Cost Transfer Procedures
To ensure that the university is in compliance with Federal regulations, the Principal Investigator (PI) and the department are required to record appropriate project expenses timely, and to support them with adequate documentation. Every cost placed on an account is certified by an authorized institutional official for allowability, allocability tests, and direct benefit to a project. This certification is included on financial reports and vouchers requesting payments under the Federal agreements. A cost transfer invalidates this original certification.During the life of the award (i.e., not at award closeout), process all cost transfers within 120 days of the close of the month in which the original charge posted to the ledger.
Cost transfers are used for correcting errors, are meant to be used infrequently and only in specific circumstances. The responsibility for compliance with federal costing guidelines and for maintaining supporting documentation for cost transfers is centered in the originating department/unit. Principal Investigators (PIs), and those to whom authority to approve cost transfers is delegated, are responsible and accountable for compliance with Federal Cost Principles, and for ensuring that costs transferred to the Federal funds are:
- Incurred during the approved budget period
- Allowable per the terms and conditions of the award and university policies
- Necessary and reasonable for the performance of the award
- Allocable
- Consistently treated
- Adequately documented
NIH Grants Policy Statement, Section 7.5, states that error corrections should be accomplished within 90 days of when the error was discovered. The University expects that all errors are discovered within 30 days of the close of the ledger of each month. Consequently, UC Policy BFB A-47 requires that cost transfers are processed timely, and no later than within 120 days from the close of the month in which the original charge posts to the ledger. Departments are required to explain untimeliness of a cost transfer completed after 120 days after the original transaction date and/or 90 days after the fund end date.
Cost transfers are to be made in the system that originated the charge (for example, Payroll system for payroll costs). The transfer will post from the subsidiary system to the General Ledger. Journal expense transfers processed in BFS require a complete 10-field C&G chartstring, which includes PC Bus Unit, Project and Activity IDs. This also applies to multi-line financial journals. The COA Validation Tool allows users to verify the PC chartfields.
The federal government expects grantees to maintain documentation of cost transfers. An explanation for cost transfers must answer the following questions:
- Why is the cost transfer necessary?
- Why was the correct fund not charged?
- How does this expense contribute to achieving the project’s objectives?
Cost transfers not made within the 120 days require an explanation stating why the error correction is late. Late cost transfers that are not approved must be moved to unrestricted funds.
Special procedures and forms exist for requesting a Late Payroll Cost Transfer exception during the life of the award and separate payroll procedures are in effect during the award closeout Adjustment Period.