completeness, accuracy, and timelines • Effort reports and Medicare time reports: consistency issues • Training policies and practices: roles & responsibilities • Streamlining Practices: PL 106-107, FDP Proposals

13. 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.

14. 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.

15. Change in Project Committed Effort • FDP Expanded Authorities allow a PI to change Committed Effort under certain conditions without prior approval • Change does not represent a change in scope of work • Change does not entail a replacement of a key person • Change does not represent an absence of more than 3 months, • Change does not represent a reduction of 25 or more in effort of PI • Change does not require additional funding • Change does not require a transfer of F&A to Direct or vice versa • Staff without Committed Effort but with actual paid effort • Research staff who was not originally listed in the budget proposal • Research staff who was listed in the budget proposal as a potential participant but neither salary was budgeted nor committed effort was promised. • Change in Committed Effort may require change in Budgeted Effort

16. Practical & Compliance Considerations for a soundEffort Reporting System PricewaterhouseCoopers LLP

17. Effort Reporting Statistics Matrix (with or w/o Periodic Memory) Faculty or staff appointment in months: 9, 10, 11, 12 months: • Percent FTE • Job Title Annual Institutional Base Salary (IBS)  Period IBS  Cumulative IBS IBSfrom1/1/t to 12/31/t and later IBSfrom1/1/t+1 to 12/31/t+1 where “t” stands for year NIH Cap (Ncap)  Period Ncap Cum Ncap Ncapt-1- Ncapt-Ncapt+1 Project Actual Effort (AE)  Period AE  Cum AE Project Committed Effort (CE)  Period CE  Cum CE Project Budgeted Effort (BE)  Period BE  Cum BE Project Paid Effort (PE)  Period PE  Cum PE  Labor Distribution PricewaterhouseCoopers LLP

18. Effort Reporting Statistics Matrix Cont’d(with or w/o Periodic Memory) • Project Committed Cost Sharing (CCS)  Period CCS  Cum CCS • Voluntary Uncommitted Cost Sharing (VUCS); • Unallowable Cost Sharing (UCS) • Total Cost Sharing (TCS) = CCS + VUCS + UCS = Allow+Unallowable CS • Effort Reporting frequency (f), • where f=1 (yearly), f= 2 (biannually), f = 3 (semesters), • f= 4 (Quarterly), f=12 (monthly) • Critical changes in effort: 25% rule • actual effort is less or equal to 75% of CE • Critical Interval of Absence: 3 months or more • Other statistics as needed PricewaterhouseCoopers LLP

19. Critical Parametric tests • 100% Paid Effort can not be throughout the project period • If committed cost sharing is involved • If faculty has administrative duties • Actual Effort deviates more than 5 (warning) or 25 percent from CE. • ABS (Actual Paid Effort - Budgeted Paid Effort) > 0 Inquire! • Actual Effort is zero • It is allowed for a cumulative period of less than 3 months during the project period • Provide contingency action-plans for substitution of key personnel • Principal investigators who declared zero paid effort in budget proposal: impute at least one percent committed cost sharing • Untimely salary cost transfers > 90 days PricewaterhouseCoopers LLP

20. Effort Reporting & Space Survey: Organized Research Laboratories Treatment of Non Institutional Scientists or Researchers • Howard Hughes Medical Institute (HHMI) directly funded PIs • Visiting scholars who work in research labs but are not paid from grants • Volunteer faculty and staff researchers who work on research labs but not paid from sponsored awards • Postdoctoral fellows who receive direct funding from Sponsor Agency who work in research labs and not paid from institutional based sponsored awards Students who work in Labs • They are paid from sponsored awards: research or research training awards • They are paid by institutional funds

21. Critical Comparison Tests Actual Effort (AE) vs. Committed Effort (CE) If AE >= CE  VUCS If AE < CE  Warning: action required Actual Effort (AE) vs. Actual Paid Effort (APE) If AE >= APE  Cost Sharing (either VUCS or CCS) If AE < APE  Warning: action required Actual Paid Effort (APE) vs. Budgeted Funded Effort (BFE) If APE >= BFE  Warning: action required If APE < BFE  Warning: unnecessary cost sharing Current Period Committed Effort vs. Project Committed Effort

22. Timeline Analysis: an illustration Aggregated Average Effort as of Period 5 Budget Period Project Period PricewaterhouseCoopers LLP

23. The Need for Automation PricewaterhouseCoopers LLP

24. Common Administrative Burden Administrative Oversight • Labor & Paper Intensive Process • Lack of or Timely Updates of a Database • Accurate Review of Certifications • Manual GL Processes Compliance with OMB Circular A-21, A-110, and other terms & conditions • Difficulty in Monitoring Compliance • Inaccurate or Untimely Information Accuracy of labor distribution Training of Faculty, departmental administrative staff Documentation & record keeping PricewaterhouseCoopers LLP

25. Common Administrative Issues • PIs are too busy working on their research & other academic duties • Salary cap not identified • Certify budgeted salaries rather than actual effort • Committed cost sharing not identified in Effort Report • Academic Year vs. Summer Efforts vs. Salary Base • IBS, Faculty Clinical Practice Revenues, Affiliated salaries • Designee does not know the research activities going on • Risk of over-commitment • Timeliness: effort reports, cost transfers • Cost transfers: effort report not re-certified • Departmental administrators: turn-over PricewaterhouseCoopers LLP

26. Effort Reporting System Benefits • Reporting • Compliant with Federal Regulations • (A-21, A-133, A-110, CAS) • Standard Summary Reports • Historical Information • Internal Analysis • Time & Money • Ease of Use • Reduces Manual Effort • Increases Administrative Effectiveness • Proactive Compliance Monitoring • Parametric & comparison tests • Committed Cost Sharing • Identification & Process Mapping • Account Assignment Capabilities • Other Cost Sharing • PIs with no sponsored paid effort • HHMRI-special status researchers • Salary CAP • Post docs and students in O.R. labs • Cost Transfers • Training • Quick Start Ability • Opportunity to Educate the Campus Community PricewaterhouseCoopers LLP

27. Introduction to Effort Reporting: Systems An Effort Reporting System should be: • Simple • User friendly • Web based • Highly adaptable to changing or special organizational conditions or requirements • Compliant with OMB Circular A-21, A-110, and other regulatory provisions or costing principles. The Goal? To create an auditable, automated process that lets the system worry about the numbers and allows you to be proactive in monitoring compliance. PricewaterhouseCoopers LLP

28. 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. PricewaterhouseCoopers LLP

29. Other System Considerations – ERP/Financials There are three primary concerns for our implementation teams: • Detailed salary by grant is required to accurately report effort • Retroactive salary transfers must be captured at the person, grant, period basis • Cost sharing should be tracked through system functionality (fund code in PS) and integrated into the payroll process PricewaterhouseCoopers LLP

30. Effort Reporting – The Future? • Four large research organizations are piloting an alternate approach to traditional effort reporting • Instead of monthly/quarterly/etc. effort certifications, PIs will certify the total salary charged at the anniversary of the grant (called “Project Payroll Certification”) • Implications: • Less institutional resources required to manage this process • Potential death to the effort reporting system market • Less visibility into individual salary information = more fraud? PricewaterhouseCoopers LLP

31. Questions? PricewaterhouseCoopers LLP