A Practical Approach to
Managing Effort Reporting
Impacts from Cost Transfers
David Ngo, University of Wisconsin-Madison
Ashley Whitaker, Nova Southeastern University
Brian Korblick, Huron Consulting Group
Agenda
1. What are Cost Transfers?
2. Acceptable Reasons for Cost Transfers
3. Salary Cost Transfers
4. Audit Risks related to Cost Transfers
5. Handling Cost Transfers related to Effort Reporting
 Cost Transfers resulting from effort certification
 Cost Transfers initiated outside of system
o Before Certification
o After Certification
Proactive” Cost Transfers
6. Case Study: UW Cost Transfer Tool
7. Case Study: NSU Effort/Cost Transfer Business Processes

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Cost Transfers
• An after the fact reallocation of costs
• Moving an expense that was not properly allocated
• NIH Grants Policy Statement
• Cost transfers… that represent corrections of clerical or booking
errors should be accomplished within 90 days of when the error
was discovered
• The grantee should have systems in place to detect such errors
within a reasonable timeframe; untimely discovery of errors could
be an indication of poor internal controls
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OMB Circulars
A-21: “Any costs allocable to a particular sponsored agreement under the
applicable cost principles may not be shifted to other sponsored agreements
in order to meet deficiencies caused by overruns or other fund considerations,
to avoid restrictions imposed by law or by terms of the sponsored agreement,
or for other reasons of convenience.”
A-110: “Unless the Federal awarding agency authorizes an extension, a recipient
shall liquidate all obligations incurred under the award not later than 90
calendar days after the funding period or the date of completion as specified
in the terms and conditions of the award or in agency implementing
instructions.”
A-133: Annual audit is conducted to “determine whether the auditee has
complied with laws, regulations, and the provisions of contracts or grant
agreements.” The annual Compliance Supplement provides auditors with
specific instructions for reviewing adherence to the cost principals and of the
institution’s internal controls.
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Acceptable Reasons
• Reflect correct usage
when multiple projects
benefit
• Transfer pre-award costs
• Remove unallowable
costs
Unacceptable Reasons
• To meet deficiencies caused
by overruns or other fund
considerations
• To avoid restrictions imposed
by law or by the terms of
sponsored agreement
• For other reasons of
convenience
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Common Occurrences Causing Cost Transfers
 Delay in Award Setup
•
•
•
•
•
Terms being negotiated
Execution between Sponsor/Institution
Compliance (IRB, IACUC, Bio, OAR/COI, Effort)
Budget (Reduction, Restriction, F&A)
Start/end date
 Clerical error
• PI realizes specific experiment expenses were charged to the wrong
project
• Old account number
 Cost overrun at end of project
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Case Study
 Funding the Commitment
• Derek Zoolander is a 9 month faculty who is paid $140,000/year. Derek is
awarded a grant from 7/1/12-12/8/12. His budget calls for him to be paid $20,000.
What is his effort commitment?
• Figure out calendar months
– $140,000/9 months = $15,555 monthly
– Payroll yearly/monthly = $20,000/$15,555 = 1.3 salary months
• Figure out dates
– 8 days in Dec = (8/31) = .26 months
– + 5 full months from Jul-Dec = 5.26 project months
• Figure out effort
– 1.3 salary months/5.26 project months = 25% effort
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Cost Transfers – Auditor Concerns
• Is the main reason for the transfer to maximize federal
funds?
• Does the organization demonstrate good fiscal stewardship
of Federal funds?
•
• Frequent errors in recording costs, and / or a delay in the time it
takes to identify errors may indicate the need for accounting system
improvements, enhanced internal controls or both
Is the transfer supported by sufficient written justification
with appropriate reviews and sign off’s?
• Are adequate policies and procedures in place? Have those
policies and procedures been followed?
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Cost Transfers – High Risk Transactions
• Red Flags
•
•
•
•
•
•
Greater than 90 days
In last two months of award
Moving overdrafts from one federal award to another
Not following institutional policy
Inadequate explanations
Adjustments to effort certifications
• Recent Audits
• Mayo Clinic - $6.5M Fine
•
OIG Work Plans
• http://www.oig.hhs.gov/publications/docs/workplan/2009/WorkPlanFY2009.pdf
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Recent Effort Reporting Audits & Settlements
St. Louis University
Overstatement of Effort
$1 million
Florida State University
Salary/Non-salary disallowances
$3.0 million in requested refund
Ohio State University
Commitments and Cost Sharing
$1.7 million in questioned costs
University of Nevada-Reno
Effort Reporting System
Georgia Institute of Technology
Effort Reporting System
Fort Valley State
Lack of an Effort Reporting System
$500,000 settlement
Effort Reporting
Non-Compliance:
Significant Audits &
Settlements
University of Alaska-Anchorage
Effort Reporting and Grants Management
California State University - Fresno
Effort Reporting Commitments and Cost Sharing
Arizona State University
Effort Reporting System
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Weill Cornell Medical College
Committed Effort
$2.6 million
Yale University
Effort Reporting and Cost Transfers
$7.6 million
Louisiana Board of Regents
Effort Reporting, Cost Sharing
$1.9 million questioned costs
University of Delaware
Effort Reporting
University of Wisconsin – Madison
Effort Reporting System
University of Michigan
Effort Certification
University of Notre Dame
Subrecipient monitoring and Effort
Reporting
Institution/Date
SUNY
Stony
Brook
Florida
State
Univ
Notre
Dame
Aug-12
July -12
Mar-12
Suitable means of
verification
Inappropriate
charges, cost
transfers
Univ
CSU –
Univ
Wash
AlaskaFresno Delawar
U
Anchorage
e
Aug-11
Mar-10
Feb10
Jan-10
U
UW
Univ
Nevada- Madison Michiga
Reno
n
Jan-10
Nov-09
X
X
Internal control
weaknesses
X
X
X
Salary above NSF
cap
X
No independent
internal evaluation
of system
X
Late certifications
X
X
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X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Certification
doesn’t include all
activities
X
X
Effort reporting
training, policies
Aug-09
X
X
ASU
Aug-09
X
Lack of salary
documentation
Effort reporting
system weaknesses
Mar11
Fort
Valley
State
X
X
X
X
Cost Transfers and Effort Reporting
• Cost Transfers resulting from effort certification
• Cost Transfers initiated outside of system
• Before Certification
• After Certification
• “Proactive” Cost Transfers
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Question for Audience
• When effort fluctuates, how do you handle the salary? (ex: yearly 30%
commitment: 10% effort Jan-Jun and 50% effort Jul-Dec)
Effort Regulations Require Us To…
• Change commitments when needed, and document the changes
• Fulfill commitments
• Charge salary in a way that’s congruent with actual effort
• Certify effort in a way that’s congruent with what actually happened
• Transfer salary charges off of a grant if the level of effort does not
justify the salary charges
• Once effort is certified, paid effort and certified effort must be
“trued up”
• Cost Transfer amounts are determined by calculating the
difference between the paid effort and the certified effort,
taking into account the policy on variance threshold
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• Cost Transfers that are created before an effort card is
certified and processed are applied to the effort statement as
normal.
• Handling Cost Transfers that are created after the effort card
has been closed will depend on your institutional policy.
• Consider:
• Does the cost transfer remove or add charges to a sponsored project?
• Does the cost transfer result in charges moving between sponsored projects?
• Does the cost transfer prompt, or is a result of, recertification of effort?
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Case Study: Ron Burgandy certified effort on project 1 (NSF), but
did not work on project 1. He worked on project 2 (NIH) and should
have certified effort on project 2.
 Does you’re your policy allow for recertification of effort?
 If so, does time (90 day rule) factor into the approval?
 Initial questions to ask:
• Why was expense originally charged to the first account?
• Why should charges be applied to the proposed account?
 Questions to consider if over 90 days:
• Why wasn’t this noticed earlier (before 90 days)?
• What actions are being taken to eliminate the need for future CT’s of this
type?
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University of Wisconsin
Cost Transfer Tool
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Nova Southeastern University
Salaried Cost Transfer Business Process
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NSU’s Set-Up of Salary Charges and Certification of Effort
• NSU allows for the opening of accounts early when deans have
approved employees to work on a project.
• PIs email the grants accounting office and copy the dean when
requesting an account to be opened early.
• Employee salary is charged to sponsored projects initially based on
commitments and/or estimates of the effort in the approved budget.
• Effort cards are created based on these estimates of effort in the
payroll/financial source system.
• Cost transfers that are generated prior to effort certification adjust the
estimates so that the effort card at certification reflects the most
current data in the payroll/financial source system.
• Actual effort is certified quarterly in an electronic effort reporting
system.
NSU’s Salaried Cost Transfer Process
• Important to Note:
• The transfer of salary and wages must correspond to the
percentage of effort actually expended (certified) on the sponsored
project.
• Salaried cost transfers are addressed in our effort reported policy;
this policy is cited in the cost transfer policy.
• Cost transfers are generated based on our policy’s threshold (5%
variance from payroll to certified effort).
• Departmental effort coordinators run a report that identifies cost
transfers resulting from effort certification (decentralized).
• Effort coordinators indicate if the transfer should be processed equally
among all pay periods in the quarterly certification period or if a grant
period affects the transfer (i.e. start/end dates).
NSU’s Salaried Cost Transfer Process Continued
• Effort coordinators send the report, with administrative instructions, if
applicable, to the Payroll Manager via email, copying the Central Effort
Administrator and their Grant Accountant.
• Cost transfers must be sent by the close of the certification period.
• As cost transfers are processed in the source system, they are loaded into
the effort reporting system.
• Cost transfers must be processed within 30 days after the close of
certification.
• If the effort certification results in a permanent change, then the estimates set
up in the payroll/financial system are updated to reflect this change.
• Changes to commitments or a reduction of effort of more than 25% are to be
communicated to the Office of Sponsored Programs BEFORE the change
occurs.
• Cost transfers that are in contrast with effort certification (i.e.
recertification/adding charges to a sponsored project) are not allowed.
Removing charges from a sponsored project is always allowed and is not
considered recertification.
Important Items to Consider when Creating a Salaried Cost Transfer
Process
• Who is in the certification flow?
• How often you certify is important, especially if certification is tied to
reconciliation of charges on sponsored projects.
• How do you ensure that cost transfers are reconciled in the
financial (source) and effort reporting systems?
• Centralized or decentralized process?
• Defining recertification and is it allowed at your institution?
Important Items to Consider when Creating a Salaried Cost Transfer
Process
• Do you allow salary transfers between sponsored projects?
• Who has the authority to approve a cost transfer? Is this different for
before or after effort certification?
• Handling transfers onto a sponsored project when someone has not
worked on a sponsored project before, how far back do you allow
charges?
• Documenting effort on a project for which there is no account set up.
• How to handle sponsored projects that end before effort is certified?
• How to ensure that reductions in effort of 25% or more are identified?
Mitigating Potentially Unwanted Outcomes
• Ensure that salaried cost transfers are reconciled in the payroll system.
• Ensure that cost transfers that are the result of recertification of effort
are properly justified and documented.
• Ensure that PIs and other certifiers are properly trained so that they
understand the importance of accurate effort certification.
• As certification is a “reasonable estimate” be wary of specific cost
transfers (Salaried cost transfer changing effort from 25.23% to
25.67%).
Mitigating Potentially Unwanted Outcomes
• Salaried cost transfers are one instance where transfers at the end of
the grant period are OK, as long as they result from the recent effort
certification.
• Where systematic errors are identified, modify the business process to
correct and ensure that employees take steps to eliminate future
systematic cost transfers.
• Allow for advance accounts with the caveat that only salary for current
employees can be charged.
• If the dean or department head has allowed employees to start
work on a project, the account number should be opened to
accommodate the effort associated.
• The department must take responsibility for costs if the funds do not
materialize.
Questions?
• David Ngo, dvngo@rsp.wisc.edu
• Ashley Whitaker, ashlport@nova.edu
• Brian Korblick, bkorblick@huronconsultinggroup.com
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