Project Accounting - Cost Transfers

Responsible Office:    Project Accounting Date Issued:    09/30/04 Date Revised:      Contact:    project.accounting@iit.edu Policy: Cost Transfers (Policy 1811) Purpose: To communicate to principal investigators and other interested parties the IIT Policy for cost transfers. Definition A cost transfer is a transfer to a sponsored account,funded by a federal, state or local government or non-governmental organization, of a charge previously recorded elsewhere. Examples: transfer costs from a departmental account correction of a clerical error reallocation of effort to reflect actual routine allocation of shared services service center charges, etc. Need For A Cost Transfer Policy To comply with the allowable and allocable cost requirements of OMB Circular A-21, it is necessary to explain and justify transfers of charges into federal awards from other federal or non-federal accounts. Timeliness and completeness of explanation of the transfer are important factors in supporting allowable and allocable costa in accordance with the principles of the Circular. As an example of a federal agency explanation of this requirement the NIH Grants Policy Statement (03/01/2001, pp.85-86) states: "Cost transfers to NIH grants by grantees… should be accomplished within 90 days…. 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…. 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 [record retention requirements] and must make it available for audit or other review…. Frequent errors in recording costs may indicate the need for accounting system improvements and/or enhanced internal controls…. NIH also may require a grantee to take corrective action by imposing additional terms and conditions on an award(s)." To comply with the requirements of OMB Circular A-21 and/or other governmental or non-governmental organizations, IIT has established the following policy and procedures for the processing of cost transfers. Procedures Each Principal Investigator (PI) is responsible for reviewing charges to her/his account(s) in a timely manner that will ensure compliance with all regulations and requirements of the sponsoring organizations. This review should be sufficient to allow the PI to identify errors, omissions, or irregularities in each account. Cost Transfer Within 90 Calendar Days If the cost transfer is completed within 90 calendar days of the end of the month in which the original charge was recorded (examples: charge posted 9/15/XX, 90 days counted from 9/30/XX; charge posted 5/4/XX to May accounting period, 90 days counted from 5/31/XX): The PI will notify Project Accounting (PA) Main Building (MB) 306 and provide the reason and details of the transfer by e-mail that such a transfer is necessary as soon as the PI is aware of the necessity; The PI will complete a Request for Transfer of Expenses form prepared at department level accompanied by a Cost Transfer Explanation & Justification Form with questions 1 and 2 answered and signed as indicated on form. Explanation field on Request for Transfer of Expenses form will read "See related Cost Transfer Explanation & Justification Form attached"; Both documents will be sent to Program Accounting MB 306 for review and approval. Once approved a copy of both documents will be returned to the originator; a copy will be forwarded to Accounting for posting to General Ledger; and a copy will be retained in the Program Accounting program file. More Than 90 Calendar Days If more than 90 calendar days have passed since the end of the month following that in which the charge to be transferred to a federal account was originally recorded in the General Ledger, an explanation for the lateness of the cost transfer is required. Questions 3 & 4 on the Cost Transfer Explanation & Justification Form must be completed (in addition to the questions 1 and 2). Cost Transfers after the 90- day period need the approval of IIT's Chief Financial Officer and the Controller. Any supporting documentation justifying the lateness of the cost transfer (e.g. correspondence between departments and central offices) should be attached to the Cost Transfer Explanation & Justification Form. Notes Approval for cost transfers submitted later than 90 calendar days (as defined above) will only be granted in extenuating circumstances; examples are given below. They DO NOT include absences of PI or responsible administrator, nor shortage or lack of experience of staff. It is the responsibility of the grantee and the PI to ensure the availability of qualified staff to administer and exercise stewardship over federally funded projects in accordance with federal policies and regulations, including those relating to regular monitoring of expenditures and timely correction of errors and reallocation of expenses. Examples of Acceptable Extenuating Circumstances for Cost Transfers over 90 calendar days: Late issuance of an administrative request for reasons beyond the control of the requestor; supporting documentation required. Note: charges should be transferred within 45 days of issuance of a request. Late issuance of a notice of grant award or full execution of a subcontract subsequent to the start of the budget year or other period of performance; supporting documentation required. Failure of another department to take action, e.g. on a properly submitted payroll reallocation; supporting documentation required. Requestors can avoid lateness by anticipating the possible need for additional clarification or documentation from PA and the OSRP. At no time should federally funded accounts be used as holding accounts for expenditures, which will subsequently be transferred elsewhere, including to competing or non-competing continuations of the same project for which the notice of award or the new account number has not yet been received. Requestors are advised to submit explanations for lateness (i.e. over 90 calendar days) to Project Accounting for review before completing the required forms and assembling backup documentation. Project Accounting is available to assist departments in all aspects of cost transfer explanation and preparation of documentation, both for transfers within the 90-day time limit and for those beyond. Roles and Responsibilities It is the responsibility of each department to: Ensure compliance with IIT's Cost Transfer Policy. Prepare the appropriate Request for Transfer of Expenses and Cost Transfer Explanation & Justification Form and any required supporting materials. Retain hard copies of all related documentation in accordance with applicable record retention regulations. Ensure that all personnel engaged in the financial administration of federally funded awards are familiar with the IIT's Cost Transfer policy. Project Accounting has review and approval responsibility for cost transfers and is available to assist in interpretation and implementation of the policy, including prior review of explanations for transfers crossing the 90-day lateness threshold, and training in the application of the policy. Example of counting 90 calendar days: Transaction date: February 8, 2004   Begin counting: February 29, 2004   March 1-31 31 days   April 1-30 30 days, total 61 days May 1-29 29 days, total 90 days Thus, February transactions are under 90 days through May 29th. Cost Transer Explanation & Justification Form (Word document)