1305 PR.02 Cost Transfers Involving Sponsored Projects

1.     Purpose

2.     Identifying the Need for a Cost Transfer

3.     Who Can Prepare and/or Approve a Cost Transfer?

4.     Preparation of a Cost Transfer

A.     Payroll Accounting Adjustment

B.     Accounting Adjustment

C.    Journal Entry – Manual Journal Entry

D.    Journal Entry – USP Adjustment

5.     Documentation/Information Requirements

6.     Cost Transfer Submission Validation

7.     Approver’s Review of the Proposed Cost Transfer

8.     Rejection and Remediation

This document outlines the procedures and requirements that are necessary to properly execute an appropriate Cost Transfer associated with Sponsored Projects Financial Administration (“SPFA”)-managed awards [FD02/FD28] (i.e. Federal and Non-Federal Grants & Contracts) (as defined in Policy 1305 Cost Transfers Involving Sponsored Projects) in Workday.

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 that 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.

Principal Investigators (“PIs”) and/or certified PI delegates receive monthly financial reports (i.e., Account Holder Reports).  The PI or other appropriately delegated 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 (“DBO”) or business support unit.

Lead administrators, operations managers, business support unit personnel, and business office staff may be involved in the preparation and/or approval of Cost Transfers.  To fulfill the role of a Preparer or Approver, the individual must be appropriately trained.  It is the Lead Administrator’s responsibility to ensure that all Preparers and Approvers successfully complete the University’s Cost Transfer Principles training and pass the accompanying quiz prior to preparing or approving Cost Transfers in Workday.

In addition, the Lead Administrator (or their delegate) should inform all Preparers and Approvers of the following Workday Training Guides relating to Cost Transfers.  These Training Guides provide details regarding system access, data entry, and submission of Cost Transfers related to sponsored awards and related information: 

• Workday Financials
• Training Guide: Assign Payroll Costing Allocation           
• Training Guide: Payroll Accounting Adjustments
• Training Guide:  Accounting Adjustments
• Training Guide: Create Manual Journal Entry
• Training Guide: Create ISP Manual Journal Entry

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

To submit a Cost Transfer, the Preparer is expected to read and understand the requirements of Policy 1305 Cost Transfers Involving Sponsored Projects.  Consistent with University policy, the Preparer is expected 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.  A complete justification will ensure that any internal or external individual reviewing, approving, or auditing the Cost Transfer has a clear understanding of the following:

• Change Reason – All Cost Transfers will require a change reason (Payroll Accounting Adjustments and Accounting Adjustments) or a Cost Transfer reason code (Accounting Journals). The corresponding drop-down lists in Workday contain a two-part reason code made up of the prefix, which defines when the need for a Cost Transfer was identified, followed by what type of error the Cost Transfer represents.
  
  • The following table provides guidance on how to select the correct prefix for the Cost Transfer change reason/reason code:

• Explanation – A concise, detailed statement that explains the reason for the Cost Transfer including how the error or situation occurred. 
• Description (not required for Payroll Accounting Adjustments) – Provide a detailed description of the expense in layman’s terms.  For Accounting Adjustments, Manual Journals, and University Service Provider (“USP”) Adjustments, it is not always clear what the expense is, and a complete description is needed to ensure that the reviewer and Approver are clear on the nature of the good or service to determine allowability and reasonableness. 
• Benefit – When moving an expense onto a sponsored award, it is necessary to describe the benefit to the award being charged.  A good benefit statement will describe how the expense benefits a specific aim or objective of the project.  For Payroll Accounting Adjustments (“PAAs”), indicate the actual percentage of effort devoted to the project.  Cost Transfers moving costs onto a Department of Health and Human Services (“DHHS”) [i.e., Agency for Healthcare Research and Quality (“AHRQ”), Centers for Disease Control and Prevention (“CDC”), Food and Drug Administration (“FDA”), Health Resources and Services Administration (“HRSA”), Substance Abuse and Mental Health Services Administration (“SAMHSA”), Administration on Aging (“AoA”), as well as other DHHS agencies (excluding the National Institutes of Health)] are subject to the following condition in the HHS Grants Policy Statement: “Permissible Cost Transfers should be made promptly after the error occurs but no later than 90 days following occurrence unless a longer period is approved in advance by the [Grants Management Officer] GMO.”  Cost Transfers requiring sponsor prior approval must be routed to the appropriate Authorized Organization Representative (“AOR”) for institutional approval and submission to the sponsor. Sponsor prior approval must be attached to the transaction in Workday. This also applies to any subaward that is primed by HHS (excluding NIH).  (See Form 1305 FR.01 Late Cost Transfer Calculator for assistance in calculating the number of days).
• For all other Cost Transfers that meet the definition of “late” as defined in Policy 1305 Cost Transfers Involving Sponsored Projects, explain the unusual circumstances that prevented the timely detection of the error and how this type of error or situation will be prevented from happening in the future. (See Form 1305 FR.01 Late Cost Transfer Calculator for assistance in calculating the number of days)
• When transferring animal or human subject related costs onto a sponsored project, document the approved IACUC or IRB protocol number in the Workday questionnaire or Form 1305 FR.02 Manual Journal – Cost Transfer Justification that identifies the award being charged for congruency. 

See below to determine the appropriate transaction to execute the Cost Transfer:

A. Payroll Accounting Adjustment

PAAs are used to make retroactive adjustments to payroll charges.  The need for a payroll adjustment should be identified during the monthly financial review process and the resulting PAA should be processed before the effort certification process begins, whenever possible.  Changes to effort during the effort certification process will automatically result in a PAA adjusting the payroll accordingly.  In rare occasions, PAAs may need to be completed after the effort certification process.  These will need additional documentation and justification as outlined in the section below and Form 1305 FR.03 Cost Transfer Documentation Matrix.

B. Accounting Adjustment

Accounting Adjustments are used specifically for supplier invoices, supplier invoice adjustments, and expense report transactions. Accounting Adjustments are the preferred transaction for correcting errors related to supplier invoices/adjustments and expense reports, but they can only be initiated after the original transaction is in Paid status. Accounting Adjustments are used when the following conditions need to be corrected: Chart of Account (“COA”), budget date, or non-trackable spend category.  Accounting Adjustments cannot be used to change an expense report spend category or when the adjustment needs to be allocated to multiple COAs. In this case, Form 1305 FR.02 Manual Journal – Cost Transfer Justification must be used.

C. Journal Entry – Manual Journal

As noted above, Accounting Adjustments should be used whenever possible.  Manual Journal Entries are used to make retroactive adjustments to non-payroll charges including but not limited to:

• Allocating a previously posted non-payroll expense to multiple COAs
• Changing an expense report spend category.

Note: Per the month-end close calendar, the deadline for Manual Journal submission is 3:00 p.m. and approvals is 5:00 p.m. on the third business day of the new month.  All unapproved accounting journals (as of 5:00 p.m.) will be canceled and need to be re-entered in the current month. To avoid canceled journals, it is advised to process these entries well ahead of the 3:00 p.m. submission deadline so the Department or Central Office has ample time to review and ask questions.

D. Journal Entry – USP Adjustment ISPADJ

ISP Adjustment journal entries are used to make retroactive adjustments to a University Service Provider (“USP”) charge.  When transferring USP charges, the journal source “ISPADJ” must be assigned to the Accounting Journal in Workday to ensure the Cost Transfer routes to the appropriate approvals.  Do not 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.

Billing Errors: USP users should contact the USP directly if they notice a billing error.  USP users are responsible for making any necessary corrections 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 (ISP Adjustments 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.

The DBO, business support unit, Preparer, and Approver are each responsible for ensuring that all required documentation that properly supports the Cost Transfer is entered, selected, and attached to the Cost Transfer. 

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

A properly documented Cost Transfer includes necessary elements as detailed Form 1305 FR.03 Cost Transfer Documentation Matrix.

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

Once a Cost Transfer is successfully approved by the Department Grant Manager, Workday routes the below noted transaction for central approvals. 

• All Manual Journal Entries (including ISPADJ) involving an SPFA-managed award (FD02/FD28) route to the Central Grant Cost Transfer Approver (SPFA) for final review and approval.
• PAAs moving costs onto an SPFA-managed award (FD02/FD28) that are > 90 days from the 5^th day of the calendar month end in which the expense was incurred after the date the original transaction appears on the award route to the Central Grant Cost Transfer Approver (SPFA) for final review and approval.  Refer to Form 1305 FR.01 Late Cost Transfer Calculator for assistance in determining if a Cost Transfer should be defined as “late.”
• Accounting Adjustments involving an SPFA-managed award (FD02/FD28) that are > 90 days from the 5^th day of the calendar month end in which the expense was incurred after the date the original transaction appears on the award route to the Central Grant Cost Transfer Approver (SPFA) for final review and approval.  Refer to Form 1305 FR.01 Late Cost Transfer Calculator for assistance in determining if a Cost Transfer should be defined as “late.”
• PAAs and Accounting Adjustments involving an SPFA - managed award (FD02/FD28) that are > 365 days from the date the original transaction appears on the award require the approval of the Controller’s Office (Controller or Controller-Sponsored) for review and final approval.  Additional information may be requested by the Controller’s Office, such as a corrective action plan. 
• PAAs that involve a previously certified Effort Certification Statement (“ECS”) require the review and approval of the Effort Certification Manager (“ECM”).  The ECM manually routes to the Associate Controller (SPFA) for review and final approval.

When evaluating a Cost Transfer submitted by the Preparer, the Approver (Grant Manager) must confirm that the entry is correct, in compliance with Policy 1305 Cost Transfers Involving Sponsored Projects and the terms and conditions of the sponsored award(s), and that all entered information and supporting documentation accurately and completely satisfies the requirements specified in Section 5, above.  

If a Cost Transfer needs to be modified (e.g., COA segment entered is incorrect, justification needs additional explanation, documentation is inadequate, change reason/reason code are inappropriate, etc.), the Grant Manager must send the proposed Cost Transfer back to the Preparer for updates.  After the Preparer completes all necessary modifications, the Cost Transfer can be resubmitted to the Grant manager for review and approval. 

Once the Grant Manager approves the Cost Transfer, they will either receive a confirmation that the Manual Journal Entry, Accounting Adjustment (including ISPADJ) or PAA was posted, or that the Cost Transfer was routed to the Central Grant Cost Transfer Approver (SPFA) for central review and approval.

Central Grant Cost Transfer Approver- SPFA

Cost Transfers that meet certain pre-defined conditions (see Section 6, above) automatically route to the Central Grant Cost Transfer Approver (SPFA) for review and approval.  Under normal circumstances, SPFA’s initial review is performed within 2 business days. 

If a Cost Transfer does not meet all policy and procedure requirements, SPFA returns the proposed Cost Transfer back to the Preparer to revise and update.  After the Preparer completes all necessary modifications, the Cost Transfer can be resubmitted for review and approval by the Grant Manager and SPFA, if appropriate. 

Controller/Controller-Sponsored

Cost Transfers that meet certain pre-defined conditions (see Section 6, above) will automatically route to the Controller/Controller-Sponsored for review and approval.  Under normal circumstances, the Controller’s office initial review is performed within approximately 2 business days. 

If a Cost Transfer does not meet all policy and procedure requirements, the Controller’s office returns the proposed Cost Transfer back to the Preparer to revise and update.  After the Preparer completes all necessary modifications, the Cost Transfer can be resubmitted for review and approval by the Grant Manager, SPFA, and Controller/Controller-Sponsored. 

PAAs and Accounting Adjustments involving an SPFA-managed award (FD02/FD28) that are > 365 days from the date the original transaction appears on the award require the approval of the Controller’s Office. 

Effort Certification Manager

PAAs that involve a previously certified ECS require the review and approval of the Effort Certification Manager.  The ECM evaluates the Cost Transfer for impact on previously certified effort.  If the ECM determines that the transaction meets all policy and procedure requirements, the ECM routes the Cost Transfer to the Associate Controller (SPFA) for review and approval. 

If the Associate Controller (SPFA) approves the Cost Transfer, recertification of the effort report will be required.

• If the approval of Associate Controller (SPFA) is not granted, and the charges being transferred would credit another sponsored project, the charges in question will instead be transferred to a departmental suspense or holding account.  An e-mail communication is sent to the Department Grant Manager(s) and/or the PI with an explanation outlining the reasons for denying the request.
• If the Cost Transfer results in a change to a previously certified ECS, the certifier will need to recertify the impacted ECS.  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 Section 8, below.)

Rejection of a Cost Transfer

Preparers and Approvers must provide complete and accurate explanations, justifications and supporting documentation for a Cost Transfer to be posted in Workday.

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/or fully justified after attempts by SPFA have been made to send the transaction back to resolve all issues.   

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

Rejected Cost Transfers may result in a charge to a departmental account. Specifically, the debit portion of the transfer will be moved and posted to the departmental account. This action does not preclude a Department from resubmitting the Cost Transfer 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 a Department’s Central GA or Unrestricted Operating fund account) resulting from the central review, an email notification is sent to both the Preparer and Grant Manager indicating the reason for the rejection.

Preparers and Grant Managers can view the status of their Manual Journal Entries (including ISPADJ), Accounting Adjustments and PAAs by accessing their Workday Inbox and then clicking on the Archive Tab. The following reports can also be generated: PAA Requiring Action – Yale, Find Journals by Cost Center – Yale, Find Accounting Adjustments by Cost Center – Yale or My Business Processes in Flight – Yale. Note: Your Workday access impacts Workday Report search results. 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. 

Appealing a Cost Transfer Rejection

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 to approve the Cost Transfer is final.

Remediation

If SPFA determines that a Department is experiencing frequently rejected Cost Transfers on a regular basis, SPFA and/or Lead Administrators will work with the Approver to remediate the issue.  Actions taken may include: i) retraining appropriate Department staff, and/or ii) denying access to the preparation and/or approval of future Cost Transfers by certain individuals and/or Departments.