Absence Management Project Update

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Absence Management Project Update

• Sponsored Programs
• Operating Committee
• February 15, 2007

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Harvard is Implementing Absence Management for
All Exempt and Non-Exempt staff

• Uses PeopleSofts Absence Management product
• Improves record-keeping, control, and consistency
  in the administration of paid time off (PTO)
  benefits
• Addresses PwC requirement to systematize vacation
  record keeping and recording of liability
• Strengthens systems in advance of SAS 112,
  Communicating Internal Control Related Matters
  Noted in an Audit

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Scope of the Absence Management Project

• Who is affected?
• Only Salary paid in object codes 6050 and 6070
• Clerical/technical and administrative/professional
  staff
• Not affected Faculty and academic appointees,
  Post- docs, Service Trades Employees, non-PS
  payrolls
• Related Policies and Processes
• Lowering of maximum allowable vacation balances
• Funding of the historic vacation liability
• New accounting process

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Colleges and Universities Rate Agreements

• The TREATMENT OF PAID ABSENCES section of
  Harvards three separate rate agreements is
  changing.
• Vacation, holiday, sick leave pay and other paid
  absences are included in salaries and wages and
  are claimed on grants, contracts and other
  agreements as part of the normal cost for
  salaries and wages.

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Harvard has 3 separate Colleges and Universities
Rate Agreements

• One for HMS, SPH, and the University Area
• Indirect rates negotiated every 4 years
• Fringe rates, every year with carry-forward
• FY 08 fringe agreements will have new vacation
  fringe and the new accounting method

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FY 2008 Fringe Agreements

• New agreements will have 2 sections under
  TREATMENT OF PAID ABSENCES
• Through June 30, 2007 Government pays for
  vacation as it is taken
• After July 1, 2007 Government pays for vacation
  as it is earned on salaries paid after July 1,
  2007
• (no agreement to pay for vacation earned, but not
  taken on salaries paid before July 1, 2007 no
  historic liability)

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Vacation not other leave

• Sick leave
• Severance
• Longer service bonus vacation

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Retroactive changes

• Cost transfer rules apply
• Within the payroll cycle no action required
• In a past payroll cycle, no funding change no
  action required
• In a past payroll cycle, with funding change
  journal voucher required
• PS AM takes care of changes in rates of pay, but
  not funding changes
• Policy development is still underway, including
  adjustments to beginning balance

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Journal vouchers for vacation corrections

• Cannot cross object codes (i.e., must net to zero
  for each object code)
• Cannot debit or credit fringe object codes
• Cannot debit or credit reimbursement object codes

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OMB A-21 Appendix A CASBs Cost Accounting
Standard 9905.502

• Harvard is prevented by CAS 502 from charging the
  same type of expense as both a direct and
  indirect expense. The fringe is considered an
  indirect expense. Once we start charging the
  vacation fringe, we can no longer direct charge
  vacation salaries.

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Impact on Vacation Reporting Practices

• DHHS Expectation for compliance starting July 1,
  2007
• Transition will follow training to stop direct
  charging vacation salaries for these object codes
• Policies and practices will be in compliance with
  CAS 502

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OMB A-21 Appendix A CASBs Cost Accounting
Standard 9905.501

• Harvard is required to use estimating practices
  that are consistent with cost accounting and
  reporting practices.
• Please see guidance from OSP and pre-award
  offices on proposal budgeting.

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Sponsored Programs Budgeting for Salaries

• Develop budgets that reflect anticipated work
  effort
• Encourage employees to take vacation in the year
  it is earned
• Encourage PIs to plan and budget for staff
  vacations at the rate it is earned, approximately
  4 wks per year
• Help PIs understand that
• The more vacation employees take, the lower the
  cost to the award.
• If employees take all of the vacation that they
  earn in a given year, there will be no cost
  impact from the application of the new fringe.

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Additional OSP Concerns

• Retroactive changes will be considered cost
  transfers
• OSP will meet with tub operational teams
• Salary certification is being reviewed likely
  no changes
• Research community readiness for change in
  vacation reporting practices
• Policy development continues

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Project Timeline