Contents
D. Preparation of Cost Transfers / Expenditure Adjustments
- Appropriate types of cost transfers
- Criteria for a cost transfer
- Method of cost transfer
E. Documentation and Retention
- Required documentation by type of cost transfer
- Department of record and document retention period
- Requirements for PI approval on specific types of cost transfers (Contracts and Grants)
- Suggested documentation of PI approval
F. Revenue and Balance Sheet Adjustments
Appendix 1. Sample written delegation to review cost transfers for Federal Contracts and Grants
B. Accountability
The responsibility for compliance with University and Federal regulations and guidelines and for maintaining supporting documentation for transfers/adjustments is in the originating department/unit. Deans, Directors and Chairs, and those to whom authority to approve adjustments is delegated, are responsible and accountable for compliance with university and Federal regulations.
Audit-derived disallowed costs (including the transfer and portion of the disallowance extrapolated to the campus) will be borne by the unit(s) that caused them.
For awards subject to Federal requirements, Principal Investigators and those to whom authority to approve cost transfers is delegated, are responsible and accountable for compliance with the following federal criteria that govern cost transfers:
Allowability
It must be allowable under the terms and conditions of the award, including the authorized budget and applicable regulations.
Allocability
The goods or services must benefit the award charged. Goods or services shared by more than one project are allocable in proportions that can be approximated through actual use. Example: If you are charging Project A for 50% of an item purchased, Project A must receive half the benefit or use of the item.
Reasonableness
A cost may be considered reasonable if the nature of the goods or service acquired, the amount paid reflect the action that a prudent person would have taken at the time the decision to incur the cost was made.
Consistency
The application of costs must be given consistent treatment within established University policies and procedures including Generally Accepted Accounting Principles and Cost Accounting Standards as issued by the Federal Cost Accounting Standards Board.
Timeliness
All adjustments should be made within 120 days from the close of the month in which the original charge posted to the ledger. Exceptions require full documentation of reason for delay.
C. Delegation
The Dean, Director or Chair of the department by assigning a role within the financial system is delegating the authority to approve these cost transfers and expenditure and revenue adjustments. The Dean, Director or Chair of the department who delegates responsibilities and decision making authority for cost transfers must ensure that the employees to whom they delegate are qualified and are properly fulfilling their responsibilities.
For federal contracts and grants, cost transfers must be approved (in BFS the approval step is the "Review" online process for the zero adjustment or financial journal) by an employee within the academic/research unit who has been delegated such authority. A Delegation of Authority to electronically approve cost transfers to someone other than a Principal Investigator, Dean, Director, or Department Chair, must be in writing. The signed original Delegation of Authority is maintained in the Department.
Sample Delegation Form
Appendix 1: Sample written delegation to review cost transfers for Federal Contracts and Grants
D. Preparation of Cost Transfers / Expenditure Adjustments
1. Appropriate Types of Transfers
Once an entry has been recorded in the general ledger, cost transfers may be made only in the following situations:
a. To correct an erroneous recording when the original source document or subsequent interim transaction (e.g. PO, Payroll transaction, Recharge journal, etc.) contained an incorrect chart string or amount.
b. To distribute / allocate certain high numerical, but small individual charges, such as copy machine costs, mailing charges, telephone charges, office supplies, or fax charges billed to a central department, but may be proportionally applied to other activities, projects or funds under the jurisdiction of the department.
c. To record a change in use of goods or services, for example a case of beakers originally ordered for and charged to a teaching program, but subsequently required by and transferred to, a research project.
2. Criteria for Cost Transfers
a. The transfer must relate to a specific item of cost incurred by the unit preparing the adjustment. The quantity and goods or services must be specified.
b. Each transfer must be in proportion to the benefits received from the goods and services.
c. Transfers must be in the same amount as the original charge unless a portion of the expense is to be transferred. If only a portion is transferred, a clear explanation needs to be given as to the basis for the division of the cost.
d. All expenditures must be in compliance with University policies and the requirements of the funding source.
e. The methodology adopted to prepare any allocations (as discussed in section a-ii above), must be in accordance with the regulations described in Section B above i.e. reasonable, allowable, allocable and consistent. They must not include a departmental surcharge. The department should maintain a methodology statement to support their allocation process. In addition the department must maintain the appropriate records and usage logs to substantiate all charges redistributed.
f. All adjustments should be made within 120 days from the close of the month in which the original charge posted to the ledger. Accurate and timely reporting of expenditures impacts the production of financial reports and invoices in meeting campus and funding agency requirements. If because of unavoidable circumstances the adjustment is made after 120 days, a full written explanation of the late adjustment must be documented.
3. Method of Cost Transfer
A cost transfer for the purpose of this policy is any expenditure adjustment initiated by the following:
| Type of Transaction | Method of adjustment | Application |
|---|---|---|
| Vouchers (Vendor payments, travel and entertainment, miscellaneous reimbursements) |
Online BFS zero adjustment | AP/PO |
| Payroll transaction | Payroll expense transfer (UPAY or OPTRS) |
Payroll |
| CARS transaction | Online CARS adjustment | CARS Accounts Receivable |
| Other (Recharge, cash deposit) |
Online financial journal | General Ledger |
The most appropriate place to make the cost adjustment is in the system of record that originated the charge, e.g. AP/PO system for purchasing related charges, Payroll system for payroll related charges and adjustment for recharges in the departments recharge systems. All these adjustments would be posted to the general ledger from the subsidiary system. In addition, making the adjustment in the system of record minimizes the information required to support the adjustment and provides a clear audit trail for the adjustment.
Please note the following actions that may also need to take place:
a. Vouchers: In these cases, the adjustments can only be made to paid vouchers. If the PO is still open, changes should be made as appropriate to the open PO line distribution to enable vouchers processed against the PO in the future to be posted to the correct chartstring.
b. Recharge Expenses: In addition, the recharge unit should be advised to make changes for future project costs or recurring charges as appropriate.
c. Payroll expenses: UPAY or online expense transfer (OPTRS) must be used for all payroll cost transfers. If payroll charges are adjusted using UPAY/OPTRS all related benefit charges will be adjusted systematically by the payroll system and posted to the General Ledger. PAFs should be corrected for future charges as required. If a UPAY/OPTRS is prepared for a period that has already been reported on a PAR, the original PAR should be updated to reflect the UPAY/OPTRS adjustment. If the Controller’s Office approves using a financial journal to move payroll expenses (e.g., during the Adjustment Period following an award’s expiration date), the department will also be required to make the corresponding benefit and PAR adjustments. If a UPAY/OPTRS is used this will automatically calculate and post the benefit adjustments and these changes will also be reflected on the PAR if the original PAR for the reporting period has not been issued. Please refer to the High Risk Direct Retros (Formerly Known As Late Payroll Cost Transfers) Involving Federal Funds Exception Request Procedures page for requesting a late payroll transfer after 120 days.
Use of a financial journal may be a more appropriate action when the number of vouchers or other transactions is significant enough that doing a "lump sum" financial journal is far more efficient – for example, correcting a missing flex field on multiple FedEx vouchers.
Please note: overhead will be adjusted automatically every night for any direct cost transfers processed during the month. Do not process a financial journal to adjust overhead. If you have questions about overhead please contact CGAawards@berkeley.edu.
E. Documentation and Retention
1. Required Documentation by Type of Cost Transfer
Please note: Documentation to support the transfer must include / or reference appropriate documents that provide support for the transfer.
a. Typographical error
i. Specific explanation of what the error is and how the error occurred. An explanation, which merely states the new transfer was made to "correct an error" or "to transfer to correct activity "is not sufficient. Explanations may include but are not limited to the following:
- Recharge unit accidentally entered different chartstring than was provided by the department
- Clerical error on time report; work performed was of direct benefit to the award or service performed
- Key entry error in payroll office (or recharge or other unit)
- Transposition error in coding original transaction
- Flexfield was omitted in error
ii. All online records must have a full explanation of the reason for the transfer or reference to document/s with the supporting information or to documents providing an audit trail to the supporting documentation.
b. Redistribution of costs
i. The quantity and description of goods and services being transferred and how the receiving project benefited from the cost being transferred.
ii. Full explanation must be provided as to the basis of any division of costs.
iii. All online records must have an explanation of the reason for the transfer along with reference to information providing an audit trail to the supporting documentation.
iv. Maintain on file in the department an allocation methodology for the redistribution of high volume, but small individual and/or minor charges such as photocopy expenses, telephone, fax, mailing, office supplies, etc.
v. Usage logs or other appropriate records to substantiate allocation / redistribution of expenses described above. (Note: Departments should submit their redistribution transactions in a timely manner and at least quarterly, but preferably more often.)
vi. A copy of the funding agency approval, if required.
c. Payroll adjustment to a terminated award or from an overdrawn award (not a typographical error)
i. For payroll adjustments to recently terminated awards or from overdrawn award (when the award is not a typographical error), supporting documentation should include a PI certified copy of the daily attendance record (staff) or PI certified statement listing specific dates worked during the period for the salary cost being transferred (academic).
d. Other types of transfers
(E.g. Late receipt of approved award from agency, terms of award allow work to be performed prior to receipt of approved award, profit share arrangements.)
i. The quantity and description of goods and services being transferred and how the receiving project benefited from the cost being transferred.
ii. Full explanation must be provided as to the basis of the transfer.
iii. All online records should have an explanation of the reason for the transfer along with information providing an audit trail to the supporting documentation.
iv. Indication that goods, services or work performed was of direct benefit to the award, project or service center.
v. A copy of the funding agency approval, if required.
The clearer the information and explanation that is provided with the transfer the more likely this will minimize the extent of further review required by internal / external audit teams or other third party reviewers of cost transfers. For example, include the voucher numbers being adjusted (a Standard Detail Report or Verification Report) or indicate the population of charges (i.e. "Federal Express charges on Org A, Fund B from March 20XX and April 20XX".)
All online cost transfers must be referenced to supporting documentation that specifically references the goods or services. Examples of supporting documentation and location of storage:
- Invoices – Accounts Payable department
- Storehouse orders – Originating department
- Travel vouchers – Originating department
- Records of high volume low-value charges with an acceptable distribution method (telephone costs, photocopy charges) - Originating department
- Job time and attendance records – Originating department
Examples
Examples of information to include in the journal header and journal line:
Journal Header
In the long description field in the Journal entry – online header panel, include items to describe the source of the transaction and why the transfer needs to be made.
Journal Line
In the Journal line description field in the journal entry – online lines panel, reference to specific transaction or range of transactions if this is not apparent from the header, or reference to header narrative.
Example 1
- Header: Correction for cleaning service (ref. no. 7860602) recharges for June 02, were posted to incorrect org. code due to keying transposition error in recharge department
- Line: June cleaning charges
Example 2
- Header: Redistribution of March 01 copier charges to department cost centers, see department usage log file G:xxxx.xls
- Line: 50 copies at $2.0 per copy
Example 3
- Header: Add flex field GASTO to all 423 vouchers posted in the month of May 02 for Funds 34987& 42673. Analyst omitted from all PO's created in April by mistake
- Line: Vchr 7025866 add flex field
2. Department of Record and Document Retention Period
Academic departments/Schools/Organized Research Units, rather than the General Accounting or Contracts & Grants Accounting departments, are the "department of record" for documentation in support of transfers. Retention periods are specified in the UC Records Disposition Schedules Manual for the records.
Support for cost transfers must be maintained for 5 years (from the end of the current fiscal year) or for 5 years from the termination of the contract and grant whichever is later.
All documentation, including justifications and certifications related to the cost transfer, are maintained by the originating department and must be made available for post audit review.
Examples of supporting documentation and location of storage:
| Invoices | Accounts Payable department |
|---|---|
| Storehouse orders | Originating department |
| Travel vouchers | Accounts Payable department |
| Records of high volume low-value charges with an acceptable distribution method (telephone costs, photocopy charges) | Originating department |
| Job time and attendance records | Originating department |
| Personnel Activity Reports (PAR) | Originating department |
3. Requirements for PI approval on Specific Types of Cost Transfers (Contracts and Grants)
Prior to preparation of an online transfer of expense, regardless of whether a written delegation of authority has been given by the PI for cost transfers, written approval by the Principal Investigator and/or Chair must be obtained for cost transfers that:
a. Involve a change in use of goods or services, originally allocated to one project and is now being moved (not a typographical error).
b. Were not prepared within 120 days from the close of the month in which the original charge posted to the ledger.
c. Transfers to a contract or grant from an overdrawn contract or grant to a terminated grant with unexpended funds (not a typographical error). This does not apply to transfers between successive budget periods for NIH grants.
Other items which may be considered suspect in an audit; examples include but are not limited to the following:
a.Transfer of equipment at end of project
b. Round sum transfers (e.g. t otal inception to date costs charged to the chartstring amount to $5,678, unit transfers $5,000)
c. Previously transferred expenses
d. Large transfers to the project at the start of an award
e. Total transfer exactly matches balance of awarded amount
The dated and written approval signed by the PI must include reasons why the transfer is being made, the benefit to the project for these costs and why the costs were not originally charged to the contract/grant using the goods or services. If the amount was not transferred in its entirety and the goods or services are not quantifiable, include a statement explaining the method of allocation.
The originating department is the department of record and maintains this approval for the cost transfer.
4. Suggested Documentation of PI Approval
The originating department for the cost transfer must keep on record information sufficient to provide evidence to an outside entity e.g. A133 review team, Federal/State auditors, outside agency, that the PI was aware of and approved the transaction. Suggested documentation includes:
a. E-mail from the PI requesting the transfer
b. Signature on a copy of the financial journal or UPAY or OPTRS PAN notice
c. Signature on Cal Answers detail report showing transfer
d. Memo requesting transfer
F. Revenue and Balance Sheet Adjustments
Departments may prepare and review financial journals to correct revenues which have been erroneously recorded when the original source documents (e.g. departmental cash deposit) contained an incorrect chart string.
Departments can only correct revenue transactions initiated by their department. All contract and grants, gifts and other centrally generated revenue transaction must not be adjusted by the department. Any required adjustments to these accounts must be referred to the appropriate central department generating these transactions for review and correction.
Revenue adjustments are subject to the same criteria and conditions as detailed in this policy document for cost transfers / expenditure adjustments.
Balance sheet adjustments are only prepared by central departments with the general exceptions of departmental key deposits, recharge depreciation reserve, departmental inventory accounts, accrued departmental revenue and expenses, and deferred department revenue. Units including UNEX, and auxiliary and service enterprises may also prepare other balance sheet transfers to meet their reporting requirements. If you feel you need to correct a balance sheet account please contact the relevant central department to discuss the adjustment. If you are not sure which central department to contact, please contact General Accounting at gao@berkeley.edu. They will advise accordingly.
Departments must not make adjustments to overhead allocations (indirect cost allocations) charged to contract and grant awards. If you feel you need to correct an overhead entry, please contact the Contracts and Grants Accounting Department to discuss the adjustment at CGAawards@berkeley.edu. They will advise accordingly.
G. Post Audit Reviews
Periodically, two types of review may be performed by Contracts and Grants Account (CGA) on award funds, along with any work performed by Internal Audit (IA) in the course of an internal review (IA may review any cost transfer regardless of funding source as part of their normal review process). Activity identified in these two reviews will be assessed as to the appropriateness of the transfer and the adequacy of the supporting documentation. In addition an assessment may be made that training is required and will be provided as necessary.
1. The first review will involve a random sample taken from all C&G cost transfers (excluding original Interdepartmental / Intercampus charges and recharge entries) for selected departments.
2. The second review may occur if issues are brought to light following discussion with the Department, Dean's office or Control Unit that require a detailed review of the units cost transfer process. This review will focus on the C&G transactions and explanations for a sample of cost transfers (excluding original Interdepartmental / Intercampus charges and recharge entries) that were:
- prepared four or more months after the original ledger date
- prepared within two months immediately before the project end date
- prepared after the project end date
- previously moved as a cost transfer
- affecting individual funds with overdrafts
- affecting unexpended balances for budget or award periods terminating within the last two months
Both review procedures for selected cost transfers include:
a. CGA notifies the Department Manager of the review and advises they may request supporting documentation.
b. The review is normally completed within 1-2 weeks.
c. The review may involve:
- A request to forward a copy of the documentation to CGA
- A visit to review the documentation at the department site
- Phone conversation
- Email exchange
- Other processes that provide sufficient information to validate the cost transfer
If the documentation is not submitted or if the cost transfer is judged on a preliminary basis to be inappropriate under the given circumstances, and/or is not adequately supported by documentation, CGA will:
a. Notify the Preparer and approver of the cost transfer, the Business Officer, and/or the Principal Investigator.
b. Provide a rationale for the tentative decision.
c. State a due date for a response that addresses why the cost transfer should be considered valid. The due date may vary depending on such variables as project end date and when in the project cycle the cost transfer review occurs.
d. After receipt of the response, a final determination will be made on the appropriateness and adequacy of supporting documentation. Cost transfers that lack documentation do not meet the standard for the adjustment criteria described in this document or for which no response is received from the department will be reversed or transferred to an unrestricted fund source within the originating unit.
Appendix 1: Sample written delegation to review cost transfers for Federal Contracts and Grants
[DATE]
[NAME]
[DEPARTMENT]
RE: Delegation of Authority – University Direct Costing Procedures – Cost Transfers (Business and Finance Bulletin A-47)
Effective immediately, in accordance with the responsibilities described in Section V-B.4, Business and Finance Bulletin A-47, University Direct Costing Procedures, I am delegating to [NAME], [TITLE] the review of all cost transfers, with the exception of those described below, for the following federal awards:
I understand I cannot delegate the authority to authorize cost transfers described in Section E, subsection c. of the University's cost transfer policies.
[NAME]
[TITLE]
cc: [DEPARTMENT MANAGER]