Effort Reporting Policy & Procedures

(Effective 8/18/2008)

The federal government requires an effort report when an individual is compensated by or has agreed to contribute time to a federally sponsored project. All faculty who serve as investigators on sponsored agreements are personally responsible to certify the amount of effort that they and their employees spent on sponsored activities.

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.

What Is Effort and Effort Reporting?

Effort is defined as the amount of time spent on a particular activity. It includes the time spent working on a sponsored project in which 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–instruction, research (including externally funded research), administration–for which Davidson College compensates an individual.

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.

What Is a Percent Effort?

Effort is measured as a percent of the individual's total Davidson College employment obligation. Percent effort represents the proportion of time an individual spends on each College activity and is expressed as a percent of the individual's total College activity. Total Davidson College activity = 100 percent effort.

The percent effort is not based on a typical 40-hour work week. Total Davidson College effort is 100 percent of time regardless of the number of hours worked (for example, a typical work week may be 20 hours for one individual and 60 hours for another).

Total effort may not exceed 100 percent and should include only those activities for which an individual receives College compensation, including work performed on sponsored projects, whether reimbursed by a sponsor or Davidson College funded.

What is Contributed or Cost-shared Effort?

Cost sharing represents that portion of the total project costs of a sponsored agreement that are not borne by the sponsor or sponsors of the project. These costs are borne by the College or other non-federal third parties, rather than by the sponsor.

Cost sharing can be required by the sponsor or volunteered by a principal investigator; regardless, any commitment of effort referenced in the project proposal or the award document must be honored, reported, and captured in an effort-reporting system.

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.

Who Is Subject to Effort Reporting?

Faculty and staff will complete an effort certification if they perform work on sponsored projects that are funded by federal, state and local government entities, and federal pass-through organizations, regardless of whether the effort is paid or unpaid. Non-exempt employees who complete auditable timecards are not subject to effort reporting procedures.

When are Time and Effort Reports Submitted?

Davidson College uses after-the-fact certification. Faculty and staff submit time and effort reports annually in August via Banner Self-Service.

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 colleges and universities have received large audit disallowances as a result.

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

Causes for Institutional Disallowances

  • 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.
  • The effort report does not encompass all of the activities performed by the employee under the terms of their employment.
  • The levels of effort reported do not appear reasonable, given the responsibilities of the individual. 

Causes for Individual Disallowances

  • The effort report certified by the individual is found to be falsified;
  • The levels of effort reported do not appear reasonable.
  • Federal audit disallowances can and have resulted 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.