Cost Transfers
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Cost Transfers Overview
A cost transfer is an after-the-fact reallocation of a transaction cost from one PTA (Project-Task-Award) to another. You should charge a cost to the benefiting sponsored project PTA when it is first incurred. However, it may be necessary to transfer a cost to a sponsored project after you initially record that cost. Stanford allows cost transfers involving sponsored projects only under these circumstances.
- To correct an error (Note, the following are not considered error corrections: allocations from service centers or clearing accounts, changes caused by account setup errors, situations where new funding comes through an unexpected mechanism)
- To transfer between tasks of the same sponsored project
- To remove disallowed costs
- To clear an overdraft at the end of a project
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.
Timeliness
Timing is important when making cost transfers on sponsored PTAs.
- Cost transfers to correct errors should be completed within 3 months of discovering the error, and no later than 6 months after the expense is posted to an award PTA.
- Errors found during the required monthly expenditure statement review process should be corrected upon discovery.
- The 6 month deadline allows one month to correct any errors discovered by the PI during the certification process.
Example of error correction
Expenses for spring quarter (April, May, June) must be certified by the PI by the end of August. If a transaction made on April 1 were discovered during the certification process, it must be corrected by the end of September to be completed within the six month period.
Explanation
If errors are discovered after certification, they must always be transferred off regardless of age. Transfers onto sponsored PTAs after six months 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 PTA.
The time restriction for cost transfers does not apply to transactions necessitated by unforeseen circumstances.
Allocations from service centers or clearing accounts, changes caused by account setup errors, situations where new funding comes through an unexpected mechanism, etc. These are not considered error corrections.
Large transfers, and transfers within the first or last 90 days of a project, receive additional central review. Detailed documentation for these transfers will facilitate timely review.
Journals
Use journals to transfer costs.
- Use New Journals to transfer non-salary or student aid expenses.
- Use Labor Distribution Adjustments to transfer salary expenses.
- 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
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.
- The expense directly benefits the receiving PTA
- The expense is allowable on the receiving PTA
- The allocation methodology used if transferring expenses to multiple PTAs
- The reason the expense was charged incorrectly to the first PTA
- That any systematic reasons which might cause this problem to be repeated have been addressed
- The reason for any delay in the timely processing of the 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
- 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.
- 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)
- These salary charges are allowable on this award per the Project Y agreement.
- PI Smith has reviewed the charges and assessed the efforts of Grad Student X.
- 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 or ERA for help making sure your documentation is adequate.
Compare Justifications
Inadequate Justification: |
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To allocate chemicals from an expenditure allocation PTA to appropriate project PTA |
Better Justification: |
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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: |
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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. |
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 your documentation, cite specific reasons not general circumstances for the cost transfer.
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.
Expenses removed as a result of an overdraft should have been incurred during the last 6 months of the project.
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 overhead (VCS F&A) rate. These overhead rates are negotiated each fiscal year and can be found here. Two expenditure types exist to support two different methods of charging animal care overhead.
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All charges to ET 58710 - INTERDEPT VSC NONFED ANIMAL CARE (Non federal sponsors and all other non-sponsored PTAs) include the animal care overhead.
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For instance, if the animal care charge for Sept 03 is $100, the amount charged to ET 58710 is ($100 * (1+.775) or $177.50 where 77.50% is the VSC F&A rate for FY04.
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All charges to ET 58720 - INTERDEPT VSC FED ANIMAL CARE (federal sponsors) do not include the VSC F&A rate. The associated VSC F&A rate is automatically calculated by Oracle and is charged to exp type 56920 VSC FED ANIMAL CARE CHARGE.
Using the same example 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 Animal Care
Oracle System generated indirect cost:
56920 $77.50 Animal Care Overhead (sum of $100.00 * .775)
Transfers and Adjustments
If the charge is in the correct expenditure type but it is charged to an incorrect award/project/ task (Use the new or historical iJournal form.)
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. Examples include:
- The charge is not a VSC charge but it is miscoded to ET 58710 or 58720.
- The charge is completely unrelated to VSC animal care but it was coded to ET’s 58710 or 58720. For instance in legacy (SUFIN) repair and maintenance charges were sometimes were miscoded as VSC federal animal care.
Central offices can only make the following these adjustment. E-mail the journal details to Jesse Charlton (jessech@stanford.edu) or Christine Siu (csiu@stanford.edu).
- The incorrect expenditure type is used on a federal or non-federal sponsored project, i.e. 58710 on a federal award or 58720 on a non-federal award.
Example 1
Transferring VSC animal charges from exp types 58710 to 58720 (Non- federal to federal) Use iJournal ALLOCATION form for this type of entry
1036524 1 ATCJT 1059010 101 PAGQW 1001020 100 AKAAF
58710 VSC CHARGES 10/2003 58720 VSC CHARGES 10/2003 48120 VSC REV ADJUST 10/2003
Debit Credit 4,635.11
2,611.33 2,023.78
In this example VSC animal charges totaling $4,635.11 on a non-federal PTA (1036524-1- ATCJT) are transferred to a federal sponsored project (1059010-101-PAGQW). We reverse the charge to 1036524-1-ATCJT by crediting exp type 58710 for $4,635.11.
The charge to exp type 58710 includes the FY04 VSC F&A charge of 77.5%, whereas charges to exp 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 exp type 58720. To calculate this amount, divide the amount originally charged to 58710 by (1+ VSC F&A rate) or $4,635.11/1.775 = $2,611.33.
The difference between the amount originally charged to exp type 58710 and the amount charged to 58720 ($4,635.11- $2,611.33 = $2,023.78) is charged to 1001020-100-AKAAF (the VSC service center) using revenue object 48120.
Example 2
Transferring VSC animal charges from exp type 58720 to exp type 58710 (federal to non-federal) Use iJournal New or Historical journal form for this type of entry
1001020 100 AKAAF 48120 1059010 101 PAGQW 58720 1036524 1 ATCJT 58710
VSC REV ADJUST 10/2003 VSC CHARGES 10/2003 VSC CHARGES 10/2003
Debit Credit 2,023.78 2,611.33
4,635.11
Here we have charged a federal award for animal care charges totaling $2611.33 which should have been charged to a non-federal PTA. Oracle calculated a separate VSC F&A charge of $2023.78 ($2611.33 * .775 = $2023.78) using the FY04 VSC rate and posted the amount to exp type 56920 on the federal sponsored award.
To transfer the animal charge we reverse the charge of $2,611.33 to exp type 58720 on the federal sponsored project. The amount of animal care expense we need to charge to exp type 58710 includes the VSC F&A charge. To calculate this total amount, take the amount charged to 58720 ($2,611.33) and multiply by (1+.775) or ($2,611.33 * 1.775 = $4,635.11. This is the amount charged to exp type 58710 on the non federal PTA. The difference between the amount originally charged to exp type 58720 and the amount charged to 58710 ($4,635.11- $2,611.33 = $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 exp 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.
Note that Example (1) should be entered on an iJournal allocation form. Example (2) should be entered on an iJournal new or historical journal form. You may not be able to validate the journal using other iJournal forms.
The journal may not validate if you enter multiple transfers or adjustments into a single journal.
Address questions or comments to Jesse Charlton (jessech@stanford.edu) or Christine Siu (csiu@stanford.edu).
