Presentation is loading. Please wait.

Presentation is loading. Please wait.

Direct Charges and Effort Reporting For Federally Sponsored Projects

Similar presentations


Presentation on theme: "Direct Charges and Effort Reporting For Federally Sponsored Projects"— Presentation transcript:

1 Direct Charges and Effort Reporting For Federally Sponsored Projects
Clinical Research Center presented by Steve Todd, Associate Director James Mizell, Sr Accounting Manager VUMC Finance Academic and Research Enterprise

2 Government Shows Growing Concern over Effort Reporting
Errors and inaccuracies in effort reporting are costly and can put our research programs, as well as those of the entire institution, in jeopardy. Recent settlements between medical institutions and the US Department of Justice over alleged misuse of federal grant money:

3 Direct Charge Understanding Direct Charges Guidelines

4 Regulatory Guidelines for Direct Charges to Federally Sponsored Projects
Sections C, D and J of OMB Circular A-21 deal with direct costs, allowability, and unallowable costs. Cost Accounting Standards (CAS) regulate consistency in reporting costs, allocating costs incurred for the same purpose in like circumstances, and accounting for unallowable costs. In accepting a federally-sponsored grant or contract, Vanderbilt agrees to abide by certain federal rules and regulations regarding the use of the funds.

5 Direct Costs Defined Costs that can be identified specifically with a particular sponsored project, or That can be directly assigned to such activity relatively easily with a high degree of accuracy A direct cost is any cost that can be specifically identified with a particular project, program, or activity or that can be directly assigned to such activities relatively easily and with a high degree of accuracy. Direct costs include, but are not limited to, salaries, travel, equipment, and supplies directly benefiting the grant-supported project or activity. Most organizations also incur costs for common or joint objectives that cannot be readily identified with an individual project, program, or organizational activity. Facilities operation and maintenance costs, depreciation, and administrative expenses are examples of costs that usually are treated as F&A costs. The organization is responsible for presenting costs consistently and must not include costs associated with its F&A rate as direct costs.

6 Is the cost… The cost principles address four tests to determine the allowability of costs. The tests are as follows: Reasonableness (Including Necessity). A cost may be considered reasonable if the nature of the goods or services acquired or applied and the associated dollar amount reflect the action that a prudent person would have taken under the circumstances prevailing when the decision to incur the cost was made. The cost principles elaborate on this concept and address considerations such as whether the cost is of a type generally necessary for the organization's operations or the grant's performance, whether the recipient complied with its established organizational policies in incurring the cost or charge, and whether the individuals responsible for the expenditure acted with due prudence in carrying out their responsibilities to the Federal government and the public at large as well as to the organization. Allocability. A cost is allocable to a specific grant, function, department, or other component, known as a cost objective, if the goods or services involved are chargeable or assignable to that cost objective in accordance with the relative benefits received or other equitable relationship. A cost is allocable to a grant if it is incurred solely in order to advance work under the grant; it benefits both the grant and other work of the institution, including other grant-supported projects; or it is necessary to the overall operation of the organization and is deemed to be assignable, at least in part, to the grant. A cost is allocable as a direct cost to a grant if it is incurred solely in order to advance work under the grant or meets the criteria for closely related projects determination (See Cost Considerations—Allocation of Costs and Closely Related Work). Consistency. Grantees must be consistent in assigning costs to cost objectives. Costs may be charged as either direct costs or F&A costs, depending on their identifiable benefit to a particular project or program, but all costs must be treated consistently for all work of the organization under similar circumstances, regardless of the source of funding. Conformance. This test of allowability – conformance with limitations and exclusions as contained in the terms and conditions of award, including those in the cost principles – varies by the type of activity, the type of recipient, and other characteristics of individual awards. Cost Considerations—Allowability of Costs/Activities provides information common to most NIH grants and, where appropriate, specifies some of the distinctions if there is a different treatment based on the type of grant or grantee. IIB contains additional information on allowability of costs for particular types of grants, grantees, and activities.

7 Reasonable “A cost may be considered reasonable if the nature of the goods or services acquired or applied, and the amount involved therefore, reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made.” (OMB Circular A-21, Section C.3) Reasonable costs are defined by the government as those that “reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made (OMB Circular A-21 K.c.3).” All costs must be reasonable and necessary. The basic guidelines for testing the reasonableness of a cost are the same among all cost principles.  Generally, a cost is considered reasonable if it passes the “prudent person” test – i.e. a reasonable person would agree that it was reasonable to incur the specific cost in order to carry out the activities of the sponsored project and would also agree that the amount paid for the specific cost was reasonable.  Other major considerations used in determining whether a cost is reasonable are listed in paragraph C.3 of the Circular.

8 Allocable Costs incurred for the benefit of only one project or costs that can easily be assigned to multiple projects which benefit. A cost is considered allocable if the goods or services involved are assignable to the sponsored project in accordance with the relative benefits received by the project. When salaries or other activities are supported by two or more sources, issues arise as to how the direct costs should be allocated among the sources of support. In general, a cost that benefits two or more projects or activities in proportions that can be determined without undue effort or cost should be allocated to the projects on the basis of the proportional benefit. A cost that benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved may be allocated or transferred to the benefiting projects on any reasonable basis as long as the costs charged are allowable, allocable, and reasonable under the applicable cost principles and the grantee’s financial management system includes adequate internal controls (for example, no one person has complete control over all aspects of a financial transaction). As a result, a grantee may allocate costs normally assignable to multiple projects to one of those projects. Costs are considered allocable if they are charged or assignable to a particular cost objective in accordance with relative benefits received or other equitable relationships.

9 Lab Supplies Order in eProcurement

10 Consistent A cost charged to a federally-sponsored project should be given treatment consistent with the treatment such a charge would receive if it was charged to a non-federal funded project. It does not matter what it is, what matters is how it is used. Consistency in charging costs means that costs are treated similarly whether charged to government grants or to University funds and are given consistent treatment through application of generally accepted accounting principles. At Vanderbilt University, there are certain "like circumstances" where costs are consistently treated as direct costs of sponsored projects. Conversely, there are certain "like circumstances" where costs are not considered direct costs, and should NOT be budgeted or charged as direct costs on sponsored projects. However, in all cases, the following standard applies: Identification with the sponsored work (i.e., the scope of work) rather than the nature of the goods or services is the determining factor in determining direct costs. [Office of Management and Budget Circular A-21, Section D.) Justification required in proposals that budget certain costs as direct costs: For the following cost items (and for any others that a layperson may consider routine and administrative in nature), specific written justification as to the relationship between the cost and the proposed project's scope of work should be completed and submitted to the Division of Sponsored Research (for University Central) or to the Office of Biomedical Sciences (for Medical Center grants) or to the Contracts Administration Office (for Medical Center contracts) as a part of the proposal to the sponsoring agency. The documentation should explain the direct benefit relationship between these cost items and the proposed scope of work. Clerical and administrative salaries Office Supplies Postage Local telephone charges Memberships Subscriptions Answering machine/beepers Items generally thought of as having multi-functional use (staplers, hole punches, filing cabinets, chairs, desks, computers, printers, fax machines, calculators, waste baskets, etc.)

11 Allowable A cost is considered allowable if the cost meets the three tests – reasonable, allocable, and consistent - and is considered allowable according to the award agreement, Generally Accepted Accounting Principles (GAAP) and other applicable regulations. (See pages of VU Guidelines for Budgeting and Charging Direct Costs for additional information.) In addition to a solid understanding of OMB Circular A-21, the determination of allowability of costs on sponsored projects often requires a close familiarity with the programmatic and technical aspects of the sponsored project and the approved budget. For this reason, ultimate responsibility for determining the allowability of costs on a sponsored projects rests with the principal investigator. By understanding OMB Circular A-21, as well as the regulations of specific funding agencies, grant administrators will be able to aid the principal investigator in determining allowability of costs and will enable the administrator to provide up-to-date and accurate advice as needed by the principal investigator and others within their department.

12 Accounting for Unallowable Costs
Many costs which are specifically identified as unallowable for federally-sponsored grants or contracts may be allowable if paid for from institutional or non-federal funds. Federal regulations specifically prohibit many costs from being charged to federally-sponsored grants or contracts. Many of these costs may be allowable under Vanderbilt policy when paid for from unrestricted or non-governmental restricted funds.

13 Specifically Prohibited Costs
Advertising for general promotion of University Alcoholic beverages Fundraising Antiques Bad debt write-offs Charitable contributions Commencement expenses Decorative Objects Entertainment Fine/original Art Fines and penalties First class / business class travel differentials Flowers Gifts and Awards Goods / services for personal use Lobbying Membership in airline travel clubs Selling or marketing products or services of the University Social events Membership in civic, social or country clubs

14 Effort Reporting

15 OMB Circular A-21 “Cost Principles for Educational Institutions”
The principles that govern how colleges and universities must document time and effort on federal grants and contracts appear primarily in OMB Circular A-21. Section J.10.b(2) of Circular A-21 (revised 5/10/04) sets forth six standards for payroll distribution that provide a reasonably clear outline of a compliant time and effort reporting system. Key points are: The system of allocation of salaries based on effort must be “incorporated into the official records of the institution.” The system must “reasonably reflect the activity for which the employee is compensated by the institution.” The system must provide some form of “after-the-fact confirmation or determination” of the reasonableness of the salary allocations to federal grants. Employee salary allocations must be confirmed by the employees themselves or by “responsible persons with suitable means of verification that the work was performed.” The payroll distribution system “may reflect categories of activities expressed as a percentage distribution of total activities.” “Significant changes in the corresponding work activity must be identified and entered into the payroll distribution system.”

16 Why This Is Important To You
In accepting a federally-sponsored grant or contract, Vanderbilt agrees to abide by certain federal rules and regulations regarding the use of the funds. OMB Circular A-21 deals with direct costs, allowability, and unallowable costs and requires that charges to federal grants and contracts be: Reasonable Allocable Consistent Allowable Reference Vanderbilt University’s Allowable Cost Guidelines for more information.

17 Why This Is Important To You
Through the federal mandate for effort reporting systems, institutions must obtain certifications from all individuals working on a federally sponsored project. Accurate time and Vanderbilt professional effort reporting is a federal and institutional requirement. These records are subject to audit by our: Internal auditors, External auditors, and/or Federal sponsors.

18 What Goes Into VU Professional Effort
Effort percentages must be based on average of the actual amount of time spent on your VU professional work. The number of hours each week may substantially exceed 40 hours. VU professional time, includes, but is not limited to research, clinical, teaching, and administrative activities. It may include time spent at other locations or from home (e.g. reading journals relevant to research being performed).

19 Exclusions from Effort Reporting
Any outside activity for which compensation is paid (or would ordinarily be expected to be paid) directly to you as an individual from sources outside the University (e.g. consulting, NIH, VA, or volunteer work, such as President of AHA). For activities deemed excluded from your VU effort, it is critical the Vanderbilt-funded staff (including administrative staff) not perform duties related to the work.

20 What You Must Know If you are charged to federally sponsored projects, you must certify your effort each time your federal sources of salary change or if no changes, you must certify at least yearly. Vanderbilt requires the Effort Report to be certified by the individual performing the work (rare exceptions). The system used at Vanderbilt for salaried employees to certify effort is ePAC–electronic Personnel Action Change. Hourly employees certify monthly for the previous month’s paid effort. You are responsible for the accuracy of your effort report and should be comfortable with explaining it to an auditor.

21 Common Effort Reporting Compliance Problems
Failure to include all institutional effort in the effort percentage calculation (teaching, administrative, clinical, grant writing) Inaccurate statements of effort on federal projects Faculty charged 100% to sponsored research Failure to account for unfunded effort Failure to adjust for significant changes in effort levels between effort reports Use of a “normal” 40-hour work week as the basis for the effort percentage calculation

22 Example Assume that Dr. Jones works an average of 50 hours each week performing the following activities: 20 hours federal research (including evenings and weekends) 10 hours seeing patients (including evenings and weekends) 10 hours teaching medical students 5 hours attending departmental, institutional, committee and other general meetings. 5 hours teaching fellows new laboratory techniques on T-32 grant

23 Example Based on above, what is the allocation of effort? 50 hours =
Assume that Dr. Jones works an average of 50 hours each week performing the following activities: 20 hours federal research (including evenings and weekends) 10 hours seeing patients (including evenings and weekends) 10 hours teaching medical students 5 hours attending departmental, institutional, committee, other general meetings. 5 hours teaching fellows new laboratory techniques on T-32 grant Example Based on above, what is the allocation of effort? Dr. Jones’ Vanderbilt denominator is ? hours 50 hours = 100%

24 Example Based on above, what is the allocation of effort?
Assume that Dr. Jones works an average of 50 hours each week performing the following activities: 20 hours federal research (including evenings and weekends) 10 hours seeing patients (including evenings and weekends) 10 hours teaching medical students 5 hours attending departmental, institutional, committee, other general meetings. 5 hours teaching fellows new laboratory techniques on T-32 grant Example Based on above, what is the allocation of effort? Dr. Jones’ Vanderbilt denominator is 50 hours Research: 20 hours = Patient care: 10 hours = Instruction (non-grant related): 10 hours = Administrative (non-grant related): 5 hours = Sponsored research training: 5 hours = 10% 10% 40% 20% 20%

25 Example Based on above, what is the allocation of effort?
Assume that Dr. Jones works an average of 50 hours each week performing the following activities: 20 hours federal research (including evenings and weekends) 10 hours seeing patients (including evenings and weekends) 10 hours teaching medical students 5 hours attending departmental, institutional, committee, other general meetings. 5 hours teaching fellows new laboratory techniques on T-32 grant Example Based on above, what is the allocation of effort? Dr. Jones’ Vanderbilt denominator is 50 hours Research: 20 hours = 40% Patient care: 10 hours = 20% Instruction (non-grant related): 10 hours = 20% Administrative (non-grant related): 5 hours = 10% Sponsored research training: 5 hours = 10% 10% 10% 40% 20% 20%

26 Example for Discussion
Assume that Dr. Jones works an average of 55 hours each week performing the following activities: 45 hours federal research (3 ROIs) 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) The remainder on teaching and administrative activities for Vanderbilt

27 Example Based on above, what is the allocation of effort?
Assume that Dr. Jones works an average of 55 hours each week performing the following activities: 45 hours federal research (3 ROIs) 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) The remainder on teaching and administrative activities for Vanderbilt Based on above, what is the allocation of effort? Excluded Time is ? Hours

28 Example Based on above, what is the allocation of effort? 5 50 hours =
Assume that Dr. Jones works an average of 55 hours each week performing the following activities: 45 hours federal research (3 ROIs) 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) The remainder on teaching and administrative activities for Vanderbilt Based on above, what is the allocation of effort? Excluded Time is Hours Dr. Jones’ Vanderbilt denominator is ? Hours 5 50 hours = 100%

29 Example Based on above, what is the allocation of effort? 5 50
Assume that Dr. Jones works an average of 55 hours each week performing the following activities: 45 hours federal research (3 ROIs) 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) The remainder on teaching and administrative activities for Vanderbilt Based on above, what is the allocation of effort? Excluded Time is Hours Dr. Jones’ Vanderbilt denominator is Hours 5 50 50 hours = 100%

30 Example Based on above, what is the allocation of effort? 5 50
Assume that Dr. Jones works an average of 55 hours each week performing the following activities: 45 hours federal research (3 ROIs) 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) The remainder on teaching and administrative activities for Vanderbilt Based on above, what is the allocation of effort? Excluded Time is Hours Dr. Jones’ Vanderbilt denominator is Hours Research: 45 hours = Teaching/Administrative: 5 hours = 5 50 10% 90%

31 Example Based on above, what is the allocation of effort? 5 50
Assume that Dr. Jones works an average of 55 hours each week performing the following activities: 45 hours federal research (3 ROIs) 5 hours on outside activities for other compensation to review grants for outside agencies and working as the editor of JCI (external publication) The remainder on teaching and administrative activities for Vanderbilt Based on above, what is the allocation of effort? Excluded Time is Hours Dr. Jones’ Vanderbilt denominator is Hours Research: 45 hours = 90% Teaching/Administrative: 5 hours = 10% 5 50 10% 90%

32 Effort Certification – Non-exempt
Non-exempt staff must certify their effort once a month for the earnings periods paid in the previous month when working on a federally sponsored project. The effort certification resides in ePAC. Users will be prompted via when certification is ready. The effort certification statement reads as follows: “I certify that I have first hand knowledge of (or have used suitable means of verifying) work performed by this individual and that the salary distribution for the period covered is reasonable in relation to the work performed.”

33 In this example, the employee is moving 4 hours of time recorded from center to center Click OK to complete the transfer of hours. You will need to complete this action as many times as necessary so that the hours allocated match actual hours worked on each grant/project for each week.

34 Click SAVE in order to see your total time allocated, including the hours you moved, in the TOTALS & SCHEDULE tab. Also, notice the addition of the MOVED AMOUNTS tab.

35 Effort Certification - Exempt
For exempt employees, certifications are made using ePAC (the electronic Personnel Action Change application). Simply click the appropriate button to approve the certification. The effort certification statement reads as follows: “I certify that I have first hand knowledge of (or have used suitable means of verifying) work performed by this individual and that the salary distribution for the period covered is reasonable in relation to the work performed.”

36 electronic Personnel Action Change
ePAC electronic Personnel Action Change

37 What is ePAC? Vanderbilt’s web-based system with electronic workflow for plan confirmation and effort certification (electronic Personnel Action Change) Faculty/staff notification of effort certification requirement based on occurrence of designated events: Earnings Distribution Changes (EDC) Retroactive Distribution Changes (RDC) Annual Certification (ACR) Final Certification (FCR) Electronic workflow approvals On-line tracking of distribution of personnel action change status Interfaces to update Human Resource Management system for position, job, and distribution changes and to financial systems for retroactive distribution changes

38 ePAC Effort Certification Email example

39 Certifying a PAC Earnings Distribution Change (EDC) or Retroactive Distribution Change (RDC) will be listed in the Distributions Worklist Final Certification Record (FCR) or Annual Certification Rerecord (ACR) will be listed under the Certifications tab

40

41

42

43

44

45

46 Research Compliance Experts (RCEs) Clinical Departments
As of December 2012 Anesthesiology – Stephen Bruehl Emergency Medicine – Alan Storrow Hearing and Speech – Jim Bodfish Medicine – Blackwell, Su, Biaggioni, Andl, May, Fowke, Wilson, George, Brandt, Hulgan, Elasy, Pozzi, Aune Neurology – Subramaniam Sriram Ob-Gyn – Kaylon Bruner Tran Ophthalmology – John Kuchtey Ortho – Ginger Holt Otolaryngology – David Zealear PMI (Pathology) – Larry Swift Psychiatry – Ron Cowan Pediatrics – William Russell, John Phillips, Candice Fike, Michael Aschner, Lynn Walker Radiology – Bruce Damon Radiation Oncology – Michael Freeman Section of Surgical Sciences – James Goldenring

47 Research Compliance Experts (RCEs) Basic Departments
As of December 2012 Biochemistry – Frederick Guengerich Biostatistics – Chun Li Cell Biology – Steve Hann Cancer Biology – Fiona Yull Informatics – Paul Harris PMI (Microbiology) – Chris Aiken Molecular Physiology – David Piston Pharmacology – Brian Wadzinski 47

48 Useful Links OMB Circular A-21
OMB Circular A-110 OMB Circular A-133 Administrator’s Resource (Online Reference Guide) https://medschool.mc.vanderbilt.edu/dept_managers/ VU Policies for Post-Award Management & Compliance https://dof.mc.vanderbilt.edu/are/pages/ggc/pub/policy.aspx VU Faculty Research Effort Reporting and Certification Online Training https://medschool.vanderbilt.edu/foto/ VU Staff Effort Reporting and Certification Online Training Medical Center Compliance Office NIH Grants Policy Statement Includes “Who to Contact” section for Finance: Academic & Research Enterprise

49 .


Download ppt "Direct Charges and Effort Reporting For Federally Sponsored Projects"

Similar presentations


Ads by Google