1. August 16, 2012 – Anschutz Medical Campus
University of Colorado Denver Writing Compliant Journal Entries – Cost Transfers Finance Office / Office of Grants and Contracts
August 16, 2012 – Anschutz Medical Campus
August 23, 2012 – Denver Campus

2. Background
An audit was conducted by Internal Audit over Cost Transfers & Journal Entry Descriptions.
Definition: A cost transfer is a transfer of expenditures to and/or from a sponsored project by means of a journal entry.
Audit Objective: Ensure cost transfers comply with applicable university, state and federal requirements.
Audit Findings - Topics:
Cost Transfers on Projects in Deficit Status
Inadequate Journal Entry Descriptions
Untimely Cost Transfers
Incomplete, Insufficient or Illegible Supporting Documentation
Finance Office
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3. Cost Transfer on Projects in Deficit Status
Guidance:
National Institutes of Health (NIH) Grants Policy Statement, Part II: Terms and Conditions of NIH Grant Awards - Subpart A – 7.5 Cost Transfers, Overruns, and Accelerated and Delayed Expenditures states:
“Transfers of costs from one project to another or from one competitive segment to the next solely to cover cost overruns are not allowable.”
Campus guidance Cost Transfers on Sponsored Projects, 4-12 also refers to the NIH Grants Policy.
Health and Human Services (HHS) Grants Policy Statement II-43, Cost Transfers states that transferring costs due to a deficit generally is not allowable.
Finance Office
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4. Cost Transfer on Projects in Deficit Status
Finding:
Journal entry description and the supporting documentation did not clearly support or explain why the transfer should be charged to the new speedtype. If new speedtype is another project, why this expense was necessary to complete the scope of work for the new speedtype.
Transfer was from a National Science Foundation (NSF)-sponsored project to a NIH-sponsored project. Because the validity of the transfer was not adequately explained, it was not possible to determine whether the charge was allowable, allocable, reasonable, or consistent.
Finance Office
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5. Inadequate Journal Entry Descriptions
Guidance:
The Cost Transfer Policy requires the “long description” on the journal entry to include the cause of the error and how/why is the expense necessary to complete the scope of work of the project charged.
Without adequate journal entry descriptions, OGC may not be able to determine whether the cost transfer is allowable, allocable, reasonable, consistent, and timely.
Finding:
There were cost transfers that did not contain an adequate journal entry description as required by the policy
Finance Office
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6. Long Description
Use the Long Description field on the Header Page to describe your JE in detail. You get 254 characters to explain what you are doing and why you are doing it. The Long Description provides useful information for someone inquiring about your JE, and necessary information for the person approving your JE. The Long Description field is mandatory. The Long Description field for this JE is, ―Correct an error on the October 2004 statement for Speedtype Mileage for Caitlin Edwards for an outreach trip to LaJunta was charged, in error, to the Brighton outreach mileage account
Finance Office

7. Example #1
Inadequate Description Identified by Internal Audit: “To transfer income/expenses from HRSA grant” Suggested Description: “To transfer salary expenses from HRSA sponsored project (ST ) that is over budget due to personnel costs being greater than planned. Expenses transferred to an allowable unrestricted departmental funding source (ST ).
Finance Office
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8. Example #2
Inadequate Description Identified by Internal Audit: “To redistribute expenses in order to close out and balance speedtypes” Suggested Descriptions: “To Transfer expenses from Adolescent Research (ST ) to Adolescent Research (new segment and new ST ). Expenses were incurred during budget period of new segment, but purchase was not updated to new speedtype.”
Finance Office
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9. Example #3
Inadequate Description Identified by Internal Audit: “To move lab supplies from one speedtype to the new project speedtype where they should’ve been reported” Suggested Description: “To transfer lab supplies from ST NIH training grant to ST Lab supplies were required by ST in order to complete INUITRO studies for the grant. Expenses were originally booked wrong due to a miscommunication in lab order request”
Finance Office
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10. Untimely Cost Transfers
Guidance:
The Cost Transfer Policy requires cost transfers to “happen immediately on the discovery of an error or as soon as possible, but not more than 90 days after the discovery of the error”
90-day timeframe is also in agreement with NIH and HHS guidance
Untimely cost transfers could be disallowed and can have consequences on financial statements and/or the project closeout process
Re-submitting financial reports are often looked upon negatively by the sponsor because (1) of the rework it cause the sponsor and (2) potential internal control weaknesses this suggests to the sponsor. Often, the sponsor will reject the re-submission. .
Finance Office
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11. Untimely Cost Transfers
Finding:
Cost transfer tested did not occur in a timely manner.
The need for the transfer to properly account for a change in primary awardee was first documented in June 2009 but the transfer did not occur until January 2011.
Finance Office
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12. Incomplete, Insufficient or Illegible Supporting Documentation
Guidance:
The Cost Transfer Policy requires transfers to be:
“clearly supportable” and “supported by documentation that contains a full explanation of how the error occurred and a certification of correctness of the new charge by a responsible CU Denver organizational official”
The policy further explains that sufficient supporting documentation will “promote understanding of why the JE is required, including how and/or why the error was made; why it is appropriate to charge the expenses to the project referenced in the JE; and assurance that the charges are reasonable, allowable, allocable, and in accordance with award terms”
The documentation requirement is also in agreement with NIH and HHS guidance
Without complete, sufficient, and legible supporting documentation, OGC may not be able to determine whether the cost transfer is allowable, allocable, reasonable, consistent, and timely.
Finance Office
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13. Incomplete, Insufficient or Illegible Supporting Documentation
Finding:
Cost transfers tested did not have complete or sufficient supporting documentation.
One cost transfer had an illegible report as supporting documentation.
Finance Office
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14. Examples – Incomplete/Insufficient Supporting Documentation
Supporting documentation doesn’t indicate how the $ amount transferred was arrived at
Incomplete because there were Invoices to support most of the journal lines but not all.
Unclear how the supporting documentation and the cost transfer relate
The supporting documentation was an expense report with numbers highlighted that add up to the number transferred; no other explanation of who determined the numbers highlighted or why they were determined to be transferred was included
Finance Office
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15. Example – Illegible Supporting Documentation

16. Additional Items
JEs create additional work & weaken internal controls. It’s best if booked (or allocated) point of purchase
Have method for communicating new speedtype for same award in Lab
Defendable basis for allocation of commonly used supplies purchased in bulk or shared by multiple projects
Example of Allocation Basis:
Based on FTE on each project
Based on proportion of budgeted expenses – if budgeted supplies based on bottom up usage estimate.
Finance Office
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17. Resources Processing a journal entry – Guidance
Finance Contacts
Shaun McMullin, Deputy Controller or
Ryan Yu, Associate Director of Accounting Services or
Caroline Kirkwood, Financial Compliance Auditor or
Office of Grants & Contracts
Post Award Administrator
Finance Office
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18. Conclusion Items to Remember:
Journal entry description should clearly support and explain how the error occurred, the appropriateness of the transfer and why the expenses were necessary to complete the scope of work – direct relationship to scope of work is key
PeopleSoft allows 254 characters in the long description
Timely booking of cost transfer w/in 90 days after discovery of error
Complete and sufficient supporting documentation
Finance Office
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19. Questions?
Finance Office
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