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Effort Reporting Associated with Personal Service Payments from Federal (and Federal Flow-Through) Grants / Contracts
Section II. Item 32.
Certifying effort is required by the Federal Government's OMB Circular A-21, Cost Principals for Educational Institutions (Revised 05/10/04). Section J10a states that compensation for personal services is “allowable to the extent that total compensation to individual employees conforms to the established policies of the institution, consistently applied, and provided that the charges for work performed directly on sponsored agreements and for other work allocable as facilities and administrative (F&A) costs are determined and supported” by an effort reporting system. The Circular identifies two categories of employees: (1) professorial and professional, and (2) other. The University distinction for these two employee classifications is salaried and hourly. Effort for salaried employees is certified through completion of the Effort Report. Effort for hourly employees is certified on time sheets. Reports are required to reflect to a reasonable extent the activities for which employees are compensated by the institution. To confirm that the distribution of activity represents a reasonable estimate of the work performed by the employee during the reporting period, the reports are required to be signed by the principal investigator and/or a responsible university official(s). Without an Effort Reporting System, the federal government could disallow salary and fringe benefit charges to a grant.
Effort reports must be submitted for faculty and staff (faculty, supportive professional staff, affiliates, civil service salaried, and graduate students) at Northern Illinois University, whose salary charges, in whole or in part, meet the criteria below:
Individuals paid directly from any federal/state sponsored project/grant /contract.
Individuals paid directly from any other NIU funds and who provide some effort on federal/state sponsored project/grant/contract for which effort is re-distributed to a sponsored project/grant /contract.
The effort certifications are distributed semiannually.
Grants Fiscal Administration produces and distributes the Effort Reports.
The effort report details, using employee ID, the base contract salary rate, the grant-fund source cost centers for which each employee has been paid, and the percentage of effort for the reporting period for each. The report reflects all HR based transactions and all redistribution entries processed with respect to grant fund source payments.
The federal standard for effort reporting requires the reports to reflect to a reasonable extent the activity for which employees are compensated. Variances of less than five (5) percent are not considered significant and will not be adjusted.
Signed effort reports are due back to Grants Fiscal Administration thirty (30) days after delivery. A second notification, with a copy to the department chair, will be sent two weeks after the first is sent if a response is not received. An administrative hold on all expenditures will be placed on any grant that is not in compliance (response within 30 days).
What Is Effort and Effort Reporting?
Effort is defined as the amount of time spent on a particular activity. It includes the time spent working on a sponsored project in which salary is directly charged or contributed (cost-shared effort). An individual's effort working on a sponsored project is expressed as a percentage of the total amount of time spent on institution base contract work-related activities (instruction, research, service, administration, etc.) for which the University compensates the individual.
Effort reporting with respect to federal/state sponsored projects is the mandated method of certifying to the granting agencies that the effort charged or cost shared to each award has actually been completed.
Effort reports therefore describe the allocation of an individual's actual time and effort spent for specific sponsored projects, whether or not reimbursed by the sponsor. Thus effort reporting is not just a verification of the salary or payroll distribution, but also includes cost-shared or contributed effort.
What Is Cost-Shared or Contributed Effort?
Cost sharing represents that portion of the total project costs of a sponsored agreement that are not borne by the sponsor or sponsors of the project. These costs are borne by the University or other non-federal third parties, rather than by the sponsor. Since salaries are, in most part, paid for by an individual's academic department, cost sharing of effort must be approved by the department chair and represents a redirection of departmental resources from departmental research, assigned teaching duties, service, or other departmental activities to support sponsored agreements.
Approved cost sharing can be required by the sponsor or volunteered by a Principal Investigator. In either case, any commitment of effort referenced in the project proposal or the award document must be honored, reported, and captured in an effort reporting system.
Basis of Effort Reporting
The Effort Report uses the payroll distribution as the basis for specifying an initial effort calculation. Adjustments that are made via PAY journals are also included. This distribution is then compared to actual effort and modified accordingly.
For example, a PI's institution base contract salary amount is paid 50% from a grant and 50% from institutional funds. When certifying the effort report, the PI reports that 75% of the effort was related to the grant. The 25% difference in this case would be classified as cost share.
Using the same example, the PI responds that 25% of the effort was to the grant. In such a case, Grants Fiscal Administration will adjust the financial records by processing a journal to remove the excess charge(s) from the grant and redistribute them to a non-grant cost center.
Adjusting Financial Records to Effort Reporting
Prior to Grants Fiscal Administration making any adjustments to the financial records, those effort reports submitted by the PI with variances more than 5% under the payroll distribution must be certified by the appropriate departmental chair and dean, and the report certified by the dean will be regarded as final and official.
When adjustments to the financial records are needed, Grants Fiscal Administration will initiate and post journal entries to adjust the personnel activity posted into the general ledger to agree with the certified effort reports. These journals will be posted in the period following the underlying activity. The certified effort reports will be used as the support for the entries.
The time and effort system uses all relevant HRS source data posted into the general ledger during the report period, all PAY journals posted during the report period, plus GFA initiated adjusting entries made in the beginning of the report period, to support the certified effort reports. It is imperative that all entries made to adjust personnel activity charged to a grant happen in the actual report period. Departmental entries transferring grant personnel charges will not be made after each reporting period closes.
There are two reporting periods: July 1 through December 31, and January 1 through June 30.
Impact to University
Departments will have to follow precisely the language of the grant/contract and use the funding appropriately. End of year transfers of salary dollars will not be allowed. Grants will have to be administered closely during the year.
Approved by APPM Advisory Committee January 4, 2007