Cost Transfer

PURPOSE

In certain circumstances, a charge may be posted to an incorrect fund. When this happens, a correcting journal entry is required to move the cost to the correct fund. This policy explains how the need for a cost transfer arises, the requirements of a cost transfer journal entry, and the method for processing cost transfers through the accounting systems.

This policy is issued to assure the integrity of the University’s charges for salaries, wages, goods and services on sponsored projects transferred to and/or from a sponsored project after an initial charge elsewhere in the University’s accounting system. Additionally, this policy is issued to ensure compliance with sponsor terms and conditions, regulations and University policies.

INTRODUCTION

Definition

A cost transfer is a transfer of expenditure from one project to another project after the expense was initially charged to another sponsored project or non-sponsored project, inclusive of reassignments of salary, wages and other direct costs. When the project receiving the charge is a sponsored grant or contract, special rules apply as discussed later in this guide.

In some instances, a cost transfer is unavoidable. The purpose of this cost transfer guide is to provide information to principal investigators, department administrators, project managers, departmental chairs, and deans concerning government cost transfer policies. Cost transfers should not be prepared or approved by departmental personnel if the requirements in this guide are not met.

Reason for Concern

Transfers that are frequent, tardy or inadequately explained, particularly on grants with overruns or unexpended balances, raise questions about the propriety of the transfers and the reliability of the university's accounting system and internal controls.

Cost Transfers Between Similar or Related Projects

The appropriate allocation of costs among similar or interrelated projects should be made at the time a transaction is initiated in accordance with the University's Direct Cost. The cost transfer guidelines summarized in the first section of this document apply to cost transfers whether projects are related or not related. If a cost transfer is not allowable, the fact the projects are related cannot be used as a reason to make the transfer allowable absent written authorization from the appropriate federal funding agency(s).

Consequences if a Cost Transfer does not Meet Government Requirements

As required by federal regulations, the University utilizes external auditors to conduct extensive reviews of federal grant and contract expenditures, which includes reviews of cost transfers. In the event that a cost transfer does not meet the government requirements, the dollar amount of the transfer will be disallowed and the area responsible for the grant will have to reimburse the grant for the amount of the disallowed cost transfer. If a significant number of cost transfers do not meet government requirements, the auditors may extrapolate the disallowances and recommend disallowing a percentage of ALL cost transfers for a particular department, college/school, or University-wide.

PROCEDURES

All requests for cost transfer should be submitted directly to the Office of Contracts and Grants.

Cost Transfers must be prepared and submitted within 90 days from the end of the calendar month in which the transaction appears on the award. Cost transfers made after this period require prior approval by the Director of Contracts and Grants and will only be permitted under extenuating circumstances.

All cost transfers must be accompanied by written documentation including an adequate explanation of the specific nature of the error and/or any other reason for the cost transfer, the way in which the error occurred, the reason why the transfer was not processed in a timely manner, if 90 days or more have passed since the original charge and how will the situation be prevented going forward. The explanation must be sufficient for an independent reviewer (i.e., a federal auditor) to understand the transfer and conclude that it is appropriate. According to federal regulations, "An explanation which merely states that the transfer was made 'to correct error' or 'to transfer to correct project' is not sufficient." Thus, any cost transfer documentation containing such an explanation will be returned to the department.

Cost transfers to correct an error must be completed regardless of timeframe if the correction benefits the sponsor.

Transfers of costs to any sponsored project fund are allowable only where the direct benefit to the project account is charged. An overdraft or any direct cost item incurred in the conduct of one sponsored project may not be transferred to another sponsored project account merely for the sake of resolving a deficit or an allowability issue. Cost transfers should not be used as a means of managing awards.

All cost transfers must also contain the following certification statement, signed by the Principal Investigator:

"I certify that the cost transferred is an appropriate expenditure for the sponsored grant/contract charged and that the expenditure complies with the terms and restrictions governing that sponsored grant or contract."

The certification statement must be countersigned by the Dean before it can be processed in the accounting system.

North Carolina A&T State University expects that costs directly charged to federally sponsored awards received by the University will comply with the cost principles outlined in the Office of Management and Budget (OMB) Circular A-21.

ADDITIONAL DOCUMENTATION REQUIREMENTS

In addition, each cost transfer request must contain all documentation necessary for processing a routine journal entry within the accounting system. Such documentation includes a copy of the inception-to-date report (FRRGITD) and transactions detail report (FGRODTA) containing the following data: fund number, account code, transaction description (both fields), document code, transaction date, etc. Within the documentation, the expense to be transferred should be clearly identified.

Salary cost transfers must contain the following information:

1. The name and employee ID# of the individual whose salary distribution is to be corrected;
2. The period of time covered by the correction;
3. A copy of the payroll action form or time sheet showing the original salary distribution for the time period covered by the request and the corrected salary distribution

INADEQUATE DOCUMENTATION

Cost transfer requests will be returned to the Principal Investigator if:

• The documentation required for the transfer, as described above, is missing;
• The cost to be transferred was incurred outside the effective dates of the sponsored grant/contract receiving the charge;
• The sole purpose of the transfer is to move deficit from one sponsored grant/contract to another;
• The sole purpose of the transfer is to "use up" unspent funds from a sponsored grant or contract; or
• If the certification statement from the Principal Investigator and/or Dean is missing.

SUPPLEMENTARY INFORMATION

The 90 day cost transfer time limit applies when transferring expenses TO a sponsored grant or contract. No time limit exists for REMOVING expenditures from a federally sponsored grant or contract. If inappropriate expenditures are discovered on federal projects, they must be removed without regard to time limits.

In certain circumstances, a transfer may be appropriate even though the 90 day deadline is not met. These transfers will be reviewed under scrutiny and may need justification

SUMMARY OF COST TRANSFER GUIDELINES

1. All cost transfers to sponsored projects should be made within 90 days of the original charge. Any cost transfer removing expenses from a sponsored grant or contract must be made without regard to this time limit. In certain unusual circumstances, a cost transfer may be appropriate after the 90 day deadline; such transfers will be subject to increased scrutiny and additional approvals.
2. The cost to be transferred must be shown to benefit and be allowable under the terms of the sponsored grant/contract receiving the charge.
3. Written justification and documentation must accompany the cost transfer request. See Section II for specific requirements.
4. Cost transfers will be returned to the Principal Investigator if:
   • Inadequate documentation is provided with the transfer request;
   • The request for cost transfer does not meet the time deadline (see A above);
   • The sole purpose of the transfer is to move a deficit from one sponsored grant/contract to another;
   • The purpose of the transfer is to "use up" unspent funds from a sponsored grant or contract; or if
   • Certification of Dean is missing.