Late Cost Transfer Guidance

All late cost transfers are an exception to established policy and are closely reviewed before being approved or denied. As a result, the review and processing of late cost transfers takes significantly longer than non-exceptional cost transfers. Reviewing time increases when the Late Cost Transfer Policy Exception Request package submitted is incomplete, requiring further requests and additional response time. The best approach to obtaining timely processing of your late cost transfer policy exception request is to ensure that the Payroll Expense Transfer (PET) form and/or PeopleSoft (source code 545) journal is complete with all required supporting documentation, full explanations and proper approvals. Effort should be taken to minimize the need for late cost transfers by reviewing financial activity in a timely manner and transferring expenses to the appropriate funding source within 120 days as necessary. By consistently reviewing expenses and transferring timely, the additional documentation and explanations associated with late cost transfers can be avoided reducing potential audit disallowance risks to the University.

When is it Appropriate to Make a Cost Transfer?

Once an expense has been recorded in the General Ledger, it is only appropriate to make cost transfers in the following four situations:

  • To correct an erroneous recording, such as when the original source document (e.g., invoice, payroll journal) refers to an incorrect Account or award number.
  • To reflect a change in the decision originally made as to how the goods or services would be used (e.g., a case of beakers originally ordered for and charged to a teaching program but subsequently used by a research project).
  • To redistribute certain high quantity but small value charges (e.g., paper costs, telephone charges, mailing charges) when allowed by the sponsor which are billed to departmental funds.
  • To redistribute payroll costs based on after-the-fact verification of effort.

A cost transfer must pass the following tests when the transfer is to a federal award:

  • It must contain a reference to the invoice, payroll journal, or other documents which initiated the original charge.
  • It should typically be for the exact amount originally recorded in the General Ledger. If transferring a fractional amount, the transfer must contain an explanation supporting a reasonable method of allocation.
  • It must be fully explained, justified and approved by the unit administrator(s) involved in the transaction. An explanation which states that the transfer is being made “to correct an error”, “to transfer to correct award”, or “expenditure inadvertently charged to incorrect award” is not sufficient.
  • The approvals must include the Principal Investigator.
  • Transfers must be processed within 120 days from the close of the month in which the original charge was posted. If there are unavoidable circumstances which necessitate a transfer after 120 days, a full explanation is required, including a well-documented account of the events that led up to the late adjustment.

How to Submit a Late Cost Transfer Policy Exception Request

Follow these steps for all payroll and non-payroll cost transfers that are charged (debited) to a federal or federal flow-through award and processed over 120 days after the posting of the original charge.

  • Complete the Late Cost Transfer Policy Exception Request Form and obtain the approval of the appropriate department financial administrator.
  • Prepare the PET packet including Attachment E (payroll) or online journal (source code 545) in PeopleSoft (non-payroll), and ensure that it includes an explanation of how the error occurred and the benefit to the receiving grant. Also, include an explanation of the need to transfer the expenses after the 120 day period.
  • Obtain approval from a designated Approved Cost Transfer Reviewer and the Principal Investigator.
  • Submit the Late Cost Transfer Policy Exception Request packet via email to the CGA Service Desk by the 15th of the month.

Once a complete packet is received by CGA, cost transfers are reviewed by the Compliance Team for allowability, reasonableness and adequacy of the explanation. The Compliance Team then makes a recommendation to the CGA Assistant Controller for final determination whether to approve or deny the cost transfer.

If you have questions about the cost transfer process, including processing of late cost transfers, contact the CGA Compliance team at [email protected] or 415.476.4693.