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Section 4 Fiscal Policies
Subject 4.5 Cost Accounting
Policy 4.5.8 Effort Reporting Policy
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01/25/06 -Originated
08/01/08 -Reviewed w/ changes
-Reviewed w/o changes
Cost Accounting -Author
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Effort Reporting Policy
Definitions
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Cost Sharing: The mandatory or voluntary commitment of institutional resources contained in the proposal or award. The concept of cost matching is synonymous with Cost Sharing. Cost Sharing may be made up of either labor or non-labor costs. This policy only pertains to Cost Sharing as it relates to Effort commitments made by Individuals listed in the proposal or award. There are different types of Cost Sharing:
Mandatory Committed Cost Sharing refers to costs in excess of what the sponsor is going to fund where a requirement for the grantee to fund some portion of the cost is required by the sponsor as a condition of obtaining an award. It must be included in the contract or grant proposal to receive consideration from the sponsor.
Salary-cap Cost Sharing results when an Individual’s Institutional Base Salary exceeds a sponsor’s salary cap. The prorated excess is a form of mandatory Cost Sharing that must be funded by an appropriate and allowable source.
Voluntary Committed Cost Sharing refers to costs in excess of what we are asking the sponsor to fund that are included in the proposal budget where cost sharing was not required by the sponsor.
Voluntary Uncommitted Cost Sharing refers to costs of a project not funded by the sponsor and which were not committed in the proposal or award.
For both mandatory and voluntary committed Cost Sharing, when a notice of grant award is received in which Cost Sharing was proposed, the Cost Sharing becomes a binding commitment that must be provided and tracked in a consistent manner across UTMB.
Budget reductions and scope changes recommended by the sponsor may be a basis for renegotiation of any proposed Cost Sharing. Additionally, these forms of Cost Sharing must be included in the appropriate direct cost base in the facilities and administrative rate proposal.
Cost Transfer: A Cost Transfer occurs when an expense is transferred from one PeopleSoft project, class or chart field value to another when
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an error has occurred. Transfers between PeopleSoft accounts are considered coding corrections, not Cost Transfer, under this policy. Cost Transfers for purposes of this policy include all costs, e.g. salaries, benefits, M&O (maintenance and operation) etc. Labor transfers typically occur via payroll transfer and may be initiated within the records of UTMB by Office of Accounting, Payroll, Research Services, UTMB Hospitals or other authorized units. The guidelines for the timeliness of the initiation of Cost Transfers are contained in the Cost Transfer Policy. For Labor Cost transfers required to properly align salary charged to a sponsored project with the Effort reported on the project, the Date of Discovery is deemed to be the last day of the effort confirmation period and will be the date used to determine the timeliness of Cost Transfers.
Date of Discovery: The date on which the need for a Cost Transfer is acknowledged.
Departmental Business Operation- The department, center or hospital office that is responsible for the stewardship of institutional resources within the policies, practices and procedures of the institution.
Designated Responsible Party: The Designated Responsible Party (DRP) is the senior administrative executive for the research operation who will manage and be responsible for the Effort reporting compliance program. This individual possesses exclusive responsibility for managing the risk, including the appropriate knowledge and necessary authority to manage the risk. The Associate Dean for Research Services Administration is the DRP at UTMB. It is acknowledged the DRP will work closely with the Provost, chief business officer and the institutional compliance officer to ensure all specific risks are adequately mitigated and effectively monitored.
Effort: Sometimes referred to as Level of Effort, Effort is the amount of time spent by an Individual on any activity expressed as a percentage of Total Professional Effort for which an Individual is compensated by a UTMB. It is extremely important to understand that Effort is not calculated on a 40-hour workweek or any other standard workweek. In addition, Total Effort must equal 100%. For example, if an Individual with a full-time appointment averages working 60 hours per week during the Effort Reporting Period and estimates that he/she spends an average of 15 hours each week on a Sponsored Program,
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25% of that Individual’s Effort is spent on the Sponsored Program and the other 45 hours, allocated to other institutional activities, represents 75% Effort.
Total Effort: The Effort that an Individual devotes in the aggregate to the professional activities for which he or she receives IBS compensation from UTMB. Specifically excluded from total Effort is time spent on outside consulting activities or
other activities for which compensation is received from an entity other than UTMB.
Actual Effort: The Effort that an employee estimates to have devoted to a particular Sponsored Project or other professional activity, even if no salary is paid by the project or activity, including Effort pledged to a sponsor as mandatory or voluntary committed Cost Sharing, expressed as a percentage of total Effort during the confirmation period.
Committed Effort: The amount of Effort proposed in a grant or other project application and accepted by a sponsor, regardless of whether salary support is requested for the Effort.
OMB Circular A-21 Section J10b(1)(c) states “in an academic setting, teaching, research, service and administration are often inextricably intermingled. A precise assessment of factors that contribute to costs is not always feasible, nor is it expected. Reliance, therefore, is placed on estimates in which a degree of tolerance is appropriate” Moreover, OMB Circular A-21 Section J10(2)(a) states, “The payroll distribution system will… (ii) reasonably reflect the activity for which the employee is compensated by the institution.”
Effort Coordinator: The individual at the department level that manages and oversees the Effort reporting process for a particular department or group departments. This individual is responsible for monitoring whether Effort has been reported and that the necessary salary adjustments resulting from Effort reporting (or lack thereof) are made.
Effort Report: This is also known as the effort card. A form used by UTMB to document the proportion of total Effort devoted by an employee to each activity with which he or she is involved, including Sponsored Projects, administration, teaching and service. This
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document becomes UTMB’s official verification that the IBS charged to a Sponsored Project is consistent with the Actual Effort expended on the project. The sum of all reported Actual Effort percentages on the Effort Report represents the employee’s total Effort. By definition, total Effort must always equal 100%.
An Effort Report must be completed by someone with suitable means of verification of the Effort expended on a project. This may be the Individual or it may be the direct supervisor. Confirmation of the Effort expended must be made by a Primary Individual on the project (see definition below). A Supporting Individual may not confirm the Effort expended on the Effort Report.
Effort Confirmation (Also, referred to as Effort Certification): A Primary Individual’s representation that the Effort supported by the sponsor has been performed and/or Effort expended in support of a project (but not paid by the sponsor) has been performed. It is imported to note that payroll distributions and Effort Confirmations are not the same thing. Payroll distributions describe the allocation of an Individual’s salary; whereas, Effort Confirmation describes the allocation of an Individual’s Effort.
Effort Confirmation Period: The designated period of time for Individuals to enter and for Primary Individuals to confirm, estimates of actual Effort in the official UTMB Effort system. The end of the Effort Confirmation Period is deemed to be the initializing transaction date as referenced in the Cost Transfer vis-à-vis timeliness.
Effort Reconciliation Period: The designated period of time, after the Effort Confirmation Period, in which salary paid should be reconciled to the Effort confirmed and any adjustments submitted.
Effort Reporting Period: The designated period of time over which the Effort is to be reported. UTMB reports Effort semi-annually or according to other timetables established and published by Research Services.
Effort Reporting Procedure Manual: A UTMB document that contains all the implementation and operational guidelines for Effort reporting at UTMB.
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Entity Business Operations: Entity Business Operations is charged with the oversight of policies and procedures for the Departmental Business Operations that report to them. Entity leaders and CFO’s will ensure that each department has an appropriate review process in place.
Fiscal Year: The financial accounting period from September 1st through August 31st.
Individual: An Individual is anyone who has committed and/or reported Effort on a Sponsored Project regardless of whether salary was charged to the project or not. Where appropriate in this policy the following subcategories will be utilized:
A Primary Individual is a person listed as principal investigator, project director, co-investigator, co-project director, or those with comparable responsibilities on a Sponsored Project application. A Primary Individual typically, but not always, carries an academic (i.e. faculty) appointment.
A Supporting Individual is an employee other than a Primary Individual who has expended Effort on a sponsored program. The Supporting Individual may or may not have been identified on the funded application and typically does not have Committed Effort greater than the amount paid on a specific Sponsored Program.
An Individual designated as Key Personnel (see definition below) may be either a Primary Individual or a Supporting Individual based on the unique circumstances of a specific Sponsored Project.
Institutional Base Salary (IBS): The total guaranteed annual compensation an Individual receives from UTMB, whether the Individual’s time is spent on research, instruction and teaching, patient care, public service, or other activities. The IBS shall be
used to compute salaries charged to sponsored programs unless sponsor’s policies further limit salary charges. IBS excludes: fringe benefit payments; non-recurring merit payments; incentive payments; reimbursed expenses; temporary, supplemental compensation for incidental work; income earned outside of duties to the institution; and any portion of compensation deemed to be at-risk. IBS may or may not include additional payment, in special circumstances, by prior approval of Research Services.
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Key Personnel –Key Personnel are defined as Individuals who contribute to the scientific development or execution of the project in a substantive, measurable way, whether or not salaries are requested. Typically, these Individuals have doctoral or other professional degrees, although Individuals at the masters or baccalaureate level should be included if their involvement meets the definition of Key Personnel. Consultants should also be included if they meet the same definition. Key Personnel must devote measurable Effort to the project whether or not salaries are requested. Key Personnel are generally listed on the Notice of Award and they may be designated as Primary or Supporting Individuals within the Effort reporting system.
Research Services: Research Services is the UTMB institutional office charged with the administrative oversight of sponsored research. Research Services is responsible for ensuring that policies and procedures are in place to assure the proper stewardship of externally funded projects, including Effort Reporting policies
Sponsored Project: An externally funded activity that is governed by specific terms and conditions. Sponsored Projects must be separately budgeted and accounted for subject to terms of the sponsoring organization. Separately budgeted means that a project budget has been prepared to identify the costs necessary to meet the scientific objectives of the project. Sponsored Projects may include grants, contracts, and cooperative agreements for research, instruction and training, and other public service activities. Sponsored programs involve a specific commitment of time of the principle investigator and other key personnel and can be either: 1) externally funded activities for which a formal written agreement, such as a cooperative agreement, contract, or grant is entered into by UTMB and by a sponsor; or 2) internally funded activities which are separately budgeted and accounted for by UTMB as a result of a formal application and approval process within UTMB. For externally funded programs, the commitment of time can either be paid or unpaid by the sponsor (see mandatory and voluntary committed Cost Sharing definitions). A sponsored program may be thought of as a transaction in which there is a specified statement of work with a related, reciprocal transfer of something of value.
Tolerance: The amount by which salary percentage paid may vary from
Effort percentage reported. This tolerance is established by the institution and is reflected in the Effort Reporting Procedures Manual.
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Total Institutional Activities: Total Institutional Activities are those activities for which an Individual is paid by the UTMB. Common activities include administrative duties, instruction, patient care, public service, and research.
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Policy
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The Federal Government, state agencies, private foundations, not-for-profit organizations, and industry provide significant funding to enable the UTMB to conduct research and training. It is the policy of UTMB to comply with federal, state and sponsor guidelines and regulations regarding Committed Effort, Effort reporting and the
confirmation of Effort for Individuals on sponsored programs. Cost Sharing is an integral part of Effort reporting and the responsibility for appropriate recording of Cost Sharing is a part of adequate Effort reporting.
This policy provides guidelines to ensure that the salaries and wages charged to Sponsored Projects are allocable, allowable, consistently treated and reasonable. This policy and any related operational procedures must comply with cost principles as outlined in the Office of Management and Budget (OMB) Circular A-21, entitled “Cost Principles for Educational Institutions” and the UT System policy
UTS163 entitled “Guidance with Effort Reporting Policies”. Section
J.10 of OMB Circular A-21, “Compensation for Personal Services”, requires UTMB to establish and maintain a payroll distribution system that reasonably distributes salary charges among direct activities. The
basic requirement of the Federal cost principles is that salary charges on Sponsored Projects must be proportionate to the Effort expended on those projects, as documented in periodic Effort Confirmations. UTS163 has expanded these guidelines to include all Sponsored Projects. UTMB fulfills these requirements through reasonable monitoring of salary allocations to Sponsored Projects and through the preparation, review and confirmation of Effort Reports.
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Procedures
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UTMB Office of Finance will maintain a payroll distribution system that allows salaries paid under Sponsored Projects to be properly allocated to the benefiting activities. Research Services will maintain an Effort reporting system that allows for confirmation of Effort spent on an activity and which supports that the Individual salaries paid under Sponsored Projects are appropriate to that award. UTMB uses the after-the-fact confirmation methodology, as described in OMB Circular A-21,
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to meet this requirement. The purpose of an Effort reporting system is to provide a reasonable basis for distributing salary charges among direct activities (e.g., sponsored research, instruction, administration, service and clinical activity) and between direct and indirect activities. Since Effort Reports are the source documents to support salary charges to Sponsored Projects, it is essential that this data be based on reasonable estimates of actual Effort expended in the various Effort categories.
All employees who are involved in allocating salaries to Sponsored Projects or completing Effort Reports are responsible for understanding the principles of accurate Effort reporting and salary allocation. They are also responsible for remaining current on any mandatory training.
All Departmental Business Operations must have an effective system for ensuring that initial allocations of salaries to Sponsored Projects are reasonable in relation to the expected Effort of the employees whose salaries are being allocated, and that such allocations are monitored and adjusted where necessary to reflect significant changes in employee and faculty Effort. Through appropriate means, all departments shall ensure that a primary Individual’s total institutional activities shall not exceed 100% and shall be consistent with his/her other duties as agreed upon with his/her supervisor.
All Effort Reports must meet the standards of accuracy set forth in applicable Federal cost principles and University of Texas System Guidance on Effort Reporting Policies (UTS 163).
All departments must complete and submit Effort Reports on a timely basis and in the correct format for all employees who are subject to Effort reporting requirements.
An Effort Report must be completed for any UTMB Employee who meets either of the following criteria:
• The employee’s salary is charged directly, in whole or in part, to a Sponsored Project.
• The employee expends actual Effort on a Sponsored Project for which a commitment was made, even though no part of the employee’s salary is charged to the project. (Cost Sharing).
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The institution is responsible for maintaining a system to track all Cost Sharing related to Sponsored Projects. (See the Cost Sharing policy for further details). The institution’s Effort reporting system will be the system used to track and report Cost Sharing of salaries
Effort reporting for all employees meeting the above criteria will be performed for each Effort Reporting Period. This includes Faculty, Administrative & Professional, Non- Teaching and Classified employees
UTMB has a web-based Effort reporting system that will notify employees and track Effort Reports electronically. Employees will receive an electronic notice when the current Effort Confirmation Period is open and the Effort Reports are available on-line. The Effort Confirmation Period will remain open for 30 days from the date the report is made available, for Effort entry and confirmation
The Effort Reports must account for the total Effort of the Individual. Allocations of Effort among different activities must be made on a reasonable, equitable, and consistent basis and should reflect a reasonable estimate of the actual Effort spent on the various activities. Effort is not based upon a 40-hour work week but on all activities which comprise the institutional responsibilities of the Individual.
Total Institutional Activities on the Effort Confirmation form (i.e. Effort Report) will be divided into two categories: sponsored programs and non-sponsored programs. There will be separate line items for each source from which salary was paid and/or for each activity with Committed Effort. {Note: UTMB’s effort reporting system will not post Committed Effort on the Effort Report until September 1, 2009.} Activities that are included in the non-sponsored category are not required to be further delineated into other categories, such as “administrative”, “patient care”, “departmental research”, “service” or “instruction”. These categories for non-sponsored programs may be used, at the department’s discretion. Maintenance of
the information within the section of the Effort Report on non-sponsored activity will be the responsibility of the department, if it is used.
Primary Individuals are responsible for reporting and confirming their own Effort allocations. They are also responsible for confirming the
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Effort of the Supporting Individuals on the projects for which they are the primary Individuals. Primary Individuals are not responsible for confirming Effort for other Primary Individuals nor are they responsible for confirming Effort on activities for others where they are not considered the Primary Individual.
The employee performing or supervising the work is in the best position to provide the information about how much Effort was spent on different activities. If this Individual is no longer employed by UTMB, the Individual’s PI, co-PI or supervisor must confirm the Effort Reports on the Individual’s behalf using the best information available. Confirmation of Effort Reports by other departmental administrative staff is not permitted.
Supporting Individuals may be responsible for reporting their Effort into the Effort reporting system although this duty may be assumed by the Primary Individual for the Sponsored Project on which they work or by another responsible Individual with suitable means of verification of how the Supporting Individual spent his/her Effort. However, confirmation for supporting Individuals may only be done by Primary Individuals.
UTMB has established minimum and maximum levels of Effort commitments on Sponsored Programs commensurate with an Individual’s roles and responsibilities at the institution. The following guidelines are established for the allocation of effort for Primary Individuals.
• A maximum of 97% of Total Effort that can be committed to Sponsored Projects
• A maximum of 90% of Total Effort that can be committed to Sponsored Projects for faculty with administrative / clinical / teaching duties such as medical school course director / clinical program advisor / significant clinical responsibilities
• A maximum of 85% of Total Effort that can be committed to Sponsored Projects for basic science chairs, center directors and
• clinical department division chiefs
• A maximum of 80% of Total Effort that can be committed to Sponsored Projects for clinical department chairs
• A minimum of 1% minimum Effort on clinical trials
• A minimum of 1% minimum Effort on other Sponsored Projects
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Except in unique circumstances, the maximum level of Effort committed to Sponsored Projects will be less than 100% of Total Effort and the minimum level of Effort on any Sponsored Project will be equal to or greater than 1% for all Primary Individuals. Exceptions to these minimums and maximums include but are not limited to equipment and instrumentation grants, doctoral dissertation grants, and augmentation grants. Exceptions for specific Individuals may be requested by departments on behalf of these Individuals with faculty titles if it is deemed that these Individuals do not have any responsibilities (including the development of new sponsored proposals) that would prevent them from allocating 100% of their Effort towards Sponsored Projects. Exceptions may be requested for Individuals with faculty titles who are not PI’s on grants, have no administrative or training/education responsibilities within the department or lab, and who are devoting their entire Effort to sponsored research. A request for exemption, approved by the department chair, can be made to the UTMB Designated Responsible Party or his/her designee.
Primary Individuals and Key Personnel are responsible for communicating with their supervisor and Departmental Business Operations staff regarding current and planned Effort commitments. Management of Effort commitments for a Primary Individual and Key Personnel require ongoing communication between the Primary Individual/Key Personnel, his/her department and several other administrative functional areas. Each supervisor of a Primary Individual/Key Personnel is responsible for ensuring that the Primary Individual’s total institutional activities shall not exceed 100% and shall be consistent with his/her other duties as agreed upon with his/her supervisor. This responsibility extends to the review and approval of Sponsored Project proposals. The Primary Individual/ KeyPersonnel’s supervisor must review and approve the Committed Effort in proposals, as well as, ensure each Primary Individual/Key Personnel listed in proposals with a specific Committed Effort is aware and has approved his/her participation in the activity. Cost Sharing commitments shall also be part of this review and approval process.
Cost Transfers may become necessary as a result of Effort Confirmations. Any Cost Transfers necessary as a consequence of Effort Reports must be initiated during the Effort Reconciliation Period, which is defined as the 30 days following the end of the Effort
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Confirmation Period. The Effort Reporting Period will be closed after the 30 day Effort Confirmation Period and the 30 day Cost Transfer period have lapsed. Exceptions to this time schedule may be made by the Associate Dean of Research Services Administration.
Cost Transfers after the close of the Effort certification period or after the submission of the final financial status report or invoice to the sponsor are not allowable unless they are to the benefit of the sponsor, e.g. transferring costs off the Sponsored Project chartfield string.
The Effort reporting system reports the percentage of an Individual’s salary as distributed by chartfield string for each reporting period. A misperception among some employees and faculty completing Effort Reports is that the percentage of Effort reported must equal the percentage of his or her salary. To the contrary, the purpose of the Effort reporting process is to determine if the salary paid is a reasonable reflection of the professional effort expended. When it is not, the employee’s salary must be adjusted to reflect the estimate of the effort expended.
In no circumstances may the Effort percentages reported on the Effort Reports be based on any consideration other than the reasonable estimates of Actual Effort expended by the employee during the Effort Reporting Period.
In those instances where some or all of the Effort an employee expends on a Sponsored Project is not funded by the project sponsor, the Cost Sharing Effort shall be reported on the Effort Reports and source of funds paying for the Cost Sharing Effort identified.
PIs and Departmental Business Operations staff are to review Effort Reports after confirmation and make appropriate payroll reallocations and transfers. The Effort Report includes the percentage of salary paid from specific accounts for the reporting period. In some cases, these salary percentages may not reflect the employee’s actual Effort attributable to that project.
When the percentage of actual Effort is less than the percentage of salary paid by a project over the Effort Reporting Period, the Departmental Business Operations must initiate a retroactive Labor Cost
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Transfer to change the actual payroll distribution to match the actual Effort reported on the Effort Reports, within the UTMB defined Tolerance.
When the percentage of actual Effort is greater than the percentage of salary paid by a project over the Effort Reporting Period, a retroactive Labor Cost Transfer may be done
to change the actual payroll distribution to match the Actual Effort reported on the Effort Reports, unless:
(a) the difference is attributable to mandatory or voluntary committed Cost Sharing, or
(b) the difference is attributable to the operation of the NIH salary cap.
Strict adherence to payroll reallocations or payroll transfers is critical to meet federal compliance for proper cost accounting.
The Effort Report requires the electronic signature of the Primary Individual, that indicates the confirmer has suitable means of verification and the amounts shown are a reasonable estimate of the actual work performed during the stated period.
It is incumbent on the Primary Individual to assure that the representations of Effort contained in the Effort Report form are accurate.
Providing inaccurate Effort estimates on the Effort Report, whether knowingly or through carelessness or mismanagement, may result in the disallowance of costs on Sponsored Projects. Each Individual with responsibility for Effort reporting must understand the proper method of completing Effort Reports and assure the total Effort reported on the Effort Reports reflects a reasonable estimate of the Actual Effort expended during the report period. Once completed, the information on the Effort Reports is subject to independent audit and review by the federal government, sponsors and UTMB.
During close-out of an Effort Reporting Period, all incomplete Effort Reports will expire. Upon expiration of Effort Reports, Research Services will take steps to remove all unsupported salary costs from Sponsored Projects for that Effort Reporting Period for all expired Effort Reports.
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Training in Effort Reporting is required for all Primary and Supporting Individuals and Effort Coordinators. A Primary or Supporting Individual may enter and confirm Effort for one Effort Confirmation Period prior to passing the mandatory training. No Effort may be entered after the first reporting period, if the training has not been satisfactorily completed. Any salary distributions to Sponsored Projects for that subsequent period will be removed and transferred to another departmental source.
After the Effort Confirmation Period, in cases where Effort Reports do not support the salary expense charged to a Sponsored Projects chartfield string, Research Services or other institutional offices may initiate a transfer of expenses from the Sponsored Projects to another departmental non-Sponsored Project chartfield string.
Compliance with this policy is mandatory, because UTMB has a legal obligation by Federal regulations and by the terms and conditions of our Sponsored Projects. Disciplinary action for non-compliance with this policy including, but not limited to, failure to file an Effort Report or knowingly filing an erroneous Effort Report, will be administered according to UTMB Institutional Handbook of Operating Procedures in accordance with the University of Texas Board of Regent’s Rules and Regulations and UTMB’s Standard of Conduct Policy. In case of a violation of civil or criminal law, violators may be subject to civil or criminal penalties. If UTMB becomes aware of alleged criminal violation(s), UTMB may report such conduct to the appropriate oversight agencies.
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References
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OMB Circular A-21, Cost Principles for Education Institutions
OMB Circular A-21, J.10 Compensation for Personnel Services
UT System, UTS163, Guidance on Effort Reporting Policies
NIH Grants Policy Statement
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