Transfer Non-Salary Costs

A cost transfer is a movement of costs associated with a transaction between two accounts, of which at least one is a grant or contract sponsored project.

Columbia has a responsibility to use funds in accordance with applicable law and sponsor terms and conditions.

 

The federal government scrutinizes cost transfers closely for indications of cost misallocation, and often disallows costs transferred into federal accounts on that basis, or because of non-compliance with timing, documentation, and procedural requirements.

 

Improper, inadequately documented, and delayed cost transfers (beyond 90 days of the date the expense was originally incurred) violate Federal law or cost policy and are potentially costly and damaging to the University.

 

Frequent cost transfers and cost transfers made long after the original cost is incurred (even if valid) raise questions about the reliability of the institution’s accounting system and internal controls.

 

OMB A-21 states:

Any costs allocable to a particular sponsored agreement under the standards provided in this Circular may not be shifted to other sponsored agreements in order to meet deficiencies caused by overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience

• U.S. OMB, Circular A-21 Revised, Section C4

If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, … the costs may be allocated or transferred to benefited projects on any reasonable basis

• OMB A-21 Revised, Section C.4.d(3)

 

Corrections of clerical or bookkeeping errors should be made within 90 days of the discovery of errors.

 

Transfers must be supported by documentation fully explaining how the error occurred and certified by a responsible organizational representative that the new charge is correct.

 

Explanations such as “to correct error” or “to transfer to correct project” are not sufficient.

 

Delayed discovery of errors could be an indication of poor internal controls.

 

Transfers of costs from one project to another or from one competitive segment to the next are not allowable if they are made solely to cover cost overruns or to spend down a grant.

 

Grantees must maintain cost transfer documentation and make it available for audit and other reviews.

 

Frequent errors in recording original costs may indicate the need for system or internal control improvements.

 

NIH may require grantees to take corrective action by imposing additional terms and conditions on grants, for example, an organization could lose the privilege of “expanded authority,” which allows institutions some flexibility for managing grants without obtaining prior sponsor approval.

 

Charges to an account must benefit the project, and be:

 

 

We Advise Departments to:

•  Plan expenditures to try to avoid cost transfers

- Cost transfers should not be a standard means for managing grants

•  Charge costs to the correct award initially and ensure they are allowable and allocable to that award

•  When costs are shared by more than one award, use split charging instructions. When this is not possible, allocate costs within 90 days

•  Set up non-sponsored program accounts to hold costs to be allocated

•  Request an “Advance Account” to charge costs incurred prior to receipt of a notice of grant award

•  Obtain no-cost extensions prior to the end of the original project to complete work after the original award period ends

•  Plan and monitor costs regularly

•  Provide PI’s with monthly financial reports and help to review them, comparing costs with budgets & investigating questionable charges

•  Make required cost transfers in a timely manner (within 90 days of the month in which the original transaction posted)

•  Remember that each award is a separately financed project with separate technical and financial products

 

Red Flags:

•  Transfers to or between federal grants

•  Transfers older than 90 days of the month in which the original transaction posted

•  Transfers in the last month of the award or after the award has expired

•  Large numbers of cost transfers

• Grants or contracts with a zero balance at the end of the award

•  Round numbers

- (may be an indicator of a plugged number)

 

Bad Practices:

•  Transfers with inadequate explanations

•  Explanations that raise more questions than answers

•  Incomplete documentation

•  Using “to correct an error” or “to transfer to correct project” as an explanation

 

Departments Should Not:

•  Pool sponsored awards

•  Use any sponsored project as a holding account

•  Make cost transfers to other sponsored projects to spend down a grant

•  Transfer costs from one sponsored project to another to clear an overdraft

•  Transfer costs to avoid the 25% carryover approval requirement

 

Cost Transfers Are Required:

•  When one cost benefiting multiple awards needs to be allocated among them

- Service center charges

•  When a cost has been charged to an award incorrectly

- Data entry error

- Pre-award costs

- Late issuance of notice of award

 

If a Cost Transfer is Required, the Department Must:

•  Ensure the reason for the transfer is acceptable

•  Ensure the cost to be transferred is allowable, reasonable and allocable to the new account, and was incurred within the award period or is permissible as a pre-award charge

•  Process the transfer in a timely manner

•  Document the transfer properly

- Provide a detailed explanation of the error and how it occurred

- Explain how the cost benefits the grant being charged

- Obtain authorization from the PI or other responsible departmental representative knowledgeable about the grant.

 

“Good” Cost Transfer Justifications Must Address:

•  How the error occurred / Why cost transfer is needed

- Example: DA inadvertently used wrong PCard to purchase supplies

•  How the error was found / Who initiated cost transfer

- Example: Noticed during PI review

•  Why the new charge code is correct

- Example: Transaction would charge award originally intended

 

Examples of “Good” Cost Transfer Justifications are as Follows:

•  Move cost incurred prior to the set-up of a new award from unrestricted account per PI and DA

•  Purchased bulk quantity of acetone from stock room, which cannot split charges to multiple awards. This entry splits the charges based on PI’s anticipated use. Allocation method on file in department

•  Supplies were originally purchased for award 5-23506, but were actually used on award 5-34053. Lab manager informed business manager of change in plans in the month of occurrence

•  Wrong P-Card was inadvertently used to purchase the supplies. Error discovered during the monthly review by the business office

•  To correct animal recharge billing which was charged to the wrong award. Error discovered by PI during monthly review of award statement

•  We made two similar purchases from the same vendor, for two different awards. One award was incorrectly charged for both items. Error discovered by lab manager during monthly review of statements

 

Examples of “Bad” Cost Transfer Justifications Include:

•  To transfer items that were incorrectly charged

•  Per PI instructions, move charges to clear an overdraft

•  Transfer animal charges from Dr. X’s special use account to Dr. Y’s account for December to March 2004 and 2005

•  Transfer credit from Dr. X’s (Non-Federal) to Dr. Y’s (Federal) to close account

 

Approving the Cost Transfer

•  The preparer and approver of the transaction should be two different individuals

•  The approver takes ownership of the entry and must review supporting documentation before approving the transfer

 

Filing the Transfer Documents

•  Ensure all documents relating to the transaction are fastened together and filed with the award being charged

•  Put a note in the original award’s file, referencing the award to which the charge was transferred

•  All documentation related to the cost transfer, including but not limited to email, a copy of the original transaction, written explanation, and signed authorization must be retained and made available for verification during the course of an audit or other review

 

Cost Transfer Limitations at the Department Level

•  Departments cannot process the following cost transfers:

- Cost transfers more than 90 days

- Cost transfers for partial amounts

- Cost transfers for expenses incurred outside the budget period

- Original batch IDIs starting with FCH. Only batches starting with PCA, APD, I, or PCC may be transferred by the department

 

Please Reference the Sponsored Projects Handbook for More Information

 

View the CU Policy for Cost Transfers

 

Compliant Cost Transfers Ensure:

•  The justification for transfer is appropriate

•  The cost being transferred is allowable, reasonable and allocable to the new award

•  The transfer is processed in a timely manner

•  Clear and concise language is used in the cost transfer journal and the accompanying documentation

•  The justification is able to stand on its own merit and does not require additional explanation

 

Departmental Good Practices

•  Initially charge costs to the correct award

•  Ensure the costs are allowable and allocable to that award

•  Reconcile accounts monthly

•  Plan expenditures to try and avoid cost transfers

 

Never

•  Use any sponsored project as a holding account to park expenses

•  Transfer costs to a sponsored project to spend down an award

•  Transfer costs from one sponsored project to another to clear a deficit

 

Cost Transfers > 90 Days

• Cost transfers should NOT be a tool for managing sponsored awards

• When original expense was incurred >90 days in the past, DA should provide SPF PM with request, all backup, and an explanation of extenuating circumstances

• If not approved, expenses will need to be moved to (or stay on) an unrestricted account Non-labor costs include all costs other than salaries, wages, and benefits

• Purchase of goods & services represents non-labor costs. Examples include:

- Lab Supplies

- Equipment

- Travel

- Internal Service Provider charges

- postage

- animal recharge

 

The Preparer Must Complete the Following Steps:

•  Assemble information and evaluate the cost transfer

•  Check work

•  Submit transaction documentation to the approver

•  Review the Transfer

•  File the Transfer Documents

 

The First Step in Executing a Non-Labor Cost Transfer is Assembling the Paperwork, Including:

•  A copy of the original transaction

•  Original and new charging instructions

•  An authorization to make the transfer by the Principal Investigator or other responsible institutional representative knowledgeable about the grant

- email or hand-written note is acceptable

•  If allocating costs between two or more projects, a description of how the allocation was done

•  A written explanation of how the error occurred

•  A written explanation of how the cost benefits the sponsored project to which the charge is being transferred

 

Acceptable Documentation Supporting Original Charge Includes:

•  Invoice

•  Internal Service Provider bill or receipt

•  Receipts (for P-card purchases)

- A P-Card is a credit card issued to authorized University personnel, for payment of non-travel related small dollar purchases (under $2,500 per transaction) of goods and services for use by the University

•  Any document that identifies what was purchased, including invoices and packing slips

 

The Second Step in Executing a Non-Labor Cost Transfer is to Evaluate the Cost Transfer. Answer the Following Questions:

•  Does the original transaction fall within the award period or is it allowable as a pre-award charge?

•  Is the charge allowable (check OMB A21 and restrictions in the Notice of Award)?

•  Is the cost reasonable?

•  Is the cost allocable to this award?

•  Is this cost being handled in a consistent manner?

•  Is the justification complete, including a description of the allocation method or an explanation how the error occurred

- If the answers to all these questions are “yes,” proceed to next set of questions

- If the answer to any question is “no,” contact your supervisor

 

The Third Step in Executing a Non-Labor Cost Transfer is to Answer the Following Questions:

•  Is the transfer being made to cover a cost overrun?

•  Is the transfer being made in the last months of the award or after the award has expired?

•  Is the amount being transferred a round number?

- If the answer to any of these questions is “yes,” review with your supervisor

- If the answers to all questions on the previous slide are “no,” answer the following question:

• Is the cost transfer being made more than 90 days from the end of the month in which it was incurred?

- If the answer to this question is “yes,” the department must provide a written explanation of “extenuating circumstances,” detailing why the request is so late

 

The Fourth Step in Transferring Non-Labor Costs is to Make the Journal Entry

• Refer to ARC Documentation

 

The Fifth Step in Transferring Non-Labor Costs is to Check Your Work. Ask Yourself:

•  Do you have all supporting paperwork?

- copy of the cost transfer

- written explanation and authorization

- copy of the original charge

- description of allocation method if appropriate

 

The Final Step is to Give the Transaction Documentation to the Approver

Compliant Cost Transfers Ensure:

•  The justification for transfer is appropriate

•  The cost being transferred is allowable, reasonable and allocable to the new award

•  The transfer is processed in a timely manner

•  Clear and concise language is used in the cost transfer journal and the accompanying documentation

•  The justification is able to stand on its own merit and does not require additional explanation

 

Departmental Good Practices

•  Initially charge costs to the correct award

•  Ensure the costs are allowable and allocable to that award

•  Reconcile accounts monthly

•  Plan expenditures to try and avoid cost transfers

 

Never

•  Use any sponsored project as a holding account to park expenses

•  Transfer costs to a sponsored project to spend down an award

•  Transfer costs from one sponsored project to another to clear a deficit

 

Cost Transfers > 90 Days

•  Cost transfers should NOT be a tool for managing sponsored awards

•  When original expense was incurred >90 days in the past, DA should provide SPF PM with request, all backup, and an explanation of extenuating circumstances

•  If not approved, expenses will need to be moved to (or stay on) an unrestricted account

View the CU Policy for Cost Transfers