Cost Transfer Guidance

 

Cost Transfers Involving Sponsored Programs 

Responsible Official:  Associate Vice Chancellor of Research and Innovation 

Responsible Office:  Office of Sponsored Projects 

Effective Date:  January 20, 2025 

Revision Date:  January 20, 2025 

Cost Transfers 

Definition 

A Cost Transfer is the reassignment of an expense to or from a sponsored project after the expense was initially recorded in the University of Arkansas’ financial system, Workday. Cost Transfers may be needed to transfer costs to a sponsored program from a different award due to an error or additional information becoming available after the expense was incurred. 

Guidelines 

Cost Transfers must be sufficiently documented in accordance with the requirements of the Office of Management and Budget (OMB) as part of 2 CFR Part 200, Subpart E (Uniform Guidance). These requirements establish guidelines in which U of A is required to relate financial data to performance data and to ensure such data is accurate, current and complete. 

Uniform Guidance (200.405 – Allocable Costs) requires that any costs allocable to a sponsored program may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards, or for other reasons. In addition to federal guidance, sponsors may have specific guidelines on cost transfer allowability. The Office of Sponsored Programs should be consulted when clarification or guidance is requested related to the allowability of any proposed cost transfer. 

Under the Uniform Guidance, costs must meet the following conditions: 

  • Be necessary and reasonable for the performance of the award and be allocable to the award; 
  • Be allowable (the cost is allowed by federal regulations, sponsor terms and conditions, including program specific requirements and University policy); 
  • Treated consistently (a cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost); and 
  • Be adequately documented. 

Submitting Cost Transfers 

Cost Transfers should be considered “the exception, rather than the rule” and kept to a minimum. Frequent errors in the recording of costs may indicate the need for improvements in accounting practices and the strengthening of internal controls at the departmental level. 

All Cost Transfers require justification for the error and departments must maintain and provide convincing evidence that the salaries, goods and/or services are properly allocable. This explanation and evidence should also indicate that the receiving award benefitted from the expenditures involved. 

Types of Cost Transfers 

In Workday, cost transfers are done using specific business processes based on the type of transaction being moved: 

  • Accounting Adjustments - non-payroll expenditures from supplier invoices, expense reports, and purchasing card expenses. 
  • Manual Journal Vouchers - all other types of non-payroll expenses or anytime a non-payroll expense needs to be transferred to more than one worktag. 
  • Payroll Accounting Adjustments (PAAs) - payroll expenditures such as salaries and wages. 

Documentation 

The following information must be included on all cost transfers: 

  • A justification(s) for the adjustment must be included to establish that the adjustment is within the approved guidelines of the sponsored program to be charged and is in direct support of the program objectives. The justification should be detailed and describe the benefit of the cost to the sponsored program being charged. 
  • Workday will automatically generate a questionnaire for any cost transfers moving transactions 90 days after the date of when the original transaction occurred. The questionnaire includes the following questions and must be completed with a detailed explanation for the timing of the adjustment: 
  • Why was the expense not charged originally to the appropriate sponsored program 
  • If moving the expense onto a sponsored program, why should the expense(s) be transferred to the proposed receiving sponsored program? (How did the award benefit from the expense?) 
  • If moving the expense onto a sponsored program, why are the charges being transferred allowable and allocable to the receiving sponsored program? 
  • What corrective action has been put in place to prevent future need for expense transfers of this nature? 

Accounting Adjustments and Manual Journal Vouchers 

Departments should initiate timely cost transfers in Workday via Accounting Adjustment and Manual Journal Voucher entry transactions. The department should add the following information to the Memo Field on both the Accounting Adjustment and Manual Journal Voucher that fully addresses all of the following: 

  • Description of the expense being transferred, including the original date incurred, original transaction number (e.g., EX0001234) and indicate appropriate Budget Date. 
  • Explanation of how the error occurred on the wrong award/cost center. 
  • Explanation of why it is appropriate to charge the receiving award/cost center. 

Supporting documentation should be maintained/attached as necessary. 

Payroll Accounting Adjustments (PAAs) 

The same principles apply to payroll accounting adjustments as to non-payroll adjustments. The following additional procedures apply to payroll accounting adjustments. 

It is crucial that the salary distributions be consistent with certified effort statements. When the salary distribution reflects a material difference from the actual effort distribution, a payroll accounting adjustment must be submitted to bring salary distribution into alignment with actual effort. In addition, payroll costing allocations in Workday should be reviewed at least quarterly and updated if needed to ensure current and future distributions reflect the correct allocation of effort. If payroll accounting adjustments are needed to be made on a certified effort report, please contact your Award Manager to discuss available options. 

Responsibilities 

Principal Investigator 

  • Principal Investigators (PIs) take primary responsibility for ensuring compliance with sponsor regulations as well as the monitoring of expenditures, timely correction of errors, and proper allocation of expenses. 
  • All transactions on sponsored programs should be authorized by the PI or a delegate who has direct scientific knowledge of the program being charged. 

Department/School/College Administrators (individuals responsible for account monitoring and management) 

  • Assist PIs with the timely review and reconciliation of expenditures and prepare/approve cost transfers in Workday 
  • Maintain adequate documentation of costs and cost transfers 
  • Ensure appropriate internal controls are in place for the appropriate allocation of costs to sponsored programs 
  • Ensure costs transfers are allocable, allowable, and reasonable, and are prepared and submitted a timely manner. 
  • Work with OSP to resolve any late cost transfers issues when necessary. 

Office of Sponsored Programs Award Managers 

  • Review all >90-day late cost transfers and supporting documentation in accordance with Sponsor and University guidelines in Workday and approves if appropriate. 
  • Exercise stewardship over sponsored projects in accordance with specific award terms and conditions and sponsor/university policies. 
  • Advise PI, Department, and College Dean’s Office on processing cost transfer adjustments and procedures. 
  • Provide guidance on cost transfers relating to sponsored programs 
  • Work with the department for securing sponsor approval if required on late cost transfers. 
  • Authorized to reject cost transfers involving sponsored program worktags that do not meet the criteria contained in this guidance or would be questionable under federal or other regulations and statutes or by the terms and conditions of a sponsor award. 

The distribution of these responsibilities may be shared or delegated differently across campus depending on organizational structure and staffing at the PI/designee and/or school/college level.