Effort Reports & Payroll Certification – The ‘What’s and ‘Why’s
Grant makers, at all levels, are seeking greater accountability,accuracy, efficiency,transparency and timing for contracts and grant compliance activities. Federal agencies are accountable to Congress and to the public for the use of the funds they award. Many agencies require Effort Reports or Payroll Certification.
The federal government requires institutions to have a process in place to certify that salary expenses on federally funded sponsored projects represent an equitable distribution of charges based on an employee’s work activities.
As specified in applicable cost principles, at a minimum, adequate time and effort reports contain the following:
- The name and signature of the employee
- The total effort of the employee for the pay period
- A breakdown of how the employee expended their effort during the pay period (i.e.,project, general and administrative, vacation, sick, leave without pay, etc.)
- The name and signature of the employee’s supervisor
What is an Effort Report?
Effort reporting is the method of verifying to granting agencies that the effort required as a condition of the award has actually been completed. Effort Reports show the actual effort spent on the project and ensures that the effort charged or committed to a project has actually been met.
Do I Need to Create an Effort Report?
Most federal grants involving Educational Institutions require very specific Effort Reports and use electronic Effort Reporting Systems (ERS). If you receive or contract under a federal grant, especially a federal grant to an educational or research institution, you may be required to follow their effort reporting process.
What is Grant Payroll Certification?
Payroll Certification is way to confirm salaries charged to federally funded sponsored projects represent an equitable distribution based on an employee’s work activities. The Federal Demonstration Partnership working group examined ways to simplify the OMB Circular A-21 regulations to find effective and efficient means to assure that the distribution of salaries and wages is appropriate. It is a shift in focus from the “effort” concept to utilize the concept that “charges are reasonable in relation to work performed”. FDP Payroll Certification Proposal 7 FINAL_Jan 3 2011
What is the Difference Between Effort Reports and Payroll Certification?
These two confirmation systems are allowed by Office of Management and Budget’s (OMB) Circular A-21,Costing Principles for Educational Institutions, and have been the main methods used by Higher Education to support salary and wage expenses charged to federally sponsored projects. The underlying concept for both systems is that an individual’s “effort” is the key to determining appropriate charges to federal projects. An Effort Report allocates an individual’s actual effort to specific activities, regardless of where the salary was charged. Payroll, on the other hand, shows how the individual’s salary was charged.
What is Effort Commitment?
Effort Commitment is the portion of an individual’s time that is committed to a particular activity expressed as a percentage of the individual’s total activity for the employer during the grant application and/or prior to the project start.
How Do I Determine Effort Commitment Amount?
Your grant professional and the grant development team have developed a budget narrative that provides details on the quantifiable amount of effort committed. This could be in the form of percentage of time committed, number of days-weeks-months-years, or amount of salary. In most cases, a grantee will have developed a well thought out budget that includes staff commitments as reflected in salary costs and FTE percent.
How does one’s time and salary relate to Effort Reporting?
Effort is not the same as salary. Effort is based on an individual’s activities and must total 100%. Effort is not based on a 40-hour work week; it is based on the total time spent on the organization’s activities, no matter how many hours are worked.
Need an example?
Here is a fairly simple formula to calculate: % of Time / % of Position = % of Effort
Example 1: An employee who has a 50% (FTE) position at a municipality and who is working 25% on a grant funded project and 25% on other non-grant activities.
Employee A – paid 50% time for the period:
25% / 50% = 50% grant funded project
25% / 50% = 50% non-grant funded project
= 100% Total Effort
Example 2: An employee has a 100% (FTE) position at a nonprofit organization and works 75% time on a grant funded project and 25% time on other non-sponsored activities. This employee’s effort also totals 100%.
Employee B – paid 100% time for the period
75% / 100% = 75% grant funded project
25% / 100% = 25% non-grant funded activities
= 100% Total Effort
What type of ‘effort’ must be reported?
Mandatory committed effort must be reported. This is effort required by the funder as a condition of the grant award. Voluntary committed effort must also be reported. This is effort identified and specifically quantified in the project proposal or award documents, including the budget or narrative as effort that will be committed to the project but not charged to the grant.
Is there ‘Wiggle Room’ in the Effort Report?
Office of Management & Budget (OMB) Circular A21 states: “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.”
It is common practice of our clients to verify effort within a +/- 5% margin. For example, if the effort report shows 75% effort for a project, either directly charged or cost shared, and the actual effort determined is 70%, the report can be verified because it is within the tolerance range.
Where Can I Find More Information on Effort Reporting and Payroll Certifications?
CFR 2010, Title 2 v1 Uniform Administrative Requirements for Grants
OMB Circular A-21 Cost Principles for Educational Institutions
OMB A-122 Cost Principles for Non Profit Organizations
OMB A-87 State Cost Principles for Local and Indian Tribal Governments
Feature photo credit and a special thank you to Blue Dot Walker on Flickr. Please see his photos at http://www.flickr.com/photos/bluedotwalker/