University of Pittsburgh Effort Reporting Guidelines Note For

University of Pittsburgh Effort Reporting Guidelines Note: For all hypertext links, once you viewed the link you will need to use your browser’s back button to return to complete this slide show.

Objectives I. Understand effort reporting requirement guidelines set forth by the Federal Office of Management and Budget. II. Follow effort reporting procedures established by the University of Pittsburgh. III. Calculate the salary basis for determining effort. IV. Determine how salary charges are to be distributed. V. Complete the appropriate forms to document effort reporting. VI. Develop a process for verifying that employees salary distribution reflects the actual effort devoted to each sponsored project charged. VII. Ensure proper certification of effort reporting procedures are applied. VIII. Understand the potential risks associated with insufficient effort reporting. IX. Use this effort reporting guideline as an ongoing reference tool.

Effort Reporting Definitions – Part 1 Award - funds provided by the National Science Foundation (NSF), National Institute of Health (NIH) or other sponsor to an entity in order to carry out an activity or project. An award may be a grant, contract, or a cooperative agreement. Certification – validation of both the employee’s effort on an activity (and the account charged) by an individual who can certify first-hand knowledge of an employee’s total effort expended on all activities. Compensation – all amounts paid currently or accrued by the University for employee services provided in conjunction with the University activities or functions of instruction, research, and public service, administration, etc. Departmental/Research Administrator – individual designated by the department or Principal Investigator who is responsible for overseeing the labor distribution schedules and effort reporting certification process. Effort – proportion of time spent on a sponsored project, award, or other University activities. Effort Reporting – disclosure and reporting of effort expressed as a percentage of total time. Continued…

Effort Reporting Definitions – Part 2 Institutional Base Salary (IBS) – annual compensation that the applicant’s organization pays for an individual’s appointment. IBS excludes any income that an individual may be permitted to earn outside of the duties to the applicant organization. National Institutes of Health Salary Cap – sponsor-imposed ceiling on salary charged directly to sponsored awards. Effective January 1, 2007 through December 31, 2007, the salary cap level is $186, 600. Any remaining salary above this cap must be supported by the University from non-sponsored program funding sources. http: //grants. nih. gov/grants/policy/salcap_summary. htm Plan Confirmation – method of ensuring that salaries and wages initially distributed based on budgeted, assigned or planned work activity are updated to reflect any significant changes in after-the-fact actual work distribution. Principal Investigator – individual, designated by the sponsoring agency, responsible for the scientific or technical aspects of and ensuring compliance with the financial and administrative areas of the project. Salaried Personnel Activity Report (SPAR) – A written/electronic form which is part of the University’s plan confirmation system that identifies direct and indirect activities, effort reporting, labor distribution, and effort certification. Continued…

Effort Reporting Definitions – Part 3 SPAR Signatures – appropriate signature(s) required on every SPAR form, Supplemental SPAR, or SPAR with modifications. Every time a form is submitted, it must be signed by the Director/Department Chair on the designated middle signature line item located at the bottom of form. In addition, at time certification is required, there is a signature line at the bottom left of form where the employee, Principal Investigator, or designee is required to sign. There is also a signature line at the bottom right of the form for the Dean/Campus President signature, however, the requirement for this is determined by the policy of the individual school/regional campus. Sponsor – external federal or non-federal organization that provides funding for sponsored activities. Sponsored Project – externally funded activity governed by specific terms and conditions that must be separately budgeted and accounted for subject to terms of the sponsoring organization. Sponsored projects may include a grant, contract, or cooperative agreement.

Section I. – Part A Understand effort reporting requirement guidelines set forth by the Office of Management and Budget v Office of Management and Budget’s (OMB) Circular A-21 describes “Cost Principles for Educational Institutions”. The circular is applicable to grants, contracts, and cooperative agreements. Section J. 8 provides the requirements for effort reporting. v Section J. 8 makes reference back to Section F. 9, which ultimately refers to Section J. 10. Therefore, it is important to review all of these sections for effort reporting. v Circular A-21 effort reporting sections, as mentioned above, require an acceptable method be established to document and certify apportionment of salaries and wages. One of these methods is “plan confirmation” under which 100% of an individual’s University effort is distributed based on budgeted, planned, or assigned work activity and is updated to reflect any significant changes in work distribution. Continued…

Section I. – Part B Understand effort reporting requirement guidelines set forth by the Office of Management and Budget v Guidelines within Circular A-21 stipulate that a “plan confirmation” system will: • be incorporated into the official records of the institution. • encompass sponsored and all other internal University related activities. • reflect categories of internal University related activities expressed as a percentage of total activities. • reflect effort applicable to each category of direct and indirect activity, and each sponsored agreement individually. • provide for modification of salary distribution commensurate with significant changes in work activity. Short-term fluctuations need not be considered as long as the distribution is reasonable over the long-term. • reflect such significant changes that are to be documented and signed by the employee, Principal Investigator, or designee having direct, firsthand knowledge of the actual activities performed. • include an annual statement of certification, signed by the employee, Principal Investigator or designee having direct, first-hand knowledge of the work performed, certifying that the work was performed and the charges are reasonable. • Include internal evaluations or audits of the payroll distribution system.

Section II. - Part A Follow effort reporting procedures established by the University of Pittsburgh v The University utilizes a plan confirmation system for effort reporting purposes in accordance with OMB Circular A-21. This system is maintained by Financial Records Services (FRS) and Payroll. v The University’s plan confirmation system is the Salaried Personnel Activity Reporting (SPAR) system which serves the following purposes: • effort reporting and payroll distribution • effort certification • identification of direct and/or indirect activities (i. e. , teaching, administrative, etc. ) • Identification of salary related cost sharing • compliance with effort reporting requirements of OMB Circular A-21 v Departments utilize the SPAR form to provide, on a percentage basis, an employees’ direct and indirect effort distribution. The percentage of effort for each month must always total 100% of the individual’s University effort and may be initially recorded using reasonable estimates. Continued…

Section II. - Part B Follow effort reporting procedures established by the University of Pittsburgh v At the beginning of each report period, a payroll system generated SPAR form is sent from FRS to the Payroll Administrator at each applicable department. The department is responsible for reviewing the distribution on these SPARs and marking any changes in “red” and if additional lines are needed a Supplemental SPAR form is used. The SPARs are to be signed and returned to FRS by the last working day of the month. FRS then enters the revised SPARs into the payroll system before the end of the month the modification pertains to. v Adjustments to planned effort reporting must be made to reflect significant changes in actual work activity. A significant change is defined by the University as a change of effort of 5% or more. In addition, the NIH Grants Policy Statement requires the correction of clerical or bookkeeping errors be accomplished within 90 days of when the error was discovered. The 90 day period begins immediately after you determine the error while you are reviewing your accounts monthly. This adjustment process is handled on the SPAR forms as described in the above paragraph. v Short-term workload fluctuations (i. e. , less than three months) can be ignored as long as the percentage distribution is reasonable over an extended period of time.

Section III. - Part A Calculate the salary basis for determining effort v The basis for determining effort is the Institutional Base Salary (IBS). v For purposes of the salary limitation per the NIH salary cap definition, the Department of Health and Human Services (DHHS) states that the terms "direct salary, " "salary, " and "institutional base salary" have the same meaning and are exclusive of fringe benefits and facilities and administrative (F&A) expenses, also referred to as indirect costs. An individual's IBS is the annual compensation that the applicant organization pays for an individual's appointment, whether that individual's time is spent on research, teaching, patient care, or other activities. Base salary excludes any income that an individual may be permitted to earn outside of the duties to the applicant organization. Continued…

Section III. - Part B Calculate the salary basis for determining effort v What is typically included in a faculty member’s base IBS? • Annual Salary • Administrative Supplements v What is not included? • Any outside remuneration • UPP clinical activity earnings • VA salaries • Any internal payment submitted through an Other Supplemental Payroll Payment (OSPP)- incidental work outside of appointment Continued…

Section III. - Part C Calculate the salary basis for determining effort v Example 1 • Dr. Jones receives a base salary of $75, 000. • Dr. Jones also receives an administrative supplement as an Associate Dean of $25, 000. • Dr. Jones has a consulting practice in which she receives $30, 000 per year. • Dr. Jones received multiple honorariums from outside sources totaling $10, 000. • What is her IBS? • Answer: The IBS for Dr. Jones is $100, 000. Only the base salary of $75, 000 and administrative supplement of $25, 000 are reflected on the SPAR and can be counted within her IBS. Continued…

Section III. - Part D Calculate the salary basis for determining effort v Example 2 • Dr. Jones receives a base salary of $75, 000. • Dr. Jones also receives external consultant payments of approximately $10, 000 per year. • Dr. Jones received internal Other Supplemental Payments which totaled $2, 000. • Dr. Jones won the lottery receiving $75, 000. • What is her IBS? • Answer: The IBS for Dr. Jones is $75, 000. Only the base salary of $75, 000 will be reflected on the SPAR and as such is the only amount we can use for her IBS.

Section III. - Part E Calculate the salary basis for determining effort v Example 3 • Dr. Jones receives a base salary of $75, 000. • Dr. Jones receives UPP clinical activity earnings of $12, 000 per year. • Dr. Jones participated in an academic appointment during the summer term and received a total of $9, 000. • What is her IBS? • Answer: The IBS for Dr. Jones is $84, 000. The base salary of $75, 000 and the academic appointment of $9, 000 are the only items which will be reflected on the SPAR and as such are the only amount we can use for her IBS.

Section IV. - Part A Determine how salary charges are to be distributed v Total effort, expressed as a percentage of time, for an employee must equal 100% of the individual’s University effort on the SPAR for each month. v Tips for determining effort distribution: • Identify appointment responsibilities. • For each responsibility, estimate total hours per week spent. • Teaching and administrative activities cannot be directly charged to sponsored research. • Add up the hours and divide each responsibility by the total to get total effort distribution. • This is the distribution that should be reflected on the SPAR. Continued…

Section IV. - Part B Determine how salary charges are to be distributed v Example 1 – Dr. Jones spends 60 hours per week spread among the following activities: • 30 hours on NIH grants • 15 hours on teaching activities • 15 hours on administrative functions – Correct percentage distribution for the above hours on SPAR should be: • NIH grants 50% • Teaching activities 25% • Administrative 25% Total 100% University effort v Example 2 – Dr. Jones spends 60 hours per week spread among the following activities: • NIH grant #1 12 hours • NIH grant #2 15 hours • CDC grant 3 hours • Assistant Dean 15 hours • Teaching 15 hours – Correct percentage distribution for the above hours on SPAR should be: • NIH grant #1 20% • NIH grant #2 25% • CDC grant 5% • Assistant Dean 25% • Teaching 25% Total 100% University effort

Section IV. - Part C Determine how salary charges are to be distributed - Scenario of new research proposal v. You have been encouraged to submit a new grant application. v. The percentage effort you want to assign to this new grant is 20%. v. You must evaluate your current hours/effort distribution and modify as necessary to accommodate the proposed new grant effort. Current Hours NIH grant #1 NIH grant #2 CDC grant Asst Dean Teaching Total 12 hrs 15 hrs 3 hrs 15 hrs Current Effort NIH grant #1 NIH grant #2 CDC grant Assistant Dean Teaching 20% 25% 5% 25% 60 hrs Total 100% Continued…

Section IV. - Part C Determine how salary charges are to be distributed - Scenario of new research proposal possible new appointment hours and effort Example 1 v. Dr. Jones does not want to revise any current research support. v. She also does not want to increase her total hours. v. Dr Jones must approach her immediate supervisor to discuss the possibility of decreasing her teaching and/or AD responsibilities. Supervisor agrees. v. Since her total hours will not change and her current research is not being touched, her percent effort on her grants won’t change. Continued…

Section IV. - Part C Determine how salary charges are to be distributed - Scenario of new research proposal possible new appointment hours and effort Example 1 continued Current Hours NIH grant #1 NIH grant #2 CDC grant New Grant Asst Dean Teaching Total 12 hrs 15 hrs 3 hrs 12 hrs 9 hrs Current Effort NIH grant #1 NIH grant #2 CDC grant New Grant Asst Dean Teaching 20% 25% 5% 20% 15% 60 hrs Total 100% Continued…

Section IV. - Part C Determine how salary charges are to be distributed - Scenario of new research proposal possible new appointment hours and effort Example 2 v Dr. Jones decides that she cannot decrease any of her hours at this stage in her career. v As a result, this new grant will increase her total hours. v Because her overall hours will go up, her effort distribution will also change. v Sponsor policies must be considered when increasing or decreasing grant effort. Continued…

Section IV. - Part C Determine how salary charges are to be distributed - Scenario of new research proposal possible new appointment hours and effort Example 2 continued Current Hours NIH grant #1 NIH grant #2 CDC grant New Grant Asst Dean Teaching Total 12 hrs 15 hrs 3 hrs 15 hrs Current Effort NIH grant #1 NIH grant #2 CDC grant New Grant Assistant Dean Teaching 16% 20% 4% 20% 20% 75 hrs Total 100% Continued…

Section V. - Part A Complete the appropriate forms to document effort reporting v Salaried Personnel Activity Report (SPAR) is a form used to account for the time and effort of every salaried employee at the University. Therefore, the salary expense charged to a department for each salaried employee is distributed based on the percentage allocation indicated on the SPAR. v There are two types of forms used in the effort reporting process: • Supplemental SPAR - manually completed by the departments with the estimates of time and effort distribution in the following instances: hourly employee converts to a salaried employee, or when there are not enough lines on the SPAR form for modifications. These estimated percentage allocations (“planned” column) are compared against any future modifications (“actual” column) on SPAR forms throughout the duration of the SPAR period. The SPAR period is indicated directly on the form in the start/end date fields. • SPAR – generated from the payroll system on a monthly basis and mailed by FRS to the Payroll Administrator at the applicable department. The SPAR will list the planned % distribution and also show the current actual distribution based on any modifications. This SPAR is also used to meet the University’s certification requirements. One of the fields on the form (i. e. , “reason for SPAR”) will indicate if certification is required and also show that certification has been completed. Continued…

NOTE - both forms contain the exact same fields: employee’s SSN, name, department, SPAR number, reason for SPAR, start/end date, account number, planned %, actual %, and signature area.

Section V. - Part B Complete the appropriate forms to document effort reporting v Modifications to SPAR forms: • Once the employee’s estimated effort distribution is submitted, the payroll system will generate a SPAR form for the current report period throughout the SPAR certification/report period. FRS distributes the forms to the Payroll Administrator at the applicable department. At this time, the department must review for accuracy and make any changes to percent allocations directly on the SPAR in red ink. Since the “Planned” column remains constant, all modifications and new plan percents should be written in the “Actual” column above the preprinted information. Modified forms must be returned to FRS by the end of that same month. If there were no changes then the forms do not need to be returned. • Employee transfers to/from other departments are also marked in red ink. The SPAR form is then forwarded to FRS and a copy sent to the new department. v All Supplemental SPAR and SPAR forms are to be submitted to FRS. An individual in FRS will enter the information into the Payroll system. During the payroll distribution process, any percents allocated to account numbers that have been disabled will be redirected to the organizational account (i. e. , hard money account) for the department to which the employee was assigned. When automatic system modifications such as these are done, turnaround SPARs are sent to the departments indicating the changes. Therefore, it is extremely important that timely changes are made to ensure account distribution is accurate. Continued…

Section V. - Part C Complete the appropriate forms to document effort reporting v Signatures are required on every Supplemental SPAR or SPAR with modifications. Every time a form is submitted to FRS, it MUST be signed by the Director/Department Chair and depending on the policy of the individual school/regional campus, signature of the Dean/Campus President may be required as well. Additional signatures including the employee, Principal Investigator, or other individual will be required at time of certification which is discussed later in Section VII – Part C. v The Supplemental SPAR form is available on the Form Flow software and is also a stock form at Stockroom, B-10 CL.

Effort Reporting Documents The following documents can also be downloaded after viewing this slideshow. v Salaried Personnel Activity Report (SPAR) v Supplemental Salaried Personnel Activity Report v Instructions as per the reverse side of the SPAR and Supplemental SPAR

Section VI. - Part A Develop a process for verifying employees salary distribution reflects the actual effort devoted to each sponsored project charged v OMB Circular A-21 requires effort reports represent 100 percent of an individual’s activity and provide an after-thefact confirmation or determination that the effort represents a reasonable estimate of the actual effort expended. v The Principal Investigator is responsible for overseeing the effort reporting process relating to research and ensuring compliance with financial and administrative areas of the project. v The Departmental/Research Administrator handles the day -to-day processing of SPAR forms and related labor distribution schedules across all activities. Continued…

Section VI. - Part B Develop a process for verifying employees salary distribution reflects the actual effort devoted to each sponsored project charged v Month-end review process involves the following steps: • At the end of each month, Payroll Labor Distribution Reports (“PLDR”) are sent to the department along with the Level Reports. Departments also receive SPAR forms sent by FRS. The PLDR show the current month payroll charges, adjustments and fiscal year to date or grant to date balances for each account. SPAR forms show the percent allocations and account numbers used to distribute these labor dollars. • The Principal Investigator or Departmental/Research Administrator must review the PLDR and SPAR forms for accuracy. Account distribution per these reports needs to be compared against the employee’s actual effort to ensure each project is charged appropriately. To assist with any audits, the reviewer should retain and sign the PLDR and SPAR indicating they did in fact review the information even if no changes are necessary. • Such reviews are required to be done during the month and modifications sent to FRS by the end of the month. Again, all modified SPAR forms are to be signed by the Director/Department Chair or the Dean/Campus President. Continued…

Section VI. - Part C Develop a process for verifying employees salary distribution reflects the actual effort devoted to each sponsored project charged v These timely reviews by the departments will ensure that a substantial amount of salary and wage costs charged to sponsored projects reasonably reflect actual effort worked on those projects. v Periodic reviews are also done by the department to ensure the PLDR reflects appropriate distribution to non-research activities.

Section VII. - Part A Ensure proper certification of effort reporting procedures are applied v Certification is only required on all SPARs indicating a distribution to a grant account (entity 05) and sponsored activity account (entity 04 with a purpose code of 3 XXXX). v When reviewing a SPAR, you will notice the “Reason for SPAR” field may have a designation of “certification required”, “certification not required”, or “certification complete”. If you feel the designation is incorrect, please contact Research/Cost Accounting for clarification. Continued…

Section VII. - Part B Ensure proper certification of effort reporting procedures are applied v Certification of SPARs with the designation “certification required” will be accepted ONLY during the last month of the certifiable period (i. e. , start/end date on the SPAR) and 90 days after the end of the certifiable period [subject to the regulations of the applicable grant(s)]. Thorough reviews of SPARs should be conducted prior to certifying to ensure distributions and accounts are correct because once a SPAR is certified, it can be modified only ONCE during the 90 days after the end of the certifiable period by the re-certification procedure [subject to the regulations of the applicable grant(s)]. Continued…

Section VII. - Part C Ensure proper certification of effort reporting procedures are applied v OMB Circular A-21 requires that effort reports be signed by the employee, Principal Investigator, or designee who is in a position to know whether the work was performed. To comply, the University requires signatures from the employee, Principal Investigator, or designee having direct, first-hand knowledge of the work performed, certifying that the work was performed and the charges are reasonable. In addition, the Director/Department Chair signature line must be completed every time a SPAR form is submitted. On the bottom of the SPAR form there are signature lines for the Employee/Supervisor, Director/Department Chair, and Dean/Campus President. The requirement for the Dean/Campus President signature is determined by the policy of the individual school/regional campus. Continued…

Section VII. - Part D Ensure proper certification of effort reporting procedures are applied v The employee’s or other signature certifies that, to the best of one’s knowledge and belief, reported effort and related payroll distributions represent reasonable charges in accordance with the provisions of the grant or contract award and OMB Circular A-21. v Once the certification is completed on the SPAR, the form needs to be returned to FRS so the records can be updated within the payroll system.

Section VIII. - Part A Understand the potential risks associated with insufficient effort reporting v Consequences of insufficient effort reporting can involve assessment of fines and penalties, and loss of external funding to the University. v Audits are conducted periodically by government sponsors or the University’s Internal Audit Department. During the course of these audits, the key compliance issues focused on are: • Accuracy of labor cost calculations • Allowable nature of the salary charges with regard to the specific grant or contract • Proper signatures from the appropriate individuals on the SPAR forms • Timeliness of effort reporting certifications Continued…

Section VIII. - Part B Understand the potential risks associated with insufficient effort reporting v Government sponsors state that since Department Chairs have direct authority over Principal Investigators, accountability should be placed on the Department Chairs for ensuring the effort reports are properly completed in a timely manner. The University requires all SPAR forms to have the Director/Department Chair signatures. v Sufficient documentation used by Directors/Department Chairs to obtain after-the-fact confirmations from Principal Investigator and others to confirm the accuracy of information on the effort reports must be retained by the department. This documentation will be referenced during audits and should include, but not be limited to: • logs of employee’s hours spent on specific projects • e-mails sent from Principal Investigators to Business Managers (or others) confirming the accuracy of effort report information • Spreadsheets showing how the Institutional Base Salary was calculated and distributed to accounts. • any other information that can prove the Director/Department Chairs had a suitable means for knowing whether the amounts and projects specified are correct as reported on the SPAR.

Section IX. Use this effort reporting guideline as an ongoing reference tool v Print this entire Power Point demonstration, including the SPAR forms/instructions, and retain for future reference. v Following is a listing of available sources to assist with any questions/concerns: • Office of Management and Budget, Circular A-21 • National Institutes of Health grants • U. S. Department of Health & Human Services grants • University of Pittsburgh Effort Reporting Guideline • University of Pittsburgh Financial Records Services Department Ø handle processing of all SPAR forms and also retain them filed by department and then alphabetically • University of Pittsburgh Research/Cost Accounting Department • University of Pittsburgh Office of Financial Information