This policy is to serve guidance for payroll and non-payroll cost transfers as they relate to federal, state, and specific sponsor's guidelines regarding sponsored programs at the University of Houston.
A cost transfer is used to allocate expenditures from one cost center to another. Allowable, allocable, and reasonable expenses are initially charged to a sponsored account when the event occurs. However, in certain circumstances it may be necessary to correct the posting of an expense by marking a timely cost transfer.
Federal regulations and university policy allows such transfer to correct errors, usually within 90 days from the close of the month in which the charge originally posted to the general ledger. If an individual sponsor or sponsored project agreement has more stringent requirements than the university policy (MAPP 05.02.03) the requirements of that sponsor or sponsored project agreement shall govern. Late reallocations beyond 90 days are allowed with adequate justification and documentation.
1. Cost Transfer - An after-the-fact reallocation from one cost center to another within 90 days from the close of the month in which the charge post to the general ledger.
2. Late Cost Transfer - An after-the-fact reallocation of payroll and non-payroll more than 90 days from the close of the month in which the charge post to the general ledger.
3. Original Expenditure Date - The date of the first posting of the expenditure to the general ledger.
4. Allowable - Costs that are necessary and reasonable under the terms of the sponsored award. Costs that are consistent with policies and procedures of the awarding agency and the University of Houston.
5. Allocable - Costs that benefit the sponsored project charged. Costs that are shared by more than one sponsored project must be allocated to the projects based on the proportional benefit.
6. Reasonable - A cost, in its nature and amount, does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.
7. eRAF - Electronic Payroll Reallocation form used in PeopleSoft HR to reallocate salary and fringes after-the-fact to designated cost centers.
8. ePAR - Electronic Personnel Action Requested form used in PeopleSoft HR to hire, terminate, and adjust the employment status of the employee.
9. GL Journal - A general ledger journal created in PeopleSoft Finance to reallocate non-payroll expenditures.
10. Closeout - A process done after a sponsored project has closed to inactivate the associated cost center.
Cost transfers are sometimes necessary in order to correct errors or appropriately allocate allowable costs to sponsored projects. However, at no time should a sponsored project be used as a holding account for costs that will subsequently be transferred elsewhere. Clearing accounts are appropriate for certain situations.
Initiating Cost Transfers
Errors requiring reallocations are identified during one of the following processes, and will be handled in the following manner:
1. During Reconciliation: Every month at the close of the prior month's accounting period, departments reconcile their designated cost centers. When an error is found within 90 days from the close of the period in which the cost originally posted, the department will initiate the cost transfer using PeopleSoft eRAF for payroll and a PeopleSoft Finance GL Journal for non-payroll.
2. During Clearing Payroll Suspense Accounts: Departments are responsible for clearing costs from the temporary holding Payroll Suspense account. To allocate an allowable, allocable, and reasonable payroll expenditure from suspense to a sponsored project account, the department will initiate an eRAF and prepare the e-PRF to ensure that the payroll post correctly in subsequent months.
3. During Invoicing and Financial Reporting: OCG creates invoices or financial reports based on a time frame according to the terms and conditions of a sponsored award. If an error is found due to an unallowable expenditure, or cost overrun, OCG will initiate the cost transfer to correct the error. These costs will be allocated to the department's IDC return cost center.
4. During Close-out: When an error or cost overrun OCG will initiate the reallocation to correct the error. These costs will be allocated to the department's IDC return cost center.
The Office of Contracts and Grants has the final approval of cost transfers allocated to or from a sponsored project cost center.
Backup Documentation for Reallocations
Departments are responsible for retaining documentation authorizing payroll on the grants. However, a detailed written explanation is required to support and justify the transfer as to why the initial charge was incorrect. This statement can be done on the eRAF comment section. Statements such as "clearing suspense", or "reallocating from Fund A to Fund B” is not sufficient. Tips for writing the justification can be found here. For reallocations past 90 days, a more comprehensive explanation of why the correction was not done in time is needed.
Cost Transfers within 90 days
Cost transfers within 90 days from the close of the month in which the charge post to the general ledger must include a justification of “Why” the allocation is needed. Approval from the PI or delegate is needed.
Cost Transfers over 90 days
Reallocations over 90 days (of the original posting date and effort certification) must include:
- A detail explanation of the delay of
a) How the error occurred,
b) How the expenditure is related to the project receiving the
expenditure (stressing the benefit to the project receiving the
c) Why the error was not previously corrected, and
d) What arrangements or measures have or are being taken to prevent
recurrence of the error.
2. The detailed explanation justification statement or memo must include
the signature of the Principal Investigator (PI). Attached here is a sample
justification form that can be used.
Other Situations where a signed written justification or prior approval is needed from the sponsor regardless of the number of days
- The transfer of charges from a sponsored project to another sponsored projects needs clear and specific documentation of benefit to the project it is being moved to.
- The transfer of costs to the sponsored project with an positive balance for the purpose of expending the remaining funds needs clear and specific documentation of benefit to the project it is being moved to.
- The transfer of charges to the sponsored project that is outside of the project performance period needs the written approval of the sponsor.
Clearing Payroll Suspense Accounts:
- If clearing a suspense account and the position is budgeted on the designated sponsored project cost center, then the executed ePRF and a justification (based on the timing of the eRAF) is needed.
- If clearing a suspense account and the position is not budgeted on the designated sponsored project cost center, then the PI or his/her delegate's approval (signature) and a justification (based on the timing of the eRAF) is needed.
An online eRAF (electronic reallocation form) in PeopleSoft HR system is prepared and routed via PS. Detail instructions for processing the payroll reallocations can be found here. The process for eRAFs involving sponsored research is the following:
- Home department initiates an eRAF and routes it to the certifying signatures at the department and college level.
- The eRAF is routed to OCG and is reviewed for the following:
- Earning dates of paycheck are within period of performance of the sponsored project
- The position or employee and amount is allowed in the approved budget
- Adequate documentation and justification is attached
- OCG approves and routes the eRAFs to General Accounting for processing
eRAFs initiated by OCG to remove unallowable expenses from a sponsored project is not routed through the department.
Non-payroll Expenditure Reallocations
An online journal or voucher in the PeopleSoft Finance system is prepared and routed via PS. The process for reallocation journals and vouchers involving sponsored research is the following:
- Home department initiates a PS journal or voucher and route it through the OCG workflow.
- An OCG RA will review, approve and forward the journal entry or voucher to General Accounting.
- In the event of a budget-check error, department staff should request that the RA override the error.
- Department staff is responsible for follow-up and checking to ensure the reallocation is posted to the appropriate cost center.
- Reallocations initiated by OCG to remove unallowable expenses form a sponsored project is not routed through the department.
- The Grant Reallocation Matrix (PDF) should be used to assists in identifying the correct account code and backup documentation to be used for this process.