Q. When is it appropriate to transfer an expense?
A. The University of California, Business and Finance Bulletin No. A-47 states that expenditure adjustments are appropriate only under the following conditions:
- To correct an erroneous recording, such as when the original source documents(s) (e.g., invoice, payroll, purchase order) cited an incorrect account, fund, sub-budget, or object.
- To record a change in the decisions made originally as to the use of goods or services (e.g., a case of beakers originally ordered for and charged to a teaching program may be subsequently transferred to a research project). In requesting expenditure adjustments, a unit administrator is certifying that the original (direct charge) recording was not a proper and legitimate charge against the account/fund cited; that the original charge is now being invalidated; and that the second account/fund is the correct one to charge.
- To redistribute certain high numerical but small individual and/or minor charges (e.g., copy machine rental and paper costs, telephone charges, mailing charges, or charges for office supplies) that are billed to departmental accounts(s)/fund(s), but a portion of which may apply to other accounts under the jurisdiction of the department. While this type of expenditure adjustment is exempt from the requirement of section V.B.2. of this bulletin, which requires reference to the original source document(s), departments must maintain internal records/logs of such usage to support the adjustment.
- To redistribute payroll costs based on the after-the-fact verification of effort reported through the campus effort reporting system used to certify individual effort on federal contracts and grants.
Q. What criteria must a cost transfer meet?
A. According to University of California Business and Finance Bulletin A-41, a request for adjustment must meet the following tests:
- It must relate to individual items of expenditures (e.g., a cylinder of oxygen or fraction thereof, two hours of technical staff time when identifiable to a specific cost objective) incurred by the unit requesting the adjustment.
- It must contain a reference to the invoice, payroll or other disbursement document(s) that initiated the original direct charge. This documentation must be retained with a copy of the transfer and filed with the department originating the transfer.
- It should be in the same amount originally recorded in the university general ledger (i.e., the whole amount or the appropriate fraction charged to and/or paid by the unit requesting the adjustment). If transferring a fractional amount, the transfer request must contain an explanation supporting a reasonable and equitable method of allocation.
- It must be fully explained, justified and approved by the unit administrator(s) involved in the transaction. (An explanation that merely states that the adjustment being made is "to correct an error," "to transfer to correct project" or "expenditure inadvertently charged to incorrect account/fund" is not sufficient.) In the case of adjustments involving federal grants and contracts, the certification and approval signatures must include that of the principal investigator.
- It must be recorded via the appropriate hard-copy or electronic form (such as the payroll expenditure adjustment request, the non-payroll expenditure adjustment request or the financial journal).
- It must be monitored by the controller of the given campus for compliance with applicable campus and university policies and terms of funding source agreements. The controller may delegate this authority to his/her subordinate(s) responsible for the accounts/funds involved.
- The university is committed to the accurate and timely maintenance of its financial records. Situations requiring the transfer of recorded costs must be identified and processed expeditiously. Additionally, special considerations must be given to transfers of cost to federal funds to ensure that the university action meets the administrative standards established by the federal government. For conditions described in 1, 2 or 3, if the expense is being transferred to a federal or federal flow-through account, it must be recorded in the general ledger within 120 days from the close of the month in which the original charge posts to the ledger. (For example, the deadline for adjusting a charge that appears in the January ledger will be the May ledger.) If, because of unavoidable circumstances, an adjustment has to be made beyond the 120-day period, a full explanation -- including a well-documented account of all the events leading to the tardy adjustment -- must be provided.
- For redistribution of payroll costs based on reported efforts; the payroll cost transfer must be recorded within the same cost transfer timeframe described in 7.
A cost-transfer checklist has been developed to assist departments with ensuring they have met all the required criteria.
Cost Transfer Review Criteria - Rev 2.doc
Q. What is an appropriate justification for a cost transfer?
A. The justification for a cost transfer should contain the following:
- Who - The person or organization that caused or played a role in the transfer
- What - Explanation of the event or circumstance causing the transfer
- When - The date of the original cost and the date of the transfer
- Why - Explain the need for the adjustment to the ledger
- How - Explain how this will be prevented from occurring again
Note: For transfers beyond the 120-day requirement, an explanation of the delay must be included along with an explanation of how this delay will be prevented in the future.
When writing a justification do not use acronyms or abbreviations. The justification must be clear to anyone reviewing the transfer.
Examples of acceptable justifications:
- Late award notification and/or setup
- For sponsored funds, consider using a pre-award account to capture the expenses
- Cost transfer to correct the grant year
- Delayed or revised sponsored budget
- Delayed extension
Examples of unacceptable justifications:
- Cost management strategy
- Avoiding or eliminating overdrafts
- Staff shortage
- Fund balance reduction
- Policies and Procedures
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