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POLICY TITLE: Carnegie Mellon University Cost Transfer Policy for Sponsored Programs
DATE OF ISSUANCE: This policy was originally issued to vice presidents, deans, department heads and business administrators on 6/3/94.
ACCOUNTABLE DEPARTMENT/UNIT: Office of Sponsored Research. Specific questions about policy content should be directed to Tom Eagan, manager, Office of Sponsored Research, x85835.
ABSTRACT: Contains policy for transferring incurred costs on sponsored programs from one expenditure cost center to another.
FORMS: Payroll Reallocation Form
This statement sets forth policy for transferring incurred costs on sponsored programs from one expenditure cost center to another.
This policy applies to all sponsored programs, federal, state and private, and all cost categories, including payroll costs.
The first step in charging costs is to be certain that the initial charge is appropriate. Therefore, the initial labor certifications and other charges should be reviewed and authorized by someone who has knowledge of the appropriate cost center to which the charge should be made.
A cost transfer is any adjustment or transfer of expenditures to/from an externally funded contract or grant cost center by means of a university (1) payroll reallocation form or (2) journal entry form. A payroll reallocation form is used to adjust an allocation of effort that was processed in a prior month. A journal entry is used to adjust any non-salary charge that had previously been posted to a cost center (e.g., travel, materials). Diligent review of financial records and timely communication between principal investigators and departmental administrators should prevent the necessity for transfers; however, under certain circumstances transfers may be appropriate. Nevertheless, it is less burdensome and questionable to charge costs to the correct cost center at the time they are incurred.
The administration of cost transfers is extremely important and sensitive when federal funding is involved. Federal agencies which sponsor agreements at Carnegie Mellon University are especially concerned that costs can be specifically identified with the funded activity they benefit. The Office of Management and Budget Circular A-21 explicitly states that costs ". . . may not be shifted to other sponsored agreements in order to meet deficiencies caused by cost overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience." The Circular goes on to say, "Any cost allocable to activities sponsored by industry, foreign governments or other sponsors may NOT be shifted to federally-sponsored agreements."
When contract records are reviewed, numerous or poorly documented cost transfers can result in federal regulators denying reimbursement of questionable charges or suspending our participation in federal programs. Therefore, it is essential to provide detailed written explanations justifying all cost transfers. Special care must be taken with cost overruns. Salaries, wages, services and goods that do not benefit another agreement may not be transferred to another account. Such cost overruns are considered "cost sharing" and must be handled in the manner described by the policy entitled Cost Sharing.[1]
The Office of Sponsored Research is responsible for reviewing and approving all cost transfers, payroll or non-payroll, before they can be processed into the accounting records. To be considered allowable, cost transfers must be timely, documented and explained in detail, adhere to the sponsor's standards, and have all appropriate authorizing signatures. Cost transfers should be prepared and submitted as soon as the need for the transfer is identified, but under most circumstances, not later than 90 days from the original transaction date or the original date of labor certification. (Note: labor certification is the official approval of effort allocations, currently performed on a monthly basis, which assigns salary and benefit costs to the appropriate university cost centers. This process takes place within the On-Line Effort System.)
Cost transfers involving sponsored research projects (including payroll reallocations) that are processed within 90 days of the original transaction require approval signatures from the principal investigator (PI), the departmental administrator (DA), and the Office of Sponsored Research.
Only in the case of exceptional circumstances will cost transfers (including payroll reallocations) be permitted more than 90 days after the original charge or effort certification. The reasons for a cost transfer over 90 days after the original charge must be documented in detail and will require the signature of the principal investigator(s), the departmental business administrator, the associate dean of the college, the Office of Sponsored Research, and the associate provost for research and academic administration.
In general, cost transfers will result from one of the two situations detailed below. In either of these cases, it is critical that the specific situation necessitating the transfer be fully documented and supported by all relevant backup material. Relevant backup material would include a copy of the original accounting report expenditure and a written justification of why the transfer is appropriate.
It is not sufficient to note that the cost transfer is necessary due to a clerical error. For example, an adequate explanation would be:
To correct entry error: account number 7104 should have been 8104.
or
To correct transposition error: cost center 1-54000 should have been 1-45000.
The situations detailed below are often encountered in the administration of sponsored research projects. The proper treatment of these situations will generally, but not always, preclude the need for cost transfers. The Office of Sponsored Research can provide guidance and assistance when these issues arise.