Cost Transfers

Contact

Questions about this topic can be answered by:

Timothy Reuter

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

Animal care expenses charged by the Veterinary Service Center (VSC) to expenditure types (ET) 58710 and 58720 are subject to an animal care Facilities and Administrative cost rate (VCS F&A). These overhead rates are negotiated each fiscal year and can be found here. Two expenditure types exist to support two different methods of charging VSC overhead.

Non federal sponsors and all other non-sponsored PTAs

All charges to ET 58710 - INTERDEPT  NONFED VSC SVC CHG (non federal and other non-sponsored PTAs) include the VSC F&A.

If the VSC charge for Feb. 2017 is $100, the amount charged to ET 58710 is ($100 * (1+.759) or $175.90 where 75.9% is the VSC FY 2017 F&A.

Federal Sponsors and CIRM

All charges to ET 58720 - INTERDEPT FED CIRM VSC SVC CHG (federal sponsors and CIRM) do not include the VSC F&A rate. The associated VSC F&A rate is automatically calculated by Oracle and is charged to expenditure type 56920 VSC FED ANIMAL CARE CHARGE.

Using the same example above but assuming the animal charge was incurred by a federal sponsored project, the entries on the PTA’s expenditure report would include the lines:

Federally Sponsored PTA Expenditure Statement line item reflecting direct cost:

58720 $100.00 VSC SVC CHG

Oracle System generated F&A:

56920 $75.90 VSC F&A  (sum of $100.00 * .759)

Transfers and Adjustments 

 

If the charge is in the correct expenditure type but it is charged to an incorrect award/project/ task.

Generally, a department should be able to transfer the VSC charges in exp types 58710 or 58720 and nothing more needs to be done. The same expenditure type must be used on for the debit and credit. 

The incorrect expenditure type is used on a federal or non-federal sponsored project, i.e. 58710 on a federal award and CIRM award or 58720 on a non-federal award.

Example 1

 

Transferring VSC animal charges from expenditure types 58710 to 58720 (Non- federal to federal) Use iJournal ALLOCATION form for this type of  entry.

            Debit Credit
1001020 100 AKAAF 48120 VSC REV ADJUST 2/2017 2023.78  
1059010 101 PAGQW 58720 VSC CHARGES 2/2017  2635.08  
1036524 1 DHAEJ 58710 VSC CHARGES 2/2017   4658.86

In this example VSC animal charges totaling $4,658.86 on a non-federal PTA (1036524-1- DHAEJ) are transferred to a federal sponsored project (1059010-101-PAGQW). We reverse the charge to 1036524-1- DHAEJ by crediting expenditure type 58710 for $4,658.86

The charge to expenditure type 58710 includes the VSC FY2017 F&A rate charge of 75.90%, whereas charges to expenditure type 58720 do not. Therefore we have to split out the animal care charge from the VSC F&A charge. The animal care expense is charged to the federal sponsored project in expenditure type 58720.

To calculate this amount, divide the amount originally charged to 58710 by (1+ VSC F&A rate) or $4,635.11/1.759 = $2,635.08. The difference between the amount originally charged to expenditure type 58710 and the amount charged to 58720 ($4,658.86- $2,635.08 = $2,023.78) is charged to 1001020-100-AKAAF (the VSC service center) using revenue object 48120. 

Example 2

 

Transferring VSC animal charges from expenditure type 58720 to expenditure type 58710 (federal to non-federal). Use the NEW ijournal Form.

            Debit Credit
1001020 100 AKAAF 48120 VSC REV ADJUST 2/2017   2023.78
1059010 101 PAGQW 58720 VSC CHARGES 2/2017   2535.08
1036524 1 DAAEJ 58710 VSC CHARGES 2/2017 4658.86  

Here we have charged a federal award for animal care charges totaling $2635.08 which should have been charged to a non-federal PTA. Oracle calculated a separate VSC F&A charge of $2023.78 ($2611.33 * .759 = $2023.78) using the proper FY 2017 VSC rate and posted the amount to expenditure type 56920 on the federal sponsored award.

To transfer the animal charge we reverse the charge of $2,635.08 to expenditure type 58720 on the federal sponsored project. The amount of animal care expense we need to charge to expenditure type 58710 includes the VSC F&A charge.

To calculate this total amount, take the amount charged to 58720 ($2,635.08) and multiply by (1+.759) or ($2,635.08 * 1.759 = $4,658.86. This is the amount charged to expenditure type 58710 on the non federal PTA. The difference between the amount originally charged to expenditure type 58720 and the amount charged to 58710 ($4,658.86 - $2,635.08 = $2,023.78) is credited to 1001020-100-AKAAF (the VSC service center) using revenue object 48120.

There should never be a need to directly adjust amounts appearing in expenditure type 56920. However, it is good practice to verify the appropriate amount was charged or cleared in this expenditure type.

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

The journal may not validate if you enter multiple transfers or adjustments into a single journal.

Have a  questions or comments? Contact Christine Siu.

 

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