A cost transfer is the assignment of an expense to a sponsored agreement that was initially recorded elsewhere in the University’s general ledger. Sponsors such as the federal government expect robust internal controls and a full justification on why a cost transfer involving sponsored agreements is appropriate. The University's Cost Transfer University Operating Procedure (PDF) promotes important business practices to reduce cost transfers, improve internal controls, and identify/submit cost transfer requests in a timely manner using a standardized form.

The UOP provides detailed guidance in the following areas:

  • Minimizing cost transfers
  • Identifying and correcting costing errors in a timely manner
  • Justifying and documenting a cost transfer request
  • Authorization and approvals
  • Requirements for Untimely cost transfer requests

Assessing Unit Business Practices

A responsible official of a unit should assess its current business practices and make necessary adjustments to comply with the Cost Transfer UOP within their respective unit. Here are some key assessment questions to use:

  • Are existing processes effective in charging costs correctly and timely to sponsored agreements?
  • When the probability of funding is extremely high, e.g., non-competing proposals, is my unit requesting budgets to be established in advance accounts for sponsored agreements?
  • Are departmental personnel who are allocating their effort to sponsored agreements reviewing their planned effort on a quarterly basis and are their effort allocations being updated to reflect changes?
  • Are encumbrances and expenses posted to the unit's department suspense account being reviewed on a monthly basis and transferred in a timely manner?
  • Does the justification and documentation for cost transfers requests typically provide a full explanation from which an independent reviewer can understand the transfer request and conclude that the expenditure is appropriate?
  • What proactive measures can the unit implement to minimize untimely cost transfer requests?
  • Is the process to identify/implement/track systemic corrective action effective in preventing untimely cost transfer requests?

 

Cost Transfer FAQs

What is considered a cost transfer?

A cost transfer is the assignment of an expense to a sponsored agreement that was initially recorded elsewhere in the University’s general ledger. A cost transfer from a sponsored agreement to a non-sponsored budget is also considered a cost transfer. Examples are a retrospective payroll distribution change or a journal entry which moves an existing non-payroll expense from one sponsored agreement to another sponsored agreement.

What is not considered a cost transfer?

Purcard reallocations, inter-departmental billings (IC journal entries), and recoding of expenses on the same sponsored project are not considered a cost transfer. Examples of recoding of expenses are:

  • A retrospective salary distribution change which maintains the same total percentage of effort on a sponsored project but changes the fund, source and function chartfields to charge part or all of the effort to a cost share chartstring.
  • A correction to an expense account to properly classify the expense on the same project.

What business practices are recommended to minimize cost transfers?

Applying the four cost principles in the University's Cost Policy (PDF) to assess whether an expense is appropriate or not on a sponsored agreement, conducting quarterly effort planning sessions to prospectively allocate payroll correctly the first time, and using advance accounts to charge appropriate expenses prior to the sponsor funding the sponsored agreement are important business practices to minimize cost transfers.

May I charge expenses to a current sponsored project and transfer the expenses to a sponsored project when it is set up in PeopleSoft?

No. A sponsored agreement may not be used as a holding account for expenses that will subsequently be transferred to another sponsored agreement. All expenses must meet the costing standards of being allocable, allowable, reasonable, and consistently applied in order to be charged to a sponsored agreement. Business practices such as requesting an Advance Account or temporarily charging the encumbrances/expenses to a department suspense account are appropriate methods.

How is a cost transfer accomplished?

Payroll cost transfers and non-payroll cost transfers have different processes, documentation requirements, and a different central unit that reviews/approves these two types of cost transfers.

Why do cost transfers require a justification and supporting documentation?

External auditors view cost transfers involving sponsored agreements as a potential internal controls issue. Cost transfers are  more rigorously challenged by auditors. A justification with adequate documentation which incorporates sufficient internal controls provide a robust framework to meet the costing standards required by the University's sponsors.

How detailed should the justification be on the cost transfer form?

The justification must include a detailed explanation from which an independent reviewer can understand the transfer request and conclude that the expense is appropriate. A statement that merely states “to correct error” or “to transfer to correct account” is not sufficient.

Why are two personnel from the cost transfer-initiating unit required to be involved in the cost transfer request?

Federal regulations require that no one person has complete control over the all aspects of a financial transaction. To comply with this requirement, the preparer of the cost transfer request and the unit person approving the cost transfer request may not be the same person.

When are additional approvals required beyond the two personnel involved in the cost transfer requests?

The cost transfer form accommodates the following cost transfer approval scenarios at the University.

  • A Dean's office may require approval of cost transfer requests
  • A PI may want to approve cost transfer requests which affect their sponsored agreements
  • For untimely cost transfer requests, the Cost Transfer UOP requires the PI receiving the expense on their respective sponsored agreement to approve the appropriateness of the cost transfer.
  • For untimely cost transfer requests, the Cost Transfer UOP requires a vice president to approve the extenuating circumstances and the unit's corrective action plan to prevent future occurrences.

How do I calculate whether a cost transfer request is untimely?

If a unit submits a cost transfer request more than 90 days after the original accounting date of the oldest expense being transferred, the cost transfer is considered untimely.

Why does the original submitted payable time detail need to be submitted for a wage cost transfer?

The hourly time submission process in PeopleSoft's time and labor system allocates someone's time and related wages. When the employee submits and the supervisor approves, the time is certified as reasonable in relation to work performed on sponsored agreements. A wage transfer request involving a sponsored agreement is a re-certification of how the time was allocated. A signature from someone who has firsthand knowledge or suitable means of verification is required to certify the reasonableness of the revised allocation of time. Typically, the employee signature is obtained.

 

Key Resources

Operating Cost Transfer Guidance

Policies & UOPs

Forms

Training

Contact