1. Where Innovation Is Tradition Payroll Certification: An Alternative to Effort Reporting NCURA FRA Rich Andrews, UC Irvine Mike Laskofski, George Mason March 11, 2013 1

2. Where Innovation Is Tradition Why Monitor Effort/Salary? Salary and wages account for approximately 60% of all sponsored expenditures Certification of salary and wages on federal awards is required by the federal government Key area of focus by auditors to verify what was proposed was actually done 2

3. Where Innovation Is Tradition Effort Reporting: Why Change? Effort incurred across multiple activities is difficult to measure Effort reports provide limited controls Administration is inefficient and costly 3

4. Where Innovation Is Tradition 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 6000 faculty reported that 42% time on federal awards spent on administrative tasks 2011 FDP survey of over 13000 faculty similar results 4

5. Where Innovation Is Tradition 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” 5

6. Where Innovation Is Tradition 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 6

7. Where Innovation Is Tradition George Mason University Public University located in Fairfax, Virginia Established in 1972 Over 32,500 students on 4 campuses Sponsored Expenditures FY12: $97M George Mason became an FDP member in 2008 7

8. Where Innovation Is Tradition Payroll Certification: Approval Mason received approval from the FDP and the Office of Naval Research (ONR) effective January 1, 2011 to pilot Payroll Certification Three other pilot schools – UC Irvine (HHS), UC Riverside (HHS), Michigan Tech (ONR) 8

9. Where Innovation Is Tradition 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 9

10. Where Innovation Is Tradition Communication and Outreach Research Council Senior Administration (Provost, Deans) Department Chairs Faculty Meetings OSP Advisory Group (Senior Unit Administrators) Training Sessions (50+ attendees March/April 2011) Website, Email, Newsletter Individual support for PIs and Liaisons monthly 10

11. Where Innovation Is Tradition Payroll Certification vs. Effort Reporting DescriptionEffort ReportingPayroll Certification System FocusIndividualsProject (Grant or Contract) Timeframe for Distribution Consistent points in timeEnd of Project Budget Year Certification Frequency Three Times per YearAnnually Types of FundingAll Sponsored FundsFederal Funds Annual # of Reports2700700 ApproversIndividuals charged to projects Principal Investigator System RationaleEffort reasonable based on overall institutional effort Salary and wage amounts reasonable based on work performed Committed Cost Sharing Shown as percentage of overall institutional effort Shown as amount reasonable based on work performed 11

12. Where Innovation Is Tradition Payroll Certification Report Samples 12

13. Where Innovation Is Tradition 13

14. Where Innovation Is Tradition 14

15. Where Innovation Is Tradition 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 15

16. Where Innovation Is Tradition 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 16

17. Where Innovation Is Tradition 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 Spring 2013 Feedback from faculty and administrators continues to be very positive 17

18. Where Innovation Is Tradition Assessment of Payroll Certification DCAA DS-2 adequacy review completed Fall 2011 with no findings Through 20 reporting cycles (Jan 2011 thru Aug 2012) 70% of reports received within 30 days compared to 33% under prior process in 2010 95% of reports received within 45 days 100% of reports received within 60 days 18

19. Where Innovation Is Tradition 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 19

20. Where Innovation Is Tradition 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 20

21. Where Innovation Is Tradition Next Steps for George Mason Pilot Complete follow-up survey Spring 2013 Regular updates to FDP on pilot progress Meet with ONR quarterly Internal Audit report March 2013 IG Audit 2013 Spring 2013 21

22. Where Innovation Is Tradition 22 Questions Mike Laskofski George Mason mlaskofs@gmu.edu Rich Andrews UC Irvine randrews@uci.edu

23. Payroll Certification: An Alternative to Effort Reporting Rich Andrews University of California, Irvine March 11, 2013

24. University of California, Irvine Public University located in Irvine, California Part of a 10 campus system Founded in 1965 About 28,000 students FY 2011-12 research expenditures: $245M A Medical Center No football team

25. Payroll Certification: Approval UC Irvine received approval from the FDP and the Department of Health and Human Services (HHS) effective April 1, 2011 to pilot Payroll Certifications UC Irvine implemented the system in August 2011

26. Control Benefits Focuses on special costing rules NIH Salary Cap NSF Salary Limit Clerical and Administrative Salaries No proposal preparation charges 90% to 100% federal funded salary = minimal other activities Easier to understand Integrates with other controls

27. Payroll and Payroll Distribution Payroll and Payroll Distribution Human Resources Human Resources Effort Reports Effort Reports Monitoring Proposals Work Load Records Work Load Records Faculty & Staff Input Faculty & Staff Input Internal Controls Supporting Effort Reporting Internal Audit Training Whistleblower Accounting System Policies and Procedures Policies and Procedures Financial Status Reports Financial Status Reports Internal Controls Federal Guidelines

28. Payroll and Payroll Distribution Payroll and Payroll Distribution Human Resources Human Resources Monitoring Proposals Work Load Records Work Load Records Faculty & Staff Input Faculty & Staff Input Payroll Certifications as an Internal Control Internal Audit Training Whistleblower Accounting System Policies and Procedures Policies and Procedures Financial Status Reports Financial Status Reports Internal Controls Payroll Certifications Federal Guidelines

29. Unfocused Compliance Compliance Costing Issues Effort Reports NIH Salary Cap NSF Salary Limit Etc. Correct Signer TimelyEtc.

30. Payroll Certifications Focus on Compliance  Principal Investigator  Co-Principle Investigator  Project Accounting Support  Lab Supervisors  Contract and Grants Accounting  Sponsored Project Administration ComplianceCompliance Establish Expectations

31. Pilot Proposal Conditions 18-month pilot All awards transitioned on April 1, 2011 Pilot initially ended September, 30, 2012 Pilot extended to December 31, 2013 Updated policies/procedures, revised DS-2 Training and new websites Two Internal Audit Reviews at 9 & 18 months Faculty and Staff survey Email certifications allowed

32. Communication and Outreach Trained Payroll Certification Coordinators Faculty trained by Coordinators Notified senior management Emailed Faculty

33. Payroll Certification Reports Payroll Expense Reports Pay Certification Reports Instructions

36. Certification Rationale OMB Circular A-21, J.10.c.(1)(e) Plan Confirmation “At least annually a statement will be signed by the employee, principal investigator, or responsible official(s) using suitable means of verification that the work was performed, stating that salaries and wages charged to sponsored agreements as direct charges, and to residual, F&A cost or other categories are reasonable in relation to work performed.”

37. Payroll Certification Reports Around the 7 th of each month, Contracts and Grants Accounting notifies departments that the PCS has certifications for them to download. PCS Coordinators work with the PI’s to obtain certification. The completed certification is due back in Contracts and Grants Accounting within 45 days.

38. Payroll Certification Reports If not certified within 45 days, assistant deans, finance administrators, and the Vice Chancellor for Research are notified. Policy allows for transferring uncertified salaries off sponsored projects after 60 days, but has not been enforced.

39. Number of Payroll Certifications University of California, Irvine MONTH 2011 2012 January 72 February 76 March 103 April 81 84 May 97 90 June201208 July145139 August 266246 September 130 133 October 25 18 November 56 46 December 89 85 Total 1,300

40. Number of Payroll Certifications University of California, Irvine Effort Month 2011 2012 Reports January 72 February 762,600 March 103 April 81 84 May 97 90 2,600 June201208 July145139 August266246 2,600 September130 133 October 25 18 November 56 46 2,600 December 89 85 Total 1,300 10,400

41. Reviews, Surveys and Audits UC Internal Audit Review @ 9 months UC system wide survey UC Internal Audit Review @ 18 months Future HHS and NSF audits

42. Internal Audit Reviews Comply with proposal to HHS 100% coverage Timely certifications Acceptable cost transfers Cost notes

43. Payroll Certification Survey UC Riverside and Irvine Overall user preference

44. Payroll Certification Survey UC Riverside and Irvine Support staff responses about the amount of work required

45. Payroll Certification Survey UC Riverside and Irvine Preferences of Principal Investigators

46. Payroll Certification Survey UC Riverside and Irvine Preferences of support staff

47. Payroll Certification Survey UC Riverside and Irvine

49. HHS/NSF Audit Much National Interest in Payroll Certifications Joint HHS/NSF audit planned for all 4 demonstration sites Start audit: March or April 2013 5-person teams onsite for 2 weeks Typical financial audit Payroll Certifications to date & 1 yr. Effort Reports Individual reports to each university Probably a consolidated report to OMB.

50. Final Comment We like Payroll Certifications!!!!!

51. Questions? Mike Laskofski George Mason mlaskofs@gmu.edu Rich Andrews UC Irvine randrews@uci.edu d