1Where Innovation Is Tradition

Effort Certification on Sponsored Projects

2012 CUAV Annual ConferenceMike Laskofski

George Mason UniversityMay 22, 2012

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Session Agenda

• Effort Defined• Effort Reporting Requirements• Federal Audit Environment• Payroll Certification: An Alternate Approach• Monitoring Effort/Salary• Next Steps

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What is Effort?

• Effort is the proportion of time spent on institutional responsibilities (research, teaching, administration and service)

• Total effort must equal 100% and is not based on a standard 40 hour week

• Effort is a “reasonable” estimate • Effort does not include outside activities

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Why is Effort Reporting Important?• Salary and wages account for nearly 60% of

all sponsored expenditures• Effort reporting is mandated by the federal

government for recipients of federal funds• Key area of focus by auditors to verify what

was proposed was actually done• Avoid audit disallowance that can result in

negative financial and reputational impacts

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Federal Regulations

OMB Circular A-21 (Section J.10)OMB Circular A-110OMB Circular A-133Disclosure Statement (DS-2)

www.whitehouse.gov/omb/circulars

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OMB Circular A-21 Section J10

• Incorporated into the official records of the institution

• Reasonably reflect the activity for which the employee is compensated by the institution

• After the fact confirmation or determination of the reasonableness of salary allocations

• Incidental work can be excluded

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OMB Circular A-21 Section J10• Confirmed by responsible persons with suitable

means of verification that work was performed• Reflect categories of activities expressed as a

percentage distribution of total activities• Significant changes must be identified and

entered into the payroll distribution system• System provides for an independent internal

evaluation

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Effort in an Academic Setting

….it is recognized that, in an academic setting, teaching, research, service, and administration are often inextricably intermingled. A precise assessment of factors that contribute to costs is not always feasible, nor is it expected. Reliance, therefore, is placed on estimates in which a degree of tolerance is appropriate.

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PI Effort Reductions

Prior sponsor approval required for,“The absence for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator.”A-110 C.25(c)(3)

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Intra University Consulting

Since intra university consulting is assumed to be undertaken as a university obligation requiring no compensation in 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….(J10d(1))

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How Much Effort is Enough?

…most Federally-funded research programs should have some level of committed faculty (or senior researchers) effort, paid or unpaid by the Federal Government. This effort can be provided at any time within the fiscal year (summer months, academic year, or both).

OMB Clarification Memo dated January 5, 2001

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Effort Reporting Cycle

Appointing Faculty &

Staff

Preparing the

Proposal Budget

Charging Salary

Certifying Effort

• Employment terms• No. of months• FTE• Base Salary

• Effort proposed; commitment to sponsor

• Salary is charged• Cost share

tracked• Adjustments to

salary processed timely

• Effort certified after activity completed

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Effort Reporting Audit Environment • Routinely included in IG audit plans• History of costly effort related audit

disallowances for universities• NSF recently completed 16 effort reporting

audits and a capstone report with findings and common themes is in process

• Grant reform initiatives attempting to balance administrative burden and compliance

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University Audit Settlements• Yale $7.6M• Northwestern $5.5M• Cornell $4.4M• UAB $3.4M• Johns Hopkins $2.6M• Harvard $2.4M• Duke $1.7M• St. Louis University $1.0M

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Effort Reporting Compliance Issues

• Inadequate effort reporting system• Failure to distribute and collect effort reports in a

timely manner• Effort reports certified by individuals without

suitable means of verification• Failure to account for all institutional effort• 40 hour work week instead of 100% effort

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Effort Reporting Compliance Issues

• Failure to adjust for significant changes in effort• Faculty charged 100% to sponsored research• Failure to account for cost shared effort including

voluntary commitments• Failure to request approval for PI effort reductions• Lack of independent method for ensuring the

system’s effectiveness (A-133 audit insufficient)

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Payroll Certification: An Alternate Approach

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Effort Reporting: Why Change?

• Effort incurred across multiple activities is difficult to measure

• Effort reports provide limited controls• Administration is inefficient and costly• George Mason needed a more efficient process

for growing research portfolio (expenditures up 50% from FY07 to FY10)

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Federal Demonstration Partnership

• Federal Demonstration Partnership (FDP) began in 1986 and is a cooperative initiative among 10 federal agencies and 119 research institutions

• FDP is focused on reducing the administrative burdens associated with research

• 2005 FDP survey of over 6,000 faculty reported that 42% of time on federal awards spent on administrative tasks

• George Mason became an FDP member in 2008

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Payroll Certification: What is it?

Payroll Certification is an alternative to Effort Reporting that uses a project based methodology and utilizes the concept that “charges are reasonable in relation to work performed”

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Payroll Certification: Benefits• Concept is straightforward and easy to

understand by faculty and administrators• Certification timeframe consistent with

project period and annual technical reporting• Smaller group of certifiers allows for more

effective outreach and training• More time to focus on key internal controls • Reduced administrative burden

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Payroll Certification: Approval

• Mason received approval from the FDP and the Office of Naval Research (ONR) effective January 1, 2011 to pilot Payroll Certification

• George Mason was the first school to receive approval for Payroll Certification

• Three other pilot schools – UC Irvine (HHS), UC Riverside (HHS), Michigan Tech (ONR)

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Pilot Proposal Conditions• All awards transitioned by January 1, 2012• Update policies/procedures, revise DS-2, deploy

training and provide ONR detailed milestone plan for implementation

• Provide feedback to FDP semi-annually• DCAA review of DS-2 for adequacy• Meet with ONR quarterly to review implementation• Review pilot progress regularly but no stated end date

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Payroll Certification vs. Effort ReportingDescription Effort Reporting Payroll Certification

System Focus Individuals Project (Grant or Contract)

Timeframe for Distribution

Consistent points in time End of Project Budget Year

Certification Frequency

Three Times per Year Annually

Types of Funding All Sponsored Funds Federal Funds

Annual # of Reports 2700 700

Approvers Individuals charged to projects

Principal Investigator

System Rationale Effort reasonable based on overall institutional effort

Salary and wage amounts reasonable based on work performed

Committed Cost Sharing

Shown as percentage of overall institutional effort

Shown as amount reasonable based on work performed

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Payroll Certification Report Samples

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Payroll Certification Process

• OSP generates reports 60 days after the last day of the month for the anniversary date or project end date, whichever is sooner

• Reports distributed to Payroll Certification Liaison

• Payroll Certification Liaison works with PIs to obtain approval

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Payroll Certification Process cont.• Payroll Certification Liaison returns reports to

OSP within 45 days of distribution• Reports not received within 45 days sent to

Dean for follow-up and completion within 2 weeks

• Any reports not certified within 60 days will result in salary charges moved to a non-sponsored source of funding

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Assessment of Payroll Certification

• Comparison to “old” effort reporting process• Survey completed February 2011 (150

respondents; majority faculty) to benchmark effort reporting process

• Payroll Certification follow-up survey will be completed Summer/Fall 2012

• Ongoing discussions with various groups on campus to solicit feedback

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Assessment of Payroll Certification• Through twelve reporting cycles (Jan thru Dec 2011)• 67% of reports received within 30 days compared to

33% under prior process in 2010• 93% of reports received within 45 days • 100% of reports received within 60 days

• DCAA DS-2 adequacy review completed Fall 2011 with no findings

• Feedback from faculty and administrators continues to be very positive

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Monitoring Effort/Salary

• Include some level of PI effort on all projects• Request sponsor approval if PI is absent for more

than 3 months or 25% reduction in PI time • Avoid charging faculty 100% to sponsored funds

if they have other responsibilities• Process funding change forms timely (avoid cost

transfer issues)

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Monitoring Effort/Salary cont…• Include complete explanations and necessary

approval signatures• Track committed cost share with activity code• Complete payroll certifications timely• Avoid funding adjustments after project period

previously certified• Review project expenses regularly

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Next Steps for George Mason Pilot

• Solicit feedback from Mason faculty and staff• Ongoing training and outreach• Regular updates to FDP on pilot progress • Meet with ONR quarterly• ONR review Fall 2012• Internal Audit review Fall 2012• IG Audit 2013

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Next Steps Beyond FDP Pilots• Advanced Notice of Proposed Guidance

published February 28, 2012 - discusses exploring alternatives to time and effort reporting and makes reference to FDP Pilots

• Universities continue to look for ways to streamline processes and reduce administrative burden

• Wait and see results of grant reform efforts

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Questions

Mike Laskofski Associate VP of Research Operations

George Mason Universitymlaskofs@gmu.edu

(703) 993-4573