Time and Effort Reporting

Documentation for Nonprofit Organizations

Organizations receiving federal funds must ensure compliance with the Uniform Guide 2 CFR Part 200, related to the policies and practices of the federal government. In this article, we will discuss the standards and criteria for the Documentation of Personnel Expenses, also known as ” Time and Effort Reporting,” which found in the regulations of the Office of Management and Budget (OMB).

Time and Effort
In essence, there are two fundamental standards related to the compensation of employees remunerated by federal funds. The first is that the pay for employees who work with federal funds is consistent with the remuneration of similar work in other organizations / regional companies. The second is that employee compensation must be for a permissible purpose within the federal regulations and requirements of those funds.

Time and Effort Criteria

In recent years, the OMB has focused on promoting that recipients of federal funds move towards the creation of their internal controls instead of requiring standard or similar reports to personnel reports “PAR” (Personnel Activity Reports). What they do emphasize is that organizations must have some way or tool to be able to accurately report all expenses to funds concerning employee pay and at the same time that this report contains evidence of the work or service provided. A premise that we always emphasize is that the OMB puts this series of principles as guidelines and not necessarily as regulations. However, if they have several criteria regarding the documentation of these reports:

  • The time and effort reports must comply with the internal policies and practices of the organization.
  • These reports must be supported by an internal control system that provides reasonable assurance that the time the grants are invoiced is appropriately allocated, is allowed within the regulations and is accurate with what these funds are invoiced.
  • Time and effort reports must be incorporated with the official payroll records of the entity.
  • These reports should reasonably reflect the total activity for which the employee is compensated.
  • Reports should cover both federally assisted activities in the same way as all other activities compensated in an integrated manner ( the use of subsidiary records is allowed ).
  • The reports should distribute the salary of employees who are paid from various federal funds ( two or more ) or if they divide the time between federal and non-federal activities.

Budgets & Time and Effort Reporting

It is essential to say that budget estimates can still be used for interim accounting purposes. If an organization decides to use these budget estimates to collect federal grants, the system used to make those initial estimates must produce reasonable approximations. Any significant change in the work activity of each person must be identified and appropriately adjusted. Also, internal controls must include processes to review post-event charges based on budgetary estimates. The goal of organizations that use budget estimates should be to make sure that the final amounts charged to the grants are accurate, allowed, and appropriately allocated.

Organizations receiving federal funds must ensure compliance with the Uniform Guide 2 CFR Part 200, related to the policies and practices of the federal government. In this article, we will discuss the standards and criteria for the Documentation of Personnel Expenses, also known as ” Time and Effort Reporting,” which found in the regulations of the Office of Management and Budget (OMB).

In essence, there are two fundamental standards related to the compensation of employees remunerated by federal funds. The first is that the pay for employees who work with federal funds is consistent with the remuneration of similar work in other organizations / regional companies. The second is that employee compensation must be for a permissible purpose within the federal regulations and requirements of those funds.

OMB in recent years

In recent years, the OMB has focused on promoting that recipients of federal funds move towards the creation of their internal controls. This has been a change from instead of requiring standard or similar reports to personnel reports “PAR” (Personnel Activity Reports). What they do emphasize is that organizations must have some way or tool to be able to accurately report all expenses to funds concerning employee pay. At the same time that this report contains evidence of the work or service provided. A premise that we always emphasize is that the OMB puts this series of principles as guidelines, not necessarily as regulations. 

Standards of Time and Effort Reporting

However, if they have several criteria regarding the documentation of these reports:

  • The reports for time and effort must comply with the internal policies and practices of the organization.
  • Time and effort reports must be supported by an internal control system. These systems should provided reasonable assurance that the time the grants are invoiced is appropriately allocated. They should also account for what is allowed within the regulations and is accurate with what these funds are invoiced.
  • The reports must be incorporated with the official payroll records of the entity.
  • The reports should reasonably reflect the total activity for which the employee is compensated.
  • Reports should cover both federally assisted activities in the same way as all other activities compensated. This should be done in an integrated manner (the use of subsidiary records is allowed).
  • The reports should distribute the salary of employees who are paid from various federal funds (two or more). Also, they should show if they divide the time between federal and non-federal activities.

It is essential to say that budget estimates can still be used for interim accounting purposes. If an organization decides to use these budget estimates to collect federal grants, they must keep something in mind. The system used to make those initial estimates must produce reasonable approximations. Any significant change in the work activity of each person must be identified and appropriately adjusted. Also, internal controls must include processes to review post-event charges based on budgetary estimates. The goal for organizations that use budget estimates is to make sure that amounts charged to grants are correct. Moreover they should be accurate, allowed, and appropriately allocated.

Fiscal Clarity & Time and Effort Reporting

It is a great benefit for organizations that process payroll and document the effort jointly to start using separate processes. Especially if not all employees work in grants (for reasons of fiscal clarity). These new criteria focused on promoting internal controls. They also allow more flexibility to organizations to design systems that adapt to their needs. This is true as long as they meet the underlying principles. However, we should note that the lack of standard requirements can be a double-edged knife. The lack of standard requirements creates a great difficulty for federal agencies. they have-to determine if the internal controls of organizations are designed correctly. 

Federal Agencies and Criteria

If an agency determines that records of an organization don’t meet the criteria listed above, they will take action. The federal agency may require reports of employee activities that validate the documents provided. Compliance with these criteria does not necessarily require a complete review of processes or reporting systems. It is possible that many organizations already have internal controls over the documentation of staff compensation. Similarly, over time, organizations should review and determine if existing internal control systems meet the criteria. Future changes may cause it to be necessary to strengthen the controls for time and effort reports. By following these guidelines you will ensuring compliance with the general requirements for your organization.

If you are interested in other aspects of operations and wish to read an introductory article to spark your mind, read: Operations Research – A Brief Overview!

Original Publication:

Rivera, Gustavo. ā€œTime and Effort Reports: Documentation for Nonprofit Organizations.ā€ Pecunia Group, Pecunia Group, 3 July 2019, https://pecuniagroup.com/time-and-effort-reporting-documentation-for-nonprofit-organizations/.

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