Changes to Time and Effort Reporting

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1 Changes to Time and Effort Reporting
Tiffany Winters, Esq. Brustein & Manasevit, pllc June 2015

2 Agenda The NEW EDGAR Prior Time & Effort Rules The New Rule
Other Significant Changes What does all that mean?

3 Structure of the NEW EDGAR
34 C.F.R. Part 74 - Administration of Grants and Agreements with IHEs, Hospitals, and other Non-Profit Orgs (removed) 34 C.F.R. Part 75 - Direct Grant Programs 34 C.F.R. Part 76 - State-Administered Programs 34 C.F.R. Part 77 - Definitions 34 C.F.R. Part 80 - Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Govts (removed) 34 C.F.R. Part 81 - The General Education Provisions Act  

4 Additional Regulations
2 C.F.R. Part 200 – Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards A-21 – Cost Rules – Rules – IHEs A-87 – Cost Rules – State / Local Gov’t A-122 – Cost Rules – Nonprofit A-102 – Administrative Rules State / Local Gov’t A-110 – Administrative Rules IHEs A-133 – Audit Rules 2 C.F.R. PART 3474 Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards. 2 C.F.R. Part 3485 – Nonprocurement Debarment and Suspension

5 The Basics

6 Why? If federal funds are used for salaries, then time distribution records are required (i) How staff demonstrate allocability If employee paid with federal funds, then must show that the employee worked on that specific federal program cost objective (a)

7 Who must participate? NOT contractors
Must be maintained for all employees whose salaries are: Paid in whole or in part with federal funds (i)(1) Used to meet a match/cost share requirement (i)(4) NOT contractors

8 Does “X” Employee have to keep time and effort records?
Is she/he an employee? Yes Is she/he paid with federal funds? T&E Required No Salary used for match? No T&E Required No T&E Required I don’t know Ask HR

9 The Old Rules Under The OMB Circulars

10 The A-87 Rule (SEAs and LEAs)
Semi-Annual Certifications Personnel Activity Report (PAR) If an employee works on a single cost objective: After the fact Account for the total activity Signed by employee or supervisor Every six months (at least twice a year) If an employee works on multiple cost objectives: After the fact Account for total activity Signed by employee Prepared at least monthly and coincide with one or more pay periods

11 A-21 Rule (IHEs) Plan Confirmation After-the-Fact Activity Reports
Budgeted allocations for professional/professorial staff Updated to reflect any significant changes in actual work Professional/Professorial staff keep records every six months All other employees keep monthly records Signed by employee, principal investigator, or responsible official using suitable means of verification. Must reflect activity applicable to each sponsored agreement and to each category needed to identify F&A costs Multiple Confirmation Records Variety of records kept in combination at least monthly.

12 A-122 Rule (Nonprofits) After the fact Account for total activity
Personnel Activity Reports (PARs) After the fact Account for total activity Signed by employee or supervisor with first hand knowledge Prepared at least monthly and coincide with one or more pay periods

13 The New EDGAR Rules

14 Part 200 Rule Charges for salaries must be based on records that accurately reflect the work performed. These records MUST: Be supported by a system of internal controls which provides reasonable assurance charges are accurate, allowable and properly allocated; Be incorporated into official records; Reasonably reflect total activity for which employee is compensated; Not to exceed 100%

15 Part 200 Rule (cont.) Encompass all activities (federal and non- federal); Comply with established accounting polices and practices; and Support distribution among specific activities or cost objectives.

16 COFAR Comments on Part 200 Rule
By focusing more on internal controls, the rule “mitigates the risk that a non-Federal entity… will focus on prescribed procedures... which alone may be ineffective in assuring full accountability.” Uncovering weaknesses in internal controls or instances of fraud is goal. Not audit findings.

17 Cost Objectives Insert an example after this slide?

18 Cost Objectives What is a cost objective? 200.28
Program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc.

19 Cost Objectives (Cont.)
Multiple Cost Objectives (i)(1)(vii): More than one Federal award. A Federal award and a non-Federal award. An indirect cost activity and a direct cost activity. Two or more indirect activities that are allocated using different allocation bases. An unallowable activity and a direct or indirect cost activity

20 Title I, Part A LEA-level Cost Objectives
LEA-level Administration (public and equitable services) School Choice Transportation and Supplemental Education Services (SES) 20% of LEA allocation (if school(s) identified for improvement) Within the 20% - parental outreach/ admin – up to .2% of LEA allocation Equitable Services Professional Development 10% of LEA allocation (if LEA identified for improvement) 10% of each school’s Title I Part A allocation (if school is identified for improvement) Parental Involvement At least 1% of LEA allocation Districtwide Initiatives Incentives and rewards to teachers to work in Title I schools in improvement, corrective action, and restructuring no more than 5% of LEA allocation Title I Part A Programmatic Costs

21 Not Cost Objectives Federal programs Title I, Part A Doing my job ESEA
Working on initiatives and programs that benefit Title I students Director of Federal Programs

22 Time and Effort Guidance by OCFO?
Does it still apply? It is possible to work on a single cost objective even if an employee works on more than one Federal award or on a Federal award and a non-Federal award. The key to determining whether it is a single cost objective is whether the employee’s salary and wages can be supported in full from each of the Federal awards on which the employee is working or from the Federal award alone if the employee’s salary is also paid with non-Federal funds.

23 Allocable Costs Any cost allocable to a particular Federal award under the principles in Part 200 may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal Statutes, regulations, or terms and conditions of the Federal awards, or for other reasons. However, this prohibition would not preclude the non-Federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal award (c)

24 Allocable Costs (cont.)
If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on proportional benefit. If cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then notwithstanding (c), the costs may be allocated or transferred to benefited projects on any reasonable documented basis. (d)

25 Other Significant Requirements

26 USE OF BUDGET ESTIMATES
Budget estimates alone do not qualify as support for charges to Federal awards (i)(1)(viii) May be used for interim accounting purposes if: Produces reasonable approximations Significant changes to the corresponding work activity are identified in a timely manner Internal controls in place to review after-the-fact interim charges based on budget estimates

27 Percentages Because practices vary as to the activity constituting a full workload, records may reflect categories of activities expressed as a percentage distribution of total activities (i)(1)(ix)

28 Focus on ihes It is recognized that teaching, research, service, and administration are often inextricably intermingled in an academic setting. When recording salaries and wages charged to Federal awards for IHEs, a precise assessment of factors that contribute to costs is therefore not always feasible, nor is it expected (i)(1)(x)

29 Compliance For records which meet the standards, the non-federal entity will not be required to provide additional support or documentation for the work performed (i)(2) DOL regulations for Fair Labor Standards Act must still be met (i.e. charges must be supported by records indicating the total nuber of hours worked each day).

30 Noncompliance For a non-Federal entity where the records do not meet these standards: USDE may require personnel activity reports (PARs), including prescribed certifications or equivalent documentation that support the records as required in this section (i)(8) PARs are not defined!!

31 Reconciliation? Silence.
All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly (i)(1)(viii)(C) Don’t forget the Allocability Requirement (a)

32 Flexibility

33 Substitute Systems States, local governments and Indian tribes encouraged to adopt “substitute systems” if approved by cognizant agency for indirect cost (i)(5) No longer applies to nonprofits. Still acceptable to allocate sampled employees’ supervisors, clerical and support staffs, based on the result of the sampled employees.

34 Alternative Proposals
Cognizant agencies for indirect costs are encouraged to accept alternative proposals based on outcomes and milestones for program performance (i)(6) These plans are acceptable as alternatives to the Part 200 standards.

35 Blended Funding A non-Federal entity may submit performance plans that incorporate funds from multiple Federal awards and account for their combined use based on performance-based metrics, if approved (i)(7) Must submit a request for a waiver that includes certain information, including the method of charging costs.

36 So what Does this mean?

37 Use Current Compliant System!
If going to make changes based on new EDGAR requirements, ensure strong system of internal controls in place! Remember: Charges for salaries must be based on records that accurately reflect the work performed. These records MUST: Be supported by a system of internal controls which provides reasonable assurance charges are accurate, allowable and properly allocated; (i)(1)(i)

38 The Definition of Internal Controls
Internal controls means a process, implemented by a non-Federal entity, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: Effectiveness and efficiency of operations; Reliability of reporting for internal and external use; and Compliance with applicable laws and regulations

39 The Definition of Internal Controls (cont.)
§200.62   Internal control over compliance requirements for Federal awards. Means a process implemented by a non-Federal entity designed to provide reasonable assurance regarding the achievement of the following objectives for Federal awards: Transactions are properly recorded and accounted for, in order to: Permit the preparation of reliable financial statements and Federal reports; Maintain accountability over assets; and Demonstrate compliance with Federal statutes, regs, and the terms and conditions of the Federal award;

40 The Definition of Internal Controls (cont.)
Transactions are executed in compliance with: Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program; and Any other Federal statutes and regulations that are identified in the Compliance Supplement; and Funds, property, and other assets are safeguarded against loss from unauthorized use or disposition

41 Internal Controls Requirements
The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.

42 Internal Controls Requirements (cont.)
§    Internal controls (cont.) These internal controls should be in compliance with guidance in: “Standards for Internal Control in the Federal Government”, issued by the Comptroller General of the United States, or The “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

43 Internal Controls Requirements (cont.)
§    Internal controls (cont.) Comply with Federal statutes, regs, and the terms and conditions of the Federal awards. Evaluate and monitor the non-Federal entity's compliance with statutes, regs and the terms and conditions of Federal awards. Take prompt action when instances of noncompliance are identified including in audit findings. Take reasonable measures to safeguard protected personally identifiable info (PII) and other information designated or deemed sensitive

44 Internal Controls (cont.)
The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly (i)(1)(viii)(C)

45 Levels of Organizational Structure
The COSO “Cube” Categories of Objectives Levels of Organizational Structure It has five integrated components: Control Environment, Risk Assessment, Control Activities, Information & Communication, and Monitoring, which are pervasive at all levels of the organization, from the most comprehensive – at the entity level – down through each operating unit and to the most discrete level, the process function. 45 Components of Internal Controls

46 Examples of Payroll Internal Controls
Separation of duties Best practice is to have different people: Prepare and update online payroll and personnel data Approve online payroll actions Review monthly payroll expense reports Review and reconcile financial records on a monthly basis Distribute the payroll Accountability, authorization, and approval Maintain data confidentiality by giving payroll and personnel access only to authorized individuals. Periodically review and update signature authorizations. Obtain pre-approval for changes made to timekeeping records. Review attendance records for accuracy and compliance to policy. Reconcile ledgers monthly for accuracy of recorded transactions.

47 Examples of Payroll Internal Controls (Cont.)
Security of assets Best practices: Request proof of identity prior to distributing payroll. Notify payees of unclaimed checks Return unclaimed checks to the Payroll office. Keep private and sensitive information secured. Review and reconciliation Monthly reconciliation activities ensure that you're paying the right people at the correct rates. Review and audit monthly payroll costing reports. Compare actual payroll costs to estimated costs to discover any variances. Perform monthly reconciliations of operating ledgers to ensure accuracy and timeliness of expenses.

48 Potential Consequences
Unauthorized, unnecessary, or fraudulent payments Misappropriation of funds Overpayments Duplicate payments made Improper charges to incorrect account/ funds Inaccurate entries or improper changes Unauthorized payroll transactions processed Disallowances resulting from costs charged to incorrect accounts, funds, or awards Inaccurate recording of payment type distorts employee data Financial records misstated Lost or stolen checks

49 Disclaimer This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the presentation or later review of these printed materials does not create an attorney-client relationship with Brustein & Manasevit, PLLC. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances.