SUBJECT: Transfer of Expenditures Between Budgets

SUPERSEDES: GIM 15 (Rev/Oct 2002)

• 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 requesting transfer of non-salary expenditures to or from a sponsored project budget number, the conditions which must be adhered to are as follows:

1. Requests should be addressed in writing to the Grant and Contract Accounting Office and must be signed by the Principal Investigator or an individual who has been delegated authority by the Principal Investigator in writing (see GIM 14, Delegation of Signature Authority).
2. Requests should be processed within 90 days of discovering the error. In addition, submit RTEs promptly after the end of the financial reporting period to facilitate timely submission of financial reports by GCA.
3. Expenditure data should be provided, which will clearly identify the specific charge to be transferred (e.g., University document sequence number and date, interdepartmental invoice number, or other appropriate expenditure reference). Revenue transfers and budget number changes for outstanding requisitions (encumbrances) are governed by separate policies and procedures.
4. The Request to Transfer Expenditure (RTE) form should clearly identify the budget numbers to be charged and credited (only expenditures are transferred, never revenue/funds or encumbrances), the dollar amounts and the object code(s). The Grant and Contract Accounting Office have preprinted forms which may be used for requesting expenditure transfers (see Attachment A).
5. The following information must be included on the request:
   • 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.
   • In order to expedite transfers involving equipment (Account code 06), equipment fabrication expenses and transactions using account code 05-40 or 05-41 send the RTE directly to the Equipment Inventory Office for review and approval. (Box #354615). The Equipment Inventory Office will then forward the RTE to GCA for processing if the transfer involves a sponsored account.
   • 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 RTE form is received and is date stamped in GCA.
   • The Grant and Contract Accounting Office reviews selected RTEs to ensure compliance with these guidelines and returns requests for additional documentation when necessary. Questions concerning RTEs should be referred to that office, 206-543-8454 or email gcatrans@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

Requests to transfer salary expenditures should be sent directly to the Payroll Office.

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

When requesting transfer of 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. When completed, a copy of the RST should be attached to the report.
2. The RST form must be completed and signed by the Principal Investigator or an individual who has been delegated authority by the Principal Investigator in writing (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 RST. 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 Request for Salary Transfer (RST) 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 RSTs promptly after the end of the financial reporting period to facilitate timely submission of financial reports by GCA.
5. The request 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 RST form is received in Payroll.
   • In addition to the normal explanations and justification, transfers requested 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.
6. 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.

7. 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 RST form 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 http://www.washington.edu/research/osp/gim/gim35.html)

8. 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.

9. 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.

Questions concerning salary transfers should be referred to the Payroll Office, 206-543-9216.