GAP NO. 200.150
Cost Transfers On Federal Sponsored Projects

I.	General
II.	Timeliness
III.	Documentation
IV.	Record Retention
V.	Additional Resources
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I. GENERAL

A cost transfer is a movement of costs associated with a transaction between two cost objects , of which at least one must be a federal sponsored project (30x – 34x projects as well as subcontracts related to federal projects). This includes salary and non-salary costs. One exception is allocating charges from an allocated or non-restricted cost object to a federal sponsored project. These are considered original or initially recorded charges if they are timely.

This procedure does not apply to non-federal sponsored projects. For corrections, involving non-federal sponsored projects refer to GAP 200.020, Journal Vouchers.

Expenditures should be initially charged to the correct G/L account and federal sponsored project. However, occasionally expenses are charged erroneously. When an erroneous entry affects a restricted federal sponsored project, the correction must be made on a timely basis and provide sufficient information to allow for a clear audit trail back to the initially recorded expense. The federal government regulations state “We will assess if the transfers are supported by documentation that fully explains how errors occurred and if responsible grantee officials certify the correctness of the new charges.”

Errors in recording costs indicate the need for improvement in the accounting process and/or internal controls. When errors occur, departments are required to evaluate these areas and make the necessary improvements.

Cost transfer documentation and timeliness of corrections involving federal sponsored projects is the responsibility of the department. SAP R/3 report ZF106 can be used to identify all cost transfers by department.

Cost Transfer Examples:

Allocating charges BETWEEN 3xx federal sponsored projects are cost transfers. For example, if lab supplies are incorrectly charged to 3431234 and are moved to the correct federal sponsored project 3031234.
Allocating charges FROM 3xx federal sponsored projects TO another cost object (such as an allocated cost object / department cost center) are cost transfers. For example, if meeting expenses are erroneously charged to a federal cost object 3031234 and later moved to a department cost center 4xxxxxx.

The following are NOT Cost Transfers UNLESS they are untimely : If any of these transactions are untimely, then they need to be coded as cost transfers and the untimely documentation requirements apply.

Allocating charges from an allocated cost object / department cost center to a 3xxxxxx cost object are considered original or initially recorded charges; they are not cost transfers. Examples include allocation of long distance phone bills, break-out/distribution of purchase or framework orders and service center bills that can not be allocated at the time of purchase.
Initially recorded charges such as expenses charged through a Purchase or Framework Order, Procurement Card, Service Center , copying charges, etc., are not cost transfers.

A cost transfer from one sponsored project to another may not be processed simply to cover cost overruns with funds in other sponsored projects, to avoid restrictions incorporated by the Sponsor, or for other reasons of convenience. Before an expense can be charged to a sponsored project it must first meet all the requirements of GAP 200.320, Direct Costing on Sponsored Projects.

The Office of Sponsored Programs (OSP) periodically tests cost transfers covered by this procedure for compliance. OSP will coordinate corrective action with the Management Center and Department.

II. TIMELINESS

A cost transfer should be processed promptly after the error is discovered. For more information regarding the verification of financial transactions, refer to GAP 200.012, Reconciliation of Financial Transactions. Untimely cost transfers may raise serious questions concerning the propriety of the cost transfer and may be subject to a cost disallowance. A cost transfer is considered “untimely” when it is not processed within three accounting periods after the initially recorded charge. Violations of the deadline do not necessarily mean that the related expenditure is unallowable from a regulatory perspective.

Please note, as of October 1, 2006, untimely cost transfers are no longer allowed on NON-NIH grants without prior HHS approval. The entire DHHS (including NIH) may soon establish policies to this stricter standard.

Chart to assist in determining when an Untimely Cost Transfer Justification is required.

GUIDELINE FOR UNTIMELY COST TRANSFER JUSTIFICATION

December Statement	=	Indicates initial expense charged in error.
January Statement	=	Fiscal calendar month allowed for correction.
February Statement	=	Fiscal calendar month allowed for correction.
March fiscal calendar	=	Correcting entry is allowed without additional justification since the error will be corrected within 3 accounting periods.
April fiscal calendar	=	Additional justification is required for untimely cost transfer.

For payroll cost transfers, the Untimely Cost Transfer Justification should be provided in the “untimely justification” field on the Cost Distribution iForm. The justification must provide a full explanation of the reason for the delay in processing the correction (cost transfer). The justification should also identify steps taken to prevent the error from occurring again, if appropriate. See documentation requirements below.

For non-payroll cost transfers , the Untimely Cost Transfer Justification should be provided in the “Extra Texts” field within SAP R/3. The justification must provide a full explanation of the reason for the delay in processing the correction (cost transfer).

If the cost transfer is being processed in response to a request sent to the department by the Office of Sponsored Programs, the entry must be posted to R/3 by the deadline stipulated by the Office of Sponsored Programs. Failure to meet the Office of Sponsored Programs deadline will cause the expense to be moved to the department's discretionary cost center.

III. DOCUMENTATION

A cost transfer is documented by processing a Journal Voucher or for payroll a Cost Distribution iForm, Supplemental Payment Form, or Non-Compensatory Awards form.

A. Payroll

All payroll cost transfers are completed by using a Cost Distribution iForm, Supplemental Payment Form, or Non-Compensatory Awards Form. Additional documentation can be entered in the untimely justification field. Additional documentation is not required unless the cost transfer is untimely.

For untimely payroll cost transfers, a clear audit trail must be provided. The justification must include how the error occurred or, if no error occurred, a reason for the delay in processing the cost transfer. Copies of source documentation can be copied in the comments field.

Some examples of acceptable justification are:

We received the continuation code several months ago but the paperwork was misfiled. We recently reconciled the code and found the error

Funding for a new grant was delayed. In the interim, Dr. Smith's 25% effort was charged to the department code (March through June) and now needs to be moved to the new grant code.

The fund code was entered incorrectly on the original iForm on 1/2/07. The code was not reconciled for 3 months because position was unfilled. It is now filled and will be reconciled monthly.

B. Journal Voucher (JV) Keyed in R/3 by Department

A cost transfer involving a non-salary cost is processed on a Journal Voucher using document type ZJ and must meet the requirements of this section and Section II Timeliness. Failure to provide the required documentation will result in the Office of Sponsored Programs moving the expense to the departments discretionary cost center .

Document Date:
Date entry is being keyed

Doc. type:
ZJ

Company code:
0010

Posting Date:
Enter the date when entry is being keyed or the last valid date during the accounting period the entry will be posted

Period:
Will default based on the posting date

Currency:
USD

Rate:
Leave blank

Document no. :
Leave blank

Translation dte:
Leave blank

Reference:
Use 8-digit format with no spacing. JVPPXXXX, JV is standard, PP is the two digit fiscal period number, and XXXX is the assigned JV number that your department has provided for your use. Example: JV070100. Do NOT use the JV Reference number of the initial entry being corrected.

Header text:
Briefly describe the need for the cost transfer (field allows 25 characters). Examples: Unallowable Charges, to correct cost element, to correct WBS element.

Trading part.BA:
Leave blank

In order to complete the Journal Voucher use the ZJVT entry template.
The fields are to be completed as indicated below:

PK:
40 = Debit, 50 = Credit

Account:
Six-digit G/L account, refer to G/L account definitions for assistance in determining the proper G/L account.

Cost Transfers may not be processed using revenue G/L accounts (3xxxxx). Transferring revenue out of a sponsored project does not allow for the proper accountability of the revenue provided by the sponsor. Transferring revenue to a sponsored project, other than the revenue received from the sponsor, is considered improper co-mingling of funds.

G/L account 695100 - Interest Expense - Internal, Internal is restricted for the Endowment/Investment Office use only. If interest has been incorrectly charged to the sponsored project, submit a request to the Office of Sponsored Programs explaining the circumstances and the Office of Sponsored Programs will submit a request to the Endowment/Investment Office to reverse the interest erroneously charged .

Cost Transfers may not be processed using Balance Sheet Accounts (1xxxxx or 2xxxxx).

The transfer of funds on a 30x-35x or 38x using an 8xxxxx G/L account is not allowed. Corrections are made by transferring specific expenses. Use G/L account 696700 or 696800 to cover an overdraft. (This is not a cost transfer)

Amount:
Amount must represent an individual transaction. Lump sum cost transfers are not allowed on sponsored projects because accountability of the expenses is lost

CoCd:
0010

WBS element:
7 digit restricted 3xx cost object

Line Item Text:
Lump sum cost transfers are not allowed on sponsored projects because accountability of the expenses is lost. Enter the following information relating to the initially recorded charge being transferred:

Fiscal Period and Fiscal Year (e.g., October 2006 would be 04/07).

Document Number of the initial transaction (e.g., 100023456).

Reason Code Select a Reason Code from the list below. Please note: the SAP R/3 “Extra Texts” field should provide a detailed explanation of each transaction including how the error occurred. Explanation such as “to correct error” or “to clean up account” are UNACCEPTABLE.
01 Data Entry Error. Extra Text examples include: Accounts Payable input error, Grant Manager data entry error on original JV.

02 GL Account Error- Verify that the GL account code is the only part of the account code that is changing.

03 Administrative Error- Extra Text examples include: An incorrect WBS element was written on an invoice by the lab technician. To correct previous cost transfer done by administrator / grant manager, or assistant did not know the new WBS element.
04 New Code - The Extra Texts explanation should explain how the error occurred. Delay in getting the notice of grant award. Pre-award spending was approved.
05 Transfer to Department or Discretionary Funds - Used for cost sharing or cost overrun transfers. This should be used only with the appropriate cost overrun or cost sharing GL Accounts: 696700, 696800, 808000, 808100, 808200. This code can also be used when transferring between sponsored and non-sponsored accounts.

Examples of order in which the Line Item Text should appear:

Correcting an entry posted in June 2006 financial statement – 12/06 100078945 code 02

Correcting an entry posted in December 2006 financial statement - 06/07 100012345 code 01

Additional Notes (Extra>Texts):

Enter additional pertinent information that will assist in obtaining a clear audit trail of the initially recorded cost being transferred. Include

how the error was discovered

why the correction is needed

how the error occurred

a statement as to where the supporting paper documentation is filed (refer to Section IV Record Retention).

For an untimely cost transfer, provide an Untimely Cost Transfer Justification (see Section II Timeliness). The justification must identify the reason for the delay in processing the correction, and certify that the cost transfer represents the correct allocation of costs.

Cost transfers debiting a Federal Project for G/L account 66xxxx (capital equipment) must meet the requirement of GAP 200.080, Equipment Screening and Shared Use on Federal Grants and Contracts. If the certification is required only by the Principal Investigator (or designee), include the following certification: “To the best of my knowledge, the (describe the item of equipment) or substantially similar item is not available for shared use.” The person posting the entry must have the authority to make the certification for the PI.

If the certification is required to be made by the Duke University Surplus Store, provide the following statement: “In compliance with GAP 200.080, paper documentation of the signed certification is maintained by the department.” (Refer to Section IV Record Retention).

IV. RECORD RETENTION

The Journal Voucher is keyed directly in R/3 by the department. If the Text and Additional Notes fields in R/3 cannot contain sufficient information to allow for a proper audit trail of the transaction, the paper documentation must be maintained in the department. The paper documentation must be retained for a period of seven (7) years or for 3 years after a project terminates, whichever is longer. It is imperative that the department implement internal procedures that allow for the paper documentation to be readily accessible in the event the cost transfer is required during an audit.

V. ADDITIONAL RESOURCES

For assistance regarding the data required in a Cost Transfer, contact:

Office of Sponsored Programs: 684-5442

For assistance in entering a Journal Voucher in R/3 contact:

Accounting Systems and Procedures: 684-2752

To request an Assigned Journal Voucher Number

University users: Submit a request via the web; the request option is available at the top of the Assigned JV list.
DUHS users: Call 286-6371

Additional General Accounting Procedures that may assist you with the Cost Transfer process:

GAP 200.010, Fiscal Calendar

GAP 200.012, Reconciliation of Financial Transactions

GAP 200.020, Journal Vouchers

GAP 200.080, Equipment Screening & Shared use on Federal Grants & Contracts

GAP 200.100, Capital Equipment Purchases on Sponsored Projects

GAP 200.320, Direct Costing on Sponsored Projects