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National Association of College Cost AccountantsSan Antonio, Texas

University of Kentucky

The University of Kentucky Established 1865 as a Land Grant Institution 16 Colleges University owned Hospital Sponsored Project Awards for 2015 $285 Million Sponsored Project Expenses for 2015 $281 Million Pre and Post Award offices report to separate Executive Vice

Presidents

Preparing for Uniform Guidance

Steering Committee• Provost• Executive Vice President for Research• Executive Vice President for Finance and Administration• Associate Provost for Faculty Advancement

Working Committee• 8 Faculty with active sponsored project activity• Directors and managers from administrative offices• 4 College Financial Officers• Department Research Administrators• Staff from Central offices

Preparing for Uniform Guidance

Reviewed existing UK policies and procedures to identify if updates or changes were needed

Identified some gaps that needed to be addressed in other areas• Procurement• Sub-awards

Specifically identified section 200.430• Biggest risk• Biggest potential reward

University Policies 200.430

Reviewed• Governing Regulation

– GR 10 Part X, Regulations Affecting Employment (Sabbatical Leave)

• Administrative Regulations related to faculty pay– AR 3:6 Faculty assignment and Vacation Leave Policy– AR 3:9 Consulting and Other Overload Employment

• Faculty Payment Policy Additions needed

• New administrative regulation defining Institutional Base Salary• Business Procedures Manual section related to payroll

University Policies

Writing• Business Procedures Manual for payroll entry

Revising• Administrative regulations for

– AR 3:6 Faculty Assignment and Vacation Leave Policy• Faculty payment policy• GR 10 Part X, Regulations Affecting Employment (Sabbatical

Leave) Completed

• AR 7:10 Institutional Base Salary for Sponsored Projects• AR 3:9 Consulting and Other Overload Employment

Executive Summary

UK engaged Huron to assess its current effort reporting process, policy, systems and procedures and how they meet the requirements of OMB’s new Uniform Guidance

Areas reviewed encompassed:• Distribution of Effort process and form (for faculty)• Staff payroll distribution process• Faculty and Staff Effort Certification forms

Background

At UK, the following processes are used to meet these requirements:• Faculty process

– Distribution of Effort (DOE) – at least annually, used to plan effort for full-time faculty, and identify accounts to which salary is distributed

– Cost distribution data is annualized over fiscal year to maximize recovery from project through active months of project

– Three part homegrown integrated system that includes a faculty database, Faculty Effort System (DOE) and SAP payroll

Originally started as a monitored workload system, modified and updated to comply with A-21

Background

• Staff pay allocation – accomplished directly in UK’s SAP Payroll system; changed as necessary (a change in funding or an account closes)– Includes both salaried and hourly employees

• Effort Certification – performed twice/year for staff (after the fact certification process) and once/year for any faculty (planned confirmation system) with charges or commitments to sponsored programs

University of Kentucky Effort Certification LifecycleD

istr

ibuti

on o

f Eff

ort

and

Effor

t C

erti

fica

tion

Process Flow

Schools/Colleges receive notice of new fiscal year DOE for faculty members. Determination is

made to either carry percentages forward or start from scratch

DOE is updated. Percentages are assigned to each ‘mission’ and account the faculty member expects

to charge or will be charging for the upcoming fiscal year

Carry Forward?

DOE is signed by the faculty member, chair, dean, and

department administrator

Hard copy DOE is returned to

sponsored program accounting

DOE percentages are entered into FES

and payroll distribution is

created

Faculty members are paid according to their DOE and this continues

until the end of the fiscal year

DOE is created with an original distribution. Percentages are assigned to each ‘mission’ and

account the faculty member expects to charge or will be charging for the upcoming fiscal year

Y

N

When the DOE is submitted and percentages are entered

a labor debit/credit is submitted for every account

listed on the DOE for the entire fiscal year

Change in Plan?New grant?

Cost Transfer?

A new DOE is created with the new account line items. Up to 12

DOE’s may be created each fiscal year

When the DOE is submitted and percentages are entered

a labor debit/credit is submitted for every account

listed on the DOE for the entire fiscal year

Fiscal Year Ends Faculty Effort Report is produced by SPA

SPA distributes the faculty effort certifications to the departments

with instructions on how to complete the certification

Effort report is delivered to faculty

by department representative

FER contains percentage of effort charges to each

account for the previous fiscal year

Faculty reviews and signs effort report with

percentage of effort worked for themselves and their

staff (in most cases)

Changes to effort report?

Cost transfer is created – Effort

Report is recertified

Faculty Effort Report is complete

Y

N

Distribution of Effort

(DOE)

Effort Certification

Faculty process

Since 1993, UK has used the Distribution of Effort (DOE) form, generated from the Faculty Effort System (FES), to record faculty*’s professional activities; the Effort Summary section of the form indicates planned effort in the following categories:• Instruction• Research• Service• Administration• Professional Development

Accounts to which the faculty member’s salary is to be charged are identified in a the Payroll Distribution Block of the DOE; the form is used for data input to UK’s SAP Payroll system

A DOE is generated for all faculty members at the beginning of the fiscal year, and only tracks academic appointment effort (not summer)

Initial DOE forms must be signed by the faculty member, the department chair and the dean each year

Faculty process - continued The DOE results in two key subsets of data, used UK-wide:

a) Planned workloads, by general category of effort– Reports to UK executives have been generated from this data

b) Salary distribution between pay/funding sources (accounts)– Used as the official payroll record for faculty salary distribution

Data from the DOE may be used by departments and schools to summarize faculty activity for various purposes:• Tenure/promotion review• Annual or bi-annual performance reviews• Bonuses/incentives

DOE expectations are often set by the department or college• Faculty generally allocate effort on the DOE to Research, Instruction, or Service • As an example, some colleges recommend splitting the percentage 45 Research

(funded and/or unfunded), 45 Instruction, 10 Service– Commonly this split is only adjusted after the 1 or 2 year performance review

– May be adjusted sooner if there is a significant increase in funded research

Faculty process - continued Percentages indicated on form for pay distribution can be confusing to

faculty• Percentages are annualized for the UK fiscal year, which is often inconsistent with

how grant effort is proposed • Ex.: if a sponsored project starts January 1st and the awarded effort is 10%, the

percentage on the form is only 5% because the DOE covers July through June Metrics are not used consistently across the colleges and departments,

and the data may not be accurate• Each “interested party” (Provost, Deans, Chairs) uses the data differently• If DOEs are only completed based on college/department expectations and not

actual plan/activity, the metrics may be inaccurate Reporting is limited

• Reports not readily available to the university community

Staff process Payroll distribution for salaried staff and non-salaried staff/students (“Cost Distribution” in the

UK system) is entered into UK’s SAP Payroll system by department administrators Payroll distribution continues unless:

• An account ends• A new account is added to the distribution• A change in distribution is initiated by the department

• For non-salaried staff/students, hours worked per period interface from Kronos (hospital-based employees) or are entered directly via Time Management in SAP Payroll

Benefits Payroll distribution is entered on the front end, electronically, reducing the risk of lost paperwork

of incorrect account codes being used There is no need to update/create a new distribution annually Department administrators indicated that this more streamlined process (compared to the

faculty process) resulted in fewer retroactive cost transfers Distribution entered at the department level reduces additional administrative stepsNo significant issues were identified with staff payroll distribution

University of Kentucky Effort Certification Workflow - StaffSt

aff S

alar

y A

lloca

tio

n a

nd

Eff

ort

Cer

tifi

cati

on

Pro

cess

Phase

Payroll distribution for salaried staff employee is received by a

department administrator

Department administrator enters payroll distribution

into SAP

Payroll Distribution carries on into

perpetuity

Account reaches end date. New distribution

is needed

Payroll distribution is updated

Payroll Distribution carries on in perpetuity

Semi-Annually – an effort certification report is created containing all payroll charges on all

accounts incurred up to that point

Effort Certification is reviewed by the employee

or an individual with suitable means of verification and

signed

Changes to effort report?

Cost transfer is created – Effort

Report is recertified

Staff Effort Certification is

complete

Y

N

Department administrator enters payroll distribution

into SAP

Payroll distribution for hourly staff employee is

received by a department administrator

Hourly staff clock in/out using Kronos or SAP

Faculty Process – Benefits

Enables UK to meet several OMB requirements associated with documenting personnel expenses• Supported by a system of internal control which provides reasonable assurance that

the charges are accurate, allowable, and properly allocated• Reflect the total activity for which the employee is compensated by the institution, not

exceeding 100% of compensated activities• Encompass both federally assisted and all other activities compensated by the

institution on an integrated basis• Support the distribution of the employee's salary or wages among specific activities if

the employee works on multiple activities Requires at least an annual review and planning of individual faculty members’

activities Identifies all sponsored projects, including cost share, that an individual is

committed to or has planned to expend effort on for the upcoming Provides key performance metrics to UK colleges, departments, and executives

Faculty Process – Issues

Administratively cumbersome – paper-based, requires multiple signatures• Initial form requires at least three signatures • Updates during the year typically require at least two signatures, and occur

frequently for faculty with sponsored projects starting and ending– DOE updated when a grant account number changes (e.g., continuation)– Potential for 12 different DOEs over the course of a fiscal year

No oversight or ownership of the form or the process• Sponsored Projects Accounting (SPA) is viewed by campus as having

responsibility for administering the DOE process, although the data relevant for SPA is only that associated with sponsored project effort (pay distribution, accounts, timing).

Forms may be returned late Initial DOE form due in September and is used for SACS reporting – late initial

forms could result in inaccurate information reported to SACS Forms reflecting changes to effort distribution during the year are often

delayed, resulting in late charging and/or cost transfers to accounts

Issues– continued

Percentages indicated on form for pay distribution can be confusing to faculty• Percentages are annualized for the UK fiscal year, which is often inconsistent with

how grant effort is proposed • Ex.: if a sponsored project starts January 1st and the awarded effort is 10%, the

percentage on the form is only 5% because the DOE covers July through June Metrics are not used consistently across the colleges and departments,

and the data may not be accurate• Each “interested party” (Provost, Deans, Chairs) uses the data differently• If DOEs are only completed based on college/department expectations and not

actual plan/activity, the metrics may be inaccurate Reporting is limited

• Reports not readily available to the university community

Effort Certification Reports - Issues Administratively cumbersome

• Electronic certifications are not allowed, reports must be printed and signed• For units requiring it, staff reports for those working on several PIs’ projects require

signatures from each PI• Tracking of certifications sent and returned is manual

Differences between actual effort and payroll distribution may not be adequately reflected• Effort percentages are pre-printed – there is no field for actual effort to be indicated• Payroll cost transfers occurring after the certification has been printed and prior to

certification will not automatically be reflected on the effort certification (although a new report can be requested and generated if the fiscal year has not yet closed)

Changes as a result of effort certification will not be reflected at a detailed level in the Payroll system• Changes after the fiscal year end or the “Earliest Retro Date” require a journal entry in the

General Ledger; there is no detail in the Payroll system Staff mid-point effort certification is effectively superseded by the end-of-year report as the

earliest retroactive adjustment date is not updated when certifications are completed

Results

In general, UK’s current process is consistent with federal requirements; however, the following recommendations will help UK enhance compliance and improve efficiencies

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Faculty Process - Recommendations

1. Separate the current DOE process into two separate, but coordinated processes

Effort Planning• Change “ownership” of this process from SPA; consider assigning responsibility to

an office with a more vested interest in the overall allocation of faculty effort• Establish a unified metrics procedure for effort allocation

Salary Charging• Segregating this process from effort planning and the FES should enable a more

intuitive approach to salary distribution data– Eliminating the current requirement to annualize the percentages (which is needed

because of system limitations) should address many faculty concerns

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Faculty Process - Recommendations

2. Consider utilizing an electronic, web-based system and process for the DOE (effort planning and salary charging) process

– Online approvals, workflow and electronic signatures; enhanced reporting capabilities would be available

– Effort commitment information could also be more easily incorporated into the processo Commitments to research sponsors could be uploaded from a sponsored program

proposal/award database– Data from the separated processes could be easily reconciled, especially if a

common system is used for the two processes

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Effort Certification - Recommendations

1. Consider an electronic salary distribution confirmation system for faculty and staff with salary charged to sponsored projects.• Would significantly expedite the process and ease administrative burden• Ideally, the system would allow individuals to review salary distribution pro-actively in order

to determine if the allocation of salary is consistent with effort (UK could still only require an annual certification, but could strongly encourage periodic reviews)

• Could enable better reporting of information such as salary cap cost sharing, sponsored and non-sponsored research effort, mandatory and voluntary cost sharing by department, and (assuming effort commitments are captured) comparisons of certified to committed effort

• Would enable automatic identification of salary journal entries (currently, the JV is noted on the paper form)

Data from the distribution of effort, salary charging, and salary confirmation processes could be easily reconciled, especially if a common system is used for all processes

UK could also consider certification by project in addition to or in place of current certification,, which is by individual Could further reduce administrative burden by coordinating certification with end-of-

budget period reviews currently performed by PIs

Effort Certification - Recommendations

2. Modify timing of staff certifications so that they are performed annually• Will reduce administrative burden and be aligned with faculty certification cycle• Consistent with federal regulations - new Uniform Guidance removes previous

requirement on timing of certification• UK should ensure that individuals review their payroll distribution more often than

once a year• UK should revisit the “Earliest Retro Date” for staff

3. Investigate whether certification of non-salaried staff can be done via the existing time-keeping mechanisms (Kronos and SAP)• Determine if the supervisor approves the hours worked• Determine if the labor distribution account(s) can be provided and confirmed with

the same process as the supervisor’s approval of hours

Action

• Recommended separation of effort planning from payroll distribution for FY 16 for the faculty.Approved – committee requests the following:

o Simple annual planning documento Simple process that may be modified if necessaryo Report to link effort planned with funded effort for VPR reporting needs

– Completed interim solution May 2015, additional functionality added throughout the summer

• Remove annualization of payroll distribution allowing more accurate reflection of actual effort and encumbering of salaries to end of current budget period.– Recommendation approved– Completed May 2015, additional functionality added throughout summer

Action

• Recommended purchase of third party system for web based effort certification based on following considerations:– In House Development

o Institutional knowledge of existing processeso Flexibility to customize design and layouto Ability to design system within university defined requirementso Faculty input into design and functionality of systemo Local on-site resources for support o Uses easily modifiable web pageso Visually similar to Employee Self Service and Manager Self Service o Integration issues less likely because within existing ERP solutiono No need to manage third party access to our systemso No external competition for desired enhancements

Action– Third party purchase

o Comprehensive tool addresses effort reporting, cost sharing and cost transferso SAP interfaces and simple navigational tools o Drilldown capability for payroll reports (not available in our system)o Dashboards allow faculty member can go to one place and see all reports

requiring certification and all individuals currently being paid from those projectso Choice of hosted (cloud) vs local implementation - UK IT moving toward cloud

solutionso Previously audited by the federal government at several institutionso Frequent upgrades to enhance functionality or rework for complianceo Flexibility to certify on a project or person basis and confirm at various points of

timeo NIH Salary cap flags, K-award reporting already presento Ability to customize to UK business rules

– Recommendation approved to pursue purchase third party effort certification system

Action

• Recommendation to continue to certify non-exempt employees based on following considerations:– Excessive consultant and UK hours involved to develop web-based approval

process in SAP~1,900 hours– Difficulty of including departments that use Kronos into the proposed solution– Could reduce administrative burden by only certifying those paid on federal

funds – does increase audit risk– Recommendation approved

Interim solution

UK developed an interim solution for faculty to separate the effort planning form (DOE) from the cost distribution• The new DOE form was simplified and was readily accepted by the

faculty (from 12 page form to 4)• Ownership of the form rests with the college• The college approval is the final approval required

Cost distribution is no longer annualized• Data entry was expanded to allow for cost distributions beyond the

fiscal year• Proposes percent per month based upon “commitment” section• Allows percent allocated per month to be updated

Interim solution

System changes have been well received Hardest issues were within colleges to update their internal

workflow and procedures as they took ownership of the form Very little time for colleges to react Currently have half of faculty cost distributions in the system

Additional enhancements

Salary and benefit encumbrances • Due to the annualization of the faculty salaries under our previous

system, encumbrances did not accurately reflect the actual salary and benefits on sponsored accounts

• All encumbrances were limited to the current fiscal year and did not follow the sponsored account budget period

• The staff encumbrances did not extend beyond the university fiscal year

• Student and temporary employees were not included• PI monthly reports, delivered to them via e-mail, did not contain

accurate available balance information

Long term solution

RFP for new solution encompassing entry for faculty and staff – will be payroll certification not effort

Both faculty and staff cost distribution will use same front end entry process

Both faculty and staff will be certified annually with interim check points for review built in

Temporary staff and students will be included NIH Salary Cap and K-award flags Campus involvement in the selection, implementation and training vital

to success• RFP committee• College financial officers• Faculty advisory group

Helpful Links

Governing Regulationshttp://www.uky.edu/regs/gr.htm

Administrative Regulationshttp://www.uky.edu/regs/ar.htm

2015-16 Distribution of Effort Form http://www.uky.edu/Faculty/Senate/files/DOE%20form%20for%20web%20detail.pdf

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Contact Information

Jennifer MilesSponsored Projects Accounting

Jennifer.miles@uky.edu