OMNI CIRCULAR KEY AREA #1: TIME AND EFFORT

1. OMNI CIRCULAR KEY AREA #1: TIME AND EFFORT SteveNsPILLAN, Esq. SSPILLAN@bruman.com MIKE BENDER, Esq. MBENDER@bruman.com Brustein & Manasevit, pllc Spring forum 2014

2. Agenda • Current Time & Effort Rules • Final Omni Circular • What’s Next?

3. OMB Circulars Time and Effort Rule • If federal funds are used for salaries, then time distribution records are required. • How staff demonstrate allocability • If employee paid with federal funds, then must show that the employee worked on that specific federal program cost objective.

4. Who must participate? • All employees paid with federal funds!! • Some employees paid with non-federal funds • When salaries are used for match purposes • NOT contractors

5. Does “X” Employee have to keep time and effort records?

6. Time and effort (Current A-87 Rule) Semi-Annual Certifications Personnel Activity Report (PAR) If an employee works on multiple cost objectives: After the fact Account for total activity Signed by employee Prepared at least monthly and coincide with one or more pay periods • If an employee works on a single cost objective: • After the fact • Account for the total activity • Signed by employee or supervisor • Every six months (at least twice a year)

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9. Cost Objectives • What is a cost objective? • “Cost objective” means a function, organizational subdivision, contract, grant, or other activity for which cost data are needed and for which costs are incurred.

10. http://www2.ed.gov/policy/fund/guid/gposbul/time-and-effort-reporting.htmlhttp://www2.ed.gov/policy/fund/guid/gposbul/time-and-effort-reporting.html Time and Effort Guidance by OCFO!!!

11. OCFO Guidance • It is possible to work on a single cost objective even if an employee works on more than one Federal award or on a Federal award and a non-Federal award. • The key to determining whether it is a single cost objective is whether the employee’s salary and wages can be supported in full from each of the Federal awards on which the employee is working or from the Federal award alone if the employee’s salary is also paid with non-Federal funds.

12. OCFO Guidance Examples of Single Cost Objectives: Title I, Part A funds and State compensatory education funds • An LEA supports a supplemental math teacher to serve low-achieving students with 50 percent Title I, Part A funds and 50 percent State compensatory education funds.

13. OCFO Guidance Examples of Single Cost Objectives: Title I, Part A funds and local funds • An LEA supports an elementary school teacher with local funds but pays her with Title I, Part A funds to provide after-school tutoring for low-achieving students. • Although the teacher could not be paid with Title I, Part A funds to provide elementary education, the portion of her time spent on after-school tutoring is easily separated from her teaching position by her schedule.

14. Time and effort (Current a-21 rule) Plan Confirmation After-the-Fact Activity Reports Professional/Professorial staff keep records every six months All other employees keep monthly records Signed by employee, principal investigator, or responsible official using suitable means of verification Must reflect activity applicable to each sponsored agreement and to each category needed to identify F&A costs. • Budgeted allocations for professional/professorial staff • Updated to reflect any significant changes in actual work Multiple Confirmation Records • Variety of records kept in combination at least monthly.

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16. Time and effort (Current A-122 rule) Personnel Activity Reports: • After the fact • Account for total activity • Signed by employee or supervisor with first hand knowledge • Prepared at least monthly and coincide with one or more pay periods

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18. OMNI Circular: Time and Effort Documentation 200.430 Most flexible and most changed Rule

19. Time Distribution Records “Standards for Documentation of Personnel Expenses” • Must be maintained for all employees whose salaries are: • Paid in whole or in part with federal funds 200.430 (i)(1) • Used to meet a match/cost share requirement 200.430(i)(4)

20. Cost Objectives • What is a cost objective? 200.28 (slightly changed) • Program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc.

21. Cost Objectives (cont) • Multiple Cost Objectives 200.430(i)(1)(vii): • More than one Federal award. • A Federal award and a non-Federal award. • An indirect cost activity and a direct cost activity. • Two or more indirect activities that are allocated using different allocation bases. • An unallowable activity and a direct or indirect cost activity

22. OCFOClarifications Re: “single cost objective” Still Applicable Even With New OMNI Circular Changes!

24. NEW: “Standards for Documentation of Personnel Expenses” 200.430 • Charges for salaries must be based on records that accurately reflectthe work performed • Must be supported by a system of internal controls which provides reasonable assurancecharges are accurate, allowable and properly allocated • Be incorporated into official records • Reasonably reflecttotal activity for which employee is compensated • Not to exceed 100%

25. NEW: “Standards for Documentation of Personnel Expenses” 200.430 (cont) • Encompass all activities (federal and non-federal) • Comply with established accounting polices and practices • Support distribution among specific activities or cost objectives

26. NEW: “Standards for Documentation of Personnel Expenses” 200.430 (cont) Compare “reasonably reflect” to current law: • Philadelphia $123 million • Detroit $51 million • Orleans Parish $26 million

27. COFAR Comments on NEW Rule: By focusing more on internal controls, the rule “mitigates the risk that a non-Federal entity… will focus on prescribed procedures... which alone may be ineffective in assuring full accountability.” • Uncovering weaknesses in internal controls or instances of fraud is goal. Not audit findings.

28. NEW: “Standards for Documentation of Personnel Expenses” 200.430 (cont) • Budget estimates alone do not qualify as support for charges to Federal awards 200.430(i)(1)(viii) • Percentages may be used for distribution of total activities 200.430(i)(1)(ix)

29. NEW: “Standards for Documentation of Personnel Expenses” 200.430 (cont) • Grantees encouraged to adopt “substitute systems” if approved by cognizant agency for indirect cost 200.430(i)(5) • Acceptable to allocate sampled employees’ supervisors, clerical and support staffs, based on results of sampled employees

30. NEW: “Standards for Documentation of Personnel Expenses” 200.430 (cont) • If records meet the standards: the non-federal entity will NOT be required to provide additional support or documentation for the work performed (200.430(i)(2)) • BUT, if “records” of grantee do not meet new standards, ED may require PARs (200.430(i)(8)) • PARs are not defined!!

31. What’s Next? • Changes/clarifications in 2014 Compliance Supplement (April 2014*) • Federal Agencies have until Dec. 26, 2014 to finalize conforming regulations (draft due June 26, 2014) • Agencies must get OMB approval if they want to promulgate more restrictive rules • OMB approval is NOT required if agency simply “clarifies” OMB rules

32. Effective Date • Administrative requirements and cost principles will apply to new awards and to additional funding (funding increments) to existing awards made after Dec 26, 2014. • Existing Federal awards will continue to be governed by the terms and conditions of the Federal award.

33. Agency Regulations • Two theories on agency regulations: • Agencies will simply adopt corresponding omni circular language • Agencies will draft own regulations, with possible changes or interpretations

34. SO What Does All this Mean??

35. Disclaimer This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the presentation or later review of these printed materials does not create an attorney-client relationship with Brustein & Manasevit, PLLC. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances.