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Cost (Expense) Transfers Overview

Find information about cost (expense) transfers (payroll and non-payroll).

Thank you for your patience as we respond to your requests as quickly as possible. Please submit your inquiry on the  Business & Finance Services & Support portal, select Related to: Post Award Financial and About: Cost Transfer Inquiries

Overview and Deadlines

Overview

An cost (expense) transfer occurs when expenses are moved from one accounting distribution to another after they have been recorded in the operating ledger. If your job duties include processing cost transfers, you must follow specified procedures to fulfill federal, state, and UC requirements. Explanation to all cost transfers must be simple and succinct. All cost transfers must include answers to the following 4 questions: 

  1. How did the error occur?
  2. What is the benefit of moving the effort (salary/payroll) or non-payroll expense to the transfer TO project? (An Direct Retro moves salary to match effort.) Provide specific descriptions of items being transferred.
  3. Address the untimeliness. Why is the expense being moved so late?
  4. What is being done to prevent this type of expense transfer in the future?

Payroll expense transfers older than 24 calendar months are the highest compliance risk. 

Deadlines

Note: OPAFS Final approval will be granted based upon ensuring federally (and university’s) mandated compliances guidelines are met for all expense transfers and also the monthly volume of all expense transfers.

Authorization

Responsibility that applies to all projects for authorizing cost transfers rests on the following administrative officials:

  • Associate and assistant vice chancellors
  • Deans
  • Department business officers (DBOs)
  • Department chairs
  • Directors
  • Managers (MSOs)
  • Principal investigators (PIs)
  • Provosts
  • Unit heads
  • Vice chancellors 

Note: A "financial manager" is different from a "project manager." Within a department, a project manager has the responsibility for processing and reconciling the financial transactions related to a project. A financial manager usually holds the position of Financial Analyst or above. A financial manager's responsibilities include reviewing and approving transactions to make sure they are prepared accurately, completely, and in compliance with UC policies, federal guidelines, and contract-specific guidelines.

Documentation

Individual departments (not BFS-OPAFS [Business and Financial Services-Office of Post Award Financial Services]) serves as the "office of record" for documenting Cost Transfers. The originating department must maintain all documentation, justifications, and approvals.

Separation of control

University policy and OMB Circular A-21 (PDF) require that no one person has complete control over all aspects of a financial transaction.

Policies

Policies that apply to all projects

Policies that apply to sponsored projects only

Conditions

After an expense has been recorded in the operating ledger, you may transfer it only under the following conditions and with appropriate documentation and a complete explanation when:

Conditions that apply to all projects

  • You are correcting an error, such as when you discover an incorrect accounting distribution.
  • You are changing the original fund source when required.

Conditions that apply to sponsored projects only

  • You can make transfers between closely related funding sources when more than one funding source supports closely related work, as long as the cost is allowable and properly justified.
  • You can make a cost transfer to a new FDP award that is within 90 days of the project start date. These expenses must have been incurred in an unrestricted nonfederal fund prior to UCSD's official acceptance, and in direct support of the award.
  • You can correct an overdraft by moving expenses from an overdrafted fund to an unrestricted funding source.

Ways to avoid

Plan ahead

  • If you manage a contract or grant, anticipate receiving the awards. Ahead of time, complete a Request for Advance Approval form for pending awards to avoid any delays after you receive the awards. Use this form when:
    • The funding agency makes a firm commitment to award the contract or grant.
    • It is essential to advance funds.
    • Other funding exists to cover the risk of a delayed start date or failure of award.

Strengthen financial management control procedures

  • Enhance department review procedures to make sure that payroll transactions are properly authorized, completed, and documented.
  • Reconcile and review the Distribution of Payroll Expense (DOPE) report and ledgers promptly to ensure that charges are accurate, complete, and applicable.
  • Monitor agency budgets and compare them to actual DOPEs and ledger charges and pending and projected expenses.
  • Read the terms and conditions of the award so you know what expenses are allowed.
  • Request timely extensions from the agency if the work is not completed and you need the available funds to complete the remaining work.

Attend a Training

Know the guidelines

Keep current with UC, UCSD, and governmental guidelines:

High risk

If the cost transfer you are processing involves a sponsored project and meets any of the following conditions, it is considered high risk and must be approved by the Office of Post Award Financial Services (OPAFS).

  • The project periods don't match.
    • The original transaction date occurred outside the project period of the fund receiving the expense.
  • The transaction date is too old.
    • The transfer is to or from an NIH award and the original transaction date occurred three or more months ago.
    • The transfer is to or from a non-NIH federal award and the original transaction date occurred four or more months ago.
  • A terminating award is involved.
    • The transferred cost is to a federal fund within the last 30 days of the originating award.
  • The cost was previously moved.
    • The cost is being transferred to a federal fund and was previously moved as an expense transfer.
  • A project is in an overdraft condition.
    • The cost is being transferred to a sponsored fund that is in an overdraft condition (includes federal flow-through funds).
    • The cost is being transferred from any fund in an overdraft condition to a federal fund.
  • The transfer includes an account code designated as "E."
    • The cost transfer has an unallowable account code (E or error code) for a federal fund.

Payroll expense transfers older than 24 calendar months are the highest compliance risk. 

Federal contracts and grants

Allowable direct charges

For an expense to be considered an allowable direct charge to a federal award, the cost must:

  • Be reasonable and necessary — the type of action that a prudent person would take under similar circumstances
  • Be required to satisfy the project scope
  • Be allocable to the sponsored project
    • If an expense benefits 2 or more projects in clear proportions, allocate it based on the proportions.
    • If an expense benefits 2 or more projects but the proportions are not clear, use sound reasoning and good judgment to assign the proportions.
  • Receive the same treatment that similar expenses would receive in similar circumstances
  • Conform to limitations or exclusions set forth by federal or campus policy
  • Be budgeted into the award or receive permission from the agency to rebudget to allow charging the cost

No cost  transfers for reasons of convenience

A cost transfer may not be made for reasons of convenience such as:

  • To cover overdraft
  • To avoid restrictions in the original sponsored agreement
  • To dispose of leftover funds

Cost transfers must be timely

Federal agencies dictate varying timeframes by which cost transfers must be made. As a general rule of thumb, cost transfers made 90 to 120 days beyond the date of the original expense will require further justification and may be denied.

More information

For more details on allowable direct costs in federal contracts and grants, see the Policies section of this page.

Training

Record retention

Guidelines that apply to all funds

Guidelines that apply to sponsored projects funds only

  • With regard to federal contracts and grants, UCSD must meet both the University of California and the individual award requirements, whichever is longer.
  • In case of audit or litigation before the retention period is up, the retention must be extended until the case has been resolved.
  • If you are responsible for deciding retention periods for federal awards, consider the following:
  • UCSD's general policy says that material related to contracts, grants, and cooperative agreements should be retained the longer of:
    • Five years from the submission of the final financial report (including billing).
    • The resolution of any litigation, claim, or audit
    • The period stated in the award document

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