INTRODUCTION AND FINANCIAL POLICY

Cost transfers move expenses from one 10-digit account to another. Cost transfers involving sponsored project accounts are necessary for a number of reasons. They are needed to distribute clearing account expenses, to correct salary distribution estimates, to correct clerical or bookkeeping errors, to transfer pre-award costs, etc.

Cost transfers are always troublesome to an auditor. An auditor will always ask, "Why was the cost not charged to the correct account initially?" When an auditor sees a department making frequent cost transfers, the auditor suspects that the department's financial management controls and procedures are inadequate. Therefore, it is very important that each cost transfer be documented in such a way that it answers the auditor's question of why the cost was not charged to the correct account initially, and why the cost transfer does not indicate the absence of sound financial management controls and procedures.

The University's Financial Policy Statement No. 2111 addresses the subject of cost transfers. The purpose of the policy is to ensure that cost transfers that involve sponsored project accounts--both federal and non-federal sponsored projects--comply with requirements contained in federal regulations. OMB Circular No. A-21 states that, "Any costs allocable to a particular sponsored agreement (see the University's Financial Policy Statement No. 2109, 'Approval of Direct Cost Expenditures') 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." Other federal regulations require cost transfers to be made timely.

The University's Policy Statement reads as follows:

1. The Office of the Comptroller is responsible for establishing procedures to ensure that cost transfers comply with federal regulations.
2. Federal regulations prohibit transferring costs to 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. Furthermore, the regulations require that cost transfers be made timely.
3. The principal investigator or designee is responsible for ensuring that cost transfers that are necessary to distribute clearing account expenses, to correct salary distribution estimates, to correct clerical or bookkeeping errors, or to make other accounting adjustments are:
   1. Made within 90 days after the month in which the cost was originally recorded on the Financial Accounting System, and
   2. Supported by an explanation that describes why the transfer is necessary.
4. Cost transfers between projects that comprise a program of related projects may be made if the following conditions are met:
   1. The transfers are made within 90 days after the month in which the cost was originally recorded on the Financial Accounting System, and
   2. The projects, if federally sponsored, have been designated as related in accordance with granting agency regulations.
5. Cost transfers not made within the time frames stated above will be reviewed on a case-by-case basis and must be approved by the appropriate dean's office and the Office of the Comptroller.

Cost Transfer Criteria

The University's policy statement requires the Office of the Comptroller to establish procedures to ensure that sponsored project cost transfers comply with federal regulations. In response to the policy statement, the Office of the Comptroller has categorized cost transfers into nine different groupings. For each cost transfer grouping, the Office of the Comptroller has established the criteria that the cost transfers must meet in order for them to be approved. Below is a description of each cost transfer grouping and the cost transfer criteria that apply to each group.

Expenses sometimes are initially charged to a "clearing" account because the correct allocation of the expense cannot be done at the time the expense is first incurred. Bulk purchases, such as postage, copying costs, and some lab supply expenses, account for most of the expenses charged to clearing accounts. Telecommunication and overnight delivery expense bills are examples of non-bulk purchases that sometimes have to be charged to clearing accounts. When it becomes known what accounts actually benefited from the expenses charged to a clearing account, the expenses are distributed (i.e., transferred) to those accounts.

The Interdepartmental Order Form 62 can be used to distribute expenses for bulk purchases when the following conditions exist:

1. The original costs are accumulated in a clearing account.
2. The correct distribution of expenses cannot be determined at the time the expense is first incurred.
3. The seller (account receiving the credit) can measure and document the cost with a high degree of accuracy.
4. The charges reflect only actual costs and are allocated on a cost per unit basis. The costs cannot include any charges for University personnel or equipment purchases.
5. The seller is responsible for providing and maintaining documentation to support quantity and unit cost information.

Cost transfers that distribute expenses for non-bulk purchases (such as telecommunication and overnight delivery bills) must be requested on an Expenditure Transfer Comptroller Form No. 61. The cost transfer must be supported by an explanation that states that the cost was charged to the clearing account until it could be determined how the cost was to be allocated.

Cost transfers that make clearing account expense distributions must be made within 90 days after the month in which the expense was initially recorded on the Financial Accounting System.

2. Cost Transfers to Correct Salary Distribution Estimates

The University's payroll system distributes an employee's salary charges to the sponsored project and other University accounts. That distribution is based upon a Multiple Action or Personnel Action Form for the employee. The distribution accounts entered on those forms are based upon the employee's projected work activities. If the projected or actual work activities change, new Multiple Action or Personnel Action Forms with new distributions should be prepared. In some cases, the work plan changes are not known soon enough in advance for payroll forms to be revised and submitted to Payroll in time for an upcoming payroll. In those cases, the payroll system will distribute the salary expense to an incorrect account. To correct the error, a salary cost transfer has to be made.

A salary cost transfer must be requested by completing a Payroll Expense Transfer Form UPP 103. The transfer must be made within 90 days after the month in which the expense was originally recorded on the Financial Accounting System. The cost transfer must be supported by an explanation that describes why the cost transfer is necessary. An explanation that merely states, "to apply salary where effort was spent," is unacceptable. Examples of acceptable explanations include the following:

1. Payroll forms were not processed timely because the financial plan for the award was being revised.
2. Individual transferred from one project to another, but payroll forms could not be processed before payroll deadlines.
3. Individual was transferred from one project to another for only one pay period.

3. Cost Transfers to Correct Clerical and Bookkeeping Errors

Cost transfers that are necessary to correct clerical or bookkeeping errors will be allowed up to 90 days after the month in which the cost was originally recorded on the Financial Accounting System. Such transfers, however, must be supported by an explanation that describes how the error occurred.

1. Examples of adequate explanations:
   1. Charges had to be placed against an alternate account because an authorized signer for the award account was unavailable. (Note: A grant or contract account should not be used as the alternate account.)
   2. Recharge center was instructed to change the account, but failed to do so.
   3. Data entry error occurred when entering the account number on the original transaction.
   4. The individual that prepared the original transaction misunderstood the principal investigator's instructions.
   5. The principal investigator mistakenly gave the wrong award number to the individual that processed the original transaction.
2. Examples of inadequate explanations:
   1. To correct clerical error.
   2. To charge correct account.
   3. To correct Comptroller's Office error, to correct Payroll's error, to correct per the principal investigator, etc.
   4. To use up budget balance.
   5. To transfer overdraft.
   6. To charge account where supplies were used.

4. Cost Transfers to Correct Errors Due to the Untimely Receipt of Information by the University

Cost transfers that are necessary to correct errors caused by the untimely receipt of information by the University will be allowed if made within 90 days of the University's receipt of the information. Those cost transfers must be supported by an explanation that describes the information that was received untimely.

5. Cost Transfers to Move Pre-Award Costs

Pre-award costs are award costs incurred prior to the beginning date of the award. Often the awarding agency will allow such costs to be charged to the award. An "advance account" should be established to record allowable pre-award expenses for an expected sponsored project award. Using an advance account will eliminate the necessity of having to transfer pre-award costs at the time the University actually receives the award. When an "advance account" has not been established, pre-award expenses should be transferred to the sponsored project account within 90 days after the month in which the FAS account was created.

Pre-award expenses should not be charged to an existing sponsored project account other than one that existed for the sponsored project's prior budget period.

6. Cost Transfers to Move Expenses Between Projects that are Related

When the same person serves as the Principal Investigator/Project Director (PI/PD) under two or more federal awards, the ostensibly discrete projects supported by those awards may actually comprise a single program of related projects. In some cases, even awards with different PI/PDs may support projects that comprise such a program.

The concept of related projects differs from the concept of common costs. Common costs are costs that are incurred for the benefit of two or more projects and allocated between those projects on some reasonable basis (see Financial Policy No. 2109, Approval of Direct Cost Expenditures).

Cost transfers between projects that comprise a program of related projects may be made if the following conditions are met:

1. The transfer is made within 90 days after the month in which the cost was originally recorded on the Financial Accounting System, and
2. The projects, if federally sponsored, have been designated as related in accordance with granting agency regulations. (Consult University Research Administration when seeking to obtain granting agency approval.)

Cost transfers that move expenses between projects that are related must be accompanied by a Related Project Certification Form (Click here to fill out this form online).

7. Cost Transfers to Move Expenses between a Project's Accounts or Subaccounts

Some sponsored projects have multiple 6-digit accounts. Cost transfers that move expenses between those multiple accounts or between a 6-digit account's sub accounts can be made at any time.

Cost transfers that move expense from a sponsored project account to a non-sponsored project account can be made at any time.

9. Late Cost Transfers

Cost transfers not made within the time frames stated in the above categories will be reviewed on a case-by-case basis and must be approved by the appropriate dean's office and the Office of the Comptroller. In addition to the normal cost transfer explanation, explanations for late cost transfers must also explain the circumstances that caused the transfer not to be made timely. If those circumstances were management problems, the department must also explain how those problems will be corrected. Late cost transfers must be accompanied by the Request for Late Cost Transfer Form.

Preparing Cost Transfer Forms

After it is determined that a proposed cost transfer meets the criteria for it to be approved, the cost transfer should be prepared as outlined in the following sections.

Salary Cost Transfers

Payroll Expense Transfer Form UPP103

  Salary transfers should be requested by completing the following steps:

1. Complete a University of Chicago Payroll Expense Transfer Form UPP 103 (see Appendix D) by entering the information shown below.

2. Payroll transfer forms for ledger 5 and 6 accounts should be directed to the Post Award Administrator in the Comptroller's Office that is responsible for the account that is being charged.  All other forms should be sent directly to the Payroll Department of the Comptroller's Office.  Payroll Expense Transfer Forms will be processed according to the following schedule:
   
   
   1. All monthly employee payroll expense transfer forms submitted to the Payroll Department by the 10th of the month will be processed during that month's payroll.  Forms received after the 10th will be processed in the following month.
   2. All biweekly employee payroll expense transfer forms submitted will be processed in the next regular biweekly payroll.
      

   When considering the time frames above, a department should allow at least one day for a Post Award Administrator to complete their review of a transfer.

3. A copy of the PEXP092 Payroll Expense Detail Report for the period(s) being transferred must be attached to the Payroll Expense Transfer Form.

4. If the transfer is a "Late Cost Transfer" as defined by University Financial Policy Statement No. 2111, attach a "Request for Late Cost Transfer" Form (see Appendix B).

5. If the transfer is to move expenses between projects that are "related", attach the "Related Project Certification Form" (see Appendix A).

6. Copies of the Payroll Expense Transfer Form are routed as follows:  Copy 1 (white) and Copy 2 (yellow) to the Post Award Administrator in the Comptroller's Office that is responsible for the account that is being charged or credited, Copy 3 (pink) to the department whose account is charged, and Copy 4 (orange) to the department whose account is credited.

Payroll Expense Transfer Form (UPP 103)
BLANK & SAMPLE COMPLETION

Select this link to go to Appendix C: Instructions for Preparing Form UPP 103

Blank Form: 

Sample Completion: 

Non-Salary Cost Transfers

  The Interdepartmental Order Form 62 can be used to distribute expenses for bulk purchases when the following conditions are met:

1. The original costs are accumulated in a clearing account.
2. The correct distribution of expenses cannot be determined at the time the expense is first incurred.
3. The seller (account receiving the credit) can measure and document the cost with a high degree of accuracy.
4. The charges reflect only actual costs and are allocated on a cost per unit basis. The costs cannot include any charges for University personnel or equipment purchases.
5. The seller is responsible for providing and maintaining documentation to support quantity and unit cost information.

Below are the steps that are necessary to complete and process the Interdepartmental Order.

1. Complete an Interdepartmental Order Comptroller Form No. 62 by entering the information shown below:

2. Interdepartmental Order Forms for ledger 5 and 6 accounts should be directed to the Post Award Administrator in the Comptroller's Office that is responsible for the account that is being charged. Other transfer forms should be directed to the Data Control Section of the Comptroller's Office.

3. Interdepartmental Order Forms sent to a Post Award Administrator by noon of the last business day of a month will be processed in that month's accounting.

EXPENDITURE TRANSFER COMPTROLLER FORM NO. 61

  The Expenditure Transfer Comptroller Form No. 61 should be used to transfer all non-salary expenses other than those that are transferred on the Interdepartmental Order Form 62. Below are the steps that are necessary to complete and process the expenditure transfer.

1. Complete an Expenditure Transfer Comptroller Form No. 61 by entering the information shown below.

2. Attach to the form the following documents:
   1. A copy of the AM091 that recorded the original entry.

3. If the transfer is a "Late Cost Transfer" as defined by University Financial Policy Statement No. 2111, attach a Request for Late Cost Transfer Form.

4. If the transfer is to move expenses for projects that are "related", attach the Related Project Certification Form (Click here to fill out this form online).

5. Expenditure transfer forms for ledger 5 and 6 accounts should be directed to the Post Award Administrator in the Comptroller's Office that is responsible for the account that is being charged. Other transfer forms should be directed to the Data Control Section of the Comptroller's Office.

6. Expenditure transfers sent to a Post Award Administrator by noon of the last business day of a month will be processed in that month's accounting.