SUBJECT: Transfer of Expenditures Between Budgets

SUPERSEDES: GIM 15 (Rev/July 2008)

• Transfer of Goods and Services Transactions
• Documenting Salary Transfers
• Countering Assumption of Transfer for Convenience
• Consistency Between Payroll Documents and Activity Reports
• Late Awards
• Number of Payroll Changes
• Attachments

Federal, state, and private agency policies and audit guidelines have become quite stringent as they relate to cost transfers between grant and contract programs. A key Federal regulation pertaining to the expenditure of sponsored project funds contains the following statement:

"any costs allocable to a particular sponsored agreement . . . 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."

(Office of Management and Budget Circular A-21/section c.4b.)

The Department of Health and Human Services (DHHS) has issued a definite policy statement containing specific guidelines on cost transfers. Since DHHS has the Federal audit responsibility at most universities, including the University of Washington (University), these guidelines are extended in audit practice to the University's grants and contracts from other Federal agencies as well. State and public auditors use similar audit guidelines when reviewing nonfederal grants and contracts. Since the University has a stewardship responsibility for all funds made available for research and training, these cost transfer guidelines are applied consistently to all sponsored agreements.

Departments should have expenditure review systems in place to detect posting errors within a reasonable time frame. The untimely discovery of errors could ultimately be an indication of poor internal controls.

Transfers of Goods and Services Transactions

When transferring non-salary expenditures to or from a sponsored project budget number, the conditions which must be adhered to are as follows:

1. Transfers are to be processed within 90 days of discovering the error. In addition, submit transfers promptly after the end of the financial reporting period to facilitate timely submission of financial reports by GCA.
2. Revenue transfers and budget number changes for outstanding requisitions (encumbrances) are governed by separate policies and procedures.
3. The following information must be included on all cost transfers:
   • The reason(s) for transferring the expenditure must be sufficiently stated to establish that the transfer is within the approved guidelines of the budget to be charged and is in direct support of the project objectives. It is important to stress the benefit to the program receiving the cost in all instances.
   • The reason(s) the expenditure was initially charged to the incorrect budget.
   • Transfers involving equipment (Account code 06), equipment fabrication expenses and transactions using account code 05-40 or 05-41 are routed to the Equipment Inventory Office for review and final submission. Expenditure transfers must be processed within 90 days of when the error was discovered. If, however, the transfer is requested more than 120 days after the transaction date, an explanation for the timing of the transfer must be included. The 120 days is from when the transaction posted to the budget to when the transfer is submitted.
   • The Grant and Contract Accounting Office reviews selected transfers after posting to ensure compliance with these. Questions concerning allowable transfers should be referred to, 206-616-8678 or email gcafco@u.washington.edu. The Grant and Contract Accounting Office can also provide assistance in establishing budget monitoring procedures to minimize the need for expenditure transfers.

Documenting Salary Transfers

The same principals apply to payroll transfers as apply to non-payroll transfers. In addition, the following procedures apply to payroll transfers.

When transferring salary expenditures to or from a sponsored project budget number, the conditions which must be adhered to are as follows:

1. The intent to transfer a given payroll transaction to or from a sponsored project budget should be noted promptly and dated on the monthly Grant and Contract Payroll Certification Report which is stored in the departmental file for audit.
2. The transfer must be completed by the Principal Investigator or an individual who has been delegated authority by the Principal Investigator in writing and has knowledge of how the work benefited the receiving budget (see GIM 14, Delegation of Signature Authority).
3. For faculty salaries already certified, the Faculty Effort Certification (FEC) Report must be revised to reflect the revised distribution of effort and resubmitted to the Management Accounting and Analysis Office along with a copy of the salary transfer. In addition, attach a statement to the FEC explaining why the change is now appropriate when the effort was previously certified as being a reasonable reflection of effort.

   NOTE: "With written approval from MAA a department may hold FECs when it is known that a Salary Transfer will be processed affecting the period being certified (e.g. late awards). In these cases the request for approval to hold the FEC should reflect the estimated date the FEC will be submitted." Contact MAA for additional information on procedures. (Suzette Ashby-Larrabee 685-7395 or suzette@u.washington.edu)

4. The requests must be processed within 90 days of when the error was discovered. In addition, submit transfers promptly after the end of the financial reporting period to facilitate timely submission of financial reports by GCA.
5. The transfer must include the following:
   • The reason(s) for transferring the expenditure must be sufficiently stated to establish that the transfer is within the approved guidelines of the budget to be charged and is in direct support of the project objectives. It is important to stress the benefit to the program receiving the cost in all instances.
   • The reason(s) the expenditure was initially charged to the incorrect budget.
   • Payroll transfers must be made within 90 days of when the error is discovered. If, however, the transfer is requested more than 120 days after the transaction date, an explanation for why the transfer is late must be included. The 120 days is from when the transaction posted to the budget to when the transfer is submitted.
   • In addition to the normal explanations and justification, transfers submitted more than 120 days after the transaction date must include an explanation for the timing of the transfer. When it is necessary to correct these errors, departments must provide convincing evidence that the services are properly allocable and that the budget receiving the transferred salary actually received a benefit from the services involved.

Countering Assumption of Transfer for Convenience

In the examination of expenditure transfers, auditors are especially skeptical of both salary and non-salary transfers involving budgets in a deficit condition or those having unexpended funds at the expiration date. If such conditions exist, it is particularly essential to provide convincing evidence that the transfer is not for reasons of budgetary convenience.

Consistency Between Payroll Documents and Activity Reports

It is essential that the salary distribution reported on the FEC be consistent with actual effort performed. When the salary distribution reported on the FEC reflects a material difference from the actual effort distribution, a salary transfer should be submitted to reflect the change. In addition, OPUS distributions should be reviewed and corrected if necessary to ensure that current and future distributions reflect the correct allocation of effort. When a salary transfer for a faculty member is processed, the salary source section of the FEC form needs to be modified prior to certification and submission to MAA (See GIM 35).

Late Awards

Care should be taken to not start work on a project before funding is assured. When an award is late, or account set-up is delayed, salary and non-salary expenditure transfers may be avoided by using the University's procedure for obtaining budget numbers in advance. (See GIM 9 for Advance Budget Number Assignments.) When it is not possible to establish an Advance Budget, interim appointment(s) may not be made to another sponsored funding source. An interim appointment should be corrected promptly upon receipt of the award and establishment or extension of a University budget number.

Number of Payroll Changes

Frequent or inadequately explained cost transfers raise serious questions about the propriety of the transfers themselves as well as the overall reliability of the department's cost distribution system, and may result in a comprehensive audit by internal and/or external auditors. It is therefore important that departments have procedures in place which ensure accurate accounting for costs and timely correction of errors.

Attachments

• Attachment A: Grant and Contract Accounting Deficit Transfer Form
• Attachment B: Cost Transfer Minimum Threshold

Questions concerning non-grant and contract salary transfers should be referred to the Payroll Office, 206-543-9216. Questions concerning salary transfers involving grant and contract budgets should be referred to Grant and Contract Accounting (GCA) 206-616-8678 or your GCA Team.

Office of Sponsored Programs
4333 Brooklyn Ave NE | Box 359472
Seattle, WA 98195-9472 | (206) 543-4043 | Fax 685-1732 | Contact Us
Modified: April 23, 2009