1305 PR.02 Cost Transfers Involving Sponsored Projects

1.     Purpose

2.     Who Can Initiate and Approve a Cost Transfer?

3.     Identifying the Need for a Cost Transfer

4.     Preparation, Documentation, Approval, and Submission of a Cost Transfer

5.     Central Review and Approval

6.     Rejection and Remediation

This document outlines the procedures and requirements that are necessary to properly execute an appropriate Cost Transfer associated with sponsored projects (as defined in Policy 1305 Cost Transfers Involving Sponsored Projects). 

Lead administrators, operations managers, business support unit personnel, and business office staff may be involved in the initiation or approval of Cost Transfers.  In order to fulfill the role of an initiator or approver, the individual must be appropriately trained.  It is the Lead Administrator’s responsibility to ensure that all initiators and approvers successfully complete/pass the Cost Transfer Principles module and accompanying quiz prior to Workday system access. 

In addition, the Lead Administrator should inform all approvers and initiators of the following Cost Transfer related information: 

• Training Guide: Assign Payroll Costing Allocation
• Workday Financials
• Graduate Student Funding (“GSF”)
• Training Guide: Payroll Accounting Adjustments
• Training Guide: Create Manual Journal Entry

It should be noted that an individual who initiates a Cost Transfer cannot also be the individual administratively approving that Cost Transfer.

As outlined in Procedure 1101 PR.02 Financial Transaction Review and Budget Monitoring, there are several steps leading up to, during, and after a month-end close, which present an opportunity to review transactions for proper sponsored project management.  Identifying the need for a Cost Transfer may occur during any one of these steps.  Refer to Procedure 1101 PR.02 Financial Transaction Review and Budget Monitoring and Form 1101 FR.01 Financial Review Checklist for additional information.    

Cost Transfers should not be used as a mechanism to manage sponsored awards.  In addition, sponsors, for example the National Institutes of Health, prohibit the transfer of costs from one project to another or from one competitive segment to the next solely to cover cost overruns.

Performing the following selected activities identified in Procedure 1101 PR.02 Financial Transaction Review will assist in ensuring that awards are managed effectively.  

Regular Monitoring of the Labor Suspense Account

• The close monitoring of the payroll costing allocations and labor suspense/labor default accounts (PJ028458-Temp Charging Instructions or PG99999 Transaction Suspense) will assist in ensuring timely salary reallocations as well as preventing Cost Transfers. 
• The labor suspense account should not be used as 1) a mechanism to “park” costs for sponsored awards that have not been received/executed by Yale, or 2) an alternative to an At-Risk account.  An At-Risk account should be requested when appropriate for any work performed in advance of receiving the official award document from the sponsor; otherwise the work on the anticipated award should not begin.  Please refer to Pre-Award Costs and At-Risk Account Requests for assistance.
• Clearing invoices that are in progress and posted to a suspense account throughout the month assists in a more efficient month-end closing.

Verify Salary Information

Generate the “Find Workers Costing Allocations” report and the “Payroll Results Verification with Costing – Yale” report after the first calculation of the payroll (see payroll calendar) in order to verify the accuracy of the payroll information and allocation.

Conduct Transactional Reviews

Review transactions on a regular basis, including but not limited to, expense reports, OK-to-Pay invoices, shipping transactions, subaward payments, and high-risk expenditure types.

Monitor on a monthly basis: review payroll costing allocations, ensuring they are appropriately updated.  Additionally, review and authorize pending Payroll Accounting Adjustments (“PAA”s), Manual Journals, and review unprocessed and unapproved Expense Management System (“EMS”) transactions.

Review the Account Holder Report (and other available financial reporting tools)

Principal Investigators (“PI”) and other account managers (e.g., program/lab/project directors) receive monthly financial reports (i.e., Account Holder Reports).  The account manager(s) or other individual(s) responsible for award activity and the identification of erroneous charges should promptly communicate the need for any required corrections to the department business office or support center.

In order to submit a Cost Transfer, the initiator is expected to read and understand the requirements of Policy 1305 Cost Transfers Involving Sponsored Projects.  Consistent with University policy, the initiator is expected to execute the following steps when initiating a Cost Transfer to ensure that the transfer is properly documented.  Essential elements of a Cost Transfer include an appropriate and thorough transaction description that addresses the who, what, when, where and why associated with the transaction.

Step 1: Preparing the Cost Transfer

Review the step-by-step training Guides addressing the execution of a Manual Journal Entry (Training Guide: Create Manual Journal Entry) and PAA (Training Guide: Payroll Accounting Adjustments).  These Guides provide details regarding system access, data entry, and submission of Cost Transfers related to sponsored awards.  Additional information supporting manual journal entries and PAAs impacting sponsored awards is located at: Workday Financials.

Note: When transferring University Service Providers (“USP”) charges, the journal source “ISP-ADJ” must be assigned to the Accounting Journal in Workday to ensure the cost transfer routes for the appropriate approvals.  You cannot use “Manual Journal” to make these corrections.  Refer to Procedure 1410 PR.03 University Service Providers: Accounting and Billing for additional information regarding USP charges.

Step 2: Documentation/Information Requirements

The department business office (“DBO”), initiator, and approver are responsible for ensuring that all required documentation that properly supports the Cost Transfer is attached to the Cost Transfer.  A checklist is available to assist DBOs through the Cost Transfer process.

Please refer to Policy 1305 Cost Transfers Involving Sponsored Projects, Section 1305.3 Authorization and Documentation of Cost Transfers for Policy details.

A properly documented Cost Transfer includes the following elements: 

• Documentation that provides evidence of the existence of the charge on the award from which the cost is being removed (i.e., Detail Transaction report ) that verifies the original date of the charge [applicable to manual journal entries only].
• PI’s (or delegated initiator or responsible individual) written authorization that is signed and dated (email is acceptable) for the Cost Transfer.    

• For manual journal entries, the authorization should include the approved cost allocation methodology documentation when allocating charges based on interrelationship (refer to Allocation Principles and Methodologies for additional information).
• For PAAs when an Effort Certification Statement (“ECS”) was previously certified, the Faculty/Grant PI certifier must provide a detailed explanation as to why the ECS was certified without requesting a reallocation of effort.  A copy of the ECS must be attached to the Cost Transfer as part of the supporting documentation
• For PAAs, when the transfer involves moving expenses from a labor suspense or default account (PJ028458-Temp Charging Instructions or PG99999 Transaction Suspense):
  
  • Documentation should include evidence that the core issue was resolved (e.g., a screenshot showing that the payroll costing allocation was updated and a setup report indicating the award is ongoing) and/or the reason why an At-Risk Account was not established.
  • Approval from the PI may not be necessary when the transaction is clearing the labor suspense or default account to the same award due to the award being “on hold” and the original charging instructions remain the same.  However, documentation (i.e., payroll costing allocation) must be attached verifying the salary/effort for the individual is continuing, rather than being initiated, on the award at the same level as the original charging instructions for the award.

• A detailed statement explaining the reason for the Cost Transfer, including an explanation as to how the error occurred. 

Note:  For manual journal entries, complete Form 1305 FR.15 Manual Journal – Cost Transfer Justification and upload to the system.  For PAAs, the justification form is embedded in the Workday process/system.

• A description of how the cost applies to or benefits the award to which the cost is being transferred.

Note:  For PAAs, in the award benefit statement, indicate percent of effort devoted to the project(s). 

Additional supporting documentation/explanation must be provided by the Initiator and attached by the Preparer should any of the following conditions exist:

1.  Cost Transfers related to Department of Health and Human Services (“DHHS”) awards (excluding the National Institutes of Health) that are more than 90 days from occurrence require sponsor prior approval.  Therefore, sponsor approval must be attached to the Cost Transfer transaction.   

2.  The Cost Transfer is being processed during the final months of or after the award period for the award that is to receive the transferred cost.  These charges are typically red flags and the explanation must substantiate why expenses are being transferred near or after the budget end date of the award.

3.  The Cost Transfer is for expenses that are animal related.  If the transfer is to move the cost of purchased animals, the associated animal per diem costs and any other related charges should also be included as part of the costs being transferred.  In order to transfer animal related charges to a sponsored award, the award must be linked to an IACUC approved protocol, as a consequence of a congruency determination (if appropriate).  The associated protocol number must be indicated within the Cost Transfer explanation.

4.  The Cost Transfer is for an expense related to summer salary (for faculty with an academic year appointment).  If the labor transfer involves summer salary, a copy of the Faculty Summer Compensation Request form and associated instruction from the faculty member that authorized the original payment must be attached to the Cost Transfer request as supporting documentation.

Preparers should contact the approver, their immediate supervisor, lead administrator and the Principal Investigator to resolve any problems related to a Cost Transfer request.

Billing Errors: USP users should contact the USP directly if they notice a billing error.  USP users are responsible for making any needed correction to an original charge that is not the result of a USP error.  If the change is permanent and continuing forward, users are responsible for contacting the USP with updated charging instructions.  Departments and/or their representatives must use a Journal Source that has been specially configured for this purpose (i.e., Name = ISP Adjustments; Ref ID = ISPADJ).  Departments may NOT use the original USP’s Journal Source.  Review Procedure 1410 PR.03 University Service Providers: Accounting and Billing for additional information regarding USP billing errors.

Step 3:  Cost Transfer Validation

Once the Initiator submits the Cost Transfer (by pressing the “Submit” button), the system will process the transaction and validate the entries against pre-defined system validations.  An error message will appear if the entries are outside the grant start/end date, or if a reason code was not selected, or if supporting documentation is not attached.  Errors must be resolved in order for the Cost Transfer to be successfully submitted. 

Once the Cost Transfer is successfully submitted, the system will identify those transactions and characteristics requiring additional review as required by Policy 1305 Cost Transfers Involving Sponsored Projects.  The types of transactions and criteria are as follows:

• All PCEs regardless of source of funds
• Manual Journal Entries involving a federal award and is > 90 days from the 5^th day of the calendar month after the date the original transaction appears on the award
• Manual Journal Entries involving a federal award that is > $2,500
• PAAs involving a federal award that is > 90days.

If any of the Cost Transfers meet the above conditions, the transaction will either route to the department’s Grant Manager or the department’s Grant Manager and Central Grant Cost Transfer Approver (SPFA) for final review and approval.

Step 4:  Approver’s Review of the Proposed Cost Transfer

When evaluating the Cost Transfer submitted by the initiator, the Approver must confirm that the entry is correct, all attached supporting documentation accurately and completely satisfies the requirements specified above in Step 2, and is in compliance with Policy 1305 Cost Transfers Involving Sponsored Projects and the terms and conditions of the sponsored award.  

If the Cost Transfer needs to be modified (e.g., COA segment entered is incorrect, justification form needs additional explanation, documentation is inadequate), the Approver sends the proposed Cost Transfer back to the Initiator by selecting “Send Back.”  A reason (instructions on what to change or fix) is required prior to submitting the Cost Transfer back.  Once sent, the Cost Transfer will appear in the initiator’s Inbox to address the necessary modifications as specified by the Approver.  After the Initiator completes the modifications, s/he can resubmit the Cost Transfer back to the Approver for review and approval.

Step 5: Approving and Posting Cost Transfers

Once the Approver approves the Cost Transfer (by electing “Approve”), the Approver will either receive a confirmation that the manual journal entry or PAA was posted or that the Cost Transfer was routed to the Central Grant Cost Transfer Approver (SPFA) for central review and approval.

SPFA – Central Grant Cost Transfer Approver

“Awaiting Action (Approval by Central Grant Cost Transfer Approver)” Status – Cost Transfers that meet certain pre-defined conditions (see Step 3 above) will automatically route to the Central Grant Cost Transfer Approver (SPFA) for review and approval.  Under normal circumstances, SPFA’s initial review is performed within 5 business days. 

If a Cost Transfer does not meet all policy and procedure requirements and cannot be centrally approved, the “Reject and Remediation” Section applies.

Secondary Approvals

PAAs that involve a previously certified ECS require the review and approval of the University Research Compliance Officer (“URCO”) (or designee) and/or the SPFA Associate Director, Financial Management.

The SPFA Associate Director has the authority to approve a PAA Cost Transfer if the PAA transfer: a) credits a sponsored award and charges a non-sponsored award resulting in a net benefit to the sponsor, or b) does not change or affect the certified effort percentage.

The URCO (or designee) will review and approve, PAAs involving a change in percentages to an already certified ECS which require recertification due to an increase in effort directly affecting a sponsored award(s).  It is essential that all supporting documentation is attached to the Cost Transfer request. 

• If the URCO (or designee) and/or the SPFA Associate Director, Financial Management approves the Cost Transfer, SPFA will post the approved adjustment and recertification of the effort report will be required.
• If the URCO approval (or designee) and/or the SPFA Associate Director, Financial Management is not granted and the charges being transferred that credit another sponsored project, the charges in question will be transferred to the department’s suspense Project.  An e-mail communication is sent to the Department Approver and/or the PI with an explanation outlining the reasons for denying the request.

If the removal of charges results in a change to a previously certified effort report, the certifier will need to recertify the impacted effort report.  In some cases, cost sharing may be required.  For additional information, refer to Policy 1315 Effort Reporting: Certifying Effort on Sponsored Projects, Section 1315.4 Completion and Certification of Effort Certification Statements.  (Refer to the Rejection and Remediation section below.)

A.  Rejecting the Cost Transfer

Initiators and Approvers must provide complete and accurate explanations, justifications, and supporting documentation in order for a Cost Transfer to be posted to the University’s financial system.

The rejection of a Cost Transfer will typically stem from either the charge not being allowed on the award or the charge not being properly documented and fully justified.   

All rejected Cost Transfers are assigned the status of “Denied” in Workday. 

Rejected Cost Transfers may result in a charge to the department’s Central GA or Unrestricted Operating fund account.  Specifically, the debit portion of the transfer will be moved and posted to the department’s fund account.  This action does not preclude a department from resubmitting the Cost Transfer at a later date with the appropriate documentation or justification supporting the Cost Transfer.  It should be noted that the credit side of a Cost Transfer is always processed. 

For each rejected Cost Transfer (including Cost Transfers charged to department’s Central GA or Unrestricted Operating fund account) resulting from the central review and approval process, an email notification is sent to both the Initiator and Approver indicating the reason for the rejection.

System Denied Cost Transfers are identified with one of the folllowing reasons: 

• Rejected - Authorization
• Rejected - Award Benefit
• Rejected - Documentation
• Rejected - Explanation
• Rejected - Ext Circumstance
• Rejected - Restriction
• Suspense - Authorization
• Suspense - Award Benefit
• Suspense - Documentation
• Suspense - Explanation
• Suspense - Ext Circumstance
• Suspense - Restriction

Initiator and Approver(s) can view the status of their manual journal entries and PAAs by accessing their Workday Inbox and clicking on the Archive Tab.  When SPFA rejects a Cost Transfer (system status: Denied), the Comment field in the Process tab section of the Cost Transfer will contain the reason for the rejection.  (See screen shot below.)

When a Cost Transfer is rejected by SPFA, the PI and/or department may appeal the decision to the Expenditure Review Panel (“ERP”).  In situations where the Cost Transfer is rejected due to insufficient documentation, the ERP will not review the appeal until sufficient documentation is provided and first reviewed by SPFA.  The ERP’s decision on whether or not to approve the Cost Transfer is final.

B.  Remediation

If SPFA determines that a department is, for example, experiencing frequently rejected Cost Transfers on a regular basis, SPFA will work with the Approver to remediate the problem.  Actions taken may include any or all of the following: i) retrain appropriate department staff, ii) reduce the SPFA review threshold for Cost Transfers submitted by a particular Approver, or iii) deny access for the preparation and/or approval of future Cost Transfers by certain individuals and/or departments.