Cost Transfer Policy – Sponsored Programs
I. Date of Initiation/Revision
Effective December 31, 2008, revised May 31, 2012.
II. Policy Classification
Senior Vice President for Administration and Finance, CFO – Office of Research Accounting and Costing Standards (ORACS), Finance Department.
III. Policy Statement
This policy serves as guidance to the University community for cost transfers to/from sponsored program accounts. It is grounded in federal costing policies promulgated by OMB Circular A-21.
IV. Policy Summary and Definitions
Summary:
This policy provides documentation and reporting guidance to University faculty/administrative staff involved in cost transfers. Cost transfers should occur infrequently, the expectation is that a well-controlled accounting environment exists in each department which serves to assure that accurate direct charging of costs to ledger accounts occurs on a continuous basis. In certain circumstances, however, costs may need to be moved to/from a given ledger account.
This policy is designed to be the basis for reporting requirements of the Finance Department and The Office of Research Accounting and Costing Standards. In the event your department has more restrictive policies, those policies must be adhered to.
Definitions:
Cost Transfer: A direct cost charged to one ledger account and subsequently transferred to another ledger account. The subject matter of the cost transfer may be either a salary or a non-salary expense.
OMB Circular A-21, Cost Principles for Educational Institutions: The Federal circular that defines/prohibits all expenses charged to sponsored programs. To comply with the cost allowability and allocability requirements of OMB Circular A-21, it is necessary to explain transfers of costs to or from federal awards. Accordingly, timeliness and completeness of explanations are required elements of such requests. While OMB Circular A-21 is Federal guidance, compliance with this circular serves as the foundation for this policy and standards set forth in this document should be applied to cost transfers to/from all sponsored program accounts. This approach provides for a consistent submission and review process across the University community.
V. Related Policies
Refer to the University’s “Office of Research Accounting and Costing Standards” web page, listed under the “ORACS Policies and Procedures” link:
Unallowable Costs for Federal Reimbursement
Plan Confirmation System and Payroll Distribution
VI. Responsibilities
Finance Department: The Finance Department is responsible for the accurate reporting of the financial statements of the University and to provide assurance that the policies and procedures of the University support the necessary internal controls to assure those financials are not materially misstated. Frequent cost transfers may result in audit questions regarding the reliability of the University’s accounting system and internal control environment, therefore any requested cost transfers must be carefully monitored.
Faculty/Department Administrator: The faculty/department administrator shall maintain adequate records for audit and accounting purposes to support the use of the sponsored research funds. Late and poorly explained cost transfers may result in audit questions regarding the propriety of the transfers. Frequent cost transfers may result in audit questions regarding the reliability of the University’s accounting system and internal control environment. Because of these risks, departments should proactively minimize the need for cost transfers.
ORACS: ORACS personnel review the cost transfer requests to assure adherence to the stated criteria, prepare the manual journal entries to the University’s accounting system and make any adjustments to the previously submitted FFR. ORACS personnel are available to assist in the interpretation and implementation of the policy, including prior review of explanations for requested cost transfers.
VII. Cost Transfer Criteria
For a cost transfer to be acceptable, it must meet the following criteria:
Costs should be transferred as soon as the error is discovered but normally not later than 90 days following the month-end that the original posting of the cost occurs. In the case of a terminating account, cost transfers must be submitted no later than 60 days after the end date of the award.
If an expense is transferred to a sponsored program account, the cost must be allowable under sponsor and University policies, and it must be allocable, necessary and reasonable.
A full explanation and justification should be provided for the transfer of costs. Merely stating that the transfer is needed to “correct an error” or “to transfer the expense to the correct project” is unacceptable pursuant to the federal guidelines. The Non-Salary Cost Transfer Request Form and the HRMS Form 800-Proposed Change of Pay Distribution assist with consistent documentation of these criteria.
Cost transfers involving sponsored funds cannot be made to spend an otherwise unexpended balance on a sponsored program account.
When a cost transfer involves ledger accounts between different departments, the transfer will need authorization from both.
For a non-salary cost transfer, department A (who has been charged erroneously) may obtain email approval from department B (to whom the charge belongs). This will allow department A to initiate the cost transfer in the interest of expediting the correction. The email approval from department B should include wording that confirms the charge is theirs and provides the information needed to process the correction. This email should be included in the supporting documentation for the cost transfer.
For salary cost transfers, the HRMS system’s security prevents department A from initiating an 800 form for personnel that reside in department B. Accordingly, these types of cost transfers must be initiated by department B.
In both cases, department B should make every effort to respond to department A in a timely manner. This is particularly important in the case where the close-out of a sponsored program account is pending.
Costs will not be transferred multiple times.
Absences of PI or responsible administrator, and shortage or lack of experience of staff are not acceptable reasons for cost transfers. It is the responsibility of the department and the PI to ensure the availability of qualified staff to administer and exercise stewardship over sponsored programs.
VIII. Cost Transfer Checklist
To determine whether the cost transfer is appropriate, the following considerations are important:
Is the expense allowable under the specific award, OMB Circular A-21 and University policy?
Does the transferred expense directly benefit the sponsored program?
Are there any restrictions (general or specific) that preclude the transfer?
Does the sponsor require notification if the expense was not budgeted?
Does the request include adequate detail of the specific costs to be transferred? Completing required fields in the Non-Salary Cost Transfer Request Form and the HRMS Form 800-Proposed Change of Pay Distribution will provide adequate detail.
Is the request adequately justified?
IX. Cost Transfer Procedure
Non-Salary Cost Transfers:
Within 90 Days
If the cost transfer is made within 90 days following the month end the original cost was recorded on the ledger, the following expedited process will be utilized.
Non-salary costs will be transferred when the Non-Salary Cost Transfer Request Form, along with copies of the ledger(s) to support the cost(s) to be transferred, are completed by the department and submitted to ORACS for review and approval. The request must be made by a responsible official. A responsible official is a person who can make the correct determination of allocability, allowability, and reasonableness of the costs, and provide a sufficient justification for the transfer being requested.
After 90 Days
If the cost transfer is submitted more than 90 days following the month end the original cost was recorded on the ledger, additional approval is required by a responsible official who is at a higher organizational level than the person requesting the cost transfer, consistent with the Universities “one-over-one” authorization policy.
Salary Cost Transfers:
If the costs to be transferred are salary expenses, the HRMS Form 800-Proposed Change of Pay Distribution must be completed. If the beginning date of the pay period being adjusted is less than 18 months before the submission date of the Form, submit the Form 800 to the Payroll Department for review and approval. Two responsible officials must sign the Form 800. The first responsible official is a person who can make the correct determination of allocability, allowability, and reasonableness of the costs and provide a sufficient justification for the transfer being requested. The second responsible official must be at a higher organizational level than the person requesting the change in salary distribution, consistent with the “one-over-one” authorization policy. If the beginning of the pay period being adjusted, via the Form 800, is greater than 18 months from the date of submission, a Cost Transfer Form needs to be completed and attached to the Form 800 and a signature from the Department Chair/Chief must be obtained. This Cost Transfer Form (supported by the Form 800) must be sent to ORACS in the event a Ledger 5 is affected, otherwise sent to General Accounting. Once approved, the payroll charge will then be recorded on subcode 1995 and HRMS will not be adjusted. Transactions of this nature should be rare and unusual and should not be an additional payroll charge to a Sponsored Award.
The required certification section on the Form 800 must be signed by a responsible official who can verify that the salary distribution in effect prior to the change being requested is a reasonable reflection of effort that occurred during that period. In the event Department policy indicates a more restrictive signature policy, that policy should be adhered to in addition to the previously described basic requirements.
To differentiate between using a Form 800 and closing out an account with a deficit via a journal entry using the subcode 7995. If the payroll is unallowable, it needs to be removed from the account via a Form 800. If the work was performed during the grant period, as recorded, and the research project was simply overspent, then the closing entry will be utilized via the 7995 subcode.
All Transfers:
Regardless of the type of cost transfer, it is imperative that Department’s perform timely reviews and reconciliations of their assigned accounts. This will ensure that the transfers are recorded both timely and accurately.
See the associated FAQ’s, should you need further clarification please contact the ORACS Department at 275-1648 with any questions regarding this policy.
7/30/2012