Cost Transfers: How to Make Them Work for You and Not Against You

Report
Cost Transfers: How to Make
Them Work for You and Not
Against You
90 days
60 days
30 days
October 2012
Office of Sponsored Projects
Rebecca Clogston
Aarron Clough
Jill Mortali
Kathy Page
Jody Patten
ON TARGET
Agenda
Background – Regulatory framework, recent developments
Dartmouth Policy
A133 Audit
Metrics – How are we doing?
Examples – What hits the target? What doesn’t?
Questions?
ON TARGET
Basic “Textbook” Definition
A Cost Transfer is the transfer of an expenditure initially posted
to one project and then transferred to another project.
Can be:
• Salary expenditures: Labor, including salaries, wages, and
benefits
• Non-salary expenditures: Non-Labor, all costs other than
salaries wages, and benefits (e.g., chemicals, lab supplies,
equipment, travel, internal service provider charges)
The government expects that costs are charged
appropriately at the time incurred and that significant
adjustments should not be required if adequate
financial management practices and policies exist.
ON TARGET
Basic Principle
Institutions have a responsibility to use funds in
accordance with applicable law and sponsor terms and
conditions.
• The federal government scrutinizes cost transfers closely
for indications of cost misallocation, and often disallows
costs transferred into federal accounts on that basis, or
because of non-compliance with timing, documentation,
and procedural requirements.
• Frequent cost transfers and cost transfers made long
after the original cost is incurred (even if valid) raise
questions about the reliability of the institution’s
accounting system and internal controls.
ON TARGET
Regulatory & Internal Control Framework
Award Budget,
Terms, Agency
Policy Statement
Dartmouth
Policies
OMB
Circular A21
OMB Circular A-133
ON TARGET
Charges to Federal Grants Must Benefit the Project AND be
Allowable
Items not restricted by OMB Circular A-21 or
the specific grant
Reasonable
Goods or services acquired and amount
involved reflect an action a prudent person
would have taken (Prudent Person Rule).
Allocable
Chargeable based on the relative benefits
received by the project.
Treated Consistently
Like costs in similar instances need to be
treated consistently throughout the
Institution.
ON TARGET
NIH Grants Policy Statement
•
•
•
•
•
•
Should be accomplished within 90 days…
Supported by documentation that fully
explains how the error occurred
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” 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
Dartmouth
documentation of cost transfers
Frequent errors in recording costs may
Policies
indicate the need for accounting system
improvements and/or enhanced internal
controls.”
NIH Grants
Policy Statement
OMB
Circular
A-21
OMB Circular A-133
ON TARGET
OMB Circular A-21
“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” (OMB Circular A21 Revised, Section C4).
“If a cost benefits two or more projects or activities in
proportions that can be determined without undue effort or cost,
the cost should be allocated to the projects based on the
proportional benefit. If a cost benefits two or more projects or
activities in proportions that cannot be determined because of the
interrelationship of the work involved, … the costs may be
allocated or transferred to benefited projects on any
reasonable basis” (OMB A-21 Revised, Section C.4.d(3)).
ON TARGET
Current Regulatory and Audit Climate
1. Increased focus on accountability
2. Concerns over the effectiveness of A133
audits
3. ARRA audits
OIG DHHS/NIH Audit Plan for 2013
• NIH—Extramural Construction Grants at NIH
Grantees
• NIH—Equipment Claims by Grantees
• NIH—Colleges’ and Universities’ Compliance With
Cost Principles
• NIH—Extra Service Compensation Payments Made
by Educational Institutions
• NIH—Inappropriate Salary Draws From Multiple
Universities
ON TARGET
Audits
December 2008 – A leading research university cooperated with a
government investigation focusing on charges to awards from over
30 federal agencies from 1999 to 2006.
• The government allegations focused on the university:
• Utilizing cost transfers to “spend down” available grant funds
• Completion of inaccurate and overstated effort reports,
resulting in salary overcharges
The university acknowledged the charging errors, but
disagreed on the nature and extent of errors.
• The university paid $7.6 million to the government
• The university improved its research compliance
administration and infrastructure, including several
upgrades to its cost accounting and effort reporting
systems and issuance of revised policies and
procedures
ON TARGET
DARTMOUTH REALLOCATION POLICY
ON TARGET
Dartmouth Sponsored Reallocation of Charges & Cost
Transfer Policy
Policy Statement: It is the policy of
Dartmouth College that costs should be
charged to the appropriate sponsored
award when first incurred. However,
there are circumstances where it may be
necessary to transfer expenditures to a
sponsored award subsequent to the
initial recording of the charge. It is the
policy of Dartmouth College that charges
to sponsored funds be reviewed on a
regular and timely basis to assure
appropriateness of charges and to
prepare corrections on a timely basis.
ON TARGET
Purpose of Policy
•
•
•
•
•
•
Comply with Circular A-21
Best practices for all sponsored
awards
Explain and justify the transfer of
charges
Timeliness and completeness of
transfer explanations
Transfer of charges closely examined
by auditors.
Frequent, tardy or unexplained (or
inadequately explained) transfers can
raise serious questions about the
propriety of the transfers and our
accounting system and internal
controls.
ON TARGET
Who is Involved?
Affected
by Policy
Dartmouth College
administered
sponsored awards
federal and nonfederal.
Aware of
Policy
Office of Sponsored
Projects staff,
Departments involved
in managing sponsored
funds, Principal
Investigators and other
faculty involved
sponsored research
and divisional and
central financial
administrators.
Questions?
Please direct general
questions about this
policy to your unit’s
administration. If you
have questions about
policy issues please
contact the Director
of the Office of
Sponsored Projects. If
you have questions
about process issues
please contact your
OSP Grant Manager.
ON TARGET
Definitions
Simple Reclassification
Option 1
Simple reclassifications are
timely reconciliation of
transactions (payroll and
non-payroll) made within
the month following the
accounting period of the
original GL Transfer Date.
Cost Transfer
Option 2
Cost transfers are
transactions (payroll and
non-payroll) that move a
previously recorded expense
which involves a Sponsored
Projects PTA Account.
Note: All Simple Reclassifications (SPUD Journals) and Cost Transfers (Cost
Transfer Form and Wage Transfer Form) must be approved by OSP before
being processed.
ON TARGET
SIMPLE RECLASSIFICATION
Simple Reclassification:
Any Dollar Amount if:
Transaction for any dollar
amount that is being moved to
or from a PTA Account
Re-class among multi
project/task combo
within same Award and
is within that annual
budget period
OR
Correction made within
the month following the
accounting period of the
original GL Transfer Date
OR
Re-class within a PTA
Account to correct an
expenditure type
$500 or less
OR
OR
Transaction is UNDER
$500 ( * )
Transaction is within the
same project/award
Transaction is moving
from a PTA Account to a
G/L Account
Correction made within 90
days following the GL
Transferred Date of the
charge / pay period (**)
PROCESS:
Non-Compensation: SPUD
Journal (CJE) completed by
Department Grant Manager or
Finance Center (FC), emails
Excel file to OSP Grant
Manager for approval and
upload.
Compensation: Wage
Transfer form completed and
signed by Department Grant
Manager or FC, emails signed
scanned copy to OSP Grant
Manager for approval, OSP
Grant Manager emails to
appropriate Finance Center
for processing.
ON TARGET
Simple Reclassification
•
Not considered Cost Transfers
•
Do not require a PI signature
•
Corrections such as expenditure type, transposition errors,
incorrect account numbers and other input errors
•
Recharge center input errors must be processed by the
originating source (i.e. computer store), refer to the matrix
http://www.dartmouth.edu/~control/docs/financialrept/
correct_trans_source.pdf
•
Transfers within the same project / award may have
budget period restrictions.
•
all transactions under $500 within 90 days of the original
charge
•
(*) Salary of $500 or less (do not include fringe)
ON TARGET
COST TRANSFER
Reallocation of Charges Involving Sponsored Funds
Not yet over 90 days and
over $500
PROCESS:
Non-Comp: Cost Transfer Form completed by Department Grant Manager or FC, PI
signs (Department Chair or equivalent can sign if PI is unavailable), Department Grant
Manager emails OSP Grant Manager a PDF and Excel version of the Cost Transfer
with adequate documentation (examples include copy of transaction report from IRA,
copy of invoice, etc.) attached to be approved and processed by OSP.
Cost Transfer
Comp: Wage Transfer Form completed by Department Grant Manager or FC, PI signs
(Department Chair or equivalent can sign if PI is unavailable), the department grant
manager emails OSP Grant Manager a PDF version of the form for approval, OSP
Grant Manager then emails to appropriate Finance Center for processing.
Correction not made in
first accounting period,
is over 90 days (**)
PROCESS:
Non-Comp: Cost Transfer Form completed by Department Grant Manager or FC, PI
signs (Department Chair or equivalent can sign if PI is unavailable), Department Grant
Manager emails OSP Grant Manager a PDF and Excel version of the Cost Transfer with
adequate documentation (examples include copy of transaction report from IRA, copy of
invoice, etc.) attached to be closely reviewed but may not be approved by OSP
depending on the circumstances.
Comp: Wage Transfer Form completed by Department Grant Manger or FC, PI signs
(Department Chair or equivalent can sign if PI is unavailable), Department Grant
Manager emails OSP Grant Manager a PDF version of the form to be reviewed but may
not be approved by OSP depending on the circumstances.
Cost Transfers are governed by A-21 guidelines which require appropriate signatures and adequate justifications for
processing. Any transaction moving charges onto a PTAEO Account 90 days after the original charge will only be approved if
there are unusual circumstances. An example would be a sponsored award having a retro start date that goes beyond the 90
day threshold. Before completing transfers that are over 90 days, please talk to your OSP Grant Manager. “Internal”
transactions must be processed by originating cost center.
(**) see Reallocation / Cost Transfer Calculator (Excel sheet)
Cost Transfer Process: Not yet over 90 days and over $500
Non-Comp:
• Cost Transfer Form completed by Department Grant Manager or FC,
• PI signs (Department Chair or equivalent can sign if PI is
unavailable),
• Emails OSP Grant Manager a PDF and Excel version
• Must include adequate documentation (examples include copy of
transaction report from IRA, copy of invoice, etc.)
Comp:
• Wage Transfer Form completed by Department Grant Manager or
FC,
• PI signs (Department Chair or equivalent can sign if PI is
unavailable),
• Emails OSP Grant Manager a PDF version of the form for approval,
• OSP Grant Manager then emails to appropriate Finance Center for
processing.
Cost Transfer Process:
Correction not made in first accounting period, is over 90 days
Non-Comp:
• Cost Transfer Form completed by Department Grant
Manager/FC,
• PI signs (Department Chair or equivalent if PI unavailable),
• Email to OSP Grant Manager (PDF/Excel)
• Must have adequate documentation (examples include copy of
transaction report from IRA, copy of invoice, etc.)
Comp:
• Wage Transfer Form completed by Department Grant Manager/
FC
• PI signs (Department Chair or equivalent if PI is unavailable)
• Email OSP Grant Manager (PDF)
APPROVED ONLY UNDER EXTENUATING CIRCUMSTANCES
ON TARGET
WHAT ARE EXTENUATING CIRCUMSTANCES?
• Late issuance of an account for reasons beyond the control of the
requestor
• Failure of another department to take action, e.g. on a properly
submitted payroll distribution change request or Journals to align
the allocation of prepaid tuition remission with effort.
Please Note: Acceptable extenuating circumstances do not include
absences of the PI or administrator, lack of staff or inexperienced
staff, or lateness of reconciliations.
ON TARGET
Sponsored Reallocation of Charges & Cost
Transfer Policy
Related Documents & Tools:
The NIH Grants Policy Statement (REV. 12/03, pp.83-84)
http://grants.nih.gov/grants/policy/nihgps_2011/
OMB Circular A-21
http://www.whitehouse.gov/omb/circulars_a021_2004
Cost Transfer Form
http://www.dartmouth.edu/~osp/resources/forms.html
OSP Policy Website:
http://www.dartmouth.edu/~osp/resources/policies/
Quiz Show
Question and Answer
Samples and Techniques
ON TARGET
If a transaction is was incurred 64 days ago
and totals $499, you do not need PI signature?
ON TARGET
Which of the following applies to a simple
reclassification
Expense of any amount under 60 days
Any transfer that is needed to closeout the grant
Expense under $500 or incurred in the prior month
Requires approval of PI
All of the above
ON TARGET
COST TRANSFERS AND THE A-133 AUDIT
ON TARGET
As part of the annual A-133 audit, the External Auditors (currently
KPMG) select a sample of Wage Cost Transfers and Non-Wage Cost
Transfers
What do the auditors review?
•
Compliance with the allowability and allocability requirements of
OMB Circular A-21
•
Are transfers being made timely – within 90 days
•
Is there a full explanation provided about why the transfers were
made?
•
Is the explanation reasonable about how the error occurred?
•
Is there adequate documentation attached?
•
Have all required approvals been obtained?
ON TARGET
Cost Transfers and the A-133 Audit Potential Findings
 Insufficient or incomplete documentation for cost
transfers
 Inadequate justification for cost transfers
 Missing/incomplete authorization for the cost transfer
 Significant number of late cost transfers (greater than
90 days after original charge)
 Cost transfers after the grant had closed
 Department grant managers can make changes without
checks and balance
 Cost transfers to clear overruns
Sample Justifications
•
Reasons why they may not be
deemed allowable under audit.
•
Re-written acceptable
justifications.
ON TARGET
Questionable justification:
“Transfer of supplies that were charged to the department in error.”
This does justification does not adequately explain:
• why the wrong PTAEO was charged
• why/how the charge is appropriate to the PTAEO
being debited
• how the error occurred
Acceptable justification:
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
account, which is our departmental account. Going
forward, the administrative assistant will review all
PCard purchases and assign the correct PTAEO
number, if applicable, to be charged before the
deadline.
ON TARGET
Questionable justification:
“Transfer overage to related project.”
This justification does not:
• clearly identify which costs are to be shared
• the proportions in which the projects will share
the costs
• a clear indication of how the amount to be shared
was determined
Acceptable justification: 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
ON TARGET
Questionable justification:
“To correct supplies charged due to clerical error.”
This justification does not:
• why and how the clerical error occurred
• why the error was not caught earlier
Acceptable justification: The research assistant in
the lab who ordered the supplies used a PTAEO
number of a project which was terminated. He has
been instructed to use the new PTAEO 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.
ON TARGET
Questionable justification
“Move charge from department.”
This justification does not:
• Give the reason for the transfer
• 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 justification: The start date of the grant
is December 1. However, the PTAEO 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 PATEO number
was established.
ON TARGET
Examples of typical circumstances in which cost
transfers may not be allowed:
• Reallocation of expenses because the grant
has unexpended funds.
• Transfer of after end date expenses to
another project.
• Transfers which do not explain why the error
occurred and how the expense is appropriate
to the project which it is being moved to.
• Transfer of an expense that was previously
transferred.
• Late because the department was
understaffed.
The End

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