Harvard University Financial Policy
Cost Transfers

Series:	Finance & Accounting
Policy Title:	Cost Transfers
Number:	FA1
Effective Date:	MARCH 1, 2008
Revision Date:	FEBRUARY 14, 2008
Responsible Office:	Office for Sponsored Programs

Policy Statement

To comply with the requirements of OMB Circular A-21, the policy of NIH, our largest source of federal research funding, and the requirements of other federal sponsors, Harvard University has established the following policy and procedures for the processing of cost transfers.

DEFINITION:

A cost transfer is a transfer to a federally funded sponsored account of a charge previously recorded elsewhere on Harvard’s General Ledger. See FAQ #4

Examples:

• transfer pre-award costs from departmental holding account
• correct clerical error
• reallocate salary and fringe to reflect actual effort
• reallocate shared services that were previously charged elsewhere

Reason for Policy

To comply with the cost allowability and allocability requirements of OMB Circular A-21, it is necessary to explain and justify transfers of charges into federal awards from other federal accounts, non-federal accounts or University accounts (including transfers from a departmental cost share fund to a sponsored project fund). Timeliness and completeness of explanation of transfer are important factors in supporting allowability and allocability in accordance with the principles of the Circular.

NIH Grants Policy Statement (12/01/03, pp.83-84) states:

"Cost transfers to NIH grants by grantees should be accomplished within 90 days. Transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official of the grantee. An explanation merely stating that the transfer was made 'to correct error' or 'to transfer to correct project' is not sufficient. Transfers of costs from one project to another or from one competitive segment to the next solely to cover cost overruns are not allowable. Grantees must maintain documentation of cost transfers, pursuant to 45 CFR 74.53 or 92.42 [record retention requirements] and must make it available for audit or other review. Frequent errors in recording costs may indicate the need for accounting system improvements and/or enhanced internal controls. NIH also may require a grantee to take corrective action by imposing additional terms and conditions on an award(s)."

Who Must Comply

All individuals in Harvard University schools, tubs, local units, Affiliate Institutions, Allied Institutions, and University-wide Initiatives that transact to the federal sponsored fund range.

Responsibilities

Tub finance offices are responsible for ensuring that local units abide by this policy and accompanying procedures when processing cost transfers. The Office for Sponsored Programs (OSP) is responsible for maintaining the policy and for answering questions regarding the policy. Individuals processing cost transfers are asked to first contact their tub finance offices with questions on this policy, to ensure that tub finance offices are aware of cost transfer questions and that consistent guidance is provided within each tub.

It is the responsibility of each school or other local unit to:

• Enter cost transfer journals.
• Retain copies of all related documentation in accordance with University record retention regulations.
• Ensure that all personnel engaged in the financial administration of federally funded awards are familiar with the University Cost Transfer policy.

Procedures

All journals of previously incurred charges to federally sponsored awards are cost transfers, even if they meet the following criteria and do not require a cost transfer form and documentation. The Batch Name for the journal should use the proper cost transfer naming convention: “CT^TUB^DEPT^ Preparer's Initials^Description^Date (or Date Range) of original transaction(s),” and the Transaction Line Description should describe the journal or, if the explanation would be too long and a CT Form was submitted, reference that Form (e.g. “Transfer June ’07 salary to fund 123456” or “See related CT Form”).

Batch Name example: CT^FCOR^CCB^ JHM^See related CT form^FEB-APR 2007

Cost Transfers requiring only a journal with explanations in the Batch Name and Transaction Line Description fields

(Cost Transfer Explanation and Justification Form (CT Form) and OSP prior approval are not needed):

• Cost transfers made within the accounting period (month) of the original charge. See FAQ #1
• Cost transfers of original expenses less than $500. See FAQ #3
• Cost transfers to correct improperly classified object code values.
• Cost transfers to correct transactions to invalid code combinations involving only the org and/or root segment values. See FAQ #2
• Cost transfers between subactivities of the same fund/activity combination having concurrent budget periods. See FAQ 11
• Cost transfers between subactivities of the same fund/activity not having concurrent budget periods (i.e. subactivities within same account group when year logic has been used) as long as the award is granted carry-forward authority for transferring the fund balance from one budget period to next without the sponsor's prior approval, and does not require annual financial reporting for each budget period.

Cost transfers requiring only a journal with explanations in the Batch Name and Transaction Line Description fields if made within 90 calendar days. Please note that 90 days means 90 calendar days, not three months. Use the OSP cost transfer to determine the deadline for your cost transfer.

• Transfer of pre-award expenses which were charged to a departmental account.
• Routine reallocation of costs charged elsewhere (e.g. long-distance telephone charges).
• Cost transfers to correct transactions to invalid code combinations involving the fund and/or activity and/or subactivity values.

Cost Transfers Requiring a Journal and Cost Transfer Form with Questions 1 and 2 Answered (Within 90 Calendar Days)

If the cost transfer is posted to the General Ledger within 90 calendar days of the 15th of the month following that in which the original charge was recorded, questions 1 and 2 on the CT Form must be answered. (Use the OSP cost transfer calculator to determine the deadline for your cost transfer).

Transaction Line Description field on journal should explain the cost transfer or, if the explanation would be too long, say "See related CT Form."

A draft or out-of-balance journal, Detail Listing of original charge, CT Form, and other supporting documentation are sent to OSP for review and approval. Once approved, the CT form is returned to originator for posting to General Ledger (OSP will enter journal if necessary to meet closing deadlines) and for retention with other accounting records.

Cost Transfers Requiring a Journal and Cost Transfer Form with Questions 1 through 4 Answered (More Than 90 Calendar Days)

If more than 90 calendar days have passed since the 15th of the month following that in which the charge to be transferred to a federal account was originally recorded in the General Ledger, an explanation for the lateness of the cost transfer and your plans to avoid this situation in the future (questions 3 and 4 on the CT Form) are required (in addition to questions 1 and 2). Cost Transfers after the 90-day period need the approval of a senior school financial officer (determined by each school) and OSP's Director of Financial Services.

Any supporting documentation justifying the lateness of the cost transfer (e.g. copy of Action Memo, correspondence between departments and central offices, etc.) should be attached to the Form.

Use the cost transfer calculator to determine the date your cost transfer reaches 90 days.

If a cost transfer is required to correct a previously processed cost transfer journal, the date the transaction originally posted to the GL should be used for counting purposes (not the date of the previous cost transfer).

Approval for cost transfers submitted later than 90 calendar days (as defined above) will only be granted in extenuating circumstances; as described below. They DO NOT include

• Absences of PI or responsible administrator
• Shortage or lack of experience of staff.

It is the responsibility of the grantee and the PI to ensure the availability of qualified staff to administer and exercise stewardship over federally-funded projects in accordance with federal policies and regulations, including those relating to regular monitoring of expenditures and timely correction of errors and reallocation of expenses.

Transfers that would result in the revision of a final Financial Status Report (FSR) or Final Invoice will generally not be approved.

Examples of Acceptable Extenuating Circumstances for Cost Transfers over 90 calendar days (note that all of these exceptions still require submission of the CT Form and supporting documentation):

• Late issuance of an Action Memorandum (See FAQ#10) for reasons beyond the control of the requestor;
Note: the deadline for submission of cost transfers is 45 calendar days after issuance of a related Action Memorandum (e.g. activation of new award, full execution of a subcontract, action changing account status from advance to active, extension of time, incremental funding, etc.).
• Failure of another department to take action, e.g. on a properly submitted payroll distribution change request;
• Journals to align the allocation of prepaid tuition remission with effort.
Note: The cost transfer rules apply to the dates of the salary charges associated with the tuition remission.

Notes:

1. When a cost transfer form is required, cost transfer journals should be processed only after the cost transfer form has been approved. Journals may be created in draft or ”out-of-balance” form while awaiting approval, but should not be posted to the General Ledger until the cost transfer form is approved by OSP.
2. Requestors can avoid lateness by anticipating the possible need for additional clarification or documentation from OSP.
3. At no time should federally funded accounts be used as holding accounts for expenses which will subsequently be transferred elsewhere, including to competing or non-competing continuations of the same project for which the notice of award or the new account number has not yet been received.
4. Requestors are advised to submit explanations for lateness (i.e. over 90 calendar days) to OSP and to their Tub senior financial officer for review before completing the journal and assembling backup documentation. OSP and your Tub senior financial officer are available to assist departments in all aspects of cost transfer explanation and preparation of documentation, both for transfers within the 90-day time limit and for those beyond.

Forms

CT Form(.doc)

Contacts

Judy McSweeney, Director of Financial Services, Office for Sponsored Programs (OSP) (617)496-2513 or judy_mcsweeney@harvard.edu

Definitions

A cost transfer is a transfer to a federally funded sponsored account of a charge previously recorded elsewhere. Examples:

• transfer pre-award costs from departmental holding account
• correct clerical error
• reallocate effort to reflect actuals
• reallocate shared services that were previously charged elsewhere, etc.

Related Documents

• Cost transfer calculator
• FAQ’s
• Cost Transfer Job Aid
• Decision tree

Related Policies

Internal Billing Transactions Policy

Appendix

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