300-22 Cost Transfers (Expenditure Adjustments)


Effective Date: 1/1/92 (revised 4/17/08)

Office of Origin: Financial and Administrative Services – Controller’s Office


I. Purpose


This policy explains cost transfers (expenditure adjustments) that are initiated when, for a variety of reasons, expenditures recorded in the general ledger should have been recorded in a different departmental account (DPA), fund, Fund Year (FY), or natural class account (NCA).



II. Definitions


Cost transfer: a department-initiated movement of a charge originally posted to one DPA, fund, FY, or NCA to a different DPA, fund, FY, or NCA. (Payroll transfers are initiated with a Payroll Expense Transfer (PET) Form which is reflected in detail on the Distribution of Payroll Expense (DPE) Report. Non-payroll transfers are initiated with online journal source codes 545 and 547 which are reflected in detail on the General Ledger.)


Cost transfer preparer: an employee who has been assigned by the department manager the responsibility for preparing PETs and/or online journals including source codes 545 and 547. The journal preparer must review, understand, and apply policies and procedures governing cost transfers.


Cost transfer reviewer for sponsored projects funds: an employee, classified PSS II or higher, who has been assigned by the department manager the responsibility for financial management and control for the department and who has received formal training in cost transfer policies and procedures from the Controller’s Office, Extramural Funds (EMF) and has been so authorized by EMF.


Government funds: for the purpose of this policy, these are federal (including federal flow-through), state, and local sponsored project funds. The Extramural Funds (EMF) website will include the most current information on fund ranges and federal flow-through funds.



III. Policy


Expenses should be charged directly to the DPA, fund, FY, and NCA to which they pertain. Occasionally cost transfers may be necessary, for the reasons indicated below, to ensure that charges are made to the appropriate funding source. Federal guidelines state that frequent, tardy, and unexplained (or inadequately explained) cost transfers should be avoided, particularly in cases involving DPA/funds with significant budget overruns or unexpended fund balances. Such adjustments could raise serious questions regarding both the propriety of the adjustments themselves and the overall reliability of the accounting system and internal controls.  

A. Conditions Under Which Cost Transfers Are Appropriate


Once an expense entry has been reported, it is appropriate to make cost transfers only in the following situations:

  1. to correct an erroneous recording, such as instances in which the original source document(s) (e.g., invoice, Personnel Action Form, purchase order) cited an incorrect DPA, fund, FY, or NCA;

  2. to record a change in original decisions regarding the use of goods or services (e.g., a case of beakers originally ordered for and charged to a teaching program should be subsequently transferred to the research project that actually used them). In requesting a cost transfer, a cost transfer preparer should exercise caution and bear in mind that the original recording was duly certified as proper and legitimate against the DPA, fund, FY, and NCA cited; this original certification is now being invalidated and a new certification is being made that the second designated set of DPA, fund, FY, and NCA is the correct one to charge;

  3. to clear an overdraft of a sponsored fund to a discretionary fund.

B. Cost Transfer Criteria

  1. Where possible, the cost transfer must relate to individual items of expenditures (e.g., a cylinder of oxygen or fraction thereof) incurred by the department requesting the adjustment and must be:

            ●     in the same amount originally recorded in the general ledger or;
            ●     the appropriate fraction of the charge based on usage or benefit to the fund the cost is being transferred to.

  2. The cost transfer must be fully explained, justified, and approved by the appropriate authorized officials to ensure adequate review and legitimacy of the transfer. For government funds, the explanation should indicate how the error occurred and why the expense is being transferred to the fund now being charged.

  3. The cost transfer must be in compliance with applicable campus and UC policies and terms of funding source agreements.

  4. For any transfer involving federal funds, the transfer must be recorded in the general ledger within 120 days of the original charge appearing in the ledger. If, due to unavoidable circumstances, an adjustment has to be made beyond the 120-day period, the preparer must provide a full explanation including a well-documented statement of events leading to the late adjustment.

C. Sponsor Special Initiatives

 

The campus will comply with the terms of special government initiatives like the Federal Demonstration Partnership, whose goals are to simplify or change policies and procedures related to administering grants and contracts. Where campus participation in such initiatives is approved, Extramural Funds may undertake to change or eliminate certain provisions of this policy for certain classes of funds. Such changes will be communicated to the campus by EMF and maintained on the EMF website.

 

IV. Responsibility

  1. The department manager is ultimately responsible for retaining authority for reviewing, approving, and ensuring that cost transfers are compliant with UC system and government regulations. This includes ensuring that cost transfer preparers received adequate training. The department manager may assign approval authority for cost transfers to the authorized cost transfer reviewer responsible for the administration of those funds.

  2. The Principal Investigator (PI) is responsible for the entire administration of the award, including the accurate and appropriate posting of expenses on the ledgers. In addition, the PI must approve all cost transfers that will create charges to a federal fund.

  3. The Controller’s Office, Extramural Funds, is responsible for providing training materials to the campus and monitoring compliance with cost transfer policy.


V. Related Policies

VI. References