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Cost and Budget Transfer Guide

This guide provides information about handling cost and budget transfers related to federally sponsored awards.

Cost transfers may only be made in compliance with strict federal requirements. This guide includes the information needed to achieve compliance. In order to perform the procedures described in this guide, an employee must have successfully completed the FIS Banner Journal Vouchers (JV) Class. 

 

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  • Background

    OMB Circular A-21 and A-110 establish principles for determining costs applicable to grants, contracts and other agreements with educational institutions as well as for the required documentation and practices associated with those costs. Since cost transfers are subject to these federal principles and requirements, it is important that all administrative staff and PIs understand the issues associated with cost transfers and adhere to the following guidelines. The University incorporates these federal principles, through the Business and Finance Bulletins, into its standards for all cost transfers involving extramural funds.


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  • FIS Banner award cost transfer (XECG) for non-payroll expenses

    Department/Division Preparer: Processing charges against extramural funds requires specialized Banner training to allow access to the contracts and grants rule codes. See EMF contacts to schedule training.

    • XECG Processing Standards: If this is a transfer between funds, the following details are required in order for the journal to pass EMF approval. Within the
      • Document Text: The following questions must be answered:
        • What is being transferred? What is the reason for this transfer? How does this transfer support the scope of the project?
        • Is this transfer being done within 120 days of the original invoice transaction date? If not, what is the reason for the delay?
        • Who authorized this transfer? (for contract and grants this must be the PI or delegate, and the delegation of authority must be kept in the divisional award file.) Physical proof of transfer of expense authorization must be obtained, whether is it the signature on the actual document, or a detailed email approval for this transaction.
      • Line Item Text: Short description that appears in the FIS/Banner and Business Objects detail reports under Description.
        • Audit must be able to trace back all journals to their source documents so it is imperative that this audit trail is kept clear, accurate, and concise.
        • On the Line Item Text of the journal use the original doc description (abbreviation is accepted) with the previous document date.
        • Example: PI Jade Smith's NSF 21110 ordered supplies that came in on Fischer Scientific I0111243 P055512 $243.33 trans date 8/14/2010. When the charge hit, it was discovered that the expenses were actually intended for his 21109 award. The line item text would read: FisherSci 8/14/10 and the Document Reference Number is the specific Invoice number (not the PO number which could apply to many invoices)
    • Recharge Journals: Units/divisions must have detailed written authorization from the PI or delegate on file. Forward any supporting documents to the Department/Division Reviewer once the transaction has been entered into FIS (refer to: examples of documentation).
    • Department/Division Reviewer: Using any associated backup documentation, review transactions for accuracy, timeliness, authorizations, and compliance with relevant University and external agency policies and guidelines. Ensure that the allowability criteria, necessary conditions, and audit standards are met for each cost transfer.
    • Unallowable Account Codes on Contract and Grants:

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  • Allowability of expenses (including payroll)

    If an expense does not meet the below criteria of allowability, it is NOT eligible to be charged against the sponsored agreement. According to OMB Circular A-21, these criteria are:

    • “(The expense) must be reasonable.” The test for reasonableness is to ask if a “prudent person” would have purchased the item and paid that price. The expense should be necessary for the successful completion of the project. Reasonableness is normally demonstrated by the PI’s or his/her designee’s approval of the expense.
    • “(The expense) must be allocable to sponsored agreements under the principles and methods provided herein.” The expense must be applicable to the sponsored agreement. Normally, this is demonstrated by the authorized budget from the funding agency and the PI’s or his/her designee’s approval of the expense.
    • “(Expenses) must be given consistent treatment through application of those generally accepted accounting principles appropriate to the circumstances.” This standard ensures that direct and indirect costs are treated consistently and distinctly from each other.
    • “(Expenses) must conform to any limitations or exclusions set forth in these principles or in the sponsored agreement as to types or amounts of cost items." An expense must not be specifically excluded by federal regulations or by the specific agreement.

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  • Cost transfer requirements (including payroll)

    One or more of the following conditions are necessary to justify a cost transfer:

    • To correct bookkeeping or clerical errors in original charges;
    • To distribute expenses associated with closely related work supported by more than one funding source (requires PI approval);
    • To record a change in a decision made originally as to the use of goods or services (requires PI approval);
    • To redistribute high volume/low value costs (common cost allocation);
    • To clear an overdraft (see:Overdrafts or balances at end of award).

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  • Audit standards for cost transfers (including payroll)

    All cost transfers to extramural funds must be timely, appropriate, and consistently treated throughout the campus. Specifically, each cost transfer must meet the following audit standards:

    • It must relate to individual items of expenditures.
    • It must refer to a source document in detail sufficient to link the transfer to the original expense (invoice, payroll or other).
    • It must be the same amount as originally recorded in FIS or an appropriate portion.
    • The cost transfer must be fully explained:
      • Why is the expense transfer being prepared?
      • Why was the original FOAPAL charged?
      • How was it determined that the new FOAPAL should be charged?
        • How does the expense relate to the project being charged?
        • What benefit did the project receive from the expense being transferred?
    • The required supporting documentation for the cost transfer is on file in the department/division business office.
      • Depending on the type of transfer, annotated copies of source documents may need to be attached to support the transfer.
      • Any documentation must support the purpose of the cost transfer, not the original charge.
      • Records and documentation associated with a cost transfer are to be kept at the department/division for five years after the submission of the final financial report on the award (normally, ninety days after the final ending date of the project).
    • Cost transfers must be recorded in FIS within 120 days from the close of the month in which the charge first posts to the ledger.
      • If the transfer is made after the 120-day period, a full explanation of the events which caused the delay must accompany the transfer.

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  • Overdrafts or balances at the end of an award

    Transferring an Overdraft

    The recommended method to clear an overdraft on an extramural fund is to move expenditures to an unrestricted fund or to a divisional fund set up for that purpose. The explanation should state the reason for the transfer, such as, “Moving overdraft from federal fund to (name of unrestricted fund)...”

    Strategies Regarding a Surplus Near the End of an Award

    Normally, federal auditors pay particular attention to cost transfers that significantly reduce the remaining funds on an award. A surplus or large final balance on an award may be addressed in the following ways:

    • If the award is not covered by automatic carry-forward provisions, recommend to the PI that permission from the funding agency to carry forward the unused funds to the next budget period be requested through the Office of Sponsored Projects.
    • If the award is in its last year, recommend to the PI to work with the Office of Sponsored Projects so that a no-cost-time-extension (NCTE) can be obtained. This should be done before the end of the award period.
    • Transfer expenses back to a fund if the expenses were previously transferred to another fund to avoid or eliminate a potential overdraft. This situation could occur when there are refunds or other unexpected credits to the original fund.

    A cost transfer should never be executed solely to reduce the final balance on an award without applying the allowability criteria for expenses and the necessary conditions for transfers described above.


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  • Adjusting budgets on extramural funds

    Upon receipt of an Electronic Data Process (EDP) aka "yellow sheet" and authorized budget for a new or supplemental award, EMF Accounting initially allocates the budget. Within the same fund, departmental/divisional staff can reallocate a budget to a different organization or activity code, or to a more appropriate budgetary pool (category).

    Note: In order to process Budget Adjustments in Banner, special contracts and grants training must be completed for access to the budget adjustment rule codes. To schedule training, refer to EMF Contracts & Grant.

    Budget adjustments must:

    • use FIS rule code XDCG
    • remain within the assigned fund
    • remain within the specified Contracts and Grants allowable budget pools (see contracts and grants budgetary pools)
    • be in compliance with specific award restrictions, including any required prior approvals

    Regarding budget signs:

    • (D)ebit/+ is an increase to the budget pool
    • (C)redit/- is a decrease to the budget pool

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  • Responsibilities

    Principal Investigator

    The Principal Investigator is responsible for the management of funds on an award. This includes monitoring expenses to ensure that an expense was charged against the appropriate fund and conforms to the University’s and funding agency’s policies. Each expense must ultimately be traced back to the PI’s or his/her designee’s authorization.


    Department/Division Business Office

    The department/division business office serves as the office of record for cost transfers. It is also responsible for providing adequate internal controls, including adequate separation of duties, to ensure the appropriateness, accuracy and timeliness of all its transactions and journals. Specifically, it ensures that the allowability criteria, necessary conditions, and audit standards described above are met for each cost transfer.


    Extramural Funds Accounting

    Normally, cost transfers entered into FIS using rule code XECG will be reviewed and approved or disapproved online by the Extramural Fund Accounting staff. EMF staff will review the adequacy of the on-line justification and the timeliness of the transfer. If disapproved, EMF will notify the responsible department/division and indicate the reason for disapproval. Additional training may be requested for department/division staff who enter and initially approve transfers that are repeatedly disapproved by the EMF staff.


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  • Definitions

    Costs specifically associated and identified to a particular project, program or activity.

    Indirect Costs

    Costs incurred for a common or joint purpose benefiting more than one cost objective and which cannot be readily assigned to a particular project, program or activity.

    Principal Investigator (PI)

    The Principal Investigator is the person, normally a faculty member or a researcher, primarily responsible for the financial management and control of project funds in accordance with University and sponsor policies and procedures. The PI bears the main responsibility for the direct costs that are charged to an award.

    Transfers of Expense (XECG) or Cost Transfers

    Move a direct cost charged from one FOAPAL to another FOAPAL.


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  • References
    1. OMB Circular A-21:
      • Section C.3.(reasonable costs)
      • Section C.4.(restrictions on cost overruns)
      • Section D (Direct Costs)
      • Section E (Indirect Costs)
      • Section J (Allowability of selected cost items)
    2. OMB Circular A-110:
      • Subpart D.(post-award requirements, including timeliness of transactions)
    3. University Business and Finance Bulletin A-47:
      • Section V.A. (establishes conditions necessary for valid cost transfers)
      • Section V.B. (establishes justification and documentation requirements for cost transfers)
    4. UC Systemwide Policies and Guidelines website

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  • Contracts and grants budgetary pools

    B02000 Salaries
    B03000 Supplies and Expenses
    B04000 Inventorial Equipment
    B06000 Fringe Benefits
    CG3500 Travel-Domestic
    CG3A00 Travel-Foreign
    CG3C00 Subcontracts
    CG3P00 Participant Support
    CG3Y00 Indirect Costs (Overhead)
    CG6000 Tuition and Fees


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  • Examples of documentation

    The type of transfer will determine the specific documentation required. The following are examples of the kinds of documentation that may be needed to support a non-payroll transaction.

    • Invoices.
    • Requisitions or Purchase Orders (P.O.).
    • Travel Expense Vouchers.
    • E-mail or letter demonstrating written prior approval from the funding agency.
    • Fully executed consultant agreement or subaward.
    • E-mail of memo indicating authorization from the Principal Investigator.
    • References adequate enough to enable online inquiry to any relevant transactions or journals, including earlier transfers.
    • Logs or records justifying redistribution of high volume/low value costs.

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  • Extramural fund ranges

    18000 to 18199
    20501 to 20599
    Special State Appropriations
    18200 to 18999
    20600 to 20939
    State of California Agreements
    20950 to 20999 Local Gov't contracts
    21000 to 33999 Federal Gov't contracts & grants

    57000 to 59999

    Private contracts & grants
    62000 to 63000 Private contract & grants
    80000 to 80999 ARRA grants

    81000 to 86999

    87000 to 87999

    Federal Gov't contracts & grants

    ARRA contracts


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  • Inventorial account codes

    Account codes Description Commodity Block Line Item Text:
    006130 Lease greater than $100K - non-computer (usually a capital lease). See below. INVEQUIP clause
    006150 Lease greater than $100K - computer equip. (usually a capital lease). See below INVEQUIP clause
    007000 Accessories (components) to inventorial equipment purchased on another PO. Property Number of accessorized item
    007010 Inventorial equipment excluding computer and furniture (Will be assigned Property Number and tagged). All inventorial data in INVEQUIP clause
    007020 Computer equipment - inventorial (Will be assigned Property Number and tagged). All inventorial data in INVEQUIP clause
    007040 Furniture - inventorial - must be greater than $1,500 (excludes system furn). (Will be assigned Property Number and tagged). All inventorial data in INVEQUIP clause
    007050 Items used in the fabrication by UC employees of inventorial equipment that UC will use - title will vest with UC or government. Fabrication EIMR number
    007080 Transfers of inventorial equipment between university departments. n/a
    007090 Installment purchase of inventorial equipment See “ Leases” below. All inventorial data in INVEQUIP clause
    007110 Initial complement of supplies/components (all items on same PO as inventorial equipment that are needed to put it into service). Line item number on PO to add value to
    007130 Trade-in of used equipment (all items on PO affected by trade-in, including freight & tax) IMPORTANT: See “Trade-in” on reverse. “Trade-in PN 95-70-00999. Amt.: $999”
    009530 Inventorial plant equipment (including initial complement of supplies)
    - Use with org codes 97xxx only
    All inventorial data in INVEQUIP clause
    009535 Accessories (components) to inventorial plant equipment
    - Use with org codes 97xxx only
    Property Number of accessorized item


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