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Risks of not complying with Circular A-21's effort
reporting requirements...
In recent years, the federal government and its auditors
have become more active in their review of effort
reporting requirements, and a number of universities have
received large audit disallowances as a result. Recent cases
of audit disallowances are:
-
Northwestern University paid $5.5 million to settle
issues related to problems with effort reporting, on a
contracts and grants base of $325 million;
-
South Florida returned $4.1 million to the federal
government to settle a number of charging issues,
including effort reporting;
-
University of California paid a total of $2.1 million to
settle an NIH salary cap limitation disallowance for the
period July 1, 1995 through June 30, 2002.
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.
Institutional disallowances can result if:
1) 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;
2) The effort report does not encompass all of the
activities performed by
the employee under the terms of their employment;
3) The levels of effort reported do not appear reasonable,
given the
responsibilities of the individual.
Individual disallowances can result if:
1) The effort report certified by the individual is found to
be falsified;
2) The levels of effort reported do not appear reasonable.
As evidenced above, federal audit disallowances can result
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. |
