The Medical University of South Carolina

After-the-Fact (Effort) Reporting Policies and Procedures
Revised 6/14/99

Table of Contents

1.0 Introduction

The Federal Government’s Office of Management and Budget (OMB) issued Circular A-21, on February 26, 1979 (subsequently revised), establishing principles for determining costs applicable to grants, contracts, and other agreements with educational institutions. All Federal agencies that sponsor research and development, training, and other work at educational institutions must apply the provisions of this Circular in determining the costs incurred for such work.

Circular A-21 deals extensively with the principles to be used in charging both direct and facilities and administrative (indirect) costs to grants, contracts, and other agreements. This analysis of the Circular, however, is limited to those provisions relating to compensation for personal services and, specifically, to the manner in which the Medical University of South Carolina complies with those provisions.

Compensation for personal services covers all amounts paid currently, or accrued by the University, for services of employees rendered during the period of performance under sponsored agreements. Such amounts include salaries, wages, and fringe benefits. Circular A-21 Section J.8. provides three methods for handling payroll distributions: a system of plan-confirmation, a system of after-the-fact activity records and a system of multiple confirmation records.

Circular A-21 Section J.8.b(2) sets forth criteria that a payroll distribution system must have to be acceptable which is prelude to selecting a method for handling payroll distributions.

1) The payroll distribution system must:

a)  be incorporated into the official records of the institution
b)  reasonably reflect the activity for which the employee is compensated by the institution, and
c)  encompass both sponsored and all other activities on an integrated basis, but may include the use of subsidiary records. (Compensation for incidental work described in Section J.8.a. need not be included.)

2) The method must recognize the principle of after-the-fact confirmation or determination so that costs distributed represent actual costs.

3) The payroll distribution system must allow confirmation of activity allocable to each sponsored agreement and each of the categories of activity needed to identify F&A cost and the functions to which they are allocable.

4) The payroll distribution system must reflect categories of activities expressed as a percentage distribution of total activities.

5) The direct and F&A charges may be made initially to sponsored agreements on the basis of estimates made before services are performed. When such estimates are used, significant changes in the corresponding work activity must be identified and entered into the payroll distribution system.

6) The system must provide for independent internal evaluations to ensure the system’s effectiveness and compliance with the above standards.

7) For systems which meet these standards, the institution will not be required to provide additional support or documentation for the effort actually performed.

The Medical University of South Carolina uses the After-the-Fact Reporting System as the basis for its distribution of salaries and wages for all faculty and staff. Under this system the distribution of salaries and wages is supported by activity reports. According to Circular A-21, MUSC’s after-the-fact reporting system must meet the following standards:

1) The activity reports must reflect the distribution of activity expended by employees covered by the system (compensation for incidental work as described in Circular A-21 section J.8.a need not be included).

2) These reports must reflect an after-the-fact reporting of the percentage distribution of activity of employees. Charges may be made initially on the basis of estimates made before the services are performed, provided that such charges are promptly adjusted if significant differences are indicated by activity records.

3) The reports must reasonably reflect the activities for which employees are compensated by the institution. To confirm that the distribution of activity represents a reasonable estimate of the work performed by the employee during the period, the reports must be signed by the employee or appropriate official using suitable means of verification that the work was performed.

4) The system must reflect activity applicable to each sponsored agreement and to each category needed to identify F&A costs and the functions to which they are allocable.

5) For professorial and professional staff, the reports must be completed quarterly. For other employees, the reports must be completed monthly and may coincide with one or more periods.

6) Where the institution uses time cards or other forms of after-the-fact payroll documents as original documentation for payroll and payroll charges, such documents shall qualify as records for this purpose, provided that they meet the above five requirements.

2.2 Employees Covered

The employees covered by the After-the-Fact Reporting System are all professorial and other employees which includes:

1) All University Faculty, except faculty with 100% effort in instruction.
2) All other University personnel who:

a)    Cost share or charge activity directly either to one or more sponsored agreements
b)    Distribute their activities to more than one direct or indirect activity
c)    Split their effort between direct and indirect activities
d)    Have any or all of their effort charged to indirect research or indirect instruction

3) Affiliate Personnel - See Affiliate Policies and Procedures

3.1 Activity Reports

An Activity Report (Exhibit 1) is provided to every employee covered under the After-the-Fact Reporting System either monthly or quarterly throughout the fiscal year. This form will reflect the percentage of effort spent in total for each column (UDAK) for the respective pay periods. The Activity Report will be sent by Grants and Contracts Accounting to the Department Effort Coordinator who will distribute the Activity Reports to the appropriate employees. Each employee or the appropriate official with firsthand knowledge of the employee’s activities must review, sign and date the Activity Report, and return it to the Department Effort Coordinator. The Department Effort Coordinator will forward the signed Activity Report to the Office of Grants and Contracts Accounting to be kept on file. If adjustments to an employee’s actual effort have been made on the Activity Report it may activate a PEAR form to be processed through the department’s normal channels (see the "Significant Changes on an Activity Report" section below, Item 3.4).

The Activity Report may be signed by a Dean, Chair, Director, Principal Investigator or Business Manager without the employee's signature (See "Exception to Appropriate Official Signature"), provided the appropriate official is prepared to certify that he/she has firsthand knowledge of all the employee's activities. If the appropriate official cannot certify that he/she has firsthand knowledge of all the employee's activities, then the employee must sign the statement. In some cases, an employee may be involved in a number of activities under different supervisors, and no single person other than the employee has firsthand knowledge of all his/her activities. In these cases, the documents must be signed by the employee. Only one signature is required if the person signing can certify all the employee's activities.

Each employee has responsibilities in the operation of the After-the-Fact Reporting System which are set forth in the transmittal memorandum (Exhibit 2) accompanying the Activity Reports.

3.2 Average Hours Per Workweek

The employee certification includes a blank for the average hours worked per week. This information is necessary for Medicare requirements, therefore, those covered employees reflecting effort in either Clinical Instruction, House Staff Instruction, Clinical Services or Hospital Administration are required to provide this information.

3.3 Exception to Appropriate Official Signature

The appropriate official signature is not acceptable for those covered employees reflecting effort in either Clinical Instruction, House Staff Instruction, Clinical Services or Hospital Administration. The covered employee must sign the Activity Report to be in compliance with Medicare requirements.

3.4 Significant Changes on an Activity Report

Circular A-21 states that "charges may be made initially on the basis of estimates made before the services are performed, provided that such charges are promptly adjusted if significant differences are indicated on the Activity Reports". If a significant change on the Activity Report is necessary to reflect actual effort of an employee a new PEAR form must be completed. Although there is no precise definition for the term "significant," it has been construed as a general rule that a change applicable to a given project or activity of 5% or more of an employee’s total effort would warrant an adjustment. These adjustments should be implemented immediately following the Department Effort Coordinators receipt of the signed activity report.

3.5 Retroactive Changes on a Previously Certified Activity Report

A retroactive change in payroll distribution by a PEAR form affecting any previously certified time frame, must be subjected to the closest scrutiny. Such a change would indicate a contradiction of the certified effort and for that reason should be limited to the correction of errors. If a retroactive change should be made, it must be supported by a full explanation and must have approval by the Department Chair, Vice Chair or Business Manager or one level higher. The adjustment should be implemented within 90 days of the receipt of the monthly or quarterly activity reports.

The After-the-Fact Reporting System will provide for independent internal evaluation to ensure the system’s integrity and compliance with applicable standards. This independent evaluation will be performed by the Internal Audit Department of the Medical University of South Carolina.

Reviews by Internal Audit will meet the following standards:

1) Reviews will have the objectives of evaluating whether:

a) Certified Activity Reports are adequate, specific, and reasonable.
b) Changes are being promptly identified and reviewed by the department effort coordinator.
c) Prompt decisions on the significant changes are being made and documented by the appropriate official.

2) The review process will include interviews with a representative number of employees covered by the system. These interviews will determine whether:

a)    The employee is aware of his/her responsibilities to review and complete each Activity Report.
b)    The employee thoroughly understands the nature of a significant change.
c)    The employee is reporting significant changes in effort to his/her appropriate official.

3) Follow-up reviews will be made to determine that prompt action has been taken to correct any problems disclosed during the initial review.

4) Internal Audit will document and retain as a part of the official records of the Medical University of South Carolina, the following: the defined scope of the review, tests that have been performed and the results and recommended corrective actions. Internal Audit will report its findings on the After-the-Fact Reporting System in accordance with written institutional policies.

5.0 Guidelines For Department Effort Coordinator

Each department will appoint an individual to perform the duties of the Department Effort Coordinator. A training course on these duties will be administered by Grants and Contracts Accounting for all Department Effort Coordinators. The Department Effort Coordinator will act as the central distribution point between the department and Grants and Contracts Accounting. The responsibilities include distributing the Activity Reports to the appropriate employees, collecting the Activity Reports from the appropriate covered employees, ensuring a signature and date and forwarding the reports to Grants and Contracts Accounting by the stipulated due dates and, if adjustments are necessary to the employee’s effort, notifying the appropriate individual in the department so that a PEAR form is processed through the departments normal channels. The departments are responsible for maintaining adequate documentation to substantiate any changes to a covered employee’s salary distribution that will hold up under internal and external audits.

6.0 Timetable