Personnel Activity Report Requirements for Federal Awards

Personnel activity report requirements for federal awards come from 2 CFR 200.430, which governs how grant recipients document the salaries and wages they charge to federal grants and cooperative agreements. The rule does not force every recipient to produce a form called a “personnel activity report.” It requires that payroll charges be backed by records accurate enough to show what work each employee actually performed, across every funding source, for 100 percent of their compensated time. A formal PAR becomes a federal requirement only when an organization’s existing internal controls cannot produce records meeting that standard.¹

One boundary before going further: these rules apply to federal grants and cooperative agreements. Federal contracts awarded under the Federal Acquisition Regulations follow different rules, though some cost-principle provisions of Part 200 can apply to cost-reimbursement contracts.²

The Six Standards Your Records Must Meet

Any salary or wage charged to a federal award has to be supported by records that satisfy all six of the following:

Supported by an internal controls system that gives reasonable assurance the charges are accurate, allowable, and properly allocated.
Incorporated into the organization’s official records.
Reflect the total compensated activity of the employee, not just the federally funded portion, and never exceed 100 percent.
Cover federally funded and non-federally funded activities on an integrated basis.
Comply with the organization’s established accounting policies and practices.
Support the distribution of the employee’s pay among specific activities whenever the employee works on more than one federal award, a mix of federal and non-federal work, or a combination of direct and indirect cost activities.¹

Budget estimates or planned percentages made before the work happens do not satisfy the rule on their own. The figures have to reflect what the employee actually did.¹

When You Actually Have to Use a PAR

The regulation gives organizations flexibility to design their own timekeeping systems. If the records those systems produce already meet the six standards above, nothing more is required. If they do not, the federal government can require personnel activity reports, including prescribed certifications, or equivalent documentation to close the gap.¹

Documentation matters most in split-funded situations: an employee whose salary draws from more than one federal award, from a mix of federal and non-federal funding, or from a combination of direct project work and indirect overhead. Auditors focus on these cases because they are where mischarging is easiest to hide.¹

What the Record Has to Contain

A compliant record identifies the employee, the pay period it covers, and every funding source using the grant or project codes assigned in the organization’s accounting system. Those codes are what let an auditor trace a payroll charge back to the specific award that funded it.

The employee must account for 100 percent of their compensated activity, not just the grant-funded slice. Someone spending roughly 60 percent of their time on a federal research grant and 40 percent on internally funded teaching reports both allocations on the same record. Distributions are usually expressed as percentages of total effort, though some organizations track hours as well.¹

Each activity carries either a direct or an indirect code. Direct codes tie time to a specific project goal, such as running experiments or drafting deliverables for a named grant. Indirect codes cover overhead work that benefits multiple projects, like general administration. Codes should match the categories approved in the grant budget; a department head or grants administrator can confirm which code fits which task.

Special Rule for Institutions of Higher Education

Universities have an extra layer. Faculty charges to federal awards during the academic year must be based on the institutional base salary (IBS), meaning the annual compensation the institution pays for the faculty member’s appointment regardless of how time is split among research, teaching, and administration. Charges to a federal award cannot exceed the proportionate share of IBS for the period worked on that award, unless the federal agency grants prior written approval.¹

Incidental activities paid through supplemental compensation under the university’s written policy do not have to appear in personnel records, provided the total rate stays within IBS. Charging incidental work directly to a federal award requires either explicit authorization in the award budget or prior approval from the federal agency.¹

Electronic Timekeeping Counts

Nothing in the regulation requires paper. Electronic time-tracking software qualifies as a contemporaneous method, generally preferred because employees record time close to when the work happens rather than reconstructing weeks later. To meet the federal standard, the system should track actual time spent on each cost objective, identify hours by labor category and by federal award charge code, and allocate time based on the nature of the work performed. Accuracy expectations should be written into each employee’s job description, and completed records still need certification or supervisory approval.³

Time You Cannot Charge to a Grant

Some activities are unallowable no matter how the employee is funded. Hours spent on them must never appear as a charge against a federal award.

Fundraising and investment management, including organizing financial campaigns, soliciting gifts or donations, running endowment drives, and managing investments to enhance income. The narrow exception is fundraising that directly serves a federal program objective, which still requires prior written approval from the awarding agency.⁴
Any cost related to alcoholic beverages.⁵

Time on these activities should be coded to a non-federal account. Small errors compound during an audit, because reviewers often extrapolate isolated mischarges into broader findings about internal controls.

Certification

Once the record is complete, it has to be certified. The employee signs to confirm the distribution of effort reasonably reflects the work performed during the reporting period. Most organizations also require a supervisor with firsthand knowledge of the work to review and co-sign, which serves as an internal control against error and intentional mischarging.¹

Submission schedules vary by organization. Some collect records monthly, some quarterly, some on academic semester cycles. If a supervisor sees percentages that do not match observed work, the record must be corrected before it is processed. Approving a doubtful record because it looks close enough is the sort of decision that surfaces two years later when an auditor pulls the file.

How Long to Keep the Records

Grant recipients must keep award-related records, including personnel documentation, for at least three years from the date the organization submits its final financial report for the award.⁶ If an audit, litigation, or claim begins before the three years run out, the clock stops and the records must be preserved until the matter is fully resolved and all final actions are taken.⁷

What Happens When the Documentation Fails

When a federal agency or pass-through entity finds personnel cost documentation inadequate, the regulation authorizes a range of remedies:

Temporarily withholding payments until the problem is corrected.
Disallowing costs for some or all of the activity tied to the noncompliance, which requires the organization to repay the money.
Suspending or terminating the award in part or in full.
Initiating debarment proceedings that can bar the organization from future federal awards.
Withholding future funding for the project or program.⁸

Cost disallowance is the most common result. When an auditor cannot verify that a salary charge was supported by adequate documentation, the grant-funded portion becomes unallowable and has to be repaid from non-federal funds.

Organizations that spend $1,000,000 or more in federal awards during a fiscal year are subject to a mandatory single audit, which reviews personnel cost documentation along with other compliance areas.⁹ Below that threshold, the organization is generally exempt from the single audit but remains subject to other federal oversight.

Falsification Is a Separate Category of Risk

Deliberately falsifying a personnel activity report exposes individuals to criminal and civil liability. Because the records support charges to the federal government, fraudulent time reporting can be prosecuted under the federal false statements statute, which carries fines and up to five years in prison.¹⁰ The False Claims Act also reaches grant fraud; its definition of “claim” covers requests for money made to grantees when federal funds are involved, and violations carry civil penalties plus treble damages.¹¹ Offices of Inspector General across federal agencies investigate grant fraud referrals, and personnel cost manipulation is a recurring finding.

1
eCFR. 2 CFR 200.430 – Compensation, Personal Services
2
eCFR. 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
3
HUD Exchange. DCTA Financial Management Series Training for Timekeeping and Personnel Activity Reporting
4
eCFR. 2 CFR 200.442 – Fundraising and Investment Management Costs
5
eCFR. 2 CFR 200.423 – Alcoholic Beverages
6
eCFR. 2 CFR 200.334 – Record Retention Requirements
7
eCFR. 2 CFR 200.334 – Record Retention Requirements
8
eCFR. 2 CFR 200.339 – Remedies for Noncompliance
9
eCFR. 2 CFR 200.501 – Audit Requirements
10
Office of the Law Revision Counsel. 18 USC 1001 – Statements or Entries Generally
11
Office of the Law Revision Counsel. 31 USC 3729 – False Claims