Tracking Timesheets under 2 CFR 200

One of the most important, and often misunderstood, change under 2 CFR 200 the Uniform Guidance: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) is the new reporting requirements for employee compensation, found at 2 CFR 200.430.

For many reasons, this provision has created much confusion in the grants community. The first difficulty comes from just trying to read the multiple subsections. I have sat in many Management Concepts classes where students have spent time just debating where one subsection ends and another begins!

To clarify, 2 CFR 200.430 has nine subsections:

  • 200.430(a) General
  • 200.430(b) Reasonableness
  • 200.430(c) Professional Activities Outside the Non-federal Entity
  • 200.430(d) Unallowable Costs
  • 200.430(e) Special Considerations
  • 200.430(f) Incentive Compensation
  • 200.430(g) Nonprofit Organizations
  • 200.430(h) Institutions of Higher Education (IHEs)
  • 200.430(i) Standards for Documentation of Personnel Expenses

In 2 CFR 200.430(a) through (f), The Uniform Guidance retains the framework found in the previous cost principles for charging personnel costs to Federal awards. 2 CFR 200.430(g) and (h) are entity-specific provisions for nonprofit organizations and IHEs that relate to unique circumstances for each entity type. For the most part, non-Federal entities should be familiar with the requirements found in these subsections.

The fun, and head-scratching, begins at 2 CFR 200.430(i). This subsection outlines documentation requirements for paying employees with Federal funds, and the Uniform Guidance significantly revises these requirements.

One notable omission in this subsection is the phrase “time and effort reporting.” This has led some non-Federal entities to believe that they no longer need to keep timesheets. This may be true for some, but not for all, and this is where the real confusion begins.

Officials from the Office of Management and Budget (OMB) have said that non-Federal entities with strong internal controls do not need to provide personnel activity reports; however, 2 CFR 200.430(i) still requires non-Federal entities to maintain records that “accurately reflect the work performed.” These records must:

  • Be supported by a system of internal control which provides reasonable assurance that the time being charged is accurate, allowable, and properly allocated
  • Are incorporated in the official records, such as payroll records
  • Reasonably reflect the employee’s total activity
  • Provide a time or percentage breakdown on all activities, both Federally funded and non-Federally funded, for the employee
  • Comply with the non-Federal entity’s pre-established accounting practices and procedures

As stated at 2 CFR 200.430(i)(8), non-Federal entities that cannot meet the aforementioned conditions may be required to submit personnel activity reports.

Even though the Uniform Guidance does not require a non-Federal entity to keep timesheets, a non-Federal entity still must account for the time an employee spends on each job-related activity. It may not be called a timesheet, but it sure sounds like one.

OMB has said the purpose of this revision is to reduce the administrative burden on non-Federal entities. Unfortunately, OMB has not provide detailed guidance, so non-Federal entities that attempt to design a new personnel system might expend substantial resources only to conclude their current system is adequate. In addition, changing a personnel system without proper guidance from OMB has the potential for audit findings.

What Does This Mean for You?

Our recommendation is that non-Federal entities should continue to use their current personnel systems, as long as there have not been previous audit findings. Non-Federal entities that have had audit findings on their personnel systems will need to implement corrective action to ensure compliance with 2 CFR 200.

Are you still confused? Let us know in the comment section below.

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