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Effort 101

 
This guide provides an overview of effort, effort reporting and certification, including an explanation of why such processes are necessary and the minimum requirements for these processes at UTB.

Note: The term PI in this guide applies to both Principal investigators and Project Directors, also known as Primary Individuals in ECRT.

Contents

  1. What is effort
  2. The Effort Lifecycle
  3. How do PIs certify effort?
  4. The difference between effort reporting and payroll distribution
  5. Federal requirements regarding effort reporting
  6. Risks of not complying with Circular A-21's effort reporting requirement
  7. Related link: 10 Things you should know about effort in sponsored projects

What is effort?
Simply stated, effort refers to the amount of time you spend on a particular activity. As an employee of UTB, our compensation is commensurate with our work on a set of activities which we were hired to perform (or are expected to perform as part of our being employed by the university). For individuals working on sponsored activities or research, it includes the time spent working on a sponsored project in which all or part of their salary is directly charged or contributed (cost-shared effort).

Individual effort is expressed as a percentage of the total amount of time spent on work-related activities (teaching, research, service administration, etc.) for which the University compensates an individual.

Effort is not calculated based on a 40-hour workweek. If a person works 80 hours a week, and spends 20 hours a week on her grant, then her sponsored effort is 25% (20/80=0.25) 

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The Effort Lifecycle
As the primary individuals in charge of sponsored projects, principal investigator/project directors should understand that effort has a lifecycle and not just some random concept that sponsored program administrators worry about. 

Pre-Award: Preparing proposal budget. Post-Award: Effort Commitment is entered. Charging salary. Certify Effort.

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Pre-Award
When preparing a proposal for submission, sponsors ask potential principal investigators for various pieces of information: narratives, scopes of work, justifications, and budgets for example. Within these proposal pieces, it is generally expected that PIs will clearly lay out what they intend to do with the extramural support they receive, and how they will do it. Proposal budgets for example should in most instances contain salary support for the time that PIs (and his/her support staff) will spend on the project should it get funded. Effort should be proposed based on good faith estimates, and be calculated using established procedures. 

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Post-Award
Should a proposal be awarded, the University accepts the award on the PI's behalf. Award negotiation may take place for a variety of reasons: 1) if the sponsor requires additional steps, 2) if the awarded funds are less than those proposed, and/or 3) if at the time of award it is necessary for a PI/PD to change the level of effort commitment on his/her sponsored project(s). For example, if Prof. Garcia already divides his time between 50% teaching and 50% research, and his proposal for additional research is funded in which he proposed 25% effort, then it is necessary to contact Prof. Garcia's sponsors to renegotiate his awarded effort commitments, and/or decrease his teaching duties.

Once the award is set up and the PI obtains his sponsored project ("22") account, and effort was proposed and awarded, the PI’s home department must appoint him/her on the grant. (If effort was cost-shared, then separate cost sharing procedures should be followed to track effort).

Appointing people on a grant ensures that effort can be tracked and monitored: the salary sources should clearly track with the effort commitments in place and the work that the PIs and support staff do. Getting paid on a grant account cannot pay for non-sponsored work. Effort should be charged at the moment that it is performed; a PI that works on her grant over the academic year cannot charge the grant over the summer. If changes must be made to effort commitments, PIs and their departments must communicate this with the Office of Sponsored Programs.

Remember, sponsored project funds, especially those budgeted towards salaries and wages, should be used for their intended purposes. They are not slush funds that can be transferred with abandon.

Lastly, PIs will certify effort on their sponsored programs every six months. If changes must be made to effort commitments, PIs and their departments must communicate this with the Office of Sponsored Programs. 

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How do PIs certify effort?
Effort reporting is the mandated method of certifying to the granting agencies that the effort charged or cost shared to each award has actually been completed. Beginning in 2009, PIs will certify their effort twice a year by logging onto ECRT with their employee login -- no new usernames or passwords to remember -- and verifying that the salary charges are commensurate with the level of effort that they expended on their sponsored and non-sponsored activities. 

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The difference between effort reporting and payroll distribution
Payroll distributions and effort reports are not the same thing. Payroll distributions are the distribution of an individual's salary, while effort reports describe the allocation of an individual's actual time and effort spent for specific projects, whether or not reimbursed by the sponsor. Thus effort reporting is separate from and can be independent of salary charges.

Effort is not just a verification of the salary or payroll distribution. Cost-shared or contributed effort must be included in effort reports. 

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Federal requirements regarding effort reporting
The Office of Management and Budget's (OMB) Circular A-21 "Cost Principles for Educational Institutions" is the federal government's cost principles for colleges and universities. It defines what costs are allowable and allocable to federal grants and other "assistance" agreements.

OMB Circular A-21 (Section J.8) sets forth criteria for acceptable methods of charging salaries and wages to federally sponsored projects. A-21 requires a payroll distribution system that directly charges salaries to appropriate projects.

In addition, Circular A-21 requires that institutions develop a mechanism to determine or confirm how individuals actually expend effort during a specified time period. These effort reports must be performed on a regular schedule and must be certified by individuals who have first-hand knowledge of 100 percent of the employee's compensated activities. In most cases, that would be the employee or the employee's direct supervisor. 

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Risks of not complying with Circular A-21's effort reporting requirement
In recent years, the federal government and its auditors have become much more active in their review of effort reporting requirements, and a number of universities have received large audit disallowances as a result. Recent cases of audit disallowances are:
Northwestern University paid $5.5 million to settle issues related to problems with effort reporting, on a contracts and grants base of $325 million; South Florida returned $4.1 million to the federal government to settle a number of charging issues, including effort reporting; University of California paid a total of $2.1 million to settle an NIH salary cap limitation disallowance for the period July 1, 1995 through June 30, 2002.

An effort reporting system must provide records on how individuals participating in federally funded sponsored agreements actually spend their time. Because the federal government mandates effort reporting, it is incumbent upon institutions that receive federal funding to maintain accurate and auditable systems and records.

Documentation (including ECRT) on how individuals spend time on federally sponsored projects is subject to federal audit and can be cause for institutional or individual disallowances.

Institutional disallowances can result if:

  1. The effort report was certified by an individual other than the employee or someone who has "first-hand" knowledge of 100 percent of the employee's time;
  2. The effort report does not encompass all of the activities performed by the employee under the terms of their employment;
  3. The levels of effort reported do not appear reasonable, given the responsibilities of the individual.

Individual disallowances can result if:

  1. The effort report certified by the individual is found to be falsified;
  2. The levels of effort reported do not appear reasonable.

As evidenced above, federal audit disallowances can result in serious financial penalties for institutions. In addition, criminal charges may be brought against an individual certifying to falsified effort. Current audit plans for federal auditors include effort reporting as a specific audit focus. 

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Related link:
Top 10 Things You Should Know About Effort on Sponsored Projects

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