Brown Bag Lunch Series: Cost Transfers
University of North Carolina at Chapel Hill
Office of Sponsored Research
Definition of Cost Transfer
The transfer of expenditure from one account to another. The expenditure should be allowable (costs that can be specifically identified with a particular project or activity) and allocable (cost can be quantified) to the account to which it is being transferred.
Methods Used for Cost Transfers
Account Adjustment Form (AJ1) is used for the transfer of non-personnel transactions
Personnel transactions, which are retroactive, are reported on Personnel Funding Forms (in HRIS)
NOTE: Only in extenuating circumstances are salaries transferred using an AJ1, such actions require advanced approval by the PARS Coordinator.
Red Flags
Transfers older than 90 days
Transfers in the last month of the award or after the award has expired
Round numbers!!
Explanations that raise more questions than answers
Key Points for Completing an AJ1 for Cost Transfers
Block 4 is the account to be charged (debit account) 10-digit account number to be charged and amount to be charged
Block 5 is the account to be reimbursed (credit account) 10-digit account number to be reimbursed and amount to be reimbursed
Block 6 identify each financial transaction from the FBM091
- list each transaction along with reference numbers or
- highlight transactions on applicable FBM091(s) or
- develop a spreadsheet using Finan$eer listing each transaction being transferred
Description/Justification Section must be completed and clearly
- State how the item being transferred benefits the account being charged
- State how error occurred
- Identify steps to prevent future errors
Where applicable, attach supporting documentation for the cost transfer
Block 8 signature approval by the department ‘accepting the charge’
Contacts:
Scott Blackwood, Director of Post Awards, 962-4675
Hilda Durham, Director of Financial Operations, 962-4676
Mary Harris, Post Awards, 843-2696
Becky Hinshaw, PARS Coordinator, 962-4666
Additional Resources:
Letter of Justification for Change in Effort (includes guidelines for justification of retroactive change in effort) (http://research.unc.edu/osr/documents/letter_justification.doc)
NIH Grants Policy Statement (12/03) Part II: Terms and Conditions of NIH Grant Awards
(http://grants2.nih.gov/grants/policy/nihgps_2003/NIHGPS_Part5.htm#_Toc54600115)
Electronic AJ1
Finan$eer
UNIVERSITY BUSINESS MANUAL
(h) COST TRANSFERS (ACCOUNT CORRECTIONS)
Corrections of accounts and associated transfer of costs are subject to sponsor justification and documentation requirements. Such transfers should be completed as quickly as possible (within 90 days or less) and may be approved by OSR after review of requisite information, e.g., appropriateness of transfer for grant receiving charge, available funds in grant receiving charge, justification for the transfer other than clearing overdrawn account, and transfer made between funding sources with concurrent budget periods. Any cost transfer over 90 days old requires additional documentation and explanation of why error was not reported and corrected sooner.
NIH Grants Policy Statement (03/01)
Part II: Terms and Conditions of NIH Grant Awards
Subpart A: General -- Part 3 of 7
Cost Transfers, Overruns, and Accelerated and Delayed Expenditures
Cost transfers to NIH grants by grantees, or by consortium participants or contractors under grants, that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error is discovered. The 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 grantee, 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.
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" http://grants2.nih.gov/grants/policy/nihgps_2001/part_iia_7.htm#RecordRetentionandAccess). 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).
The GMO monitors grantee expenditure rates within each budget period and within the overall project period of individual grants. The funding that NIH provides for each budget period is based on an assessment of the effort to be performed during that period and the grantee's associated budget. Although NIH allows its grantees certain flexibilities with respect to rebudgeting, unobligated balances, and preaward costs (see "Administrative Requirements—Changes in Project and Budget" http://grants2.nih.gov/grants/policy/nihgps_2001/part_iia_5.htm#ChangesinProjectandBudget), NIH expects the rate and types of expenditures to be consistent with the approved project and budget and may question or restrict expenditures that appear inconsistent with these expectations.
The GMO may review grantee cash draw downs to determine whether they indicate any pattern of accelerated or delayed expenditures. Expenditure patterns are of particular concern because they may indicate a deficiency in the grantee's financial management system and/or internal controls. Accelerated or delayed expenditures may result in a grantee's inability to complete the approved project within the approved budget and period of performance. In these situations, the GMO may seek additional information from the grantee and may make any necessary and appropriate adjustments.
OFFICE OF SPONSORED RESEARCH
ADMINISTRATIVE MEMO
POLICY/PROCEDURE
DATE: JUNE 15, 2004No.10-B
SUBJECT: COST TRANSFERS (Non-Personnel)
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This memo will address the requirements for approval of non-personnel cost transfers in order to insure that our review of forms that charge one grant and reimburse another is consistent.
The transfer of costs from one source of funding to another should occur only when specific criteria have been met, such as:
- Charge is appropriate for receiving source
- Sufficient funds are available to cover cost in receiving source
- Form indicates where charge originally incurred (requires review)
- Account transferring charge is not overdrawn (requires review)
- Accounts involved in transfer have concurrent budget periods
- Reason(s) for transfer is properly DOCUMENTED
- Transfer is processed within 90 days of cost incurrence
Renewed emphasis is to be placed on any transaction older than 90 days such that they will be approved only in extraordinary circumstances by the appropriate contract specialist and must have a detailed explanation of their lateness. Language in the Business Manual will be modified to discourage processing of cost transfers older than 90 days.
Routine application of the above criteria should insure consistent treatment of both personnel and non-personnel costs as regards the 90 day requirement.
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Scott BlackwoodJames Peterson