OFFICE OF SPONSORED PROJECTS Cost Transfers OFFICE OF SPONSORED PROJECTS

Agenda Introduction to the Cost Transfer process Provide an overview of cost transfer regulations Review of Brown University’s Cost Transfer Policy Provide tips and tricks that will help to reduce the need for cost transfers Intro to Cost Transfer Process: What it is What it looks like How to appropriately do a cost transfer at Brown

What is a Cost Transfer? A cost transfer is an after-the-fact reallocation of costs, either labor or non-labor, to a sponsor funded award

Why is a Cost Transfer Policy Necessary? Federal regulations require that transfers to federally funded sponsored accounts be timely and properly documented. Previous Under 2 CFR Part 220 (OMB Circular A21) New Under 2 CFR Part 200 (Uniform Guidance) as of 12/26/15

Why is a Cost Transfer Policy Necessary? Late, frequent, and inadequately explained cost transfers: Suggest poor financial management Lead to questions on the overall reliability of the institution’s internal controls and accounting systems Cause audit issues Can also have cash implications when accounts are used to “hold” expenses inapprioriately

Brown’s Cost Transfer Policy To comply with allowability and allocability requirements under the Uniform Guidance, (Cost Principles for Educational Institutions), it is necessary to explain and justify the transfer of charges to federal awards from other accounts. The Uniform Guidance prohibits the use of cost transfers for the purpose of “convenience”, i.e., a transfer largely for the purpose of using unexpended funds on an award that is ending. Timeliness and completeness of transfer explanations are important factors in supporting allowability and allocability in accordance with the principles set forth in the regulations. Procedures have been established in accordance with Uniform Guidance which provides guidance for determining the costs applicable to sponsored agreements and requires the recipient institution to ensure that costs charged are allowable. http://www.brown.edu/research/about-brown-research/policies/cost-transfer- policy Polic We are working on Updating our Cost Transfer policy but in the meantime this one can be found on Brown’s Website. and its implementation are indicative of the internal controls Brown provides

General Rules: To be permissible, cost transfers must meet the criteria established for both timeliness and appropriateness. Cost transfers should be initiated as soon as possible after the original transaction, preferably within 90 days of the accounting date of incurring the expense. Requests for transfers after 90 days must include sufficient documentation and justification and will be considered on a case by case basis. The University is obligated to immediately remove incorrect charges made to sponsored accounts, regardless of time frame.

Cost Transfer Requirements Cost Transfer Form Answers to Questions 1 and 2 on Cost Transfer Justification form Copy of original invoice, shipping slip, etc. clearly documenting purchase being transferred Copy of expense showing account where expense currently resides

The Cost Transfer Justification Form Form is designed to clearly document: Why was an expense initially attributed to an account Why is the charge more appropriate for the account where it is being transferred. Specifically, how is the charge related to the advance of the scope of work of the project. If this transfer is over 90-days: Why did it take so long to identify this mischarge What corrective action will Brown undertake to make sure such circumstances do not occur in the future.

Items not subject to the 90-day Period 1. Transfers of true over expenditures (off sponsored awards to unrestricted accounts). These transfers may be made in lump sum entries rather than identifying individual transactions. 2. Transfers of expenditures between account numbers under the same award number (i.e. between parent and/or child accounts), in cases where there are no sponsor restrictions on the funds set aside in a particular sub account. 3. Transfers of expenditures incurred and charged to a departmental, unrestricted, or other non sponsored account while awaiting the fully executed sponsored agreement. Assuming the costs are allowable and allocable 4. Transfer of an incorrect charge from a sponsored account to a non-sponsored account. #3 Must be completed within 90 days of receiving the NGA Can be minimized by utilizing advance accounts Make sure you document

Items to consider Ensure the reason for the transfer is acceptable. Ensure the cost being transferred is allowable, reasonable, and allocable to the new award, that it was incurred within the award period. Process the transfer in a timely manner (within 90 days). Be clear and concise in the language used in the cost transfer documentation and the accompanying journal. Tell the story of what happened – simply stating “fixing a mistake” is insufficient. Review the documentation for a late cost transfer to ensure it includes an explanation for the lateness of the request. If its over 90 days make sure to complete questions 3 & 4 Over 90 Days is case by case basis with senior mgmt approval and infrequent

Salary Reallocations Reallocations are considered cost transfers of salary and must be in compliance with the University’s Cost Transfer Policy. Departments are responsible for periodically reviewing effort distribution for appropriateness and accuracy of effort expended on all projects. It is recommended that the review be done monthly or no less frequently than quarterly. The Uniform Guidance requires adjustments to salary allocations in response to significant changes in work activity. Failure to adjust salary allocations in a timely manner will result in errors to salary charges to grants, leading to over/under recovery of salaries. Best Practices to consider involve meeting with researchers when awards begin or expire to review changes in allocation. Waiting until the annual certification process or award closeout will often result in non-compliance

Salary Reallocations and the Effort Certification Process In order to process a reallocation made prior to the Certification of Effort the department must provide: Answers to question 1 and 2 of Cost transfer justification form Procedure for Salary Reallocation Requests Made after The Certification of Effort The Cost Transfer Justification form must include the appropriate justification and supporting documentation for why the researcher certified effort now deemed incorrect. A review of the department’s certification procedures and the corrective action that it will take place to avoid recertification in the future. A re-signed, re-dated, time and effort certification form that includes the new adjustments. OSP will review and consider the request. If it is appropriate to process the reallocation, OSP will approve for processing by payroll. Rare Occasion.

Best Practices – Get it right the first time! Active account management – timely, proactive reviews with PI’s regarding grant activity. Charge costs to the correct award initially and ensure they are allowable and allocable to the award. When costs are shared by more than one award, use an allocation methodology.

Best Practices Continued… Request advance accounts via a UPAS form to charge costs incurred prior to receipt of notice of grant award. Update accounts for items such as salaries and standing purchase orders in a timely manner when award numbers change.

Please Avoid Transfers with inadequate explanations. Explanations that raise more questions than answers. Incomplete explanations. Using “to correct an error” or “to transfer to correct project” as an explanation. If a cost transfer is not approved, the expenses in question need to be removed from sponsored award/account If in doubt, contact OSP before writing anything down Bullet 3 – we know there was an error, that’s the basis of a CT Remember that reviewers are not as intimate as department staff Remember that auditors will ask to “show me the new procedure in place….”

Do not: Use any sponsored project as a holding account, including for competing continuations of the same project for which the notice of award or the new account number has not yet been received. Process cost transfers to a sponsored award to spend down the funds or remove overage to other unrelated grant funding. Transfer costs to another to avoid restrictions imposed by the terms of the sponsored agreement.

Red Flags to Auditors Cost transfers to or between sponsored awards Cost transfers older than 90 days after the original transaction date Cost transfers in the last month of the award or after the award has expired Large numbers of cost transfers Round numbers in a cost transfer – they may be an indicator of a plugged number rather than actuals Cost Transfers that result in recertification Cost transfers that remove overages Examples of audit findings that include CT’s University wide implications and amounts. May end with faculty salary going to 2-ledger because it is too late.

Should the following CTs be approved? If not, why? A request to move 50% Dr. Researcher’s salary to a federal award starting in October. Dr. Researcher just returned from 4 months of field work and forgot to tell the grants manager of the change before they left. A Notice of Grant Award for Dr. Researcher’s AIDS project was just received on February 1 for an award that began in October. The department is requesting to move $12,550 of salaries and supplies from the last 2 months to the award.

Are the following wordings appropriate and adequate Are the following wordings appropriate and adequate? Please explain why or why not. The attached cost transfer is late because I was on vacation and could not get it done within 90 days. The attached cost transfer is over 90 days because the graduate school did not change the post doc’s appointment form as requested. We made a request about once a month and they finally completed the change and the journal last week.

Should the following CT be approved? If not, why? Dr. Researcher’s grant ended in August 2014. The administrator realized in February 2015 that a $455 lab supply order should have been charged to the old grant. The administrator submits a cost transfer request to move the charge. Professor Jones travels to India for an archaeological dig for his research project entitled “Secret Cults and the Temple of Doom.” He submits a reimbursement form for his travel expenses. When the reimbursement was processed, the airfare was charged to a domestic travel worktag rather than the foreign travel worktag. The administrator submits a cost transfer request to correct it.

What do you say? In September Dr. Researcher directs you to reallocate salary from the prior fiscal year for two RA’s working on the project. The RA’s effort is supported 100% between Dr. Researcher’s two NIH grants.

What should you do? Your most prolific researcher comes to you and asks you to move $22,000 in supplies from his parent account in your department to a child account found in Engineering. When asked for a justification you are told that “we are overspent and they still have money.”

Should the following CT be approved? If not, why? Dr. Researcher approaches you and tells you that he would like to transfer $10,000 in expenses from his grant to a non sponsoredP account. The expenses relate to the purchase of DNA sequencing that were purchased fives months ago.