Guide section list
Comprehensive reference guide
Compensation
Compensation – Personal Services: General
Definitions Accordion Closed
200.430 Compensation—personal services.
Reasonableness
Compensation for employees engaged in work on Federal awards will be considered reasonable to the extent that it is consistent with that paid for similar work in other activities of the University.
Institutional Base Salary (IBS)
IBS is defined as the annual compensation paid by the University 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 NAU.
Text Accordion Closed
200.430 Compensation—personal services.
Compensation for personal services includes all remuneration for services of employees rendered during the period of performance under the Federal award, including but not necessarily limited to wages and salaries.
The costs of compensation are allowable if:
(1) they are reasonable for the services rendered and conform to the University’s established written policies consistently applied to both Federal and non-Federal activities;
(2) they follow an appointment made in accordance with the University’s rules or written policies and meet the requirements of Federal statute, where applicable; and
(3) they are determined and supported as provided in the Standards for Documentation of Personnel Expenses, when applicable. (See below.)
Institutions of higher education (IHEs)
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.
Salary basis
Charges for work performed on Federal awards by faculty members during the academic year are allowable at the Institutional Base Salary (IBS) rate. In no event will charges to Federal awards exceed the proportionate share of the IBS for that period. This principle applies to all members of faculty at an institution. Unless there is prior approval by the 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.
Standards for Documentation of Personnel Expenses
Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated, not exceeding 100% of compensated activities;
(iv) Encompass both Federally assisted and all other activities compensated by the University on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity’s written policy;
(v) Comply with the established accounting policies and practices of the University; and
(vi) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.
(vii) Budget estimates alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The University’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.
(viii) Because practices vary as to the activity constituting a full workload, records may reflect categories of activities expressed as a percentage distribution of total activities.
Explanation Accordion Closed
The updated clause requires the University to comply with a stringent framework of internal control objectives and requirements. More emphasis is placed on written policies and procedures.
In addition, the Uniform Guidance eliminates the examples of acceptable methods for payroll distribution and creates some ambiguity around long-standing requirements for effort reporting and verification.
Application Accordion Closed
Agency prior approval is required to charge faculty salaries exceeding the proportional share of the IBS covering the time worked on Federal awards.
In all cases, internal controls must demonstrate that all salary charges are accurate, allowable, and properly allocated.
PAASFC is working on a new approach to documenting and verifying compensation on sponsored projects. Until further notice, follow the current procedures for reporting effort.
Comments on agency implementation policies/procedures Accordion Closed
Compensation – Personal services: incidental activities
Subpart E: Cost Principles
Text Accordion Closed
200.430 Compensation—personal services
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 Section (i), Standards for Documentation of Personnel Compensation, 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.
Intra-Institution of Higher Education (IHE) consulting
Intra-IHE consulting by faculty is assumed to be undertaken as a University 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.
Extra Service Pay
Extra Service Pay normally represents overload compensation, subject to institutional compensation policies for services above and beyond IBS. It is allowable if all of the following conditions are met:
(i) The non-Federal entity establishes consistent written policies which apply uniformly to all faculty members, not just those working on Federal awards.
(ii) The non-Federal entity establishes a consistent written definition of work covered by IBS which is specific enough to determine conclusively when work beyond that level has occurred. This may be described in appointment letters or other documentations.
(iii) The supplemental amount paid is commensurate with the IBS rate of pay and the amount of additional work performed.
(iv) The salaries, as supplemented, fall within the salary structure and pay ranges established by and documented in writing or otherwise applicable to the non-Federal entity.
(v) The total salaries charged to Federal awards including extra service pay are subject to the Standards for Documentation of Personnel Expenses.
Explanation Accordion Closed
Incidental Activities are short term, often one time assignments.
Intra-institutional consulting by faculty is assumed to be undertaken as a University obligation requiring no compensation in addition to IBS.
Extra Service Pay normally represents overload compensation, subject to University compensation policies for services above and beyond IBS. It is allowable only under extraordinary circumstances.
Application Accordion Closed
Agency prior approval is required for incidental activities, intra-institutional consulting, and extra service pay.
Incidental activities, intra-institutional consulting, and extra service pay must be included in the approved awarded budget or receive prior written approval by the awarding agency.
In addition, agency prior written approval is required for any work increasing compensation above the IBS, e.g. intra-institutional consulting, extra service pay.
If the above activities are to be paid with Federal funds, contact OGCS for review before including them in the proposal budget or PAASFC before incurring these expenses after award.
If the above activities are to be paid with University funds, contact OGCS or PAASFC for guidance about the potential impact on sponsored projects and whether agency approval is required.