First, calculate the effort period FTE work months (no longer 6 months). 4.5 months at 75% employment (1/1 – 5/15: 4.5*.75 = 3.375) plus 1.5 months at 100% employment (5/16 – 6/30: 1.5*1 = 1.5) = 4.875 FTE work months for the effort period. Second, calculate the effort period FTE project months. 4.5 months at 75% (1/1 – 5/15) times 50% effort on the project (3.375*.5) = 1.6875 FTE project months for the effort period. Last, divide the FTE project months by the FTE work months for the effort period. 1.6875 / 4.875 = 34.6% which rounds to 35%. (this is why the most important step to perform when you first receive notice of an award is to appoint the people to the project and let the system make the calculations!)
What is the NIH Salary Cap and how does it affect my effort report?
In 1990, Congress directed the National Institutes of Health to impose a salary cap that limits the rate of pay at which salaries can be directly charged to NIH sponsored projects. For awards made from January 11, 2015 through January 9, 2016, the salary cap is $183,300 for annual (12 month) appointments which equates to $137,475 for academic (9 month) appointments. Effective January 10, 2016 through September 30, 2016, the salary cap is $185,100 for annual and $138,825 for academic. In order to ensure compliance with this regulation, the percentage of total salary charged to an NIH account needs to be accompanied by companion cost sharing at a ratio that base salary exceeds the NIH cap. The formula is: X + X*(total MSU Sal / NIH Sal Cap - 1), where X is the percentage of salary charge to the NIH project.
For example, if a 12-month (AN) faculty member with a base MSU salary of $250,000 submitted a proposal and it was awarded and the PI planned to devote 50% of their effort to the NIH project, the award would have been made for $91,650 (50% * 183,300) plus fringes and F&A, and not $125,000 (50% * $250,000) because of the NIH salary cap. The Effort Report will show pay of 37% (91,650/250,000) plus companion cost sharing of 13% for a total commitment of 50%.
The potential problem arises if the Effort Report is not adjusted for the companion cost sharing. For example, if we simply showed the payroll percentage on the Effort Report, i.e. 37% and the PI only reported 37%, then the Effort Report would only support $67,821 in salary (37% * 183,300), instead of the $91,650 that was charged, i.e. a $23,829 potential disallowance.
Wasn’t that easy!