Pennsylvania Association of
Community Health Centers
Time & Effort Reporting
Presented by
David Fields, CPA, Senior Manager
October 9, 2013
1 // experience perspective
HEADLINE ISSUE – TIME & EFFORT REPORTING
 Significant buzz surrounding cost principles &
allowable cost rules & time & effort reporting
 What have you heard?
 What are your thoughts regarding issues?
 Is room for improvement & if so
most significant areas?
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what are
HEADLINE ISSUE – TIME & EFFORT REPORTING
 OIG audits of CHCs
 New era of accountability – phrase spoken with
ARRA bill
 Seeing fruits of change
 Accountability, not new rules
 HRSA scrutinized by OIG
 OIG audits of CHCs
 Significant questioned costs
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WHY ARE AUDITORS CONCERNED?
 The risk that
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
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
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An “unallowable” cost is paid for with federal grant dollars
Costs charged to the grant are not properly supported
Unreasonable costs are incurred
A CHC expense is charged to wrong federal grant or wrong
amount is allocated
OIG AUDIT TIME & EFFORT REPORTING FINDING
 Pursuant to 2 CFR pt. 230, Appendix B, §§ (8)(m)(1) &
(8)(m)(2)(a), the distribution of salaries and wages to
awards must be supported by personnel activity
reports. The reports must reflect an after-the-fact
determination of the actual activity of each
employee. Budget estimates (i.e., estimates
determined before the services are performed) do
not qualify as support for charges to awards
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OIG AUDIT TIME & EFFORT REPORTING FINDING
 Continued - Contrary to these Federal requirements,
CHC calculated NAP & IDS payroll costs on basis of
budget estimates & not on basis of actual time
employees worked on grant-approved activities
 Specifically, in lieu of tracking actual time employees
worked on grant-approved activities, CHC multiplied
each employee’s salary & benefit cost by predetermined grant FTE allocation. Use of budget
estimates rather than actual costs could result in
improper allocation of Recovery Act grant funding
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OIG FINDINGS 2012 – TIME & EFFORT
 Most common & frequent
 Some six & seven-figure questioned costs
 Examples
 Did not work outside of normal hours – IDS
 Salaries not supported by personnel activity reports &
improperly allocated
 $87,000, $700,000, $785,000, $1.6m, $3m (part of $3m on
next page), $5.2m
 No time & attendance approval – $120,000
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OIG FINDINGS 2012
 Documentation of expenditures
 No separate system to track expenditures
 Multiple instance exceeding $3m, $2m, $2m & $350,000
 More than half of the 18 reports in 2012 had some
finding
 Expected new PIN draft to remind, clarify & address
documentation of & cost principles for CHCs
 It did not address time & effort reporting
 Why not?
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BLAME GAME – CHC EXCUSES
 “No one told me”
 Auditor, HRSA site
visit, HRSA grant or
project officer
 “No one else is
doing it either…”
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BLAME GAME – CHC EXCUSES
 “We take care of indigent population in our
community”
 Bad Debt & Sliding Fee more than grant
 Grant funds were used for grant purposes
 Response from OIG
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WHAT ARE WE GOING TO DO?
 Take it seriously
 Knowledge is power – understand regulations
 Review policies
 Reconsider processes
 Accept this as a cost of doing business, but adjust as
efficiently & painlessly as possible
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8. COMPENSATION FOR PERSONAL SERVICES
 Definition – includes all compensation paid currently
or accrued by organization for services of employees
rendered during the period of award
 Fringe, overtime, retirement, bonus, etc.
 It must be reasonable, conform with established
policies & be applied consistently
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8. COMPENSATION FOR PERSONAL SERVICES
 Costs unallowable under other paragraphs of this
appendix shall not be allowable under this paragraph
just because it is personal compensation (e)
 Nonallowable costs addressed in other areas of appendix B
are not allowable just because you call them
compensation
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8. COMPENSATION FOR PERSONAL SERVICES
 Overtime, shift premiums, etc., are only allowable with
awarding agency approval unless (f)
 Necessary due to emergencies
 Indirect functions – admin., maint., & accounting
 Continuous nature of job & cannot be reasonably
interrupted or otherwise completed
 When lower federal costs to federal government will result
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8. COMPENSATION FOR PERSONAL SERVICES
 Fringe benefits are permitted as long as allocated
proportionately to relative amount of time or effort
actually devoted to each cost objective (g)
 Pension costs (i) as long as they meet the reasonable, fair &
consistent rules
 Personal use automobiles are unallowable fringe
benefit cost, direct or indirect (h)
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8. COMPENSATION FOR PERSONAL SERVICES
 Incentive compensation is permissible under criteria
mentioned (j)
 Severance pay is only allowable if it is required by law,
employer/employee agreement, established policy
creating an implied agreement or circumstances of
particular employment (k)
 Two categories – see terms
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8. SUPPORT OF SALARIES & WAGES (M)
 Time & effort reporting
 Maintained for all staff members whose compensation is
charged in whole or in part directly to awards or if needed
to facilitate determination of indirect cost rate (2)
 Includes hourly & salary
 Uses term “personnel activity report”
 See required elements on PAR slide
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8. SUPPORT OF SALARIES & WAGES (M)
 How is overtime handled?
 Charges for salaries & wages of nonexempt employees, in
addition to other supporting documentation, must also be
supported by records indicating total number of hours
worked each day (3)
• e.g., Hours worked by hourly employees must be
captured & allocated
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Know the rules...
Documentation is key!
NO TIME AND EFFORT REPORTING GUIDANCE
 Anticipated PIN would address
 Lack of explanation implies there will be no relief
 Response to PIN has requested guidance on applying
time and effort reporting in a CHC
 The OIG has been very critical of the lack of adequate
time and effort reporting in the industry
 Hope? – OMB is working on “Super Circular”
20 // experience perspective
PERSONNEL ACTIVITY REPORTS (PARS)
 After the fact
 Actual
 Not budget
 Total activity
 Signed as accurate
 Employee or
 Supervisor with firsthand knowledge
 Prepared monthly
 Coincide with at least one pay period
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MyTown Community Health Center
Personnel Activity Report
Employee Name: Dr. John Smith
Date
Adult Med
HIV
IDS
Admin
Total
Monday
5/2
6
2
8
Tuesday
5/3
6
2
8
Wednesday
5/4
6
2
8
Thursday
5/5
8
Friday
5/6
4
Saturday
5/7
Monday
5/9
6
2
8
Tuesday
5/10
6
2
8
Wednesday
5/11
4
Thursday
5/12
8
Friday
5/13
4
Saturday
5/14
Total
8
4
8
0
4
8
4
4
34
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14
8
4
8
80
PRACTICAL THOUGHTS
 The rules are the same, but the approach will vary
based on facts & circumstances
 What is your risk profile? Variables to consider:
Out of scope services
Indirect cost rate
How many federal grants
Size of federal grants relative to budget
Others
23 // experience perspective
FINAL THOUGHTS
 What are my risks?
 Do I have policies in place?
 Are existing systems/accounts adequate?
 Establish an action plan & execute soon
THANK YOU
Please feel free to contact
David Fields
dfields@bkd.com
417.865.8701
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