Documentation of transfers/corrections must contain a justification for the transfer and an explanation of how the error occurred and why the expenditure was not correctly charged the first time. The PI or his/her designee must sign all correction forms. DHHS specifies that an explanation stating “to correct error” or “to transfer to correct project” is neither sufficient nor satisfactory. DHHS also requires the documentation for the adjusting/correcting entries to be readily available at the time of audit.
A federal awarding agency may restrict the transfer of funds among direct cost categories or programs, functions and activities for awards in which the federal share of the project exceeds $100,000 and the cumulative amount of such transfers exceeds or is expected to exceed 10 percent of the total budget as last approved by the federal awarding agency.
Transfers of charges to and between government grants and contracts should be kept to a minimum. Account numbers should be properly reflected on requisitions, appointment forms, time sheets, etc. when initiated.
To help ensure that cost transfers will meet audit requirements, any transfer of cost into or between federal government grants and contracts must meet several criteria to satisfy audit requirements:
- The transfer must be current (less than 90 days old). The authorizing party must approve any cost transfers for payroll charges submitted more than 90 days from the date of the original charge.
- The transfer must be a proper and allowable charge to the grant or contract receiving the charge.
- The transfer must be supported by documentation, which contains a full explanation of how the error occurred and why it was not initially charged to the proper account.
- The transfer must be accompanied by justification for the need for the transfer.
- The transfer must contain a certification by the principal investigator(s) of the project(s) involved of the correctness of the charge being transferred.
- The transfer must be identified as a cost overrun or an account correction.
- Cost overruns should be transferred to a non-sponsored account with the same account type.
Processing Cost Transfers
Project personnel should not submit journal entries directly to accounting without notifying OSP. This is an effort to reduce the number of corrections to the grants module. It is the policy of GHS that all cost transfers must be processed in compliance with Federal and other sponsor requirements. All cost transfers must be appropriately justified, documented and completed in a timely manner to support its allowability. Principal Investigators (PI’s) are responsible for ensuring all cost transfers are executed in compliance with this policy.
Cost transfers to all sponsored projects should be completed within 90 days from the original transaction date. Transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official. An explanation merely stating that the transfer was made to “correct error” or “to transfer to correct project” is not sufficient.
Grantees must maintain documentation of cost transfers, pursuant to 45 CFR 74.53 or »92.42 [record retention requirements] and must make it available for audit or other review. Frequent errors in recording costs may indicate the need for accounting system improvements and/or enhanced internal controls. Sponsors may require a grantee to take corrective action by imposing additional terms and conditions on an award.
“Frequent, tardy and unexplained (or inadequately explained) transfers, particularly where they involve projects with significant cost overruns or unexpended fund balances, raise serious questions about the propriety of the transfers themselves, as well as the overall reliability of the institution’s accounting system and internal controls.” (PHS Grants Administration Manual)
It is the responsibility of each department to ensure that cost transfer journals to the project are posted correctly and to retain copies of all related documentation in accordance with the record retention for the grant.
The Cost Transfer Form is to be used to notify OSP of cost transfers needed on your current award.