Documentation of Personnel Compensation
Organizations receiving NSF awards are required to have adequate personnel compensation systems, as outlined the applicable cost principles. Specific cost principal guidance is documented by awardee type. Cost principles for for-profit organizations are detailed in FAR Part 31. Cost principles for nonprofit organizations, state, local, and Indian tribal governments, and colleges and universities are detailed in 2 CFR §200.430.
All salaries and wages charged to Federal awards must be supported by a system of internal controls that provides reasonable assurance that the personnel costs incurred are accurate, allowable, and properly allocated. Generally, this system of internal controls should ensure that:
- The total compensation paid to individual employees is reasonable according to the work performed on the NSF-supported project;
- The compensation is made in accordance with established policies of the organization;
- That the compensation policies are consistently applied to both government and non-government activities;
- The system must be able to adequately identify whether or not the work performed is considered a direct or an indirect cost, consistent with the organization’s established policies and 2 CFR §200.430, or FAR Part §31.205-6 for for-profit organizations.
Organizations should provide a sample copy of their personnel compensation records as an attachment to the "Financial Management System Questionnaire" which organizations are required to provide NSF as part of CAAR's Accounting System Review.
For additional information about personnel compensation requirements for for-profit organizations, refer to FAR Part §31.205-6.
Nonprofit Organizations, State, Local, and Indian Tribal Governments, and Colleges and Universities
Total salaries charged to Federal awards (including extra service pay) are subject to the Standards of Documentation as described by 2 CFR §200.430(i). Per this section, salaries and wages charged to Federal awards must be based on records that accurately reflect the work performed. These records must:
- Be incorporated into the organization’s official records;
- Reasonably reflect the total activity for which the employee is compensating across all grant-related and non-grant related activities (100% effort)
- Support the distribution of employee salary across multiple activities or cost objectives (for example, effort spent on multiple federal awards, spent on general/or administrative activities, vacation, sick leave, leave without pay, etc.); and
- Utilize an "after-the-fact" review of the employee’s actual hours worked during the reporting period for identifying and correcting significant changes (as defined by the organization’s written policies).
Guidance for the documentation of personnel compensation is described in 2 CFR §200.430(i) for nonprofit organizations, state, local, and Indian tribal governments, and colleges and universities, as described above. Select provisions also apply to each of these awardee types as follows:
- Nonprofit organizations (2 CFR §200.430(g):
- For compensation to members of nonprofit organizations, trustees, directors, associates, officers, or the immediate families thereof, determination should be made that such compensation is reasonable for the actual personal services rendered rather than a distribution of earnings in excess of costs. This may include director’s and executive committee member’s fees, incentive awards, allowances for off-site pay, incentive pay, location allowances, hardship pay, and cost-of-living differentials.
- State, Local, and Indian Tribal Governments (2 CFR §200.430 (i)(5)):
- For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (1) if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed.
- Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including:
- The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section;
- The entire time period involved must be covered by the sample; and
- The results must be statistically valid and applied to the period being sampled.
- Allocating charges for the sampled employees' supervisors, clerical and support staffs, based on the results of the sampled employees, will be acceptable.
- Less than full compliance with the statistical sampling standards noted in subsection (5)(i) may be accepted by the cognizant agency for indirect costs if it concludes that the amounts to be allocated to Federal awards will be minimal, or if it concludes that the system proposed by the non-Federal entity will result in lower costs to Federal awards than a system which complies with the standards.
- Colleges and Universities (2 CFR §200.430(h)):
- Certain conditions require special consideration and possible limitations in determining allowable personnel compensation costs under Federal awards. Among such conditions are the following:
- Allowable activities. Charges to Federal awards may include reasonable amounts for activities contributing and directly related to work under an agreement, such as delivering special lectures about specific aspects of the ongoing activity, writing reports and articles, developing and maintaining protocols (human, animals, etc.), managing substances/chemicals, managing and securing project-specific data, coordinating research subjects, participating in appropriate seminars, consulting with colleagues and graduate students, and attending meetings and conferences.
- Incidental activities. Incidental activities for which supplemental compensation is allowable under written institutional policy (at a rate not to exceed institutional base salary) need not be included in the records described in paragraph (h)(9) of this section to directly charge payments of incidental activities, such activities must either be specifically provided for in the Federal award budget or receive prior written approval by the Federal awarding agency.
- Charges for work performed on Federal awards by faculty members during the academic year are allowable at the institutional base salary (IBS) rate. Except as noted in paragraph (h)(1)(ii) of this section, in no event will charges to Federal awards, irrespective of the basis of computation, exceed the proportionate share of the IBS for that period. This principle applies to all members of faculty at an institution. IBS is defined as the annual compensation paid by an IHE for an individual's appointment, whether that individual's time is spent on research, instruction, administration, or other activities. IBS excludes any income that an individual earns outside of duties performed for the IHE. Unless there is prior approval by the Federal awarding agency, charges of a faculty member's salary to a Federal award must not exceed the proportionate share of the IBS for the period during which the faculty member worked on the award.
- Intra-IHE consulting by faculty is assumed to be undertaken as an IHE obligation requiring no compensation in addition to IBS. However, in unusual cases where consultation is across departmental lines or involves a separate or remote operation, and the work performed by the faculty member is in addition to his or her regular responsibilities, any charges for such work representing additional compensation above IBS are allowable provided that such consulting arrangements are specifically provided for in the Federal award or approved in writing by the Federal awarding agency.
For additional information about personnel compensation requirements for nonprofit organizations, state, local, and Indian tribal governments, and colleges and universities, see 2 CFR §200.430.