The State Education Department (SED) continues to stress the importance of time studies as the primary method for charging payroll related costs between entities and programs. The 2015 reimbursable cost manual (RCM), which is utilized for the 2015/16 rate year, was modified to principally state that time studies are, for all practical purposes, the only way personal service costs can be allocated. Payroll is often the largest cost incurred by special education schools and failure to ensure that you have appropriate support for how these costs are charged to your Consolidated Fiscal Report (CFR) could have significant impact on an audit.
For staff, such as classroom staff, who are only assigned to one program, time studies are not necessary. However, if you charge staff to multiple entities, position title codes, or, in many cases, programs, and you do not maintain contemporaneous daily time records, you definitely need to have your staff produce quarterly time studies.
The process of conducting time studies should include the following key aspects:
- Develop a standard template inclusive of the employee’s name, position, and time study date range. The template should include columns for the date, employee time in and out, the organizations various cost centers, and a description of duties performed. An example of a standard template can be found in exhibit 1.
- Cost centers included in the time study should align with the organization’s various programs/contracts but must also incorporate time spent on general and administrative and fundraising tasks. If staff cross entities or program title codes, this should be clearly identified within the time study.
- Ensure that employees are completing their time study templates efficiently and accurately. This can be accomplished by having the employee and a direct supervisor sign off on each time study sheet upon completion and by requiring a due date when time study sheets must be returned to management.
- At a minimum, time studies should be performed for two consecutive weeks during each quarter throughout the fiscal year. The organization should ensure that the time study takes place during a representative time period and decide in advance when the time study should be conducted. A time study should never be performed during a week when there is an office closure or holiday, or during a week when employees typically take vacation time. The organization should also avoid using the same two weeks in consecutive quarters (i.e. the first two weeks of the quarter).
A time study will not only improve employee productivity, but also provide the necessary tools to evaluate employee performance and ensure accurate accounting and budgeting, which in turn will help the organization remain in compliance with SED cost allocation guidelines. Additionally, the study can provide an accurate depiction of the staffing costs needed to run an organization’s various programs. This information is vital in the current economic environment as providers continue to try to stretch reduced resources over multiple programs, and the Office of the State Comptroller (OSC) continues to audit providers’ compliance with cost principles.
Employee Name: _____________________________________
Employee Position: ___________________________________
Time Study Date Range: _______________________________
Employee Signature: _________________________________
Supervisor Signature: ________________________________
Kenneth R. Cerini, CPA, CFP, FABFA
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.