Justification/Documentation of Cost Transfers
August 12, 1989
Several past Important Notices have respectively dealt with cost transfers either into or between federal projects and the necessity for adequate documentation to support such transfers for audit purposes. The Department of Health and Human Services which has audit cognizance of all federal programs at Indiana University, continues to be concerned with frequent and sometimes tardy, unexplained or inadequately explained cost transfers. Auditors from the Indiana State Board of Accounts, other state agencies, private CPA and industrial firms who audit our applicable non-federal projects have the same concerns and questions on similar transfers. Overdrafts on federal projects cannot be covered from other federal funds unless specifically allowed on continuation projects.
In order to be consistent on the processing of cost transfers, the following procedures shall be adhered to on any transfer into or between accounts in the 40-59 areas.
Transfers involving cost items on sponsored programs, other than personnel, should be requested by memo promptly after the error is discovered by the project director, account manager or principal investigator.
The memos justifying cost transfers should give a full explanation of why the transfer is being made. An explanation of "to correct error" or "to transfer to correct project" will not be sufficient. The explanation should include justification that the person was actually working on the project in the case of personnel, or that materials were consumed on the project in the case of supplies. It should include documents and any other pertinent information at the disposal of the project director that would help support his/her case and should also include his/her certification of the propriety of the transfer.
Cost transfers should be made within 120 days of the original charge. Any transfer after the 120 day period should include an explanation of why the transfer was tardy in addition to the justification outlined above. Transfers more than 120 days after the original charge will receive additional scrutiny by auditors concerning the propriety of the transfer.
If cost transfers are requested on the basis that projects are closely related, the request should explain the relationship of the projects along with the above justification.
The financial or administrative review of these transfer requests will be made in Contract and Grant Administration to see if all the above criteria have been met.
The justification of transfers is the responsibility of the project director and any disallowance resulting from such transfers shall become the responsibility of the project director and his/her department or school.