Documenting Employee Time and Effort in the SNPs

This Management Bulletin (MB) provides guidance to school food authorities (SFA) about federal requirements pertaining to documentation of employee time and effort by SFA employees whose salaries and wages are supported by federal funds. For a more detailed explanation, SFAs should refer to the California School Accounting Manual (CSAM), located on the California Department of Education (CDE) Definitions, Instructions, and Procedures web page at http://www.cde.ca.gov/fg/ac/sa/ and U.S. Department of Agriculture (USDA) Policy Memorandum SP 69–2016: Indirect Costs: Guidance for State Agencies and School Food Authorities, located on the USDA School Meals Policy web page at http://www.fns.usda.gov/school-meals/policy/.

Due to the complexity of this topic, the CDE Nutrition Services Division (NSD) will issue at least one additional MB about time documentation for SFAs operating multiple federal child nutrition programs (e.g., Child and Adult Care Food Program [CACFP], Summer Food Service Program [SFSP], Fresh Fruit and Vegetable Program [FFVP], or the National School Lunch Program [NSLP]).

Note: The CDE Documenting Employee Time Questions and Answers (Q&A) web page at http://www.cde.ca.gov/ls/nu/sn/cafefundguide.asp#timeandeffort provides some time documentation information for the FFVP.

Background

Title 2, Code of Federal Regulations (2 CFR), Section 200.430, requires employees who are paid with federal funds to document their time and effort within the federal program. The federally funded portion of the employee salary must be reflective of the actual time and effort the individual has put forth for that federal program.

The purpose of documenting time and effort is to ensure that SFAs use federal funds to compensate an employee only for time spent on work activities allowed under the terms and conditions of the federal funding source. The level of time and effort documentation needed is predominately determined by whether an employee works on a single cost objective or on multiple cost objectives.

Cost Objectives and Documentation Requirements

Section 200.28 of 2 CFR, Part 200, defines a cost objective as “a program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are needed and for which costs are incurred.”

As stated above, the type and frequency of time and effort documentation required is dependent on whether an employee works on a single cost objective or on multiple cost objectives. For employees working on a single activity or cost objective, it is sufficient for SFAs to use a periodic certification prepared at least semiannually (every six months). For employees working on multiple activities or cost objectives, federal regulations require SFAs to use a personnel activity report (PAR) or equivalent documentation that is prepared at least monthly.

Single Cost Objectives

For SFA employees who work on a single cost objective, CSAM Procedure 905, specifies the following documentation requirements:

Where employees are expected to work solely on a single Federal award or cost objective, charges for their salaries and wages will be supported by periodic certifications that the employees worked solely on that program for the period covered by the certification. These certifications will be prepared at least semi-annually and will be signed by the employee or supervisory official having first hand knowledge of the work performed by the employee.

Since nutrition programs are typically funded by a mix of federal, state, and local resources, the SFA will need to consider if the service(s) performed and the population(s) served are allowable under all of the funding sources supporting the cost objective to determine if the activity is a single cost objective. For example, the salary of a cook working in a school cafeteria may be funded from federal funds (free or reduced-price meal reimbursement), state funds (additional reimbursement funds), and local funds (lunch sales). If the cook spends all their time preparing and serving school lunches, and if 100 percent of the activities performed by the cook are allowable under each of the funding sources, then the cook’s activities can be considered a single cost objective.

Multiple Cost Objectives

Per CSAM Procedure 905, a federally funded employee is considered to be working on multiple cost objectives when the employee works on:

• More than one federal award (e.g., School Nutrition Programs, CACFP, SFSP)
• A federal award and a nonfederal award
• An indirect cost activity and a direct cost activity

Federally funded employees working on multiple cost objectives must have the following documentation per CSAM Procedure 905:

Where employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be supported by personnel activity reports or equivalent documentation . . . unless a substitute system has been approved by the cognizant Federal agency [emphasis added].

Types of Time and Effort Documentation

Federal regulations require SFAs to maintain auditable time and effort documentation that shows how federally funded employees have spent their compensated time. Such documentation must reflect an after-the-fact distribution of the employee’s actual activity (i.e., not be a budget estimate or other time distribution percentage determined before the services are performed). Time and effort must be documented for any staff charging their salary or wage directly to either a federal award, multiple federal awards, or any combination of a federal award and state or local funding sources.

It is the SFA’s responsibility to ensure time and effort documentation complies with the requirements of 2 CFR, Section 200.430 and CSAM Procedure 905.

Lack of documentation or insufficient documentation will be cited during an SFA’s administrative review (AR) or audit, and the SFA will be required to reimburse the federal account for any unsupported or inadequately supported payroll charges.

Periodic Certification

Employees whose salaries or wages are supported by federal money and who work on a single cost objective need only complete a periodic certification. Per CSAM Procedure 905, the periodic certification must conform to the following requirements:

• Be prepared at least semiannually (every six months)
• Be signed and dated by the employee or a supervisory official having
  first-hand knowledge of the work performed by the employee
• Identify the program or cost objective under which the employee worked
• State that the employee worked solely on a single federal program or cost objective during the period covered by the certification

Neither the CDE nor federal regulations require SFAs to use a specific periodic certification form. The CDE does provide a sample periodic certification form in CSAM Procedure 905 that SFAs may use.

Personnel Activity Report

Employees who work on multiple cost objectives, with at least one federal funding source, must complete PARs or equivalent documentation at least monthly, except as described in the Substitute Systems for Time Accounting section of this MB. Per CSAM Procedure 905, a PAR or equivalent documentation must:

• Reflect an after-the-fact distribution of the actual activity of the employee
• Account for the total activity for which the employee is compensated
• Be prepared at least monthly and coincide with one or more pay periods
• Be signed by the employee

Neither the CDE nor federal regulations require the SFA to use a specific PAR form. The SFA may use either the sample PAR in CSAM Procedure 905, or its own PAR (as long as the PAR satisfies all of the federal requirements found at 2 CFR, Section 200.430. For CNPs, the NSD recommends that SFAs use a PAR similar in detail to the CDE Sample Personnel Activity Report located at http://www.cde.ca.gov/ls/nu/sn/documents/snpsamplepar.xls. For audit purposes, SFAs may need to provide additional documents to substantiate the information reported on PARs.

Budget Estimates

CSAM Procedure 905, states that “budget estimates or other distribution percentages determined before the services are performed do not qualify as support for charges to Federal awards” [emphasis added].

If the SFA uses budget estimates or other distribution percentages to document employee time and effort, the CDE will cite the SFA during an AR or audit and require the SFA to reimburse the federal account for the unsupported payroll charge(s).

Substitute Systems for Time Accounting

Federal regulations allow for certain substitute systems of time accounting as an alternative to PARs, subject to prior federal approval. The CDE has two approved substitute systems for time accounting:

• Substitute System Based on Sampling Method approved by the U.S. Department of Education (USDE) in 1998; a detailed description of this alternative is located in CSAM Procedure 905.
• Substitute System Based on Employee’s Predetermined Schedule approved by the USDE in 2012; a detailed description of this alternative is in the letter titled “Approved Substitute System for Time Accounting for Federal Programs,” located on the CDE Accounting Correspondence web page at http://www.cde.ca.gov/fg/ac/co/index.asp, as well as in CSAM  Procedure 905.

Summary

Federal regulations pertaining to documentation of employee time and effort require that employees paid from federal monies must document all labor charges through the use of either periodic certifications (for employees who work on a single cost objective), PARs or equivalent documentation, or an approved substitute system (for employees who work on multiple cost objectives). Failure on the part of the SFA to comply with these regulations will result in a finding during an AR or audit and the CDE may require the SFA to reimburse the cafeteria fund from its general fund for all insufficiently documented labor charges.

For a list of common questions and answers, please visit the CDE Documenting Employee Time Q&A web page at http://www.cde.ca.gov/ls/nu/sn/cafefundguide.asp#timeandeffort.

If you have any questions regarding this MB, please contact the CDE NSD Cafeteria Fund Team by email at SNPCAFEFUNDQUESTIONS@cde.ca.gov. If you have any questions about the CSAM, please contact the CDE School Fiscal Services Division by email at SACSINFO@cde.ca.gov.