Did You Know
Grantees Must Adequately Address Time and Effort Documentation
Grant recipients have had to repay the federal government millions of dollars because they failed to adequately document time and effort and overcharged the grant. Understanding how to accurately document the compensation of employee services is critical in preventing these circumstances. The absence of proper documentation of hours worked is the basis for auditors questioning costs and grant- or agencies disallowing costs claimed. Initially, grantees should be aware of time and effort requirements in the federal cost principles, and there are other secondary sources that grantees can turn to for assistance. This issue provides a useful overview of time and effort documentation.
The absence of proper documentation of hours worked is the basis for auditors questioning costs and grantor agencies disallowing costs claimed. Section -.525(d)(1) of Office of Management and Budget Circular A-133 states “federal programs primarily involving staff payroll costs may have high risk for time and effort reporting.”
Requirements for educational institutions can be found in 2 C.F.R. Part 215 (0MB CircularA-21) Section 1(10); requirements for state, local and Indian tribal governments are available in 2 C.F.R. Part 220 (0MB Circular A-87) Appendix B(8); and nonprofit organizations can find requirements in 2 C.F.R. Part 225 (0MB Circular A-122) Appendix B(8). These circulars, while they vary somewhat, require grantees to document a claim for actual costs incurred.
Other secondary sources that grantees can turn to for assistance, such as ASMB-C-I0, A Guide for State and Local Governments ,and the 0MB Circular A-133 Compliance Supplement (see l)[429 of the Federal Grants Management Hand- book). Auditors referring to these documents should realize they are a compilation of requirements and not the actual primary source. When determining if time and effort costs are allowable, a grantee should determine if the cost is reasonable; allocable or of benefit to the grant; consistently treated (deter- mined by the entity’s own policy); incurred in accordance with generally accepted accounting principles; not charged elsewhere in the grant; and adequately documented.
Key standards that are present in all 0MB cost principle circulars on time and effort reporting are:
- Time and effort is confirmed after the fact -bud- get estimates do not qualify as support for federal awards.
- Full disclosure -grantees must know where employees are spending 100 percent of their time.
- Credible endorsement or signature -grantees must arrange for a qualified person familiar with the effort expended to endorse the document prepared.
- Reasonable estimate -effort estimates should closely reflect actual time worked, as documentation that matches too closely with the budgeted amount can be met with scrutiny.