Systems and Procedures
A Division of The Office of Budget and Finance
A Division of The Office of Budget and Finance
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. 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 sponsored awards must pay salaries via the salary clearing cost center. This requires the use of the SIMBA Labor Distribution system to perform the distribution of the effort worked. 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 (EC) 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 and/or other u university cost collectors. Effort is the percentage of time an individual has communicated to the sponsor that they will work on a specific sponsored award over a specified period. EC is the after-the-fact verification that the effort recorded in the LD, which allocated payroll expenses each period, is accurate.
This procedure provides general guidelines on the distribution of labor and Procedure RA2064 Effort Certification provides general guidelines on the effort certification process.
The 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 sponsored awards, as well as any distribution to multiple accounts (general or restricted) must be charged through a salary 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) for sponsored awards, or the budget administrator (or appropriate delegate) of the department, for non-sponsored funds.
Part-time non-academic appointments must be directly charged and appropriately approved through WorkLion for that specific appointment. Part-time non-academic appointments (bi-weekly) must not be charged to a salary clearing account.
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 updating the planned distributions in the LD system based on direction from the Principal Investigator (PI) or budget administrator (or appropriate delegate). The FO may delegate authority for updating to the departmental Finance Office staff, or others appropriately trained on the LD system to ensure University policy and procedures are followed.
The PI is ultimately responsible for all effort distributed to their grants and must preemptively review the effort routinely, but no less frequently than quarterly, via myResearch Funds Portal or other methods to ensure the effort is correct before the end of the grant or annual effort certification process takes place. Research Administrator (RA) provide guidance to the PI on various compliance requirements of a sponsored award. Some of these key regulations include:
Due to the enhanced requirements for protecting confidential employee data, it is extremely important that business area staff carefully determine 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.
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. Individuals who perform services chargeable to more than one cost collector must have their base salary and Supplemental I compensation (SUPP I) charged to and cleared from xxxxx00090. An employee cannot be processed under more than one xxxxx00090 per position within the same month. Overtime, holiday time and holiday overtime, either direct paid or paid on xxxxx00090 will be charged to a separate GL account on the individual's primary position. These charges represent the actual payrolls and do not represent the effort performed by the employees. Graduate Assistants and Fellows must also be appointed to xxxxx00090 for their Pay Account in WorkLion to properly distribute their stipend and tuition.
Services performed as part-time non-academic appointments 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 the Institutional Base Salary (IBS), it is unallowable to charge on a sponsored award.
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 labor distribution plan. 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.
The responsibility for entering an individual's earnings into the system lies with the FO in the business area of the employee'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 WorkLion along with the SIMBA labor rates are used to generate the labor distribution.
At the beginning of fiscal 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.
There are two types of LD adjustments:
All LD comments and attachments are saved in the plan, regardless of funding source. Comments and attachments for LATRs should still be added to the journal entry produced by the LATR since they do not transfer over from the plan when the journal entry posts. 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
All realignment of estimates and labor adjustments follow an approval path, as required by FN18 University Approval Authorization. The approval workflows for sponsored awards and non-sponsored funds are shown below. For sponsored awards, given that each business unit may be structured differently, business units must ensure that at least one individual in the approval workflow are reviewing the following items, and a different person may be reviewing different items or one person may be reviewing all items. It is the business unit’s responsibility to delegate duties to their staff.
For sponsored awards, LD Planners must ensure that data is entered based on the direction of the PI, or the RA communicating on behalf of the PI, for sponsored awards.
If a change is submitted, the Budget Administrator (or their designated delegate) must approve the redistribution or LATR. The Budget Administrator ensures salary allocations align with budget constraints and institutional policies/procedures, while verifying that labor costs are appropriately charged to the correct cost collectors.
For sponsored awards, the RA is verifying that the compliance requirements listed above are met based on the terms and conditions of the sponsored awards and other applicable policies of the sponsor.
Any distributions on grants which have reached the hold close date will not be permitted unless special approval is received from the sponsor.
The FACO approves a redistribution or LATR with federal or federal pass-through funds processed more than 3 months in the past. The redistribution or LATR on federal or federal pass-through 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 or federal pass-through funds was not made in the 3 months following the pay period, resulting in a labor adjustment.
After effort certification has been completed for a sponsored program, LATRs for any time already certified will NOT be permitted without approval from the FACO.
The LD Planner is responsible for ensuring salary allocations are accurately assigned to the appropriate departmental or institutional funding sources. They review and manage LD changes to align with institutional policies/procedures and financial best practices.
If a change is submitted, the Budget Administrator (or their designated delegate) must approve the redistribution or LATR. The Budget Administrator ensures salary allocations align with budget constraints and institutional policies/procedures, while verifying that labor costs are appropriately charged to the correct cost collectors.
If a change is submitted, the Financial Officer (FO) (or their designated delegate) must approve the redistribution or LATR. The FO ensures salary allocations align with budget constraints and institutional policies/procedures, while verifying that labor costs are appropriately charged to the correct cost collectors
The xxxxx00090 account should be reconciled monthly, following the pay date. Any adjustments must occur before the next payroll period ends.
At the end of each fiscal year, it is the business area's FO 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 Assistant Vice President for Post Award Contractual Compliance, for sponsored awards or the Associate Vice President for Budget and Finance or authorized delegate, for non-sponsored activities.
Violations of University policy should be reported to the appropriate supervisor, unit manager, Human Resources representative, or the office responsible for the relevant policy or procedure. If these channels are insufficient or unavailable, individuals may submit an anonymous report through the Penn State University Hotline, accessible via the Reporting at Penn State website.
The RA or the FO 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 RA or the FO is responsible for working with Internal Audit and Post Award Contractual Compliance 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 RA or the FO would also be responsible for collaborating with Post Award Contractual Compliance, 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.
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 Post Award Contractual Compliance.
September 30, 2025