The Illinois Association of Title I Directors

1. The Illinois Association of Title I Directors Spring Meeting April 27, 2010 Crowne Plaza Springfield, Illinois

2. Time and Effort Reporting Presented by: Paula Williams Principal Consultant Illinois State Board of Education External Assurance Division (217) 782-7970 pawillia@isbe.net

3. Topics of Interest Time and Effort Reporting • What is it? • Why is it necessary? • Who must complete it? • How must it be done? • When must it be done? • Systems, Certifications and Components • Example of a Time and Effort Reporting System • Direct Costs • Indirect Costs / Indirect Cost Rate • Cost Allocation Plans • Summary

4. Time and Effort Reporting • What is it? • In general, time and effort documentation provides support for salaries and wages in addition to the standards for payroll documentation.

5. Time and Effort Reporting • Why is it necessary? • Time and effort reporting is required under the Federal Office of Management and Budget (OMB) Circular A-87 – Cost Principles for State, Local and Indian Tribal Governments, Attachment B, Paragraph 8 • If you chose to accept Federal funding, you agree to comply with OMB Circular A-87 • The lack of adequate documentation is one basis for questioning and disallowing costs during an audit

6. Basic Guidelines for Expenditures • Per the OMB Circular A-87, expenditures: • Must be allowable • Must be reasonable • Must be allocable • Must be adequately documented

7. Time and Effort Reporting • Who must complete it? • Educational entities that fund employees with one or more Federal sources of revenue • State Education Agencies (ISBE) • Local Education Agencies (school districts and joint agreements)

8. Time and Effort Reporting • Who must complete it continued… • Employees charged to one Federal indirectcost activity do not have to provide any additional documentation – standard payroll documentation is sufficient • Employees charged to one Federal direct cost activity must certify at least every 6 months that they worked on that one activity • Employees charged to multiple activities, with at least one being Federal, must complete Personnel Activity Reports (PAR)

9. Time and Effort Reporting • Who must complete it continued… • Multiple Activities include: • More than one Federal grant • A Federal grant and a non-Federal grant • An indirect cost activity and a direct cost activity • Two or more indirect activities which are allocated using different allocation bases • An unallowable activity and a direct or indirect cost activity

10. Time and Effort Reporting • How must it be done? • Personnel Activity Reports (PAR): • Must reflect an after the fact distribution of actual activity for each employee • Must disclose a full workload • Must be signed by the employee

11. Actual vs. Budgeted • Budget estimates or other distribution percentages determined before the services are performed do not qualify as support for charges to Federal awards but may be used for interim accounting purposes. • Comparisons of actual costs to budgeted distributions based on the monthly activity reports must be made at lease quarterly.

12. Time and Effort Reporting • When must it be done? • Must be prepared after the work has been completed • Must be completed at least monthly • Must coincide with one or more pay periods

13. Substitute Systems • Substitute systems for allocating salaries and wages to Federal awards may be used in place of personnel activity reports. These systems are subject to approval if required by the cognizant agency. Such systems may include, but are not limited to: • Random moment sampling • Case counts • Other quantifiable measures of employee effort • Examples of substitute systems which use sampling methods include: Temporary Assistance to Needy Families (TANF) and Medicaid

14. Time and Effort Reporting So HOW must it ACTUALLY be done? • There is no standard Federal format on how to record time and effort • Entities subject to time and effort reporting must develop a system that adequately records time and effort

15. Systems: Database system Web-based system Paper system Certifications: Actual signature Electronic signature Components: Breakdown of daily time Program assignment Activity assignment Location assignment Time and Effort Reporting

16. Time and Effort Reporting • Example of a Time and Effort Reporting System: • Database system • Record daily time on a quarterly basis • Assign Program Code (i.e. Title I, IDEA, GSA etc.) • Assign Activity Code (i.e. administration, technical assistance, regulatory, etc.) • Assign Location Code (i.e. Springfield Office, Chicago Office, Non-public/Public School, etc.) • Complete each activity report within 5 days of the end of the payroll period • Submit the activity report – no changes allowed • Electronic signature

17. The Goal • The goal of time and effort reporting is to produce timely, credible documentation that has been developed under a disciplined system and that can be used to support salaries and wages.

18. The Relationship Between: • Time and Effort • Direct Costs • Indirect Costs • Cost Allocation Plans

19. Direct Costs • Direct costs are costs that can be directly traced to or identified with a particular grant project or other institutional activity. • Example: • One full time equivalent (FTE) Title I Director would be a direct cost to a Title I grant

20. Indirect Costs • Indirect costs are costs that an organization incurs for common or joint objectives that cannot be readily and specifically identified with a particular grant project or other institutional activity. • Example: • The district has one bookkeeper who handles all payroll, purchasing and accounts payable for the district. The bookkeeper’s salary would be considered an indirect cost.

21. Indirect Costs • The following expenditure functions are usually considered as indirect costs: • Function 2510 – Direction of Business Support Services • Function 2520 – Fiscal Services • Function 2570 – Internal Services • Function 2640 – Staff Services • Function 2660 – Data Processing Services

22. Indirect Cost Rate • The School Business Services Division of the Illinois State Board of Education annually computes a new indirect cost rate for each school district and joint agreement. • Each year these computed indirect cost rates are made available electronically to the respective local education agencies. • A state-wide average indirect cost rate is also determined at this time. • The indirect cost rate is applied to the amount expended, not to the total grant award, to determine the amount of the indirect costs.

23. Cost Allocation Plan • A Cost Allocation Plan (CAP) is a document that states how a district will identify, accumulate and distribute certain allowable administrative costs in grants and identifies the allocation methods used for distributing the costs. A written plan for allocating joint costs is required to support the distribution of those costs to the grant program.

24. Cost Allocation Plan • A CAP must be documented via personnel time and effort information as well as formal accounting records according to generally accepted governmental accounting principles to substantiate the propriety of the eventual charges. All applicable documentation must be available for review upon request by a local auditor or ISBE compliance monitor.

25. What is the Difference? • An Indirect Cost Rate is a percentage rate determined by the ISBE on an annual basis that can be used to allocate indirect costs to grants. • A CAP is a document created by the district to outline how the district will allocate indirect costs to grants.

26. When to use the Indirect Cost Rate or a CAP? • When completing a grant application and/or amendment, the local education agency must decide to either utilize its restricted Indirect Cost Rate or to utilize a Cost Allocation Plan.

27. Summary • Time and Effort documentation must be maintained for all Federal direct cost employees charged to one or more activities • Time and Effort documentation must be part of a CAP for all indirect cost employees charged to multiple activities

28. References and Resources • OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governmentshttp://www.whitehouse.gov/omb/rewrite/circulars/a087/a87_2004.html • State and Federal Grant Administration Policy and Fiscal Requirements and Procedureshttp://www.isbe.net/funding/pdf/fiscal_procedure_handbk.pdf

29. Questions