Effort Report Education Workshop Tim Burris ACE Team (Audit, Compliance, Effort) Office of Research Administration Indiana University 509 E. 3rd Street Bloomington, IN November 8, 2010

Effort Report Education Workshop What we will cover ◦ Why do we report effort? ◦ What is Effort Certification? ◦ How do we report effort? ◦ What to look for in specific effort report scenarios ◦ What justification do we need to approve changes in effort ◦ Cost share and effort  Expense subaccounts vs. true cost share subaccounts  NIH Salary Cap ◦ Types of pay not included in effort  Supplemental pay  Fellowships ◦ Employees with more than one appointment ◦ Salary Transfers and Effort Periods ◦ Effort recreates ◦ What’s around the corner? / Questions

Why do we report effort? Office of Management and Budget (OMB) Circular A-21 (Section J.10) Cost principles for educational institutions Verification that the salaries charged are consistent with effort expended IU Policy – Effort Reports Employees with regular pay Effort reports are issued to certify effort

How do we report effort? Indiana University utilizes an “after the fact” effort Reporting based on periodic effort period. Payroll data is gathered from the Financial Information System (FIS) labor ledger on a periodic basis to determine 100% of each employee’s regular compensation, (i.e. Institutional Base Salary). That data is complied and distributed through the Effort Reports in FIS.

How do we report effort? Effort Periods are based on classification, for example:  Monthly 12-Pay  M01 - July 1 to December 31  M02 - January 1 to June 30  Academic 10-Pay  A01 – August 1 to December 31  A02 – January 1 to May 31  A03 – May 1 to August 31  Biweekly  B01– July 1 to December 31  B02 – January 1 to June 30

Scenario 1 – The Basic Effort Report One Sponsored Project. One Departmental Account.

Scenario 2 – Multiple Projects Consider an investigator with multiple projects or a research assistant who works with multiple investigators. ◦ If pay is already distributed to all the relevant accounts, all will be displayed on the effort report. ◦ If some accounts are not listed, they will need to be added to the effort report. ◦ If projects are underway but the award is not yet finalized, request an underwrite account be established for the project so that effort is charged to the project account up front, rather than moving salary charges later.

Scenario 3: Start and Stop Dates in mid- Period Most projects do not start and stop on same dates of the Effort Report periods. When calculating effort, the start and stop dates need to be taken into account. – Review start/stop dates on awards Drill down into the account to view start/stop dates Drill down into labor ledger to view salary posted – Ensure pay distribution okay for accounts beginning/ending within report period. Drill down to review actual pay during month per account

Justifying Changes in the Effort Reports Understanding why justifications are important. What should your justifications include? ◦ What do you know now that you didn’t know when the initial pay was reviewed or the original effort report was certified? ◦ How was the incorrect effort distribution determined? ◦ What is being done to prevent similar occurrences in the future? Please don’t use the phrase “To correct Effort.”

Cost Share Cost sharing or “match” is defined as the portion of the project or program costs that are not borne (paid for) by the funding agency. ◦ Mandatory Committed Cost Share ◦ Voluntary Committed Cost Share ◦ Voluntary Cost Share Cost share is either provided by the university or provided by a third party.

Mechanics of Cost Share Research Administration Activities ◦ Establish Main Account ◦ Establish a Cost Share Sub-account  Dept. source account Department charges expenses to the CS sub-account ◦ Pay distribution – e-doc ◦ Travel ◦ EPIC purchases ◦ Etc. The System transfers cash to cover the expenses. ◦ Transfer of Funds document (TF) is automatically generated, posting a “contra-expense” into the cost share sub-account to offset the cost share expenses incurred each day (object code 9915). ◦ The Dept source account shows a “Transfer of Expense” to reflect the cash transfer (object codes 9920, 9956, etc.).

Cost Share Main Account Cost Share Sub-Account Department Account Expenses – charged to a Cost Share Sub-Account Cash Cash is transferred nightly to cover all cost share expenses incurred that day.

Scenario 4 – Cost Share Expense sub-accounts are aggregated with the main account into one line on the effort report. Cost share sub-accounts are entered on a separate line to allow users to identify the departmental source accounts. This helps users correctly allocate effort to the source account that is covering the cost share. Most accounts only have one cost share sub-account, but some have multiple sub-accounts to reflect the various departmental source accounts which are funding the cost share.

Scenario 5 – NIH Salary Cap NIH (and a few other DHHS agencies) have limited the amount of salary that they will reimburse. This limit has been in effect since The limits for current year funding from NIH are available at The limits are for a full 12-month 1.0 FTE position at 100% effort. (100% effort should be reduced in individual has other activities within an appointment.) If an individual works less than 100% on a project, the limit is prorated. Likewise, the limit is prorated for 9-month academic employees, or employees with less than 1.0 FTE. IU’s policy is that any salary above the cap may not be paid by NIH accounts, but instead must be cost-shared.

NIH Salary Cap – Example 1 A 12-month faculty member making $200,000/year. The current NIH cap is $199,700. If the faculty member spent 100% of his/her effort on an NIH grant, only $199,700 could be charged on the main account, and $300 would be cost-shared using the standard cost share sub-account process. If the faculty member’s effort was 50% on the NIH grant, the limit is prorated to 50% as well. Therefore, only 50% of the cap ($99,850) could be charged directly on the main account, and $150 would be cost shared.

NIH Salary Cap – Example 2 A 10-month faculty appointment making $160,000/year. The current NIH cap is $199,700, but IU must prorate for our 10 month appointments. The current calculation for these appointments is $150,717. If the faculty member spends 100% of his/her effort on an NIH grant, only $150,717 could be charged on the main account, and $9,283 would be cost-shared using the standard cost share sub- account process. If the faculty member’s effort was 50% on the NIH grant, the limit is prorated to 50% as well. Therefore, only 50% of the 10 month cap ($75,358.50) could be charged directly on the main account, and $4, would be cost shared. If the faculty member earns summer-session salary, the cap must continue to be applied. The same prorating process is required.

Scenario 6 – Supplemental Pay Supplemental Pay is usually on object code 4580 (some other object codes as well) Supplemental Pay object codes are not included in the Effort Reports. If you believe that Supplemental Pay is showing on an Effort Report, contact FMS Payroll or Research Administration. It is possible that the Supplemental Pay has been incorrectly charged as a normal-pay object code. It is important to get this corrected – it impacts the employee’s fringe benefits. Indiana University defines Supplemental Pay as: ◦ Outside appointment ◦ Across departmental lines ◦ Non-recurring To be direct charged to a federally sponsored project, supplemental pay must be formally approved by the sponsoring agency.

Scenario 7 - Fellowships Know the situation – understand the relationship between the individual and the institution – Fellowships recipients do not have an employee/employer relationship. – Fellowship payments are not considered compensation, and therefore are not included in the Effort Reports. – Fellowship payments are typically on object codes 5820 or – Within accounts, fellowships are only allowed on Training or Fellowship grants.

Scenario 7 – Fellowships (cont.) Occasionally, a paid position is called a “fellowship” when it truly is not a fellowship. Units may define “fellowship” differently. For purposes of Effort Reporting, a fellowship is an award which provides support for a researcher. It does not constitute an employer/employee relationship. Do not confuse a fellowship with a “Fellow.”

Scenario 8 – Split Appointments Staff members with two appointments – One salaried, exempt position – One hourly or bi-weekly position – Two Effort Reports – one for exempt, one for non-exempt – Be aware of staff who fall into this category, so that you can focus on the duties of each position when completing the Effort Report. – Also be aware of employees who change appointments within an effort period Staff members with one appointment and one fellowship – Frequently seen with post-docs who receive a fellowship and a part- time instructor or researcher appointment. – Consider that the fellowship will not be included in the Effort Report, so only include activities that relate to the part-time appointment.

Effort Reports and the Labor Ledger The Effort Reports are primarily a mechanism to satisfy OMB Circular A-21 requirements for a method of “Payroll Certification.” For that reason, Effort Reports are linked to the salaries which have been posted to the FIS labor ledger. Any changes to Effort Reports result in changes to the labor distribution. The individual’s salary distribution among accounts is automatically adjusted to reconcile with the effort distribution on the approved Effort Reports. The automatic salary transfers occur after the Effort Report has been fully approved and inserts the final approver’s name into the salary transfer document as the Initiator. Remember that these automatic salary transfers will not move salary to an “expense” subaccount

Salary Transfers and Effort Reports Salary transfers change the Labor Ledger distribution and therefore affect effort reporting. Once individual effort periods are opened for reporting, initiation of salary transfers are no longer allowed Notification is provided regarding upcoming effort report generation and cutoff of salary transfer initiation. If salary transfers are not fully approved by the date individual effort periods are opened, they will be disapproved to maintain the accuracy of effort reporting

Top 10 Reasons for Effort Recreates 10.The account wasn’t set up in time for me to post salaries. 9.It’s a cost reimbursable account that’s about to expire, and it still has money left. 8.It’s a fixed-price account – who cares what gets charged to it? 7.I finally have the signed copies of the Effort Reports from the PI, but it looks like she’s made changes. 6.I’m trying to move that overdraft Research Administration keeps complaining about.

Top 10 Reasons for Effort Recreates (cont.) 5.I’m trying to get the account’s residual funds under $50, If I put more effort on the prior effort report, I won’t have to allocate any effort on the next one. 3.I know we just certified the original effort report, but that was before the other grant came in. 2.I need to allocate effort to the cost share subaccount. 1.I just approved the Effort Report you recreated for me, but I forgot to make the changes!

Typical Questions… Why, when I change the effort, do the dollars not come out correctly? Why, when I change the effort, do the fringe benefits not balance? Why, when I allocated effort to the expense sub- account, didn’t it book to the expense sub-account? The Effort Report doesn’t show supplemental pay. How do I distribute supplemental pay? I have a person with a split appointment. How do I move salary for their monthly pay when they have an outstanding biweekly effort report? Why can’t I transfer salary between non-grant accounts?

What’s around the corner? - New Bi-weekly effort reporting period - New Policies -Effort reporting & delinquent effort reports -Effort recreates -NIH Salary Limitation -Cost Transfers - Review of effort recreates and cost transfers - Monitoring of delinquent effort reports

Questions and Answers Additional topics are covered in the Advanced Education Workshop

Questions & Additional Training Tim Burris ACE Team (Audit, Compliance, Effort) Office of Research Administration Indiana University 509 E. 3rd Street Bloomington, IN Telephone (812) Fax (812)