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LCOOCC Fiscal Policy and Procedures

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GENERAL STATEMENT
1.01 Sometimes it is necessary to make correcting journal entries (retroactive cost transfers) to ensure that original charges and/or credits are recorded in the proper account, fund group, department, project, and/or line item. A Retroactive Cost Transfer form should be completed and submitted to the LCOOCC Business Office for approval.

POLICY STATEMENT

2.01 Individuals responsible for sponsored program administration may request necessary reclassification of accounting data. Since the original entry is presumed to have been approved after adequate review, any change should be fully justified. The program director must ensure that funds are available to permit any transfer of charges/credits. Documented explanation and justification should be provided in order to permit subsequent reviewers (college employees, auditors, funding agencies) to evaluate the appropriateness of the cost transfer.  An explanation merely stating that the transfer was made "to correct error" or "to transfer to correct project" is not sufficient.  At a minimum, an explanation will detail 1)the cause of the error, 2) why the expense is more applicable to the account being charged, and 3)an explanation for any delays in submitting the Retroactive Cost Transfer form.

2.02 For sponsored agreements, retroactive cost transfer requests made for the sole purpose of expending available funds still remaining on a project are not allowable. Other unacceptable purposes for retroactive cost transfers include circumventing award restrictions, avoiding a cost overrun by charging another unrelated agreement, or transferring an item which applies to a closed fiscal year.

Regulations governing cost transfers are specified in OMB Circular A-21 and in certain federal sponsors' regulations:

"Any costs allocable to a particular research (sponsored) agreement...may not be shifted to other research (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 research agreement, or for other reasons of convenience." (OMB Circular A-21, C.4.b.)

"...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." (National Institute of Health Grants Policy Statement)

CRITERIA FOR COST TRANSFERS

3.01 A Retroactive Cost Transfer form should be used to request, document, justify, and certify a correction to the accounting records. Transfers should be made within 90 days of when the error was discovered. 

3.02 A retroactive cost transfer is justified in the following circumstances:

a. Clerical and data entry errors--Any request to correct a clerical error should be accompanied by an explanation of how the error occurred. The correcting entry must include a statement certifying that the adjusted charge/credit is correct and appropriate. Frequent errors in the recording of costs may indicate the need for improvements in the grantee's accounting system and/or internal controls.

b. Transfers between a continuation grant and a new project when the account number was not established at the time the expense was incurred--It is possible that if a continuation grant account number is not established promptly, continuation grant charges that have been incurred on or after the start date of the continuation award may have been temporarily charged to the prior year's account. Overexpenditures from a prior year are unallowable costs that can be transferred to the continuation award only with sponsor approval.

c. Pre-award costs that are specifically authorized in writing by the sponsor--A department or division may, at its own risk, incur obligations and expenditures to cover costs prior to the beginning date of an award if the following criteria are met: 1) costs incurred are considered necessary for the conduct of the project, 2) costs are allowable under the potential award, and 3) sponsor's written prior approval is obtained when required.

d. Pertinent information is received subsequent to the date of original entry.

e. It was impractical or impossible to allocate charges at the time of the original entry.

f. An award fails to materialize and charges have been incurred on the grant/contract account.--Costs incurred subsequent to the anticipated effective date of the award will need to be transferred to other nonfederal funds. At times, principal investigators are notified verbally or by memo that an award is forthcoming. If, for any reason, the award is not received as anticipated, a request may be necessary to transfer any charges made to an anticipated account to other nonfederal funds of the department.

a. Budget director (this may require 2 signatures if the accounts to be debited and credited are under the responsibility of 2 different directors.)

b. LCOOCC business manager.

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