Cost Transfers on Sponsored Awards

Cost Transfers on Sponsored Awards

Procedure Area: Vice President for Research

Latest Revision: June 27, 2023

Responsible or Contact Office/Role: Office of Sponsored Programs

Roles & Responsibilities

1. Principal Investigator (PI): Generally, a Principal Investigator is the primary individual responsible for the conduct and administration of a sponsored program received at UVA. A sponsored award with multiple PIs, will have a single person identified as the primary PI, while the others will be Co-PIs or Co-Is (also known as Lead PIs). An award PI in the financial system is generally the primary PI. For multi-disciplinary programs, Co-PIs are the Lead PIs assigned to the Grants associated with the Award. A Principal Investigator has the overall responsibility to ensure that charges on the Grant are aligned with work performed.

2. Grant Manager, Grant Financial Analyst, Grant Account Certifier: Administrators responsible for assisting PIs to reconcile charges to their Grants to the authorized budgets, including submitting cost correction requests when appropriate.

  • For each Grant-Award combination, responsible for reviewing all transactions during monthly account certification process and identifying costs that need to be transferred
  • Responsible for ensuring that the charges being moved will meet the objectives of the receiving sponsored award, and are allowable, allocable and reasonable per the terms and conditions
  • Responsible to ensure that the transfer is not to move a deficit on another sponsored award
  • Responsible to fill out the cost transfer justification form, obtain approvals from responsible individuals and submit to OSP Post Award for review and approval

3. Department Chair: The person who has fiduciary responsibility and the appropriate knowledge and authority to authorize a cost transfer that is over 90 days in PI’s absence.

4. OSP Reviewer/Approver: The OSP person responsible for verifying and approving/rejecting cost transfers. This person is also responsible to ensure that justifications for over 90-day transfers are accurate and corrective actions are appropriate.

Purpose

Per the guidelines in Office of Management and Budget Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (2CFR 200, Uniform Guidance), UVA is required to provide reasonable assurance that federal awards are managed in compliance with federal statutes, regulations and the terms and conditions of the federal award. 2CFR 200.405 specifically stipulates that allocable costs need to be necessary and benefitting the award. Costs cannot be moved between sponsored awards to overcome fund deficiencies or to avoid restrictions imposed by sponsors. However, this prohibition does not preclude UVA from transferring costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal awards.

For example, the National Institute of Health Grants Policy Statement 7.5 stipulates cost transfers to NIH grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was 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 recipient, 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 project to another or from one competitive segment to the next solely to cover cost overruns are not allowable. Incorrect charges that are discovered on a sponsored project must be moved off the award to a fund source that can accept the expense (i.e., gift/endowment account) regardless of the age of the charge and when the error was detected. Expenditure credits and refunds will continue to post, irrespective of date, and will be returned to sponsor in a timely manner.

NIH also requires the recipients to maintain documentation of cost transfers and to make it available for audit or other reviews. The recipients are required to have systems in place to detect such errors within a reasonable time frame; untimely discovery of errors could be an indication of poor internal controls. Frequent errors in recording costs may indicate the need for accounting system improvements, enhanced internal controls, or both.

Definition 

A cost transfer is an post transactional adjustment entry to transfer an expense to or from a sponsored award, altering the original recorded transaction in the financial system.

A retroactive cost transfer is when a cost is being transferred after 90 days from the original accounting date or pay period end date.

Payroll allocation adjustments: Salary cost transfers, adjustments are made in the payroll system.

Accounting adjustments: non-salary cost transfers, involving supplier invoices

Accounting journals: Grant cost transfer and retro grant cost transfer for non-payroll journal sources. Historical payroll journal source for processing payroll corrections originally charged to the legacy system.

Procedures

In accordance with University policies FIN-023: Reconciling Unit Accounting Records, and FIN-017: Consistent Treatment of Sponsored Program Costs, departments are responsible for recording and reconciling all charges that post to their sponsored awards, identify incorrect charges and transfer costs to correct errors in a timely manner. This procedure provides guidelines for processing cost transfers complying with the 2CFR200, NIH and other sponsor requirements.

Cost transfers processed within 90 days of the original accounting date:

For non-payroll cost transfers, users can initiate an Accounting Adjustment when 100% of the transaction is moved or can initiate an Accounting Journal using journal source Grant Cost Transfer.

Accounting Adjustments:

The initiator will enter the worktags the expense is being adjusted to, if a grant worktag is entered then an adjustment reason code must be selected. A memo field is also available to provide additional comments regarding adjustment reason as needed.

Once submitted, the Accounting Adjustment will route to the Grant Manager and Post Award Grant Manager for review/approval

Accounting Journals:

Create a journal using the Grant Cost Transfer journal source. Enter journal lines with the worktags the expense is crediting and debiting, including amounts. If a grant worktag is receiving the charges, the memo field is used to explain the adjustment reason. 

Once submitted, the Accounting Journal routes to the Grant Manager and Post Award Grant Manager for review/approval.

Payroll Allocation Adjustments (PAA):

After the fact salary adjustments due to payroll costing allocation changes should be processed through the payroll allocation system. Department enters corrected allocations for the impacted pay period, netting to 0%. The payroll allocation adjustments are routed to OSP Financial Compliance for review and submission.

The initiator selects the employee, position, pay period(s), earning(s) and adjustment reason to create a payroll accounting adjustment (PAA).  The initiator then enters in the proposed allocation lines with intended worktags. 

Once submitted, the PAA routes to the Grants Compliance Review in OSP for review/approval.  

Cost transfers processed after 90 days of original accounting date or pay period end date (Retroactive cost transfers):

Transferring costs after 90 days from the original accounting date or pay period end date shows inadequate internal controls over charging costs to sponsored projects. Such transfers require additional justifications, corrective actions, and approval from the PI (Department Chair/Co-PI can be delegated by the PI for approval).

Retroactive cost transfers (both payroll and non-payroll) that involve moving costs to or between sponsored awards that are over 90 days from the original accounting date or pay period end date, require the initiator to use Retro Grant Cost Transfer journal source and retro cost transfer justification form.

A retro grant cost transfers can be initiated via Payroll Accounting Adjustment (PAA), Accounting Adjustment (AA) or Accounting Journal.

The retro cost transfer form must be completed by the initiator and approved through the system business process by the Grant Manager and Principal Investigator. Once approved, the transaction is routed to the Office of Sponsored Programs for review.  OSP has the option to send back the transactions with comments, deny with comments or approve. 

The retro cost transfer form is embedded in the PAA and AA business processes. Retro cost transfer forms must be attached to accounting journal entries (RetroRequestForm.Workday_1.pdf (virginia.edu)) .

Retro Cost Transfer Justification Form questions:

  1. Why was the expense(s) originally charged to the award from which it is now being transferred?
  2. Describe how the expense(s) being transferred directly benefits the receiving award? (Merely stating 'this is allowable and allocable' is not sufficient. Add justification of allocation methodology (e.g., FTE of lab personnel, square footage of lab etc.)
  3. Why is this cost transfer being requested 90 days after the original accounting date or pay period end date?
  4. What internal controls have been implemented as a corrective action to prevent such events from re-occurring?

Exceptions: In rare circumstances, when there is administrative delay in setting up the expenditure account in the financial system, costs are generally held in a non-sponsored award and moved to the newly set up Award and Grant worktag. The administrative exception reason code can be used which will only require OSP approval. The administrative exception reason code can be used if adjustments are submitted within 90 days of the grant being set up.

OSP will review and if in agreement, will approve the form/transaction. If not, OSP will return the form/transaction with comments explaining why the transfer request is being returned. Grant Manager will need to revise the request with complete and accurate information and re-submit the request.

Please note: Recharge or Service Center allocations are not considered cost transfers, and as such will not be subject to this procedure.

Documentation

Supporting documentation must be filed/retained in such a manner that allows the documents to be readily retrieved and presented when requested for audit review.

This documentation must be retained by the department in accordance with guidelines specified by the University Records Management Office to satisfy University, state and federal audit requirements, as well as state and federal records retention requirements.

Resources

 Policy or Other Underlying Requirement Policy

Previous Review Date: January 19, 2021