NSF OIG Labor and Effort Audits Lessons Learned so far

1. NSF OIG Labor and Effort Audits – Lessons Learned (so far) July RARA Presenter: Michael Ritz ORPA – CLASP Facilitator

2. Overview There are now five audits that have been completed, and posted, by the National Science Foundation Office of Inspector General (OIG) dating from June 2006 through March 2008. The audits are focused on internal controls and systems, rather than disallowances of labor charges, as demonstrated by the tone of the written audit observations.

3. Overview Even though some of the institutions do not adhere to the plan confirmation effort system, we can learn lessons from these audit reports regarding: Timeliness of effort-related reports Suitable means of verification Interpretation of “significant change” in effort Documentation regarding an appointment Key personnel Voluntary commitments of effort

4. Timeliness of Effort-Related Reports An institution must have policies regarding timeliness of effort reports. The institution is audited to determine compliance with such time-standards. The audit reports suggest the Department Chairs actively monitor timeliness and that an institution adopt and enforce strict penalties for noncompliance.

5. Timeliness of Effort-Related Reports NSF audit position: Lateness of report preparation and certification increases the risk of misallocation of effort since the accuracy of the changes/certifications is based on memory (which is less reliable with the passage of time).

6. Timeliness of Effort-Related Reports Application to: Fall Plan Confirmation Report 800 Forms Semi-annual K award confirmation Cost Sharing Certification Forms (where effort is being cost shared)

7. Suitable Means of Verification If an individual or PI does not certify for himself/herself, the expectation is that the person who does certify must have active engagement (e.g., email communication, oral and/or written correspondence, etc.) with the respective individual. OMB Circular A-21 does not give specific guidance as to what is an acceptable form of “suitable means of verification”.

8. Suitable Means of Verification The NSF auditors took exception to administrators who signed effort certifications based upon a general understanding that the work was being performed.

9. Suitable Means of Verification One institution adopted a practice that only PIs would certify effort for individuals working on their projects. If an employee works for multiple PIs, then the employee’s effort is certified piecemeal (i.e., each piece by each associated PI). A certification of 100% effort by one accountable individual is not achieved. The PI needs to speak with other PIs and the employee whose effort allocation is being certified.

10. Suitable Means of Verification Do individuals certifying effort in your department have suitable means of verification? Examples: Direct supervisory responsibility Email correspondence Contemporaneous notes from meetings

11. Interpretation of Significant Change in Effort One institution was cited for not having a policy that defined the threshold level for triggering a payroll adjustment. Some institutions employ a 5% threshold; however, there can be confusion/inconsistency in application (e.g., 5 percentage points or 5 percent?).

12. Interpretation of Significant Change in Effort When significant changes were identified, they were not entered into the payroll system contemporaneous with the change in effort (aligns with the earlier discussion of timeliness of effort reports).

13. Interpretation of Significant Change in Effort What do you consider a significant change in effort? Please recall: 1 – 2 month guideline 25% percent reduction in commitment

14. Appointment Letters, Work Responsibilities, Institutional Base Salary These three topics define the basis for charging salaries to federal projects. At one institution the NSF OIG focused on the available documentation (or lack thereof) related to these areas.

15. Appointment Letters, Work Responsibilities, Institutional Base Salary Are appointment letters in sync with the effort distributions of particular faculty members (with consideration of sources of cost sharing)?

16. Key Personnel NSF OIG regards key personnel with no effort charged to a project as indicative of an insufficient commitment to the project. In effect, NSF OIG is implying there should be a minimum effort commitment to a project.

17. Key Personnel No metric has yet to be defined, but it is reasonable to assume it will be in the range of 1% - 5%. The minimal effort commitment could be a direct salary charge or a cost sharing commitment.

18. Key Personnel How do you ensure that all key personnel have at least 75% of their proposed effort commitment to the project charged to the related project ledger account (or cost shared)? Do you ensure that the PI always has effort charged (or cost shared) for their awards—unless a rare exception exists?

19. Voluntary Commitments in the Application Any narrative describing the proposed research plan is subject to representing a voluntary commitment of effort. Example: “The PI will dedicate Friday afternoons to the project” is a commitment, and is cost sharing if the value of the effort is not included in the budget.

20. Voluntary Commitments in the Application Establish a process to carefully review grant application narratives prior to proposal submission. Furthermore, the Current and Pending support section must be accurately completed so that a determination may be made of the individual’s ability to meet the proposed time on the current application.

21. Voluntary Commitments in the Application Do you look for buried cost sharing commitments in proposals? How do you ensure adequate effort is available to meet the commitments? Are all activities (direct charged and cost shared) disclosed in the Current and Pending Support sections of proposals? How do you ensure effort allocations are aligned with proposal commitments?

22. What’s to come? The NSF OIG labor and effort audit program might continue for several more years. It is anticipated that there will be approximately thirty audits in total. It is expected that the NSF OIG will issue a capstone report to summarize all findings.