Part III - UNM Finance: Practical Applications

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Standard Accounting Resource Manual (SARM)

MSC 0000 00
1 University of New Mexico
Albuquerque, NM 87131

Appendix 3 - Effort Reporting Guidance

This document can be found at:     http://cgacct.unm.edu/docs/jul-dec_effort_cert_guidelines.pdf

1. Purpose

Under Office of Management and Budget Circular A-21 and other regulations, the University is required to prepare effort reports to confirm, on an after-the-fact basis, any effort that has been compensated or contributed as cost share under a sponsored award.  These reports or effort certifications are only prepared for exempt employees whose salaries are charged to restricted funds.  The effort of non-exempt employees is tracked through timesheets.

In recent years, effort reporting has been a primary focus of auditors for the federal government.  If it is determined that inaccurate, incomplete, or untimely effort reports were submitted to the federal government, an institution could face substantial penalties and funding disallowances.  Several universities have paid large amounts to settle accusations of submitting false effort reports.  As examples, in 2003, one university had to pay the government $5.5 million; in 2004, a university paid $2,6 million; in 2004, another university paid $3.3 million; and more recently in 2005 a university paid $11.5 million.  additionally, criminal charges may be brought against an individual for certifying falsified effort.

2. Definitions

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 through cost share.

Individual effort is expressed as a percentage of the total amount of time spent on work related activities (such as instruction, research, patient care, administration) for what the University compensates an individual.

Effort reporting is the method required under federal regulations for certifying to sponsoring agencies that the effort charged or cost shared to each award actually has been expended.

3. Standards for Reasonable Distribution of Effort

The nature of academic work precludes absolute accuracy in accounting for the time devoted to a particular project.  Therefore, the OMB A-21 regulations require effort reports to be only reasonably accurate, as follows:

[1]In an academic setting, teaching, research, service, and administration are often inextricably intermingled.  A precise assessment of factors that contribute to costs is not always feasible, nor is it expected.  Reliance, therefore, is placed on estimates in which a degree of tolerance is appropriate [emphasis added].

[1] This guidance, it should be noted, does not apply to clinical research, which will be the subject of a separate guidance.

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