Last Revision: 03/22/2024

Procedure FN2015 Labor Distribution (formerly CR2015)

Process Owner: Research Administrator or Financial Officer

Policy Steward facilitating procedure: Senior Vice President for Research and the Associate Vice President for Budget and Finance

Table of Contents:


  • Allowable Cost – A reasonable cost that is allocable to the sponsored award. The cost must conform to any limitations or exclusion set forth in federal regulations or the sponsored award agreement.
  • Allocable Cost – A cost assigned to a sponsored award or other cost object where the goods or services involved are chargeable or assignable to that sponsored award or cost objective in accordance with relative benefits received.
  • Direct Cost – Those costs that can be identified specifically with a particular project, or other internally or externally funded activity, or can be assigned to such activities easily with a high degree of accuracy.
  • Effort – Amount or percentage of time an individual has communicated to the sponsor that they will work on a specific sponsored project over a specified period. Commitments are made in the project proposal to the sponsor and sponsor approval may be required to change the level of committed effort.
  • Key Personnel – Principal Investigator, Project Directors, Co-Investigators, and other individuals who contribute to the scientific development or execution of a project in a substantive, measurable way, whether they request salaries/compensation or not. NOTE: The definition of Key Personnel can be agency and award specific.
  • Labor Distribution (LD) – An allocation of payroll costs to or from a sponsored award. Labor Distributions may be for future distributions or after-the-fact cost transfers taking place after the expense was initially charged to another sponsored award or non-sponsored index.
  • LD Planner - An individual who utilizes the Labor Distribution Module to assign effort for employee positions in the department/business area/unit for which they are responsible.
  • MENDIX - a leading enterprise low-code application development platform.
  • Supplementary I Compensation (SUPP I) - Utilized as an extension of a current contract for a full-time academic employee who extends their weeks at the existing rate of their current contract.
  • Supplementary II Compensation (SUPP II) - Utilized in cases where a full-time employee, academic or staff, performs work outside the scope of their full-time exempt appointment. For full-time staff, the work should be differentiated from the work the staff member provides in their regular full-time position.
  • Unallowable Costs – Those costs than cannot be charged to a sponsored award due to sponsor and/or PSU policies, regulations, and/or restrictions. These regulations vary by sponsor and the same sponsor may have different restrictions for different awards, depending on the source of the funding, the type of award (e.g., grant, cooperative agreement, or contract), or the purpose of the award (e.g., research, equipment, conference, training). Therefore, whether a cost is considered allowable or unallowable for a sponsored award may only be determined through close review of the award documentation, sponsor regulations and guidelines, and PSU policies and procedures.


Uniform Guidance 200.430 Compensation – personal services states “charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated”. The System for Integrated Management, Budget, and Accounting (SIMBA) is the system of internal control for labor distributions.

In accordance with Policy RA64 Personnel Costs, all departments distributing labor to federally sponsored projects must use the SIMBA Labor Distribution system to perform the distribution. Labor distribution processes are especially important for recording compensation records accurately in the General Ledger and managing effort certification.

Labor Distribution (LD) and Effort Certifications are two separate but related business processes. LD represents an allocation of payroll costs for each payroll period (Bi-weekly or Monthly) to sponsored awards. Effort is the percentage of time an individual has communicated to the sponsor that they will work on a specific sponsored project over a specified period. Effort Certification is the verification that the time percentage is accurate.

This procedure provides general guidelines on the distribution of labor and Procedure FN2064 Effort Certification provides general guidelines on the effort certification process.


The Labor Distribution (LD) System was designed using the Plan - Confirmation method of charging direct salaries and the payroll distribution method for wages, as noted in the University's Cost Accounting Standards Board Disclosure Statement (CASB DS-2) for Educational Institutions as well as subsequent amendments.

All salary charges to federally sponsored projects, as well as any distribution to multiple accounts (general or restricted) must be charged through a clearing account to properly distribute the charges. Distributions to restricted accounts through the LD system are to be made only upon the direction of the:

  • Principal Investigator (PI) (or delegate) of the project for sponsored or federal awards, or
  • budget administrator (or appropriate delegate) of the department for non-federal funds.

Wages must be directly charged and appropriately approved through WorkLion.

The Financial Officer’s (FO) role in distribution of labor is in the control and management of inputs into the LD system. The FO is responsible for managing the entry and update of the planned distributions in the LD system based on direction from the PI or budget administrator (or delegate). The FO may delegate authority for updating to the departmental or Finance Office staff or others appropriately trained on the LD system and ensure University policy and procedures are followed. It is the responsibility of the PI, budget administrator, research administrator, or appropriate delegate to ensure that salaries charged to a particular account are accurate given effort expended and the specific terms and conditions of the grant or contract.

Due to the enhanced requirements for protecting confidential employee data, it is extremely important that business area staff carefully determines who will be able to see confidential employee data.


The Salary Clearing Cost Center is a "common cost center" account. The full Salary Clearing Cost Center is a 10-digit number with the first three (3) digits being the business area number, the fourth and fifth digits being the department number, and the last five (5) digits being 00090 (i.e., 1231200090). Throughout this procedure the salary clearing cost center will be referenced as xxxxx00090.

Individuals who perform services chargeable to federal funds must have 100% of base salary and Supplemental I compensation (SUPP I) charged to and cleared from xxxxx00090. Payroll is processed through WorkLion by entering xxxxx00090 as the Pay Account on the position. WorkLion is the system of record for the pay account. An individual cannot be processed through more than one xxxxx00090 in any given month, per position. Overtime, holiday time and holiday overtime, either direct paid or paid on xxxxx00090 will be charged to a separate General Ledger (GL) account on the individual’s primary position. These charges represent the actual payrolls and do not represent the effort performed by the employees. Summer Session Graduate Assistants should be appointed to xxxxx00090 for their pay account.

Services performed as wages or Supplemental II (SUPP II) compensation may neither be charged to nor cleared from the Salary Clearing Cost Center. Because Supp II compensation does not fall under Institutional Base Salary (IBS), it is not permissible to pay an employee Supp II compensation chargeable to federal funds unless specifically provided for within the agreement or approved in writing by the sponsoring agency.

In general, the Salary Clearing Cost Center works by allowing the distribution of an employee's salary to it temporarily. Once an annual salary schedule is developed for the employee it is entered into the LD system. Distributions are entered by pay period to build a salary schedule. Each month's earnings are automatically cleared at the end of the month to the various cost objects on which the employee has worked. If the appointment plan is less than 48 weeks, and the employee is added to the salary clearing cost center at some time other than the beginning of a fiscal year, the distribution from xxxxx00090 can only be processed from the effective date of the change.

Responsibility for entering an individual's earnings into the system lies with the FO in the business area of the individual's home budget. That FO will be able to update the entire record for an individual and see all distributions regardless of method of payment or cost collector charged. The FO may delegate this responsibility to Finance Office staff or other departmental individuals trained in the LD system, who will be referred to as LD Planners.


For labor charges to be distributed to Applied Research Laboratory (ARL) projects from other business areas, the LD System is used to clear the effort from the other business area to the ARL Clearing Account. The ARL Financial Specialist is then responsible for distributing the charges to the appropriate ARL project based on hours submitted.

For Graduate Assistants working on ARL sponsored awards, the Labor Distribution System is used for stipend and tuition distribution.

For ARL employees working on ARL sponsored awards, the hours recorded to projects in WorkDay along with the SIMBA labor rates are used to generate the labor distribution.


At the beginning of each year, or upon an initial appointment, a LD Plan is prepared for each employee using xxxxx00090 as their pay account. The LD planner specifies the planned distribution of the employee's effort over the course of the appointment. Upon submission of the LD plan, the following is the electronic workflow:

NOTE: If the distribution for an individual has no changes from the previous year, it is still necessary to prepare a new LD plan for the new fiscal year. After the LD plan is approved the distributions then create commitment records for each month on the appropriate cost collectors in the SIMBA system.

Immediately following the running of the final payroll for a month or for a bi-weekly pay, the LD plans are updated. The Fiori tile named Labor Distribution Plans in Error must be reviewed by the FO, or their authorized delegates and adjustments are made as necessary via the LD plan. The LD System automatically clears any distributions from the Salary Clearing Cost Center.

At the end of the month, the LD system charges the various cost collectors according to the distributions entered in LD plans and credits xxxxx00090.


Authorized changes to the distribution are made by the FO or LD planner through the LD plan. The payroll posting file received from WorkLion for each payroll period clears xxxxx00090 and records the actual expenses on the planned cost collector. Adjustments made before the next payroll processing are made in the LD plan.

Retroactive salary adjustments should not be a routine activity and impact effort certifications.

There are two types of LD adjustments:

  1. Realignment of Estimate (within 30 days of pay period):
    1. Adjustments to the LD plans within the month following the pay period already paid are processed by the LD planner either as redistributions or a Labor Transfer (LATR).
      1. Redistributions occur when the pay account is xxxxx00090.
      2. LATRs occur when the pay account in WorkLion is a direct paid cost collector.
  2. Labor Adjustments (more than 30 days after pay period):
    1. Adjustments to the labor distribution plans processed more than 30 days after the pay period in which the labor was paid are processed as redistributions or a LATR via the plan. Prior year LD plans will be locked for editing on October 31st of each year. After October 31st, journal entries will be required to make any corrections to LD plans. Given a timely review of the LD plans, labor adjustments are expected to occur infrequently and must include detailed documentation as to why the adjustment is required and is needed for approval. Further details pertaining to what needs to be included in a justification can be found in Policy RA60 Cost Management. Attachments to LATRs are only kept in MENDIX for 30 days, therefore any justification needing to be kept longer must also be attached to the journal entry produced by the LATR, which will be stored in SIMBA.


All realignment of estimates and labor adjustments follow an approval path, as required by FN18 University Approval Authorization.

Principal Investigator and Budget Administrator:

If a change is submitted, the Budget Administrator or Principal Investigator (or their designated delegate) must approve the redistribution or LATR.

Director of Research Accounting:

Any distributions on grants which have reached the hold close date will not be permitted unless special approval is received from the sponsor.

The Director of Research Accounting role approves a redistribution or LATR with federal funds processed more than 30 days in the past. The redistribution or LATR on federal funds must include an explanation in the comment section of the plan. The explanation should document why the distribution change that resulted in the charge to federal funds was not made in the month following the pay period, resulting in a labor adjustment. Exceptions to this requirement are:

  • No explanation is required if the distribution is to a continuation grant with a fund number change (this should be noted on the LATR form).
  • No explanation is required if the change is only to the general ledger account distribution, not the cost collector distribution.
  • No explanation is required if the change is to tuition only (graduate assistants).
  • The Research Administrator can submit the explanation, without approval from the PI/budget administrator, for errors or delays which occurred in the Research Office or Payroll, or for delays in creating the grant due to late receipt of the award documents.

After effort certification has been completed for a sponsored program, labor transfers for any time already certified will NOT be permitted.


Monthly Reconciliations:

The xxxxx00090 account should be reconciled monthly, following the pay date. Any adjustments must occur before the next payroll period ends.

End of Fiscal Year Reconciliations:

At the end of each fiscal year, it is the business area Financial Officer or authorized delegate responsibility to ensure that the xxxxx00090 balance is less than $1.00.


Exceptions to this procedure may only be approved by the Associate Vice President for Budget and Finance or authorized delegate.


Violation of a financial policy should be reported to your supervisor, unit manager, Human Resources representative, and/or office responsible for the policy and/or procedure. Where those resources are inadequate, you may choose to make an anonymous report through the Penn State University hotline by calling 1-800-560-1637.


The Research Administrator or the Financial Officer is responsible for ensuring that procedures pertaining to the accountability and safeguarding of all cash receipts, cash funds, and other assets are established and followed in accordance with approved University policies and procedures. Regular audits relating to advances, cash, travel, equipment accountability, and other expenditures provide a means to protect University assets. The Research Administrator or the Financial Officer is responsible for working with Internal Audit when audits are being performed in the administrative area. Audits relating to sponsored activities or other audits performed by external auditors may also be performed. The Research Administrator or the Financial Officer would also be responsible for collaborating with the external auditor and/or a central university office related to these procedures.


University Records must be retained and managed in accordance with Policy AD35 University Archives and Records Management and the University’s Records Retention Schedules that have been approved by the Records Management Advisory Committee (RMAC), the Office of General Counsel, and Senior Vice President and Chief of Staff. These Records Retention Schedules are derived from - or based upon - federal, state, and local statutes or regulations (i.e., Federal Acquisition Regulations, the OMB Uniform Guidance, Internal Revenue Service, and other regulations governing the auditability and retention of financial records), University Policy, industry standards, and business needs. All University Records must be maintained in such a manner to provide ease of access, establish a suitable audit trail for all transactions, and to be reviewed prior to disposition.

University Records and Transitory/Disposable Records are defined below. See Policy AD35, Definition of Terms for additional information.

  • University Records - Information that documents a transaction or regularly conducted activity of the University and that is created, received, or retained pursuant to law, University policy, or in connection with a transaction, business, or activity of the University.
  • Transitory/Disposable Records - University Records that have temporary value and, as a result, may be destroyed after they are no longer needed. In no event shall be retained longer than the official copy of the University Records as delineated on the Records Retention Schedule.

Upon completion of the retention period, University Records must be disposed of via secure destruction or transfer to University Archives, unless an exception to the disposition process set forth below applies. In many cases, retention periods and disposition methods may be determined by comparing the type of record (i.e., reports, correspondence, etc.) to similar records series with known retention periods listed on the Records Retention Schedule. If the disposition method for University Records states "Review by Archives" on the Records Retention Schedule, the Unit responsible for those records should consult the University Archivist for a final determination of disposition. For University Records that must be securely destroyed, units may arrange for shredding services by either contacting the Blue/White Shredding Program or the Inactive Records Center (IRC).

Exceptions to the disposition process are as follows:

  • University Records subject to a Legal Hold (see Policy AD35, Legal Hold). A legal hold will remain in effect until it is released in writing by the Office of General Counsel.
  • University Records under audit or review by external auditors - The Financial Officer will be notified regarding any cost objects that are under audit hold; the Financial Officer will be responsible for contacting the Unit associated with the cost objects. An audit hold will remain in effect until the hold is released by the Office of Budget and Finance.
  • University Records under audit or review by Internal Auditing – Internal Auditing will notify the department or individual regarding any audit holds pertaining to an Internal Auditing investigation. The audit hold will remain in effect until the hold is released by Internal Auditing.

To safeguard the privacy of individuals, records that contain Personally Identifiable Information (PII), as defined in University Policy AD53 Privacy Policy, or student records, as defined in University Policy AD11 Confidentiality of Student Records, must be securely destroyed beyond recovery. For additional information regarding privacy and the protection of an individual's personal information, see Policy AD53 Privacy Policy.

Additional questions may be directed to the The Office of Records Management.


There are no exhibits associated with this procedure.


For questions or additional details, please contact the Office of Sponsored Programs or Research Accounting.

To request changes to this procedure, please contact the Office of Systems & Procedures by submitting a GURU Technical Support Request Form.




March 21, 2024


  • 3/21/2024 - Procedure completely written to update current business processes:
    • Procedure renumbered and retitled from CR2015 to FN2015.
    • Effort Certification business process moved to Procedure FN2064 effort certification.


  • Revision 5 - dated 2/29/16 (revised to reflect updated Uniform Guidance information)
  • Revision 4 - dated 04/08/11 (revised to react to DCAA audit findings)
  • Revision 3 - dated 07/15/05 (revised to update Plan Effort Confirmation and to reflect current operations)
  • Revision 2 - dated 10/12/00 (revised per changes to effort confirmation process)
  • Revision 1 - dated 04/11/00 (formerly titled "Use of the 1002 Salary Clearing Account;" revised to reflect current operations)
  • Original - dated 04/11/85