University of Washington Implementation of New DHHS Executive Level II Salary Cap - Executive Summary

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1 University of Washington Implementation of New DHHS Executive Level II Salary Cap - Executive Summary The Department of Health and Human Services (DHHS) budget signed on December 23, 2011 included a reduction in the salary cap from Executive Level I ($199,700) to Executive Level II ($179,700) for FY2012 awards where the initial Issue Date of the award is on or after 12/23/2011. The actual text in Section 203, General Provisions of H.R states "None of the funds appropriated in this title shall be used to pay the salary of an individual, through a grant or other extramural mechanism, at a rate in excess of Executive Level II." The attached document describes the process the University of Washington has implemented to recognize the new salary cap. The new Executive Level II (EL II) salary cap, as implemented, creates the need to separate budgets for a single project when said budget (project) results in two salary caps being applied, in some cases simultaneously. The process, detailed in the attached document, has been developed with the collective assistance from several campus offices as listed in Appendix A. Every attempt has been made to minimize the burden on all departments who will be involved in this process. The main examples of that include: Identification of Grant Flag 08 to distinguish correct salary cap for qualifying budgets, Initial upload for populating Grant Flag 08 (complete), Actions of each unit based on least amount of administrative effort, e.g., o OSP including comment on Funding Action and Post award change for exceptions., o GCA populating only Grant Flag 08 when budget is subject to EL I salary cap, o MAA processing monthly uploads to populate Grant Flag 08 for EL II salary cap o Departments to take action only when differential salary caps apply to SNAP awards, supplements and carry forward balances, o Separate budgets/sub budgets to enable departments to more easily determine correctness of FEC reports when faculty have more than one salary cap apply, o Enhanced salary cap calculator tools for departments to acknowledgee multiple caps, In addition, efecs is researching the potential for a systems modification to accommodate multiple salary caps for purposess of reflecting salary cap cost sharing for faculty effort reports (presently efecs accommodates only a single salary cap). The Task Force will remain intact to periodically review the process and, if deemed necessary, modify same. It is anticipated that the concurrent multiple salary cap issue will not extend more than about a year unless DHHS repeats this very onerous implementation process however, the UW does want to be positioned, as best as possible, to accommodate this should that occur. Sincerely, UW DHHS Executive Level II Salary Cap Task Force Committee

2 Implementationn of New DHHS Executive Level II Salary Cap The Department of Health and Human Services (DHHS) budget signed on December 23, 2011 includes a reduction in the salary cap from Executive Level I ($199,700) to Executive Level II ($179,700) for FY2012 awards where the initial Issue Date of the award is on/after 12/23/2011. The actual text in Section 203, General Provisions of H.R states "None of the funds appropriated in this title shall be used to pay the salary of an individual, through a grant or other extramural mechanism, at a rate in excess of Executive Level II." The following outlines the process the University of Washington has implemented to recognize the new Executive Level II salary cap of $179,700. You are strongly encouraged to refer to the March 23, 2012 UW Salary Cap Task Force memorandum available in the What s New section of the Management Accounting & Analysis (MAA) webpage for more details concerning this implementation. PI/Department Responsibilities. The PI and administering department are responsible for ensuring the proper salary amounts and distributions are made to sponsored budgets. This includes, but is not necessarily limited to, reviewing budgets to make sure the direct charged salary and cost shared salary, including salary cap cost sharing, is correct, and making the necessary adjustments if they are not. When adjustments are required it is especially important for departments to make them within each Faculty Effort Certification (FEC) cycle so that each FEC cycle captures the correct level of effort averaged across the reporting period. Use of Grant Flag 08. To identify budgets subject to the salary cap and distinguish which salary cap applies, Grant Flag 08 was established in the FAS Budget Index. On April7, 2012 the Office of Information Management (OIM) populated active budgets through a batch upload to reflect the following: Value Description 1 budgets subject to Executive Level I (EL I) salary cap 2 budgets subject to Executive Level II (EL II) salary cap 7 budgets from non-dhhs agencies which apply their own salary cap policy. 9 budgets from the Center for Disease Control (CDC) and Health Resources and Services Administration (HRSA) which are NOT subject to a salary cap (CDC and HRSA had no salary cap requirements prior to the implementation of the EL II salary cap). The batch process successfully established Grant Flag 08 for the following sponsors i : National Institutes of Health (NIH) Substance Abuse and Mental Health Services Administration (SAMHSA) Agency for Healthcare Research and Quality (AHRQ) Health Resources and Services Administration (HRSA) Centers for Disease Control (CDC)

3 Management Accounting & Analysis will continue to perform monthly batch processes to populate Grant Flag 08 for awards from these agencies which are subject to the Executive Level II salary cap. Awards from non-dhhs agencies which require a 7 code in Grant Flag 08 will not be captured in the monthly batch process, but will be subject to the processess describe below. Tools and Resources. To assist departments in determining salary distributionss and Faculty Effort Certification (FEC) report accuracy the Salary Cap Calculator tools have been enhanced to accommodate multiple salary caps. These tools can be accessed through the MAA website (click on Faculty Effort Reporting (FEC) then select Calculator Tools. New Process and Responsibilities - Effective April 17, 2012: I. New Awards, Non-Competing Continuations (non SNAP) and Other Sponsor Awards (Issue Date on or after 12/31/2011): a. Role of Office of Sponsored Programs (OSP) i. NIH/SAMHSA/AHRQ/HRSA/CDC - - For any budget (project) subject to the former EL I salary cap (excludes CDC and HRSA), OSP will enter Subject to the EL I salary cap in the Comments section of the Funding Action (FA) form. - For any CDC or HRSA budgets (projects) NOT subject to a salary cap, OSP will enter Not Subject to salary cap in the Comments section of the Funding Action (FA) form. - For any budget (project) subject to new EL II salary cap, no comment is entered. ii. Other Sponsor Awards, e.g., DoD, American Heart, with salary cap restrictions OSP will enter Subject to salary cap (insert salary cap specifics) in the Comments section of the Funding Action (FA) form. If agency policy is tied to the DHHS salary cap, OSP comment will cite the appropriate Executive Level I or II. b. Role of Grant & Contract Accounting (GCA) i. NIH/SAMHSA/AHRQ/HRSA/CDC - - If the Comments section of the FA reflects Subject to the EL I salary cap, assign the value of 1 in Grant Flag 08 of the FAS Budget Index. - For CDC and HRSA, if the Comments section of the FA reflects Not Subject to salary cap, assign the value of 9 in Grant Flag 08 of the FAS Budget Index. ii. Other Sponsor Awards, e.g., DoD, American Heart, with salary cap restrictions When setting up a new budget, if the Comments section of the FA reflects Subject to salary cap (insert salary cap specifics) :

4 - Assign the value of 1 in Grant Flag 08 of the FAS Budget Index if the salary cap is Executive Level I, - Assign the value of 2 in Grant Flag 08 of the FAS Budget Index if the salary cap is Executive Level II, - assign the value of 7 in Grant Flag 08 of the FAS Budget Index if the salary cap is other than Executive Level I or II c. Management Accounting & Analysis (MAA): As described in the introductory section of this memo, MAA will perform a monthly query to identify qualifying DHHS awards (NIH/SAMHSA/AHRQ/HRSA/CDC) which do not reflect a coded value for Grant Flag 08. The Grant Flag 08 for these budgets will be coded as 2 to classify them as subject to Executive Level II salary cap. II. SNAP Awards (Issue Date on or after 12/31/2011) - When new funds subject to EL II are received on a SNAP award previously subject to EL I, a new sub-budget willl be required for the new dollars only. Any remaining balance in the prior period will stay in the original budget to be expended down. a. OSP: i. For established budgets, Grant Flag 08 should already show 1 because these budgets were coded as part of MAA s batch process. Continuation funding will default to EL II via the MAA upload process as noted in I.c. above. ii. If there is an exception and new funds should also be subject to the former EL I cap, OSP will reflect Subject to the EL I salary cap in the Comments section of the Funding Action (FA) form. b. GCA: i. Set up a new sub-budget for the new dollars only. ii. Remaining balance for prior period will remain in the prior period budget and be expended from that budget. iii. No action required for Grant Flag 08 as this will be populated throughh the MAA process. c. MAA: Populate Grant Flag 08 with the value of 2 as part of the monthly batch process described earlier. d. PI/Department: One month after budget has been established, verify that Grant Flag 08 is accurately coded. If code is absent or incorrect, efecs@uw.edu to request action. Do not use GrantTracker for this. III. Supplements (Issue Date on or after 12/31/2011) Supplements are awarded for a variety of purposes, many of which may not involve payroll costs for above-cap personnel. It is difficult for OSP to consistently determine whether supplement funds would benefit from a separate sub-budget to manage the new salary cap. To avoid unnecessary use of sub-

5 budgets where no above-cap payroll expenditures are involved, departments are responsible for determining whether a sub-budget is appropriate, and communicating with OSP and GCA as needed. This will generally be limited to instances when the supplement is associated with a budget subject to the EL I salary cap however the supplement is subject to the EL II salary cap, and the department intends to use the supplemental funds to pay an individual whose salary exceeds the EL II salary cap. a. PI/Department: i. Determine if sub-budget is needed. ii. If needed notify OSP prior to FA is being processed. Specify that sub-budget is subject to EL II salary cap in communications with OSP. iii. If it is determined a sub-budget is needed after the FA has been processed complete a TRANSPASU Form and submit it to GCA. Specify to GCA that sub-budget is subject to EL II salary cap. b. OSP: i. If a department indicates a sub-budget is needed to address above-cap salary issues, note in the Comments section at time the FA is being processed for the supplemental funding and include. ii. If the department does not request a sub-budget, the supplement should be treated in the usual manner. c. GCA: i. Set up sub-budget if FA indicates it is required. ii. Set up sub-budget if department submits TRANSPASU Form. d. MAA: Populate Grant Flag 08 with the value of 2 in the same manner as described in I.c. above. IV. Carry Forwards If there is a carry forward of unobligated balances from a budget period subject to EL I into a budget period subject to EL II, and the department intends to use those funds to pay an individual whose salary exceeds the EL II salary cap, then a sub-budget for the carryover funds must be established. If the department does not notify GCA of the need for a sub-budget, then GCA will carry forward the funds into the new budget and all funds will be subject to the EL II cap. To ( '!"#$%&' a. PI/Department: i. Submit request to OSP if sponsor approval is required to carry forward funds. ii. When notified of approval contact OSP to advise a sub-budget is needed at the time of the PAC setup to maintain EL I status for the carry forward funds.

6 iii. If sponsor approval is not required and it is determined a sub-budget is needed, i.e., intent to use funds to pay an individual whose salary exceeds EL II, complete a TRANSPASU Form and submit it to GCA. Specify to GCA that sub-budget is subject to EL II salary cap. b. OSP: i. Request sponsor approval for carry forward. ii. If carry forward approved, initiate PAC and note on the PAC subject to EL I salary cap. c. GCA: i. Receive PAC from OSP and set up sub-budget, or ii. Receive TRANSPASU Form from department and set up sub-budget. iii. Assign Grant Flag 08 a value of 1 d. MAA: Populate Grant Flag 08 with the value of 2 through monthly batch process described earlier in this memo. V. No Cost Extension - If theree is a no cost extension, the original award terms and conditions remain unchanged for the period of extension. Therefore, an award subject to the EL I salary cap for the original grant period will remain at the EL I salary cap level for the period of extension and no special action is required. a. PI/Department While no formal action should be required, it is recommended that the PI/Department verify the Grant Flag 08 is set at the correct value, i.e., set at the value of 1 if the award was funded under EL I salary cap rules, or the value of 2 if the award was funded under EL II salary cap rules. i The criteria used for populating these budgets was Revenue Class (the code used to define specific categories of revenue), Revenue Source (a 2-digit code following Revenue Class which defines a specific source of revenue) and Current Period Begin Date (indicates the beginning date for the current fiscal period such as a grant start date) as follows: Revenue Class 9313 (DHHS Prime) or 9446 (DHHS Pass Thru) AND Revenue Source 01 (NIH) or 02 (HRSA) or 03 (CDC) or 04 (AHRQ) or 11 SAMHSA) AND Current Period Begin Date < 01/01/2012 apply 1 OR Current Period Begin Date > 12/31/2011 apply 2 (proxy for estimating the salary cap applicable to specific sponsored agreements (budgets). Actual effective date for Executive Level II salary cap is awards issued on or after 12/23/2011). Please direct questions to: Salary cap calculations/tools: efecs@uw.edu Other federal agencies/subcontract issues: OSPhelp@uw.edu Other questions: efecs@uw.edu