Recently The Oregonian newspaper reported that the University of Oregon had to repay $330,000 in federal grant funds and replace key grant personnel after investigating payroll irregularities at two of their research facilities.
The issues centered on improper charging of overtime and other hours to federal grants.
Reportedly employees were encouraged to mischarge the federal grants to circumvent salary freezes and other and other budgetary restrictions.
The problem was first noticed by university staff who requested the audit division to investigate further.
The good news is that the discrepancies were noticed and acted on.
The bad news is that the practice may date back as far as 2004 and involve even more personnel.
The University Took Action
Kudos go to the University of Oregon for taking action to repay the questioned costs and mitigate the risk to existing federal awards.
Kudos as well that they recognized the need for re-training professors, grant managers and payroll staff on the proper reporting and procedures for charging hours to federal sponsored agreements.
Because much of the problem arose from mis-charging overtime-let’s look at what the Cost Principles say about the use of overtime during the period of a federal award.
What Do the Cost Principles Say?
For Grant Managers, the guidance in the Federal Cost Principles regulations is silent on the subject of overtime for Institutions of Higher Learning and State, Local and Tribal Governments.
Internal policies and specific federal agency requirements may step in for this lack of guidance for these types of organizations.
However, for Non-Profit Organizations it is much more straightforward: Overtime for direct employees is unallowable unless:
(1) Necessary to cope with emergencies, such as those resulting from accidents, natural disasters, breakdowns of equipment, or occasional operational bottlenecks of a sporadic nature.
(2) In the performance of tests, laboratory procedures, or other similar operations which are continuous in nature and cannot reasonably be interrupted or otherwise completed.
(3) When lower overall cost to the Federal Government will result.
3 Overtime Mistakes
An ounce of oversight and training can go a long way to keeping your organization out of trouble.
You can avoid the three mistakes that were made by the unfortunate experience at the University of Oregon.
Mistake #1 Charging Bogus Overtime
The charging of any hours not actually worked in performance of the federal award is not allowed.
It doesn’t matter if it is overtime or regular hours.
The organization should have procedures in place to ensure that all time spent on grant-related activities is accurately tracked and approved.
Mistake #2 Lack of Oversight
Certification by both the employee and their direct supervisor that the hours were spent in accordance with approved grant budgets is expected on compensation charges to federal awards.
Regular communication and oversight from the Finance Department or other Grant Management professionals should also be flowing back to the employees working on the grant and supervisors reviewing and approving timecards.
Mistake #3 Not Requiring Periodic Training of Grant Staff
Grant Administrators should make sure that employees receive periodic training on what the requirements are for charging time to the grant and maintaining adequate timekeeping records in compliance with the grant requirements-particularly regarding the use of overtime.
• Refresher training should be held at periodic intervals for all employees.
What’s Your Experience?
How about your institution or organization?
How are you handling overtime related to performance of federal grants?
Would your process stand up to further scrutiny?
Now is a great time to review and give some refresher training to your employees on the time and attendance procedures for charging overtime to your federal award!
Lucy Morgan CPA, MBA
CEO, Compliance Warrior
P.S. Making sure that grant funds are spent consistent with certain regulations, and appropriate oversight can feel a bit overwhelming.
If you’d like to find out more about how to avoid grant management problems and pitfalls?
Check out Grant Management Boot Camp training that helps that helps people work through these issues.
Click the link below for your type of organization to get more information about our courses and to get signed up.