1 The Illinois Association of Title I Directors Spring Meeting April 27, 2010 Crowne Plaza Springfield, Illinois.

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The Illinois Association The Illinois Association of Title I Directorsof Title I Directors

Spring MeetingSpring MeetingApril 27, 2010April 27, 2010Crowne PlazaCrowne PlazaSpringfield, IllinoisSpringfield, Illinois

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Time and Effort Time and Effort ReportingReportingPresented by:Presented by:

Paula WilliamsPaula Williams

Principal ConsultantPrincipal Consultant

Illinois State Board of EducationIllinois State Board of Education

External Assurance DivisionExternal Assurance Division

(217) 782-7970(217) 782-7970

[email protected]@isbe.net

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Topics of InterestTopics of Interest

Time and Effort ReportingTime and Effort Reporting• What is it?What is it?• Why is it necessary?Why is it necessary?• Who must complete it?Who must complete it?• How must it be done?How must it be done?• When must it be done?When must it be done?• Systems, Certifications and ComponentsSystems, Certifications and Components• Example of a Time and Effort Reporting SystemExample of a Time and Effort Reporting System• Direct CostsDirect Costs• Indirect Costs / Indirect Cost Rate Indirect Costs / Indirect Cost Rate • Cost Allocation PlansCost Allocation Plans• SummarySummary

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Time and Effort Reporting Time and Effort Reporting

What is it?What is it? In general, time and effort documentation In general, time and effort documentation

provides support for salaries and wages provides support for salaries and wages in in additionaddition to the standards for payroll to the standards for payroll documentation.documentation.

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Time and Effort ReportingTime and Effort Reporting

Why is it necessary?Why is it necessary? Time and effort reporting is required under the Time and effort reporting is required under the

Federal Office of Management and Budget (OMB) Federal Office of Management and Budget (OMB) Circular A-87 – Cost Principles for State, Local and Circular A-87 – Cost Principles for State, Local and Indian Tribal Governments, Attachment B, Indian Tribal Governments, Attachment B, Paragraph 8Paragraph 8

If you chose to accept Federal funding, you agree to If you chose to accept Federal funding, you agree to comply with OMB Circular A-87comply with OMB Circular A-87

The lack of adequate documentation is one basis for The lack of adequate documentation is one basis for questioning and disallowing costs during an auditquestioning and disallowing costs during an audit

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Basic Guidelines for Basic Guidelines for ExpendituresExpenditures

Per the OMB Circular A-87, Per the OMB Circular A-87, expenditures:expenditures: Must be allowableMust be allowable Must be reasonableMust be reasonable Must be allocableMust be allocable Must be adequately documentedMust be adequately documented

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Time and Effort ReportingTime and Effort Reporting

Who must complete it?Who must complete it? Educational entities that fund employees Educational entities that fund employees

with one or more Federal sources of with one or more Federal sources of revenuerevenue State Education Agencies (ISBE)State Education Agencies (ISBE) Local Education Agencies (school districts and Local Education Agencies (school districts and

joint agreements)joint agreements)

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Time and Effort ReportingTime and Effort Reporting

Who must complete it continued…Who must complete it continued… Employees charged to Employees charged to oneone Federal Federal indirectindirect costcost

activity do not have to provide any additional activity do not have to provide any additional documentation – standard payroll documentation is documentation – standard payroll documentation is sufficientsufficient

Employees charged to Employees charged to oneone Federal Federal direct costdirect cost activity must certify at least every 6 months that they activity must certify at least every 6 months that they worked on that one activityworked on that one activity

Employees charged to Employees charged to multiplemultiple activities, with at activities, with at least one being Federal, must complete Personnel least one being Federal, must complete Personnel Activity Reports (PAR)Activity Reports (PAR)

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Time and Effort ReportingTime and Effort Reporting

Who must complete it continued…Who must complete it continued… Multiple Activities include:Multiple Activities include:

More than one Federal grantMore than one Federal grant A Federal grant and a non-Federal grantA Federal grant and a non-Federal grant An indirect cost activity and a direct cost activityAn indirect cost activity and a direct cost activity Two or more indirect activities which are Two or more indirect activities which are

allocated using different allocation basesallocated using different allocation bases An unallowable activity and a direct or indirect An unallowable activity and a direct or indirect

cost activitycost activity

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Time and Effort ReportingTime and Effort Reporting

How must it be done?How must it be done? Personnel Activity Reports (PAR):Personnel Activity Reports (PAR):

Must reflect an after the fact distribution of Must reflect an after the fact distribution of actualactual activity for each employeeactivity for each employee

Must disclose a full workloadMust disclose a full workload Must be signed by the employeeMust be signed by the employee

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Actual vs. BudgetedActual vs. Budgeted

Budget estimates or other distribution Budget estimates or other distribution percentages determined percentages determined beforebefore the services the services are performed do not qualify as support for are performed do not qualify as support for charges to Federal awards but may be used for charges to Federal awards but may be used for interim accounting purposes. interim accounting purposes.

Comparisons of actual costs to budgeted Comparisons of actual costs to budgeted distributions based on the monthly activity distributions based on the monthly activity reports must be made at lease quarterly.reports must be made at lease quarterly.

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Time and Effort ReportingTime and Effort Reporting

When must it be done?When must it be done? Must be prepared after the work has been Must be prepared after the work has been

completedcompleted Must be completed at least monthlyMust be completed at least monthly Must coincide with one or more pay periodsMust coincide with one or more pay periods

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Substitute SystemsSubstitute Systems

Substitute systems for allocating salaries and wages to Substitute systems for allocating salaries and wages to Federal awards may be used in place of personnel Federal awards may be used in place of personnel activity reports. activity reports. These systems are subject to approvalThese systems are subject to approval if required by the cognizant agency. Such systems if required by the cognizant agency. Such systems may include, but are not limited to:may include, but are not limited to: Random moment samplingRandom moment sampling Case countsCase counts Other quantifiable measures of employee effortOther quantifiable measures of employee effort

Examples of substitute systems which use sampling Examples of substitute systems which use sampling methods include: Temporary Assistance to Needy methods include: Temporary Assistance to Needy Families (TANF) and MedicaidFamilies (TANF) and Medicaid

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Time and Effort ReportingTime and Effort Reporting

So HOW must it ACTUALLY be done?So HOW must it ACTUALLY be done?

There is no standard Federal format on There is no standard Federal format on how to record time and efforthow to record time and effort

Entities subject to time and effort Entities subject to time and effort reporting must develop a system that reporting must develop a system that adequately records time and effortadequately records time and effort

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Time and Effort ReportingTime and Effort Reporting

Systems:Systems: Database systemDatabase system Web-based systemWeb-based system Paper systemPaper system

Certifications:Certifications: Actual signatureActual signature Electronic signatureElectronic signature

Components:Components: Breakdown of daily Breakdown of daily

timetime Program assignmentProgram assignment Activity assignmentActivity assignment Location assignmentLocation assignment

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Time and Effort ReportingTime and Effort Reporting

Example of a Time and Effort Reporting Example of a Time and Effort Reporting System:System: Database systemDatabase system Record daily time on a quarterly basisRecord daily time on a quarterly basis Assign Program Code (i.e. Title I, IDEA, GSA etc.)Assign Program Code (i.e. Title I, IDEA, GSA etc.) Assign Activity Code (i.e. administration, technical Assign Activity Code (i.e. administration, technical

assistance, regulatory, etc.)assistance, regulatory, etc.) Assign Location Code (i.e. Springfield Office, Assign Location Code (i.e. Springfield Office,

Chicago Office, Non-public/Public School, etc.)Chicago Office, Non-public/Public School, etc.) Complete each activity report within 5 days of the Complete each activity report within 5 days of the

end of the payroll periodend of the payroll period Submit the activity report – no changes allowedSubmit the activity report – no changes allowed Electronic signatureElectronic signature

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The GoalThe Goal

The goal of time and effort reporting is to The goal of time and effort reporting is to produce timely, credible documentation produce timely, credible documentation that has been developed under a that has been developed under a disciplined system and that can be used disciplined system and that can be used to support salaries and wages.to support salaries and wages.

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The Relationship The Relationship Between:Between:

Time and Effort Direct Costs Indirect Costs Cost Allocation Plans

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Direct CostsDirect Costs

Direct costs are costs that can be directly Direct costs are costs that can be directly traced to or identified with a particular traced to or identified with a particular grant project or other institutional activity.grant project or other institutional activity. Example: Example:

One full time equivalent (FTE) Title I Director One full time equivalent (FTE) Title I Director would be a direct cost to a Title I grantwould be a direct cost to a Title I grant

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Indirect CostsIndirect Costs

Indirect costs are costs that an Indirect costs are costs that an organization incurs for common or joint organization incurs for common or joint objectives that cannot be readily and objectives that cannot be readily and specifically identified with a particular specifically identified with a particular grant project or other institutional activity.grant project or other institutional activity. Example:Example:

The district has one bookkeeper who handles all The district has one bookkeeper who handles all payroll, purchasing and accounts payable for the payroll, purchasing and accounts payable for the district. The bookkeeper’s salary would be district. The bookkeeper’s salary would be considered an indirect cost.considered an indirect cost.

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Indirect CostsIndirect Costs

The following expenditure functions are The following expenditure functions are usually considered as indirect costs:usually considered as indirect costs: Function 2510 – Direction of Business Function 2510 – Direction of Business

Support ServicesSupport Services Function 2520 – Fiscal ServicesFunction 2520 – Fiscal Services Function 2570 – Internal ServicesFunction 2570 – Internal Services Function 2640 – Staff Services Function 2640 – Staff Services Function 2660 – Data Processing ServicesFunction 2660 – Data Processing Services

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Indirect Cost RateIndirect Cost Rate

The School Business Services Division of the The School Business Services Division of the Illinois State Board of Education annually Illinois State Board of Education annually computes a new indirect cost rate for each computes a new indirect cost rate for each school district and joint agreement. school district and joint agreement.

Each year these computed indirect cost rates Each year these computed indirect cost rates are made available electronically to the are made available electronically to the respective local education agencies. respective local education agencies.

A state-wide average indirect cost rate is also A state-wide average indirect cost rate is also determined at this time.determined at this time.

The indirect cost rate is applied to the amount The indirect cost rate is applied to the amount expended, not to the total grant award, to expended, not to the total grant award, to determine the amount of the indirect costs.determine the amount of the indirect costs.

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Cost Allocation PlanCost Allocation Plan

A Cost Allocation Plan (CAP) is a A Cost Allocation Plan (CAP) is a document that states how a district will document that states how a district will identify, accumulate and distribute certain identify, accumulate and distribute certain allowable administrative costs in grants allowable administrative costs in grants and identifies the allocation methods and identifies the allocation methods used for distributing the costs. A written used for distributing the costs. A written plan for allocating joint costs is required plan for allocating joint costs is required to support the distribution of those costs to support the distribution of those costs to the grant program.to the grant program.

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Cost Allocation PlanCost Allocation Plan

A CAP must be documented via personnel A CAP must be documented via personnel time and effort information as well as formal time and effort information as well as formal accounting records according to generally accounting records according to generally accepted governmental accounting accepted governmental accounting principles to substantiate the propriety of the principles to substantiate the propriety of the eventual charges. All applicable eventual charges. All applicable documentation must be available for review documentation must be available for review upon request by a local auditor or ISBE upon request by a local auditor or ISBE compliance monitor.compliance monitor.

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What is the Difference?What is the Difference?

An Indirect Cost Rate is a percentage An Indirect Cost Rate is a percentage rate determined by the ISBE on an rate determined by the ISBE on an annual basis that can be used to allocate annual basis that can be used to allocate indirect costs to grants.indirect costs to grants.

A CAP is a document created by the A CAP is a document created by the district to outline how the district will district to outline how the district will allocate indirect costs to grants. allocate indirect costs to grants.

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When to use the Indirect When to use the Indirect Cost Rate or a CAP?Cost Rate or a CAP?

When completing a grant application When completing a grant application and/or amendment, the local education and/or amendment, the local education agency must decide to either utilize its agency must decide to either utilize its restricted Indirect Cost Rate or to utilize a restricted Indirect Cost Rate or to utilize a Cost Allocation Plan.Cost Allocation Plan.

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SummarySummary

Time and Effort documentation must be Time and Effort documentation must be maintained for all Federal maintained for all Federal direct costdirect cost employees charged to one or more employees charged to one or more activitiesactivities

Time and Effort documentation must be Time and Effort documentation must be part of a CAP for all part of a CAP for all indirect cost indirect cost employees charged to multiple activitiesemployees charged to multiple activities

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References and References and ResourcesResources

OMB Circular A-87, Cost Principles for State, OMB Circular A-87, Cost Principles for State, Local and Indian Tribal GovernmentsLocal and Indian Tribal Governments http://www.whitehouse.gov/omb/rewrite/circulars/a087/a87_2004.html

State and Federal Grant Administration Policy State and Federal Grant Administration Policy and Fiscal Requirements and Proceduresand Fiscal Requirements and Procedures http://www.isbe.net/funding/pdf/fiscal_procedure_handbk.pdf

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QuestionsQuestions