Cost Transfers

The purpose of this policy is to ensure that cost transfers that involve sponsored project accounts comply with the federal regulations in .2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirement for Federal Awards. 

2 CFR 200.405 (c) states that “Any cost allocable to a particular Federal award under the principles provided for in this part may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal statutes, regulations or terms and conditions, or for other reasons.”

However, there are times when cost transfers are necessary, e.g., to correct errors in the original data entry. Such transfers must be made in a timely manner, which NIH defines as within 90 days of the incurrence of the cost. Cost transfers made after 90 days of their incurrence are considered unallowable.

Per NIH, transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official of the recipient, consortium participant, or contractor. An explanation merely stating that the transfer was made “to correct error” or “to transfer to correct project” is not sufficient. Transfers of costs from one budget period to the next solely to cover cost overruns are not allowable. To maintain consistency in managing cost transfers, NIH guidance is applied to all sponsored programs cost transfer requests, regardless of funding source.

To ensure that the university is in compliance with these regulations, the principal investigator is responsible for ensuring that cost transfers are:

• made within 90 days after the cost was originally recorded in Workday, but no later than 60 days after the project terminates, and
• supported by a written explanation on the Cost Transfer Explanation Form that describes in detail why the transfer is necessary.

Cost transfers not made within the time frames stated above will be reviewed on a case-by-case basis and require signature approval by the appropriate Chair’s/Dean’s office.

Personnel cost transfers from one funding source to another are accomplished using the Payroll Accounting Adjustment (PAA) process. 

Non-personnel cost transfers are processed by one of two methods:

• accounting adjustment - an accounting adjustment is used if the entire amount of a supplier invoice or expense report is to be moved once the transaction has been paid/settled
• journal entry - a journal entry is used if only a portion of a supplier invoice or expense report needs to be corrected or if another type of transaction (other than payroll/fringes) needs to be transferred to/from a sponsored grant

PAAs and accounting adjustments are both linked directly to the original transactions in Workday so include all the required supporting documentation, including the Cost Transfer Explanation questionnaire.    

For journal entries, the original transaction should be referenced on the journal entry. Supporting documentation including the Cost Transfer Explanation form, detailed billing invoices/statements and receipts that fully support the expenditure must be attached.   

The following job aids describe how the above processes are completed in Workday:

• Payroll Accounting Adjustments 

• Create Accounting Adjustment

• Upload Journal Entries with EIB Template

• Create Manual Journal Entry

• Are attachments required on all journal entries?

This standard applies to:

• sponsored project funds and is not applicable to all sources of university funds
• all university service centers or any departmentally based service or recharge activity to a sponsored project
• payroll expenditures and associated adjustments.
  • payroll expenditures must be budgeted and recorded on the proper accounts as they occur (an expense occurs when it is posted to the general ledger)
  • payroll expenditure transfers will cause effort to recalculate (a new effort report will generate and a new certification will be required)
• all subaward agreements
  • executing subaward agreements with other institutions often requires additional time that may extend beyond a 90-day time period (it is critical that subawards are executed as timely as possible so that expenditures can be promptly recorded)

Timelines

• The university cannot pay for services for which it has not been invoiced. If a vendor invoices later than 90 days after the provision of services, the university will pay upon receipt and note for the record that the invoice was late.
• The university has an obligation to timely notify vendors if goods and services are not satisfactory and to timely pursue resolution of outstanding issues. A dispute extending beyond 90 days should be clearly documented between a department and the vendor. Delays due to the normal course of other business intervening, change in personnel or other departmentally based factors are not acceptable reasons for delaying the posting of expenditures.
• Personal reimbursements are subject to the 90 day rule. It is entirely reasonable to expect that employees with travel expenses or miscellaneous reimbursements can account for those expenses within 90 days of their return to campus. In cases of extended foreign travel that may extend for periods longer than 90 days, reimbursements can be made at the conclusion of the trip.

Documentation and Explanation

• When rates have been reviewed and approved by the Office of Business and Finance, the investigator is required to maintain invoices, receipts, and posted rates of earnings operations.
• When rates have not been approved by the Office of Business and Finance, documentation supporting how the rate has been derived or calculated is required.
• The Office of Grants and Contracts will assist a department in establishing appropriate prespending mechanisms that associate the expenditures with the pending award. It is not appropriate to use a generic departmental account and move expenses to the funded award beyond 90 days.
• Grantees must maintain documentation of cost transfers, pursuant to 45 CFR 74.53 or 92.42, and must make it available for audit or other review (see Administrative Requirements-Monitoring-Record Retention and Access). Frequent errors in recording costs may indicate the need for accounting system improvements and/or enhanced internal controls. If such errors occur, grantees are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. NIH also may require a grantee to take corrective action by imposing additional terms and conditions on an award(s).”