Contracts and Grants Accounting
Effort reporting is a process mandated by the federal government to verify that direct labor charges to, or cost shared on, sponsored projects are accurate, timely, and reflect the actual level of work performed. Effort is the portion of time spent on a particular activity, expressed as a percentage of the individual's total activity for the university.
It is the method of certifying to the granting agencies that the effort required as a condition of the award has actually been completed. Effort reporting is required by OMB Circular A-21 which requires certification of effort spent by all employees whose salaries are charged directly to federal and federal flow-through funds, as well as for reporting committed cost sharing.
Effort Reporting is intended to ensure that individuals confirm "after-the-fact" for effort expended on federally funded activities. The confirmation certifies they have received compensation from federal fund sources and they have expended effort on the federally funded project, at a minimum, in the same percentage they are paid.
Government sponsors expect to pay only for those portions of employee effort that are actually devoted to their projects. Periodically, government and internal auditors review our payroll charges to enforce this expectation. In conducting these audits, they are assessing whether the salary charged to awards is for effort that appropriately benefited those projects over the reporting period.
Auditors review the accuracy of our payroll charges by verifying that the percentage of the employee's salary charged to a sponsored project reasonably approximates the actual proportion of the employee's FTE effort devoted to that project. The Effort Reporting System is frequently called upon to provide this verification to audits.
Effort Reporting must be completed and certified on a regular basis in accordance with the terms stated in OMB A-21. Failure to meet these requirements puts the University at risk for audit disallowances resulting in significant financial penalties. In recent years, several major universities have been assessed large penalties and/or agreed to settlements due in part to effort reporting violations: Northwestern University for $5.5 million; University of Southern Florida, for $4.1 million; Johns Hopkins for $2.6 million; Harvard University for $3.3 million; and University of Alabama Birmingham for $3.39 million.