Cost Transfers: Best Practices

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Cost Transfers Best Practices

• March 29, 2007
• RSA Quarterly Meeting

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What is a cost transfer?

• Purposes
• Error correction
• Change in use
• Expense/Cost posted to ledger

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Journal Types

• 545 Cost Transfer Journal (Non-Payroll)
• Posted expense from ledger
• 547 Cost Transfer Exception Journal
• Examples
• Exceptional payroll entries
• Program income
• True OD transfer to unrestricted fund
• Complete the UCSF Link On-Line Journal Processing
  course
• Payroll Journal still to be processed on paper

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When auditors review cost transfers

• What do the government auditors want to see?
• Policies
• Procedures
• Evidence that we follow our own policies and
  procedures
• What dont the government auditors want to see?
• Non-compliance
• Allowable/Unallowable, Reasonable, Allocable
  (A21) charges to federal funds
• Timeliness. Why? It could reflect poor
  internal controls e.g., poor reconciliations
• What are the issues on this campus that EMF
  Audit Committee have observed?
• Examples of EMF post-audit review

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Top 4 Issues on Campus

• Timeliness half of cost transfers processed
  over 90 days
• Insufficient documentation to make a
  determination whether cost transfer was
  appropriate. Incomplete audit trail. Dont put
  N/A time consuming, audit risk.
• Insufficient justification to determine whether
  cost transfer was allowable. Explanation too
  general need more details how transfer benefits
  project. Dont put N/A time consuming, audit
  risk.
• Federal Flow Through Contracts e.g., local, city
  and state (Att E sign on 2nd box)
• PI signature not attached as PDF or e-mail

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Worst Case Scenarios

• If government auditors are unsatisfied with the
  way we handle their funds,
• They could lien severe financial penalties
• They could Implement stricter rules
• Cascades down to PI and RSA effort workload
• They could disallow future funding
• Cascading effect on institution
• Potentially negative impact on
• private funding
• peer institutions (prime) and UCSF is
  subcontractor
• Fundraisers, gifts, endowments, etc.

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How can UCSF prepare?

• Internal Controls and Review
• Department Administrative Review of all transfers
• Academic Review is limited to charges (debits)
  Federal funds
• EMF post-audit Review
• Continued training and education
• Development Training classes, keep reference
  binders handy
• Information packet and case studies
• Self-paced independent studies Read federal
  rules on cost transfers
• NIH Grants Policy Statement (12/03 or latest
  revision)
• http//grants2.nih.gov/grants/policy/nihgps_2003
  /index.htm
• OMB Circular A-21 (05/04 or latest revision)
• http//www.whitehouse.gov/omb/circulars/a021/a21
  _2004html
• Call EMF Compliance Unit for questions
• Cost Transfer Reviewer at 476-4571
• Cost Transfer Manager at 476-8688
• Refer to EMF website (next slide)

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EMF Website - Helpful Job Aids

• Tips and Refreshers (October 05) 
  http//acctg.ucsf.edu/peoplesoft/journals/training
  /journal_tips/Regular_and_Exception_Cost_Transfers
  20(3).pdf
• Quick Reference  http//acctg.ucsf.edu/archives/p
  c/je540.xls
• Compliance Mandates on Timely Cost Transfers
  (June 06)  http//acctg.ucsf.edu/extramural_funds
  /communications/Overdrafts_Timely_Cost_Transfers_C
  ommunication_6-9-06.pdf
• Request for approval of a departmental cost
  transfer reviewer  http//acctg.ucsf.edu/archives
  /pdf/ctrequest.pdf
• Policies and Procedures Maintenance of General
  Ledgers  http//acctg.ucsf.edu/extramural_funds/e
  mf/Policy-Fed-Grant.doc
• Peoplesoft Journals Training Preparing cost
  transfers  http//acctg.ucsf.edu/peoplesoft/journ
  als/training/jobAids/Lesson_10.pdf

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Best Practices

• Avoidance ensure internal controls by setting
  up correct fund-dpas for payroll, speedcharts to
  vendors recharges.
• Monitoring ensure reconciliation of detailed
  transactions each month, signed by PI, BSRs, etc.
• What actions need to be taken to prevent the same
  error from happening again?

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Documentation Standards

• Provide complete audit trail (documentation,
  documentation, documentation)
• Original purchase order (date)
• Budget detail
• PAN/PAF/IDOC
• Email correspondence
• Provide detailed explanation for transfer and how
  it directly benefits the project
• PETs Vacation accrual
• DPE
• Timesheet (sub 2)
• Vacation accrual record, revised PAF/PAR
  (payroll)
• Review calculations for over NIH salary cap
  (646-2)

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Justification (Att E)

• Certification Requirements
• Required when charging (dr) government funds
• Identify error and how it occurred
• Explain why expense is being correctly
  transferred to the fund.
• How does expense relate to the project being
  charged?
• What benefit did the project receive from expense
  being transferred?
• Why is the expense necessary to the project being
  charged?

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Example 1 Approved Cost Transfer

• Explain how error occurred.
• The Lab Tech who placed the orders left the
  account/fund number blank. The administrative
  review person entered the incorrect acct/fund
  information. The items identified are all used
  in the HIV positive peridontal lab. They are
  identified by person placing the original order.
• Explain why the expense is being correctly
  transferred to the fund being charged.
• The Micor support is for computer peripherals
  used for storage and transfer of data to
  collaborators. The Baxter and Fisher items are
  used to hose off the liquid waste used in this
  research. The Cibco and Sigma items are for
  culture media and bacteria cultures used in this
  research project.
• Explain why transfer is late (over 120 days).
• The person who reconciles the ledgers was out on
  disability leave and has only recently returned
  to her duties. Upon review of the ledgers, the
  error was discovered.

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Example 2 Approved Cost Transfer

• Explain how error occurred.
• Due to administrative error, the original TB
  test was charged to the incorrect research grant.
• Explain why the expense is being correctly
  transferred to the fund being charged.
• The TB test is to screen patients for TB. Fund
  599xx is for the initial testing. Fund 305xx is
  the research project for patients after they have
  tested positive for TB. Fund 599xx is the
  appropriate project for the initial testing.
• Explain why transfer is late (over 120 days).
• PI just returned from an extended travel and
  recently audited G/L transaction details. He
  noted that this charge was not correct.

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Dos and Donts

• Do take time and attach all supportive
  documentation
• Do thoughtfully and completely explain why cost
  transfer is necessary and how it benefits the
  project
• Dont write N/A
• Do reflect on cost transfer and think about what
  actions need to be taken to prevent the same
  error from happening again

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AUDIT PROCEDURES

• Signatures

• Explanation
• Documentation

• Time Frame

• General Ledger

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Questions?
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• Thank you!