In a previous blog, we defined both effort reporting and payroll certification and outlined the distinctions between the two. Today, we will readdress the requirement for either process and highlight the major differences between the two. We will also address potential benefits and common challenges associated with the two options. Some of these points will be based on the perspective of institutions (George Mason University, Michigan Tech and the University of California – Irvine*) that have transitioned to payroll certification.
Why Complete Effort Reporting or Payroll Certification?
Personnel compensation typically represents the single largest expense charged to sponsored projects. It can account for 70 to 80 percent of a project. Therefore, federal regulations stipulate that personnel compensation on federally sponsored projects must be documented in a method that is in accordance with federal regulations (eCFR – 200.430, Section I) which state “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.”
The Federal Government takes certification seriously as they are accountable to the public and Congress for the use of the funds that they award. As recently as 2008, NSF has conducted audits which have resulted in fines of more than $11.5 million due to audit discoveries. These type of findings, whether intentional or not, typically bring negative publicity to the institution and sponsors are not likely to award future projects.
What is the Difference between Effort Reporting and Payroll Certification?
Effort reporting and payroll certification are not the same, though many people do not understand the true differences in these approaches. Effort reporting describes the allocation of an individual’s actual time and effort for specific projects whereas payroll certification is the distribution of an individual’s salary based on the work performed.
Potential Benefits and Common Challenges of Effort Reporting*
Some of the benefits of effort reporting certification are as follows:
- Process provides knowledge of which projects require the most effort
- Process provides knowledge of how much time is spent on a project
- Process provides knowledge of how much overtime is required to get the project completed
- Process provides knowledge of how much non-productive overhead is common and often necessary for the project
Some of the common challenges of effort reporting are as follows:
- The process is seen as difficult to understand and overly complicated
- As there is no standard value of time, it is difficult to quantify effort
- Individuals completing effort reports may not understand requirements
- Employees are certified through individual reports which means numerous reports for each certification period
- Clear guidance on specific issues is unclear
Potential Benefits and Common Challenges of Payroll Certification*
Some of the benefits of payroll certification are as follows:
- The concept is straightforward and easy to understand by administrators and faculty
- The certification timeframe is consistent with the project period and annual technical reporting
- The volume of certification forms is reduced as is the time of effort reporting (based on one report per project for all personnel)
- Enhances the responsibility of certifying salary and wages with the PI
- Allows the PI to continuously monitor award expenses, proactive adjustments, and budget management (depending on the frequency of certifications)
Some of the common challenges of payroll certification are as follows:
- Internal controls need to be in place to ensure labor charges are adequately supported
- Requires the enforcement of internal written policies
- Must maintain the full allocation of payroll to each individual’s activities
- Requires more diligence in ensuring that control procedures are adhered to on a consistent basis and communicated if certifying less frequently
- Requires PI to have direct visibility of each employee’s full payroll allocation to ensure the amount assigned to his or her project is accurate
- Certifications are completed on varying schedules, due to varying budget and project period dates, and diligence is required to ensure these certification schedules are not missed.
- Challenges occur in whether to compare the certification to the committed effort or budget
Effort Certification System Solutions
If you’re searching for a system that meets federal reporting requirements, increases faculty and staff participation, monitors cost sharing, compares actual and committed time and incorporates payroll data, IT Works offers such effort certification system solutions. Our Effort Administrator allows administrative and research staff to quickly access, review, and certify time and effort. It has a user friendly interface which provides dashboards and email alerts for overseeing the certification process, and easy-to-interpret display screens for reviewing time and effort records by employee and project. For more information regarding this product, please contact the IT Works team.
*Note: The information above is a representation of documentation generated by several different institutions as well as information presented at the NCURA Annual Conference. It is possible that some benefits and challenges of one process could also pertain to the other. IT Works does not promote one process over the other.