Cost Transfers

1. Cost Transfers CALS Research Division http://www.cals.wisc.edu/research/ CALS Business Services http://www.cals.wisc.edu/bussvc/ March 15, 2007

2. Today’s session will cover: • Overview of campus policy • Roles and responsibilities of the PI • General principles • Processing procedures • Justification statements • Timelines • Questions/suggestions

3. Overview of Campus Policy

4. Cost transfer policy Terms and definitions Types of transfers Roles and responsibilities Project management Regulatory references Extenuating circumstances Cost transfers FAQ Transfer forms Allowable example Unallowable example Cost transfer policy for sponsored projectswww.rsp.wisc.edu/policies/costtransfer

5. Definition of Cost Transfers A cost transfer is an after-the-fact reallocation of costs, either salary or non-salary costs, to a sponsored project within a 90-calendar day period from the accounting date. (Accounting date, for the purpose of this policy, is the end of the month of the journal date as shown in WISDM.)

6. Reason for policy Proper management of funds is essential to uphold the fiduciary responsibilities of the University … responsibility to manage funds in a manner consistent with the University’s mission and the conditions specified by external sponsors.

7. Regulations OMB Circular A-21: • Sections C.1-C.4 -- concepts of allowability, allocability, and reasonableness • Section C.4.b. – costs … may not be shifted to other sponsored agreements to meet deficiencies caused by overruns or other fund considerations; to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience.

8. Regulations Allowability: A cost is allowable to a project if the costs: • are reasonable; • are allocable to the specific project; • are treated consistently in like circumstances; AND • conform to any limitations of the cost principles or the sponsored agreement.

9. Regulations Allocability: A cost is allocable to a project if goods or services involved are chargeable or assignable in accordance with the relative benefits received by the projects. In order to be allocable a cost must be treated consistently in like circumstances.

10. Regulations Reasonableness: Would a prudent person pay this amount for this item? OR If it were published on the front page of the Wisconsin State Journal, would that be okay with you?

11. Regulations OBM Circular A-110: • Subpart D.71: 90 days to close Agency Specific Regulations • See award terms and conditions of awarding agencies/sponsors

12. Roles and Responsibilities of the PI

13. PI/Department designee Ensure that expenditures are allocable, allowable, and reasonable to a specific sponsored project. Ensure that expenditures are allocated in accordance with award budget, sponsor guidelines, and UW-Madison policy. Ensure that individuals have appropriate authority to incur and allocate expenditures.

14. PI/Department designee Ensure that monthly monitoring of expenditures, timely correction of errors, and reallocation of expenses, including personnel effort, occurs. Ensures compliance with UW-Madison Cost Transfer Policy. Initiates and authorizes requests for cost transfers.

15. PI/Department designee Provides complete, clear, and reasonable justification for transfers as required by this policy. Manages project to minimize the need for cost transfers.

16. General Principles

17. Project management Sponsored project expenditures should be reviewed on a regular basis to ensure that both salary and non-salary charges are correct and appropriate. It is the responsibility of the PI and/or the PIs designee to authorize transactions and review expenditure activity. Regular review should include determination that the charges are reasonable, allowable, allocable, and directly support the scope of work for the project.

18. DOs Do – apply costs to appropriate sponsored project when first incurred Do – request account numbers in advance for pending awards Do – split code requisitions when items are to be used across multiple sponsored projects

19. DOs Do – use an allocable split to charge costs to multiple projects (e.g., 50/50, 30/70, 25/40/35) Do – set up MDS accounts and open vendor requisitions on individual sponsored projects Do – provide clear, detailed justification statements

20. DOs Do – verify with PI to which project(s) costs should be applied Do – perform ProCard edits in a timely manner AND cross-train staff to handle ProCard editing Do – carefully prepare paperwork; errors in account numbers, reference numbers, amounts, etc., will only delay transactions

21. DOs Do – verify as best one can that chargeback centers have current/correct information regarding the grant/project to which costs should be applied Do – process chargebacks/billings MONTHLY!

22. DON’Ts Don’t – park costs on sponsored projects Don’t – transfer costs from one sponsored project to another to eliminate a deficit Don’t – default ProCard accounts to sponsored projects

23. DON’Ts Don’t – use generic/standard statements to justify transfers Don’t – apply all costs on one grant and then move to the next grant to apply costs; if the grants are related and costs are to be shared, costs should be split-coded as purchased

24. Processing procedures Submit all transfers to CALS Business Services unless specifically instructed otherwise. All transfers are entered logged/tracked. Transfers involving sponsored project accounts will be routed from CALS Business Services to CALS Research Division for review and approval.

25. Types of transfers Salary cost transfers Non-salary cost transfers Transfers within 90 days Transfers beyond 90 days

26. Processing procedures NON SALARY TRANSFERS Form available: http://www.cals.wisc.edu/bussvc/forms/index.html Submit transfer forms in duplicate – original plus one copy; submit only one copy of documentation. Transfers involving sponsored project funding, attach one copy of documentation to support the charge being transferred.

27. Processing procedures Use Legacy class codes only on Non-Salary Payment Transfers. “Type” are on Payment Transfer forms: “P” (partial) – apply to a req.; leave req. open “F” (final) – apply to a req.; close req. “M” (miscellaneous) – does not affect a req.

28. Processing Procedures SALARY CASH TRANSFERS Form available http://www.cals.wisc.edu/bussvc/forms/index.html Accurately fill out the appointment ID, name & SSN (mistakes are found when template used). Make sure SFS account codes are indicated. Enter year in the pay period in addition to the month(s). The salary cash transfer should accompany a PayData form which shows how the individual should be paid.

29. Processing Procedures SALARY CASH TRANSFERS (continued) Check PHIQ in the legacy 3270 system to see what should go in the WAS section. Do not only rely on your copy of the PayData form. Exceptions when you should call CALS Payroll: -You are correcting a payment that has already been processed on an earlier salary cash transfer. -You know that campus payroll made payment on a different fund because of a “block” or other funding problem.

30. Processing Procedures SALARY CASH TRANSFERS (continued) When you move only a part of the funding to another fund, you need two lines in the SHOULD BE section. The lines will be (a) what stays on the original fund with no amount in the TOTAL TRANSFER column and (b) what is to be transferred to the new fund with the amount to be transferred in the TOTAL TRANSFER column.

31. Processing Procedures Transfers may be disallowed by campus, even with our best efforts. Audits can result in disallowances well after transfers are processed and even possibly after an award has ended/closed.

32. Justification Statements

33. Recommendations Be aware of agreement terms and conditions to assure allowability of costs. Apply costs directly to sponsored project to alleviate the need for cost transfers. Incorporate an authorization, verification, and review process by PI into sponsored project processes.

34. Recommendations Provide a clear, complete, thorough justification statement. Prepare the transfer in a timely manner, well in advance of the 90 day limitation.

35. Red flags! Frequent/repeated transfers from a given entity. Canned language. Transfers in the last month of the award or after the end of the award. Explanations that raise more questions than answers.

36. Issues of concern Documentation is not provided. Transfers involving unallowable purchases (e.g., computers, travel, equipment, furniture … items defined as unallowable per terms/conditions of award).

37. Issues of concern Incomplete justifications: • Edit error • Wrong funding charged • Correct class code • Cost center error justification used when it isn’t a cost center error • Accounts payable mistake • To apply charge to correct account • Computer purchase for XXX to use on project

38. Issues of concern Insufficient explanations: • Placing travel costs on project for which the traveler has no relationship • UPS/FedEx charges without explanation of what was shipped • Documentation that does not explain what type of service was provided

39. Issues of concern Contradictory justifications: • Stating expenditures is for one project but moving expenditure to an entirely different project • Long, lengthy, confusing statements – telling too much can lead to more questions; be clear/concise!

40. Issues of concern Confusion: • Indicating a transfer is being made for cost sharing is confusing; cost sharing is the portion of project or program costs that are not borne by the Federal Government. “Sharing costs” across multiple projects is more likely the intended statement.

41. Issues of concern Confusion: • Stating that items being transferred are for lab use, but the transfer does not split costs allocably across the projects.

42. Issues of concern Problems: • When a transfer is received, the justification may say one thing, but it becomes questionable when WISDM is reviewed it is evident that the transfer amount is simply clearing a deficit.

43. Issues of concern Problems: • Justification indicates that RSP or CALS requested the transfer. You need to explain “why” the transfer is needed AND provide documentation, not say “because someone told you to.”

44. Example Transfer lab supplies purchased on MDS account on fund 144-AB12 to fund 144-CD34 where items were used. Parking charges on one grant/project and then moving to another grant/project isunallowable.

45. Example Transferring charges from 144-AB12 to 150-A123 unrestricted fund due to over expenditure on 144-AB12. Transferring an account deficit to an unrestricted source of funding is allowable. However, justification statement should not reference deficit nature of account.

46. Example Transfer from 133-AB12 to 144-CD34 – ProCard defaults to 133-AB12. Transfer to correct sponsored project on which items were utilized. ProCard charges should be applied to correct sponsored project at biweekly point of review – transfer after-the-fact is unallowable.

47. Example Fleet vehicle charges were fully applied to 142-AB12. The travel costs were to be shared equally between two sponsored projects – Hatch and WCB sponsored projects. One-half of the assessed travel costs are being transferred to 133-HF15 WCB. If total travel costs are split 50/50, this transfer would be allowable.

48. Example However, if the justification is simply to share travel costs ... And, if the amount being transferred is simply that amount appearing as a deficit balance on the account … Then, the transfer would be unallowable.

49. Example Accounting error. Unallowable – errors may be allowable; however, simply stating an accounting error occurred would provide an insufficient justification. Explain how the error occurred and what actions have been taken so such does not reoccur.

50. Example Transfer postage charges from 133-AB12 to 133-AB34. Postage charges are for newsletter mailings as defined within sponsored project. Postage charges on 133-AB12 are being transferred to successor sponsored project 133-AB34 per terms of agreement. Allowable – clearly justifies action taken.