Supplemental pay is extremely rare at our institution because of our
 research orientation.  Interdisciplinary activities are expected as a
 matter of normal faculty commitment.

 I would suggest that you review the Cost Principles in Office of
 Management and Budget Circular A-21 particularly section J 8
 "Compensation for Personal Services" to determine if your practice or
 intended practice meets with this pronouncement.

 This section is subject to interpretation by your particular
 institution, your outside auditors and agency grant or contract
 officers.  The more liberal the interpretation by the institution the
 greater the potential for audit findings.

 Note especially J 8 d.  Salary rates for faculty members

 1.      Salary rates for academic year  ... "Since intra-university
 consulting is assumed to be undertaken as a university obligation
 requiring no compensation in addition to full-time base salary, the
 principle also applies to faculty members who function as consultants
 or otherwise contribute to a sponsored agreement conducted by another
 faculty member of the same institution."

 This section goes on to read "However, in UNUSUAL (emphasis added)
 cases where the consultation is across departmental lines or involves
 a separate or remote operation, AND (emphasis added) the work
 performed by the consultant is in addition to his regular departmental
 load, any charges for such work representing extra compensation above
 the base salary are allowable provided that such consulting
 arrangements are SPECIFICALLY PROVIDED FOR IN THE AGREEMENT OR
 APPROVED IN WRITING BY THE SPONSORING AGENCY (emphasis added)."

 As "insurance" I suggest that you:

 a. define:      full time duties of the faculty member in question
 so that it is clear when effort that exceeds full
 time is identifiable.

 A question you may want to ask is: "What does your
 institution's appointment contract, faculty
 handbook etc. describe as a normal duties of a
 faculty member."

 separate or remote operation: is it clear and
 definable

 (If you get these taken care of, you are in great shape)

 b.         compensation should be based on regular rate for the
 academic year

 c.         get the required approvals

 In regard to the effort reporting or activity reporting question.

 I recommend paying in such a way as to avoid inclusion in your "100%"
 activity reporting system.  This will avoid any obvious impact in the
 percentage distributions and will not serve you well in trying to
 distinguish this "extra effort" from their regular duties.  A "piece
 work" method based on an appropriate percentage of their base pay rate
 could be in order.  If you can process the compensation for the extra
 work AFTER the completion of the effort this could constitute your
 after the fact reporting requirement; if the nature of the work is of
 sufficient duration that a forecast method of payment is necessary
 (appointment of the additional compensation through future pay
 periods) then, if possible pay on an activity reporting excluded pay
 code and have the project director/faculty member complete a separate
 post effort activity report.

     Gary Chaffins
     Director
     Office of Grants and Contracts
     University of Oregon
     xxxxxx@OREGON.UOREGON.EDU
     (503) 346-2395