How to Prepare for an Effort Reporting Audit

By Sam Mombou, PhD, MBA, CRA · 5 minute read

Effort reporting remains the single most common source of federal audit findings and settlements at research institutions, and for a simple reason: it sits at the intersection of payroll, sponsored awards, and faculty behavior, and none of those three systems was designed with the other two in mind. An auditor does not need to understand the science to find a problem. They need only to compare what was charged to what was certified and look for gaps.

What the auditor is actually testing

Under 2 CFR 200.430, charges for salaries and wages must be based on records that accurately reflect the work performed, and the institution's system must provide reasonable assurance that charges are accurate, allowable, and properly allocated. Auditors translate that standard into four questions. Was effort certified on time? Was it certified by someone with suitable means of verification, which usually means the employee or a supervisor with first-hand knowledge? Does the certified effort match what was charged to the award, and if not, was the difference corrected with a timely cost transfer? And does total certified effort across all activities equal 100 percent?

Most findings come from the first and third questions. Late certification suggests the process is not under control, and mismatches between certified and charged effort suggest the institution is certifying what payroll says rather than what the person did.

The warning signs to look for before the auditor does

A few indicators reliably predict trouble. Certification rates below 95 percent at the close of each period. A high volume of cost transfers in the weeks after certification, which signals that effort is being reconciled backward from payroll. Faculty certifying at exactly the budgeted percentage on every award, every period, which auditors read as evidence that no one is actually thinking about the number. Research staff charged at 100 percent to sponsored awards with no cost-shared or administrative effort at all. And summer salary that is certified at the full three months while the faculty member was visibly engaged in proposal writing, teaching, or administrative service.

Building a defensible process

Institutions that pass effort audits cleanly share a few practices. They set an internal certification deadline well ahead of the policy deadline and escalate non-certifiers through department chairs, not just through email reminders. They review effort distributions before the certification period opens, so that obvious mismatches are corrected in advance rather than discovered during certification. They train certifiers on what "suitable means of verification" means in practice and document that training. They treat a cost transfer after certification as an exception that requires explanation, not as routine cleanup. And they report certification rates to leadership every period, which turns a compliance chore into a visible performance measure.

If the audit letter has already arrived

Do not begin by pulling every record. Begin by understanding the scope: which awards, which periods, which population of employees. Assemble the certification history for that population and identify every late, missing, or amended certification before the auditor does. For each one, prepare a factual explanation and the corrective action taken. Where effort was mischarged, quantify it and be prepared to discuss repayment. Auditors respond well to institutions that have already found their own problems and poorly to institutions that make them do the work.

The institutions we have helped move from certification rates in the 70s to the high 90s did not do it with a new system. They did it by making effort a managed process with an owner, a calendar, and a report that leadership actually reads.

RACCS offers effort management training and audit preparation through the Audit-Ready in 90 Days™ program. Request a scoping call to discuss your situation.