Effort Certification on Sponsored Projects

1. Effort Certification on Sponsored Projects 2012 CUAV Annual Conference Mike Laskofski George Mason University May 22, 2012

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

3. 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

4. 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

5. Federal Regulations • OMB Circular A-21 (Section J.10) • OMB Circular A-110 • OMB Circular A-133 • Disclosure Statement (DS-2) • www.whitehouse.gov/omb/circulars

6. 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

7. 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

8. 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.

9. 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)

10. 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))

11. 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

12. Effort Reporting Cycle • 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

13. 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

14. 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

15. 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

16. 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)

17. Payroll Certification: An Alternate Approach

18. 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)

19. 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

20. 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”

21. 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

22. 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)

23. 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

24. Payroll Certification vs. Effort Reporting

25. Payroll Certification Report Samples

28. 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

29. 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

30. 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

31. 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

32. 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)

33. 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

34. 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

35. 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

36. Questions Mike Laskofski Associate VP of Research Operations George Mason University mlaskofs@gmu.edu (703) 993-4573