Cost Transfers A Briefing for Faculty

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Cost TransfersA Briefing for Faculty
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What is a cost transfer?

• Any cost that is first charged to one account and
  is later moved to another account, where one or
  both of the accounts is a grant or contract, is a
  cost transfer for sponsored programs.
• There are two types of cost transfers
• Labor and
• Non-Labor.

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Mayo Clinic Story

• In May 2005, the Mayo Clinic paid approximately
  6.5 million to settle a fraud suit alleging that
  it improperly charged the government for work
  performed under federal grants from NIH.
• The government alleged that the Mayo Clinic had
  long-standing practices of
• Spending down grant accounts at the end of the
  year to avoid returning unused funds to NIH,
• Shifting costs from grant projects that were
  over-expended to grant projects that were
  under-expended without adequate documentation,
• Retroactively altering effort and financial
  progress reports to reflect the reassignment of
  charges to the grants with remaining funds,
• Not properly documenting transfers,
• Not making transfers in a timely manner.
• While Mayo Clinic did not admit wrong doing in
  the settlement, the hefty settlement payment and
  adverse publicity were detrimental.

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Charges to Federal Grants and Contracts must
benefit the project AND be
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What else do federal regulations require?

• Costs may not be shifted to cover cost overruns,
  to avoid restrictions, or for convenience.

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Federal Regulations Allow Costs to Be Allocated

• A cost that benefits more than one grant or
  contract can be allocated among all projects that
  benefit from the cost.
• The method of allocation must be documented.

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NIH Grants Policy Statement

• 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
  certification 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.
• 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.

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Good Practices GET IT RIGHT THE FIRST TIME!

• 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 At Risk fund or pre-award 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.

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Good Practices for Making Cost Transfers

• Monitor costs monthly.
• Compare costs with budgets investigate
  questionable charges.
• Make required cost transfers in a timely manner
  (within 120 days of original transaction or 90
  days of discovery, whichever is earlier).
• Remember that each award is a separately financed
  project with separate technical and financial
  reports.

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Red Flags

• Transfers to or between federal grants.
• Transfers older than 120 days.
• Transfers in the last month of the award or after
  the award has expired.
• Large numbers of cost transfers.
• Round numbers (may be an indicator of a plugged
  number).
• Paying summer salary late (in December).
• Labor distribution adjustments to previously
  certified effort.

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Federal Regulations DO NOT allow PIs to

• 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.

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When are cost transfers required?

• To allocate costs that benefit more than one
  project,
• To reallocate planned effort to reflect actual
  effort,
• To correct erroneously charged expenses,
• To transfer pre-award costs from a departmental
  holding account.

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If you must make a cost transfer

• The PI or other responsible departmental
  representative knowledgeable about the grant must
  authorize the transfer in writing.

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Yale Monitors Cost Transfers

• If the transfer explanation and documentation is
  incomplete or unacceptable and the department
  does not correct it, GCFA will notify the
  department and require the cost transfer be
  reversed.
• If an individual repeatedly submits incomplete or
  unacceptable justifications and documentation,
  access for that individual to prepare and approve
  cost transfers will be terminated.

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Principal Investigator Responsibilities

• The PI has primary responsibility for
  accomplishing the technical goals of the project,
  while also complying with the financial and
  administrative policies and regulations
  associated with the award. Although PIs may have
  administrative staff to assist them with the
  management of project funds, the ultimate
  responsibility rests with the PI. These
  fundamental responsibilities of the PI include
• Execute the project as outlined in the funded
  proposal, using sound management techniques.
• Authorize only those expenditures that are
  reasonable and necessary to accomplish the
  project goals and are consistent with the
  sponsor's terms and conditions.
• Spend no more than the amount authorized by the
  sponsor for the project period.
• Carry out the project's financial plan as
  presented in the funded proposal, or make changes
  to the plan following a prescribed set of
  policies and procedures.
• Report project progress to the sponsor as
  outlined in the terms of award.
• Review expenditures in a timely fashion to assure
  their appropriateness and correctness.
• Comply with all Yale University policies and
  procedures related to project management and
  personnel practices.
• Comply with all applicable sponsor rules,
  regulations and/or terms and conditions of the
  award.

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If you need assistance with cost transfers

• Contact Frances.Dykstra_at_yale.edu,
  John.Maloney_at_yale.edu or Lan.Virasak_at_yale.edu in
  GCFA or call 432-3060.
• At the Yale School of Medicine, contact
  Mark.Prendergast_at_yale.edu in Financial Operations.

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Questions, Answers Suggestions