October 2012 Office of Sponsored Projects Rebecca Clogston Aarron Clough Jill Mortali Kathy Page Jody Patten 90 days 60 days 30 days A133 Audit Agenda Background Regulatory framework recent developments ID: 675955
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Slide1
Cost Transfers: How to Make Them Work for You and Not Against You
October 2012Office of Sponsored ProjectsRebecca ClogstonAarron CloughJill MortaliKathy PageJody Patten
90 days
60 days
30 daysSlide2
A133 Audit
AgendaBackground – Regulatory framework, recent developmentsDartmouth Policy Metrics – How are we doing?
Examples – What hits the target? What doesn’t?
Questions? Slide3
Basic “Textbook” Definition
A Cost Transfer is the transfer of an expenditure initially postedto one project and then transferred to another project.Can be:Salary expenditures: Labor, including salaries, wages, and benefits
Non-salary expenditures: Non-Labor, all costs other
than salaries wages, and benefits (e.g., chemicals, lab supplies, equipment, travel, internal service provider charges)
The government expects that costs are charged
appropriately at the time incurred and that significant
adjustments should not be required if adequate
financial management practices and policies exist
.Slide4
Institutions have a responsibility to use funds in accordance with applicable
law and sponsor terms and conditions.• The federal government scrutinizes cost transfers closely for indications of cost misallocation, and often disallows costs transferred into federal accounts on that basis, or because of non-compliance with timing, documentation, and procedural requirements.• Frequent cost transfers and cost transfers made long after the original cost is incurred (even if valid) raise questions about the reliability of the institution’s accounting system and internal controls.
Basic PrincipleSlide5
Award Budget, Terms, Agency Policy Statement
Dartmouth Policies
Regulatory & Internal Control FrameworkSlide6
Charges to Federal Grants Must Benefit the
Project AND beAllowableItems not restricted by OMB Circular A-21 orthe specific grant
ReasonableGoods or services acquired and amount
involved reflect an action a prudent personwould have taken (Prudent Person Rule).Allocable
Chargeable based on the relative benefits
received by the project.
Treated Consistently
Like costs in similar instances need to be
treated consistently throughout the
Institution.Slide7
NIH Grants Policy Statement
Should be accomplished within 90 days…S
upported by documentation that fully explains how the error occurred
Certification of the correctness of the new charge by a responsible organizational official of the grantee…An explanation merely stating that the transfer was made “to correct error” to “transfer to correct project” is not sufficient.
Transfers
of costs from one project to another or from one competitive segment to the next solely to cover cost overruns are not allowable. Grantees must maintain documentation of cost
transfers
Frequent
errors in recording costs may indicate the need for accounting system improvements and/or enhanced internal controls.”
NIH Grants
Policy Statement
Dartmouth PoliciesSlide8
“Any costs allocable to a particular sponsored agreement under the standards provided in this
Circular may not be shifted to other sponsored agreements in order 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” (OMB Circular A-21 Revised, Section C4).“If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the
cost should be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions
that cannot be determined because of the interrelationship of the work involved, … the costs may be allocated or transferred to benefited projects on anyreasonable basis” (OMB A-21 Revised, Section C.4.d(3)).
OMB Circular A-21Slide9
Increased focus on accountability
Concerns over the effectiveness of A133 auditsARRA auditsOIG DHHS/NIH Audit Plan for 2013NIH—Extramural Construction Grants at NIH GranteesNIH—Equipment Claims by GranteesNIH—Colleges’ and Universities’ Compliance With Cost Principles
NIH—Extra Service Compensation Payments Made by Educational Institutions
NIH—Inappropriate Salary Draws From Multiple UniversitiesCurrent Regulatory and Audit ClimateSlide10
Audits
December 2008 – A leading research university cooperated with a government investigation focusing on charges to awards from over 30 federal agencies from 1999 to 2006. The government allegations focused on the university:Utilizing cost transfers to “spend down” available grant fundsCompletion of inaccurate and overstated effort reports, resulting in salary
overcharges
The university acknowledged the charging errors, but
disagreed on the nature and extent of errors.
The university paid $7.6 million to the government
The university improved its research compliance administration and infrastructure, including several upgrades to its cost accounting and effort reporting systems and issuance of revised policies and proceduresSlide11
Dartmouth Reallocation PolicySlide12
Dartmouth Sponsored Reallocation of Charges & Cost Transfer Policy
Policy Statement: It is the policy of Dartmouth College that costs should be charged to the appropriate sponsored award when first incurred. However, there are circumstances where it may be necessary to transfer expenditures to a sponsored award subsequent to the initial recording of the charge. It is the policy of Dartmouth College that charges to sponsored funds be reviewed on a regular and timely basis to assure appropriateness of charges and to prepare corrections on a timely basis.Slide13
Purpose of Policy
Comply with Circular A-21 Best practices for all sponsored awards Explain and justify the transfer of charges Timeliness and completeness of transfer explanations
Transfer of charges closely examined by auditors.
Frequent, tardy or unexplained (or inadequately explained) transfers can raise serious questions about the propriety of the transfers and our accounting system and internal controls. Slide14
Dartmouth College administered sponsored awards federal and non-federal
.Office of Sponsored Projects staff, Departments involved in managing sponsored funds, Principal Investigators and other faculty involved sponsored research and divisional and central financial administrators.Please direct general questions about this policy to your unit’s administration. If you have questions about policy issues please contact the Director of the Office of Sponsored Projects. If you have questions about process issues please contact your OSP Grant Manager.
Who is Involved?
Affected by Policy
Aware of Policy
Questions?Slide15
Simple Reclassification
Option 1Simple reclassifications are timely reconciliation of transactions (payroll and non-payroll) made within the month following the accounting period of the original GL Transfer Date.Cost Transfer Option 2Cost transfers are transactions (payroll and non-payroll) that move a previously recorded expense which involves a Sponsored Projects PTA Account.
Note: All Simple Reclassifications (SPUD Journals) and Cost Transfers (Cost Transfer Form and Wage Transfer Form) must be approved by OSP before being processed.
DefinitionsSlide16
Simple reclassificationSlide17
Simple Reclassification:
Correction made within the month following the accounting period of the original GL Transfer Date
PROCESS:
Non-Compensation:
SPUD Journal (CJE) completed by Department
G
rant
M
anager or Finance Center (FC), emails Excel file to OSP Grant
M
anager for approval and upload.
Compensation:
Wage Transfer form completed and signed by Department
G
rant Manager or FC, emails signed scanned copy to OSP Grant
M
anager for approval, OSP Grant
M
anager emails to appropriate Finance Center for processing.
Transaction is UNDER $500 ( * )
Correction made within
90
d
ays following the GL Transferred Date of the charge / pay period (**)
Transaction is within the same project/award
Transaction is moving from a PTA Account to a G/L Account
Transaction for any dollar amount
that is being moved to or from a PTA Account
Any Dollar Amount if:
$500 or less
Re-class among multi project/task combo within same Award and is within that annual budget period
Re-class within a PTA Account to correct an expenditure type
OR
OR
OR
ORSlide18
Simple Reclassification
Not considered Cost Transfers
Do
not require a PI signature
Corrections
such as expenditure type, transposition errors, incorrect account numbers and other input
errors
Recharge center input
errors must be processed by the originating source (i.e. computer
store), refer
to the matrix
http
://www.dartmouth.edu/~control/docs/financialrept/correct_trans_source.pdf
Transfers within the same project / award may have budget period restrictions.
all
transactions under $
500 within
90 days of the original charge
(*)
Salary of $500 or less (do not include fringe
)Slide19
Cost transferSlide20
Reallocation of Charges Involving Sponsored Funds
(**) see Reallocation / Cost Transfer
Calculator (Excel sheet)
Cost Transfer
Not yet over 90 days
and over $500
Correction not made in first accounting period, is over 90 days (**)
PROCESS:
Non-Comp:
Cost Transfer
Form completed by Department
G
rant
M
anager or FC, PI signs (Department Chair or equivalent can sign if PI is unavailable),
D
epartment
G
rant
M
anager emails OSP Grant
M
anager a PDF and Excel version of the Cost Transfer with adequate documentation (examples include copy of transaction report from IRA, copy of invoice, etc.) attached to be approved and processed by OSP.
Comp:
Wage Transfer Form completed by Department
G
rant
M
anager or FC, PI signs (Department Chair or equivalent can sign if PI is unavailable), the department grant manager emails OSP Grant
M
anager a PDF version of the form for approval, OSP Grant
M
anager then emails to appropriate Finance Center for processing.
PROCESS:
Non-Comp:
Cost Transfer Form completed by Department
G
rant
M
anager or FC, PI signs (Department Chair or equivalent can sign if PI is unavailable),
D
epartment
G
rant
M
anager emails OSP Grant
M
anager a PDF and Excel version of the Cost Transfer with adequate documentation (examples include copy of transaction report from IRA, copy of invoice, etc.) attached to be closely reviewed but may not be approved by OSP depending on the circumstances.
Comp:
Wage Transfer Form completed by Department
G
rant
M
anger or FC, PI signs (Department Chair or equivalent can sign if PI is unavailable),
D
epartment
G
rant
M
anager
e
mails OSP Grant
M
anager a PDF version of the form to be reviewed but may not be approved by OSP depending on the circumstances.
Cost Transfers
are governed by A-21 guidelines which require appropriate signatures and adequate justifications for processing.
Any transaction moving charges onto a PTAEO Account 90 days after the original charge will only be approved if there are unusual circumstances.
An example would be a sponsored award having a retro start date that goes beyond the 90 day threshold. Before completing transfers that are over 90 days, please talk to your OSP Grant
M
anager
. “Internal” transactions must be processed by originating cost
center.Slide21
Cost Transfer Process: Not
yet over 90 days and over $500
Non-Comp:
Cost Transfer
Form completed by Department
G
rant
M
anager or FC,
PI signs (Department Chair or equivalent can sign if PI is unavailable),
Emails OSP Grant
M
anager a PDF and Excel version
Must include adequate documentation (examples include copy of transaction report from IRA, copy of invoice, etc.)
Comp:
Wage Transfer Form completed by Department
G
rant
M
anager or FC,
PI signs (Department Chair or equivalent can sign if PI is unavailable),
E
mails OSP Grant
M
anager a PDF version of the form for approval,
OSP Grant
M
anager then emails to appropriate Finance Center for processing.Slide22
Cost Transfer Process:
Correction not made in first accounting period, is over 90 days
Non-Comp:
Cost Transfer Form completed by Department
G
rant Manager/FC,
PI signs (Department Chair or equivalent if PI unavailable),
Email to OSP Grant
M
anager
(
PDF/Excel)
Must have adequate documentation (examples include copy of transaction report from IRA, copy of invoice, etc.)
Comp:
Wage Transfer Form completed by Department
G
rant Manager/ FC
PI signs (Department Chair or equivalent if PI is unavailable)
Email OSP Grant
M
anager
(
PDF)
APPROVED ONLY UNDER EXTENUATING CIRCUMSTANCESSlide23
WHAT ARE EXTENUATING CIRCUMSTANCES?
Late issuance of an account for reasons beyond the control of the requestorFailure of another department to take action, e.g. on a properly submitted payroll distribution change request or Journals to align the allocation of prepaid tuition remission with effort. Please Note: Acceptable extenuating circumstances do not include absences of the PI or administrator, lack of staff or inexperienced staff, or lateness of reconciliations.Slide24
Sponsored Reallocation of Charges & Cost Transfer Policy
Related Documents & Tools:The NIH Grants Policy Statement (REV. 12/03, pp.83-84) http://grants.nih.gov/grants/policy/nihgps_2011/ OMB Circular A-21 http://www.whitehouse.gov/omb/circulars_a021_2004 Cost Transfer Form http://www.dartmouth.edu/osp/resources/forms.html
OSP Policy Website: http://www.dartmouth.edu/osp/resources/policies/ Slide25
Quiz Show
Question and Answer
Samples and TechniquesSlide26
If a transaction is was incurred 64 days ago and totals $499, you do not need PI signature?Slide27
Which of the following applies to a simple reclassification
All of the aboveRequires approval of PIExpense of any amount under 60 days
Any transfer that is needed to closeout the grant
Expense under $500 or incurred in the prior monthSlide28
Cost Transfers and the A-133 AuditSlide29
As part of the annual A-133 audit, the External Auditors (currently KPMG) select a sample of Wage Cost Transfers and Non-Wage Cost Transfers
What do the auditors review?Compliance with the allowability and allocability requirements of OMB Circular A-21Are transfers being made timely – within 90 daysIs there a full explanation provided about why the transfers were made?
Is the explanation reasonable about how the error occurred?
Is there adequate documentation attached?
Have all required approvals been obtained?Slide30
Cost Transfers and the A-133 Audit
Potential FindingsInsufficient or incomplete documentation for cost transfersInadequate justification for cost transfers
Missing/incomplete authorization for the cost transfer
Significant number of late cost transfers (greater than 90 days after original charge)
Cost
transfers after the grant had closed
Department grant managers can make changes without checks and balance
Cost transfers to clear overrunsSlide31
Sample Justifications
Reasons why they may not be deemed allowable under audit.
Re-written acceptable justifications.Slide32
Questionable justification:
“Transfer of supplies that were charged to the department in error.”This does justification does not adequately explain:why the wrong PTAEO was charged
why/how the charge is appropriate to the PTAEO being debited
how the error occurredAcceptable justification:
The
supplies being transferred were purchased via
PCard
. The administrative assistant did not review the
PCard
transactions by the deadline, which caused the transactions to post to the default
Pcard
account, which is our departmental account. Going forward, the administrative assistant will review all
PCard
purchases and assign the correct PTAEO number, if applicable, to be charged before the deadline.Slide33
Questionable justification:
“Transfer overage to related project.”This justification does not:clearly identify which costs are to be sharedthe proportions in which the projects will share the
costsa clear indication of how the amount to be shared was
determinedAcceptable justification: The supplies to be transferred are used on related projects. Supplies should be shared equally on both projects, thus 50% of the cost of the highlighted items is being transferredSlide34
Questionable justification:
“To correct supplies charged due to clerical error.”This justification does not:why and how the clerical error occurredwhy
the error was not caught earlierAcceptable justification:
The research assistant in the lab who ordered the supplies used a PTAEO number of a project which was terminated. He has been instructed to use the new PTAEO number. In the future, all supply orders will be reviewed and approved by myself or other administrator prior to submission of the order so that such errors can be prevented. Slide35
Questionable justification
“Move charge from department.”This justification does not:Give the reason for the transfer The
description should be expanded to explain how the charge benefits the grant being charged and why the charge was not originally posted to the grant
Acceptable justification: The start date of the grant is December 1. However, the PTAEO number was not established in the accounting system until January 15. The PI needed to purchase some materials to begin work on the project in December, thus they were charged to the department until the PATEO number was established.Slide36
Examples of typical circumstances in which cost transfers may not be allowed:
Reallocation of expenses because the grant has unexpended funds.Transfer of after end date expenses to another project.Transfers which do not explain why the error occurred and how the expense is appropriate
to the project which it is being moved to.
Transfer of an expense that was previously transferred.
Late because the department was
understaffed.Slide37
The End