Cost Transfers

Contact

Questions about this topic can be answered by:

Timothy Reuter

Sr. Director, Post Award Operations, OSR

Office of Sponsored Research Post Award

(650) 721-1758

Cost Transfers Overview

A cost transfer is an after-the-fact reallocation of costs associated with a transaction from one Project-Task-Award (PTA) to another.

Costs should be charged to the PTA for the benefiting sponsored project when first incurred. However, at times it may be necessary to transfer a cost to a sponsored project subsequent to the initial recording of that cost. Such transfers require careful monitoring for compliance with Stanford University policy, federal regulations and policies, and the federal cost principles that underlie all fiscal activities of sponsored projects.

The cost transfer procedure requires thorough documentation to support the transaction. In addition, the transfer must be timely, complete, and comply with allowability, allocability, and reasonableness requirements.

A cost transfer invites the assumption that the transaction was not handled properly initially. The charge will be scrutinized for allowability and allocability to the benefiting sponsored project. The documentation or justification for moving charges will be scrutinized as well.

 

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Timeliness

Cost transfers that represent corrections of errors should be completed within three months of when the error is discovered, and no later than six general ledger (GL) months after the original expense is posted to an award. Errors found during the required monthly expenditure statement review process should be corrected upon discovery.

For example, expenses for winter quarter (January, February, March) must be certified by the PI by the end of May. If a transaction posted during the January GL month was discovered during the review and certification process, it must be corrected no later than the July month end close.

 

 

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GL MONTH

JAN-16

FEB-16

MAR-16

APR-16

MAY-16

JUN-16

JUL-16

 

Original* transaction posts in GL month

 

Qtr ends

 

Last month to review Winter Quarter expenses w/PI

 

Any corrections for transaction that posted in JAN-16 must post before this GL month closes

*This applies to the original transaction only. It does not apply to a journal of a previous journal.

Exceptions to time restriction of cost transfers

Exception

Discussion

Transactions necessitated by unforeseen circumstances

These are not considered error corrections. Examples:

  • allocations from Service Centers or Allocation PTAs
  • transfers due to account set-up errors
  • transfers due to new funding comes thru an unexpected mechanisms (e.g., an award comes in with a different prime sponsor than originally proposed or was thought to be a grant at proposal time, but once awarded is a contact)

Transfers between tasks of the same sponsored project

These are not considered error corrections because the expense remains in the same award.

Changes in expenditure types within the same sponsored project

Charges that do not impact changes to capital expenditure types.

Incorrect charges

Charges must be transferred off the non-benefiting sponsored project regardless of age of the expense.

Refunds and unexpected credits

Refunds benefiting a sponsored award must be allowed to post to the award even if it may necessitate a closeout correction.

Transfers onto sponsored PTAs after six months or after award closeout

 

Late charges are generally not allowed and must be transferred to a cost sharing PTA unless the expense also benefited a non-sponsored award, in which case it can be transferred to the other benefiting non-sponsored account.  Only OSR or RFCS may authorize a transfer onto a sponsored PTA after six months with the concurrence of a school level approval.

Clearing an overdraft

At the end of a project to either a Cost Sharing PTA or to an unrestricted PTA depending upon the specific circumstances.  See Section F of this policy “Overdrafts”.

 

 

Allocations from service centers or clearing accounts, changes caused by account setup errors, situations where new funding comes through an unexpected mechanism, etc. are not considered error corrections.

Effective for transactions with a GL date of January 2017

Large cost transfers that exceed $10K or 10% of the award, and transfers within the first or last 90 days of a project, and transfers that do not meet the timeliness criteria receive additional central review.   For the transfer of all non-salary charges subject to the above criteria, a PDF of the general ledger** showing the expenditure(s) requesting to be moved MUST be attached to the cost transfer transaction by the originator.  Attaching detailed documentation for these transfers will facilitate their timely review by the Office of Sponsored Research (OSR).

**Acceptable versions of the general ledger include ReportMart3 279, OBI 285 Expenditure Detail Report, OBI 149 - Quarterly Review and Certification, OBI CER Expenditure Balance and Expenditure Details reports, and Expenditure Transactions (PTD) screens of FFIT.

 

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Journals

Use journals to transfer costs.

  1. Use New Journals to transfer non-salary or student aid expenses.
  2. Use Labor Distribution Adjustments to transfer salary expenses.
  3. Use Allocation Journals to distribute costs based on proportional benefit to a project. Allocation Journals are used when it is difficult to determine in advance how much to charge each account for a shared supply or service. Allocations are often used to distribute costs from Service Centers, Auxiliaries, or expenditure allocation service types. Often allocations are repetitive, or are required on a repetitive basis. To process an allocation journal, you must comply with Administrative Guide Memos 3.2.2 and 3.2.3 and have written approval on file from those with signature authority over the PTAs you will charge. You must be able to certify that:
  • The allocation has been processed in accordance with policy
  • The cost is an appropriate charge to the PTAs sharing the expense
  • The expenditure PTAs actually benefited from the cost of the goods and services
  • The transaction is documented according to policy

Keep in mind: Federal regulations require an expense solely advance the work under the sponsored agreement, or benefit both the project and other work in proportions that can be approximated through reasonable methods.

A cost that benefits more than one project should be allocated at the time of the expenditure. At no time should a sponsored project be used as a holding account for costs that will subsequently be transferred elsewhere. Clearing accounts are appropriate for certain situations

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Justification

All cost transfers must be supported by documentation that fully explains the error. An explanation merely stating that the transfer was made "to correct an error" or "to transfer to correct project" is not sufficient. The cost transfer documentation for a sponsored project should be reviewed by the PI. The documentation must include a justification.

The justification must explain why you are taking an expense off of one PTA, and why it is appropriate to put it on another PTA. If you are moving the charge to another sponsored project, your explanation must make it clear why the charge is ALLOCABLE to that project, and how the project received a benefit from this expense. The justification should clearly show the following.

Cost transfer documentation must include a justification that clearly shows:

1. How the expense directly benefits the receiving PTA

2. How the expense is allowable on the receiving PTA (e.g., attach documentation of sponsor approval)

3. The allocation methodology used if transferring expenses to multiple PTAs

4. The reason the expense was charged incorrectly to the first PTA

5. That any systematic reasons which might cause this problem to be repeated have been addressed

6. The reason for any delay in the timely processing of the transfer

In addition, large cost transfers that exceed $10K or 10% of the award, and transfers within the first or last 90 days of a project, and transfers that do not meet the timeliness criteria receive additional central review.   For the transfer of all non-salary charges subject to the above criteria, a PDF of the general ledger** showing the expenditure(s) requesting to be moved MUST be attached to the cost transfer transaction by the originator.  Attaching detailed documentation for these transfers will facilitate their timely review by the Office of Sponsored Research (OSR).

**Acceptable versions of the general ledger include ReportMart3 279, OBI 285 Expenditure Detail Report, OBI 149 - Quarterly Review and Certification, OBI CER Expenditure Balance and Expenditure Details reports, and Expenditure Transactions (PTD) screens of FFIT.

Sponsor Requirements

Sponsors may have more restrictive guidelines on cost transfers; departments should consult the Office of Sponsored Research or Research Financial Compliance & Services (RFCS) when in doubt about the acceptability of a proposed cost transfer.

Tips for Writing the Justification

A good justification will allow anyone reviewing the cost transfer to understand how the expense benefits the receiving PTA. It should be easily understood by anyone reviewing the journal, and provide enough detail to inform approvers and auditors about the action taken. Think, "if I leave, will an auditor be able to understand this two years from now?" it should answer: who, what, where, when, and why. 

  • Who: the person, organization, or department name(s) that caused or played a role in the journal
  • What: what events or circumstances are causing the journal
  • When: the month of occurrence or the key date related to the cause
  • Where: the location of the event or occurrence (if it is significant)
  • Why: why a change is required

The trick to writing a complete justification is to try to answer all possible questions. It is important to state explicitly how the project which will pay this expense benefits from the transfer. Include a statement like: "The direct benefit to Project XXX of this expense was __".  Indicate whether the sponsor approved the transaction. If you wonder if you have included enough information, you probably haven't. Do not use abbreviations or acronyms in a justification. Above all, remember, you cannot transfer expenses to a new PTA  just because it has money!

Examples of documentation to include: Allocation methodology, an invoice or packing slip, notes on an expenditure statement, “per PI …”

Sample Wording to Document a Salary Transfer

  1. Charges are being transferred onto this award because the appointment paperwork for Grad Student X was not received in time to allocate her salary correctly. Consequently, this month’s charges for Grad Student X are incorrect.
  2. The efforts of Grad Student X directly benefit the scope of work for Project Y - OR - Grad Student X conducted experiments related to the Project Y statement of work (be specific, but brief)
  3. These salary charges are allowable on this award per the Project Y agreement.
  4. PI Smith has reviewed the charges and assessed the efforts of Grad Student X.
  5. Appointment paperwork is now fully approved, and the Labor Distribution Schedule corrected for Grad Student X so that her salary will now be charged correctly.

Ask OSR, RMG, ERA or School Compliance Officer for help making sure your documentation is adequate.

Compare Justifications

Inadequate Justification: 

To allocate chemicals from an expenditure allocation PTA to appropriate project PTA

Better Justification:

Department X expenditure allocation PTA is used to collect all department chemical charges. All charges to sponsored projects were proposed and approved consistent with Stanford and sponsor policy. Documentation, including allocation methodology, is in departmental files.

Explanation:

The inadequate justification does not address the questions of whether or not the chemical charges are allowable and allocable to the PTAs to which they are being charged through the cost transfer.  The better justification states that the department is aware of the documentation requirements for these charges, attests that all requirements have been met, and states where the documentation records can be found. The length of a justification is irrelevant. A justification must include the pertinent facts, and easily understood by anyone who may read it now and in the future.

 

Use the Cost Transfer Check List to help you write the documentation and to facilitate a timely review by OSR.

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After the Project End Date

If an error is discovered after the end of the award, a transfer of expense should be made by removing the expense prior to award closeout.

If after the end date of an award an expense is determined to be unallowable to the project (but did benefit the project), the expense must be transferred to a Cost Sharing PTA for accounting purposes, although it cannot be counted towards a Cost Sharing commitment.

Documentation

The documentation of a cost transfer made after a project end date will be closely scrutinized. In addition to including all the necessary element of a cost transfer justification large cost transfers that exceed $10K or 10% of the award, and transfers within the first or last 90 days of a project, and transfers that do not meet the timeliness criteria receive additional central review. For the transfer of all non-salary charges subject to the above criteria, a PDF of the general ledger** showing the expenditure(s) requesting to be moved MUST be attached to the cost transfer transaction by the originator.  Attaching detailed documentation for these transfers will facilitate their timely review by the Office of Sponsored Research (OSR).

Examples

These charges are for effort expended before [insert Project Y’s end date] and they are appropriate per the Project Y award agreement.

These charges could not be processed in a timely manner because PI Smith was traveling in Mongolia, and was not available to review and approve the charge.

If a Project Ends In Overdraft

An overdraft exists if after the end date of an award expenses exceed funding.

If the award is in overdraft at the end of the project period, remove the overdraft from the award according to rules outlined in Stanford Policy. Federal regulations state an overdraft is unallowable on any other sponsored project, therefore unless there was an error, the overdraft must be treated like cost sharing. This must be done in a timely manner. Expenses removed as a result of an overdraft should have been incurred during the last 6 months of the project.

  • Do it in a timely manner
  • If total overdraft is less than $500, transfer lump sum (net of indirect costs) Expenditure type 56135 (which allows the Cost and Management Analysis group to segregate these costs for purposes of indirect cost calculation)
  • If the overdraft is greater than $500 dollars the overdraft is transferred to a cost sharing PTA.
  • Explain reason for the transfer. For example: Charges are legitimate project expenses, but funds were inadequate. This is accounted for in the same manner as cost sharing.

 

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Veterinary Service Center (VSC) Transfers and Adjustments

Background

The Veterinary Service Center (VSC) charges animal care expenses to two expenditure types (ET) which are subject to associated animal care Facilities and Administrative (F&A) costs. More information about VSC F&A overhead rates can be found the Stanford Rates page.

ET 58710 - INTERDEPT  NONFED VSC SVC CHG

This ET is used for non-federal and other non-sponsored PTAs. The associated VSC F&A costs are automatically calculated by the VSC billing system and included in ET 58710.

ET 58720 - INTERDEPT FED CIRM VSC SVC CHG

This ET is used for federal sponsors and CIRM and does not include VSC F&A costs. The associated VSC F&A costs are automatically calculated by the Oracle Financials system and charged separately to ET 56920 VSC FED ANIMAL CARE CHARGE.

 

Scenarios for VSC Transfer

Scenario 1.)

Transfer of VSC expenses from a Non-Federal/Non-Sponsored PTA to another Non-Federal/Non-Sponsored PTA.  Open a "New Journal" form. 

Scenario 2.)

Transfer of VSC expenses from a Federal Sponsor PTA to another Federal Sponsor PTA.  Open a "New Journal" form.

Scenario 3.)

Transfer of VSC expenses from a Federal/CIRM Sponsor PTA to a Non-Federal/Non-Sponsored PTA. Open a "New Journal" form.

Scenario 4.)

Transfer of VSC expenses from a Non-Federal/Non-Sponsored PTA to a Federal/CIRM Sponsor PTA. Open an "Allocation Journal" form.

 

View VSC Cost Transfer Journal Examples

Examples

Common iJournal error messages and solutions

Error Message:  "PTAEO VALIDATION ERROR -XXDLPV035: Expenditure Type is not allowed for this Project (Transaction Control).

Solution:  Change the Expenditure Type (ET) from 58710 to 58720, or 58720 to 58710. 

Error Message:  "A single iJournals transaction may include Debit lines to either GA (PTA) or GL (PFO), but not both."

Solution:  Open and complete an"Allocation" journal by entering all lines.  Void the "New" journal.

Routing for Approvals

All VSC iJournals should be routed to Ruth Burns in VSC for approval. If Ruth is not listed as an approver, please add her as an approver.

Questions or comments? Contact Christine Siu - Financial Management Analyst, ORA Research Administration Policy and Compliance

 

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