Vanderbilt University Cost Transfer Guidelines

Effective March 1, 2005 and approved by

• Jerry Fife, Assistant Vice Chancellor for Research Finance, for University Central Colleges and Schools; and
• Rick Wagers, Senior Vice President and CFO, for Medical Center.

I. INTRODUCTION

Definition

A cost transfer is a transfer of an expenditure from one project to another project. When the project receiving the charge is a sponsored grant or contract, special rules apply as discussed later in this guide.

In some instances, a cost transfer is unavoidable. The purpose of this cost transfer guide is to provide information to principal investigators, department administrators, project managers, Chairs, and Deans concerning government cost transfer policies. Cost transfers should not be prepared or approved by departmental personnel if the requirements in this guide are not met.

Applicability of this Guide

All federal grants, contracts, cooperative agreements, traineeships, etc. are subject to these cost transfer guidelines. Subcontracts from other entities (universities, local government units, states, etc.) which are funded by federal agencies are subject to the same regulations as federal awards made directly to Vanderbilt.

Non-federal grants may have similar restrictions regarding cost appropriateness and therefore are subject to these cost transfer guidelines. Drug studies and fixed price contracts (federal or non-federal) may have greater flexibility. In some cases, the interrelationship of federal and non-federal centers will dictate the applicability of these cost transfer guidelines.

These guidelines may not cover all instances and you are urged to contact the Office of Contract and Grant Accounting (for University Central Schools and Colleges) or Department of Finance (for Medical Center) if you are not sure of the appropriateness of a requested cost transfer.

Reason for Concern

Transfers that are frequent, tardy or inadequately explained, particularly on grants with overruns or unexpended balances, raise questions about the propriety of the transfers and the reliability of the university's accounting system and internal controls.

Government Requirements

Various government agencies have published cost transfer policies. They generally include specific requirements for written documentation, specific time limitations for making a transfer, and prohibition on transfers used solely to cover a project deficit. Exhibit A includes cost transfer policies from the Office of Management and Budget and the Grants Policy Statement.

Cost Transfers Between Similar or Related Projects

The appropriate allocation of costs among similar or interrelated projects should be made at the time a transaction is initiated in accordance with the University's Direct Charge Guidelines (http://www.vanderbilt.edu/ocga/vupolicies/directcost/directcost.htm). The cost transfer guidelines summarized in the first section of this document apply to cost transfers whether projects are related or not related. If a cost transfer is not allowable within the guidelines as stated, relatedness cannot be used as a reason to make the transfer allowable absent written authorization from the appropriate federal funding agency(s).

Consequences if a Cost Transfer does not Meet Government Requirements

As required by federal regulations, the University retains external auditors to conduct extensive reviews of federal grant and contract expenditures, which includes detailed reviews of cost transfers. In the event that a cost transfer does not meet the government requirements, the dollar amount of the transfer will be disallowed and the area responsible for the grant will have to reimburse the grant for the amount of the disallowed cost transfer. If a significant number of cost transfers do not meet government requirements, the auditors may extrapolate the disallowances and recommend disallowing a percentage of ALL cost transfers for a particular department, college/school, or University-wide.

II. COST TRANSFER REQUIREMENTS

When the need for a cost transfer arises, a written request is made to the Office of Contract and Grant Accounting (for University Central Schools and Colleges) or to the Department of Finance (for Medical Center). This request must be signed by the Principal Investigator or designee and routed through the required signature authorities within the department and school or college. The request must contain certain basic information relating to the costs to be transferred, as described below.

All transfers should be made within 90 days of the original charge. It is critical that all transaction reports for federally funded projects be reconciled in a timely manner each month in order to facilitate the timely submission of cost transfers. In certain circumstances, a transfer may be appropriate even though the 90 day deadline is not met. These transfers will be reviewed under scrutiny and may need further justification and additional approvals.

BASIC COST TRANSFER REQUIREMENTS

All cost transfers must be accompanied by written documentation including an adequate explanation of the specific nature of the error and/or any other reason for the cost transfer, the way in which the error occurred, the reason why the transfer was not processed in a timely manner, if 90 days or more have passed since the original charge and how will the situation be prevented going forward. The explanation must be sufficient for an independent reviewer (i.e., a federal auditor) to understand the transfer and conclude that it is appropriate. According to federal regulations, "An explanation which merely states that the transfer was made 'to correct error' or 'to transfer to correct project' is not sufficient." Thus, any cost transfer documentation containing such an explanation will be returned to the department.

All cost transfers must also contain the following certification statement, signed by departmental personnel:

"I certify that the cost transferred is an appropriate expenditure for the sponsored grant/contract charged and that the expenditure complies with the terms and restrictions governing that sponsored grant or contract."

The certification statement must be countersigned by either the Dean (or someone authorized to sign for the Dean) before it can be processed in the accounting system.

ADDITIONAL DOCUMENTATION REQUIREMENTS

In addition, each cost transfer request must contain all documentation necessary for processing of a routine journal entry within the accounting system. Such documentation includes a copy of either the monthly ledger sheet (MD091, Report of Transactions) or Edog/Business Objects printed reports containing the following data: center number, account number, transaction description (both fields), JEID, transaction date, etc. Within the ledger documentation, the expense to be transferred should be clearly identified.

Salary cost transfers must contain the following information:

1. The name and employee ID# of the individual whose salary distribution is to be corrected;
2. The period of time covered by the correction;
3. A copy of the payroll action form or time sheet showing the original salary distribution for the time period covered by the request and the corrected salary distribution; and
4. The effort certification signed by the appropriate person.

   Additional guidance regarding effort reporting and certification issues can be found at: http://www.vanderbilt.edu/ocga/vu_policies/vupolicies.htm or https://finweb.mc.vanderbilt.edu/AcadRes/VUOnly/GiftsGrantsCont/Policy.asp.

INADEQUATE DOCUMENTATION

Cost transfer requests will be returned to the Department if:

• The documentation required for the transfer, as described above, is missing;
• The cost to be transferred was incurred outside the effective dates of the sponsored grant/contract receiving the charge;
• The sole purpose of the transfer is to move deficit from one sponsored grant/contract to another;
• The sole purpose of the transfer is to "use up" unspent funds from a sponsored grant or contract; or
• If the certification statement from the Department and/or Dean is missing.

III. SUPPLEMENTARY INFORMATION

The 90 day cost transfer time limit applies when transferring expenses TO a sponsored grant or contract. No time limit exists for REMOVING expenditures from a federally sponsored grant or contract. If inappropriate expenditures are discovered on federal projects, they must be removed without regard to time limits.

In certain circumstances, a transfer may be appropriate even though the 90 day deadline is not met. These transfers will be reviewed under scrutiny and may need justification

IV. SUMMARY OF COST TRANSFER GUIDELINES

1. All cost transfers to sponsored projects should be made within 90 days of the original charge. Any cost transfer removing expenses from a sponsored grant or contract must be made without regard to this time limit. In certain unusual circumstances, a cost transfer may be appropriate after the 90 day deadline; such transfers will be subject to increased scrutiny and additional approvals.
2. The cost to be transferred must be shown to benefit and be allowable under the terms of the sponsored grant/contract receiving the charge.
3. Written justification and documentation must accompany the cost transfer request. See Section II for specific requirements.
4. Cost transfers will be returned to the Department if:
   1. Inadequate documentation is provided with the transfer request;
   2. The request for cost transfer does not meet the time deadline (see A above);
   3. The sole purpose of the transfer is to move a deficit from one sponsored grant/contract to another;
   4. The purpose of the transfer is to "use up" unspent funds from a sponsored grant or contract; or if
   5. Certification of Dean is missing (see Section II).
      

V. SAMPLE DOCUMENTATION

Below are several examples of cost transfer documentation which do not meet the requirements described above, a description of the improvements needed in the documentation, and a suggestion as to how the description could be improved to meet the requirements.

1. Questionable explanation: Transfer of supplies that were charged to the department in error.

Issue: This explanation does not adequately explain why the wrong center was charged and why/how the charge is appropriate to the center being debited, nor does it describe how the error occurred. The explanation should be expanded to better describe the reason why the center being charged is appropriate and how the amount being transferred was determined.

Acceptable explanation: The supplies being transferred were purchased via PCard. The administrative assistant did not review the PCard transactions by the deadline, which caused the transactions to post to the default Pcard center, which is our departmental center. Going forward, the administrative assistant will review all PCard purchases and assign the correct center number, if applicable, to be charged before the deadline.

2. Questionable explanation: Transfer overage to related project.

Issue: The transfer overages from one project to another is not permitted. If expenses are being moved between two interrelated projects, the cost transfer description should clearly identify which costs are to be shared, the proportions in which the projects will share the costs, and a clear indication of how the amount to be shared was determined.

Acceptable explanation: The supplies to be transferred are used on related projects. Supplies should be shared equally on both projects, thus 50% of the cost of the highlighted items is being transferred.

3. Questionable explanation: To correct center incorrectly charged due to clerical error.

Issue: Insufficient explanation of why and how the clerical error occurred, and why the error was not caught earlier. In general, this explanation is only adequate if a transposition error occurred, and such circumstances should be included in the description.

Acceptable explanation: The research assistant in the lab who ordered the supplies used a center number of a project which was terminated. He has been instructed to use the new center number. In the future, all supply orders will be reviewed and approved by myself or other administrator prior to submission of the order so that such errors can be prevented.

4. Questionable explanation: To charge a portion of a lab technician's salary to the project.

Issue: The reason for the transfer is missing, and there is no indication of why the PAF or timesheet was incorrectly submitted at the time the charge was generated. The description should be expanded to include a description of the individuals' role on the project, the portion of his/her salary being moved, and how the portion of salary being moved was determined.

Acceptable explanation: Transfer 50% of the lab technician's salary to Dr. Smith's project. This individual performed experiments with mice and split his time equally between Dr. Smith's NIH project and NSF project. When the timesheet was completed, neither the lab technician or the approver of the timesheet was aware that the experiments being conducted related to the additional project. We have talked with the lab technician and Dr. Smith to ensure that more information about the experiments is shared in the future which will better ensure that such errors do not occur in the future.

5. Questionable explanation: PAF was not processed in time.

Issue: The explanation does not adequately address why the PAF was not processed in time. The description should be expanded to better explain the circumstances of the delay in processing the PAF and the specific plan to avoid such occurrences in the future.

Acceptable explanation: The administrator was informed of a faculty member's effort distribution change after HR deadline for PAFs for January payroll. The faculty member has been requested to communicate changes in effort in a more timely manner in the future in order to avoid such circumstances.

6. Questionable explanation: Move charge from department.

Issue: The reason for the transfer is not stated. The description should be expanded to explain how the charge benefits the grant being charged and why the charge was not originally posted to the grant.

Acceptable explanation: The start date of the grant is December 1. However, the center number was not established in the accounting system until January 15. The PI needed to purchase some materials to begin work on the project in December, thus they were charged to the department until the grant center was established.

7. Questionable explanation: To charge 10.58% of Dr. Wilson's salary to the research grant and close grant center.

Issue: Actual effort is to be estimated as closely as is reasonably possible. The use of very precise estimations is only allowable to the extent that the individual's effort can be confirmed with such precision. The effort distribution should reflect the actual amount of effort spent on the grant, even if it causes the grant to be overspent (for which the overspent amount would then be cost shared) or causes the grant to be underspent (in which case the unspent funds would be handled as required by the award).

Acceptable explanation: Dr. Wilson worked 15% of his time in January on this grant project, which ended January 31. The center is currently in deficit due to a salary increase in October. Please cost share 50% of January's salary and fringe benefits and use the department budget to fund the cost share portion.

VI. INFORMATION AND ASSISTANCE

Faculty and staff in Medical Center divisions can call Melissa Smith (x3-5350), Steve Todd (x2-3293) or Craig Carmichel (x2-2179).

Faculty and staff in University Central colleges and schools can call Michelle Vazin (x3-1558) or Jerry Fife (x3-6658).

EXHIBIT A
OMB Circular A-21, Section C.4.b

Any costs allocable to a particular sponsored agreement under the standards provided in this Circular may not be shifted to other sponsored agreements in order to meet deficiencies caused by overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience.

NIH Grants Policy Statement (12/03) Part II: Terms and Conditions . . . Subpart A: General . . . Cost Transfers . . .

Cost transfers to NIH grants by grantees, consortium participants, or contractors under 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 grantee, 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.
Grantees must maintain documentation of cost transfers, pursuant to 45 CFR 74.53 or 92.42, and must make it available for audit or other review (see "Administrative Requirements-Monitoring-Record Retention and Access"). The grantee should 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. If such errors occur, grantees are encouraged to evaluate the need for improvements and to make whatever improvements are deemed necessary to prevent reoccurrence. NIH also may require a grantee to take corrective action by imposing additional terms and conditions on an award(s).