Brown Bag Breakfast Briefing: Cost Transfers

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Brown Bag Breakfast BriefingCost Transfers
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The Basics

• Definition The reassignment of an expenditure
  initially posted to one project then transferred
  to another project
• Represents corrections of clerical or bookkeeping
  errors
• Cost Transfers can be salary or non-salary
• All PIs and their business managers are
  responsible for ensuring that transfer of costs
  to sponsored programs are made promptly (within
  90 days from original entrys posting date), are
  fully documented and comply with cost principles
  in OMB A-21 and university policies.
• Philosophy The government expects that costs
  are charged appropriately at the time incurred
  and that significant adjustments should not be
  required if adequate financial management
  practices and policies exist.

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Why Important?

• RU has a responsibility to use funds in
  accordance with applicable law and sponsor term
  and conditions
• Federal Government scrutinizes cost transfers
  closely for indications of cost misallocation and
  often disallows costs transferred into federal
  awards on that basis
• Always tested during year-end audit
• Improper, inadequately documented and delayed
  cost transfers violate federal law or cost policy
  and are potentially costly and damaging to RU.
• Frequent or late cost transfers (even if valid)
  raise questions about the reliability of the
  institutions accounting system and internal
  controls

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Fully Documented Cost Transfers Are Those That

• Explain HOW the Error occurred
• Describe how the cost BENEFITS the award to which
  the cost is being transferred to
• WHAT makes the expense appropriate to the account
  now receiving the expense?
• Explanation merely stating to transfer to
  appropriate account/subcode is NOT acceptable
• EASILY traces back to original entry on GL
  Including ALL details such as dates (WHERE/WHEN),
  VN, JE, Document, vendor names, PO and amounts -
• Explain WHY was the expense charged to the
  account from which it is now being moved
• Provide detailed information so a lay person 10
  years from now would understand it
• What action is being taken to eliminate the
  future need for cost transfers of this type?

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Late Transactions

• Should be infrequent, minimal and not recurring
• Those exceeding the 90 day threshold must include
  an additional justification
• Must describe the extenuating circumstance that
  prevented the transaction from being processed in
  a timely fashion
• Acceptable examples
• Late account establishment because the new grant
  agreement was received late by the university or
  there was a delay
• A delayed retroactive salary increase created the
  need for an adjustment
• Unacceptable examples
• Absence of an administrator or lack of staffing
• I didnt see it or wasnt looking
• The PI didnt tell me

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AT NO TIME

• Should cost transfers be used as a cost
  management strategy
• Should cost transfers be used to avoid or
  eliminate cost overruns
• Should cost transfers be used solely for the
  purpose of utilizing available, unexpended funds
  
• Should a sponsored program be used as a holding
  account for another project a.k.a. parking
  expenses
• Note Greater risk is when costs are being
  transferred TO a sponsored program

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Red Flags

• Transfers made in excess of 90 days after the
  original entry
• Transfers without a full explanation or boiler
  plate explanations
• Transfers in excess of 90 days missing additional
  justification as to lateness
• Reason for lateness is not extenuating
• Documentation provided doesnt support the entry
• High volume of transfers
• Timing of Transfers Transfers made near or after
  end of budget period
• Transfers between closely related projects
• Even dollar or Partial cost transfers

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Best Practices

• Charge the appropriate award initially
• Goods and Services should be charged or allocated
  among awards at the time of original purchase
  whenever possible or practical to avoid cost
  transfers
• Process PDRs to place appropriate personnel on
  new awards within 2 weeks of receipt of award
  notice from DGCA or off expired awards within 2
  weeks of end date
• Request HOLD Accounts
• Review financial reports regularly with PI
• Assist PI in reviewing monthly reports to
  identify legitimate errors timely or any changes
  in personnel assignments, distributions and
  effort
• Attend additional training on cost transfers on
  sponsored programs
• All individuals who prepare and approve cost
  transfers on sponsored programs
• Ensure all cost transfers are timely, fully
  documented and compliant
• Within 90 days of original entry date
• Answers all WHO, WHAT, WHERE, WHY, and HOW
• Are Allowable, Reasonable, Allocable and Treated
  Consistently

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Best Practices - Continued

• RIAS Tips
• When using WebADI for Journals
• Provide a complete justification in description
  field on the header. This will default to each
  line of the entry in the Base App. (Max 240
  characters)
• Feel free to go into the Base App and edit/ add
  to the description for the different lines. If
  you need more space then attach either a short or
  long text. You have approximately 1 hour after
  the upload to edit the description or add
  attachments.
• Recommendation Use the short/long text
  attachment for over 90 day justifications.
• For all cost allocations, remember to specify the
  basis for allocation
• of experiments, samples, headcount, etc.
• For SRAs, remember to cite specific dates not
  simply pay period if not all days are applicable
• Increase Internal Departmental and DGCA
  Monitoring