University of Colorado Denver
Writing Compliant Journal Entries – Cost Transfers
Finance Office / Office of Grants and Contracts
August 16, 2012 – Anschutz Medical Campus
August 23, 2012 – Denver Campus
Background
An audit was conducted by Internal Audit over Cost Transfers & Journal Entry
Descriptions.
Definition: A cost transfer is a transfer of expenditures to and/or from a
sponsored project by means of a journal entry.
Audit Objective: Ensure cost transfers comply with applicable university, state
and federal requirements.
Audit Findings - Topics:
1. Cost Transfers on Projects in Deficit Status
2. Inadequate Journal Entry Descriptions
3. Untimely Cost Transfers
4. Incomplete, Insufficient or Illegible Supporting Documentation
Finance Office
Slide 2
Cost Transfer on Projects
in Deficit Status
Guidance:
• National Institutes of Health (NIH) Grants Policy Statement, Part II: Terms
and Conditions of NIH Grant Awards - Subpart A – 7.5 Cost Transfers,
Overruns, and Accelerated and Delayed Expenditures states:
“Transfers of costs from one project to another or from one
competitive segment to the next solely to cover cost overruns are not
allowable.”
•
Campus guidance Cost Transfers on Sponsored Projects, 4-12 also refers
to the NIH Grants Policy.
•
Health and Human Services (HHS) Grants Policy Statement II-43, Cost
Transfers states that transferring costs due to a deficit generally is not
allowable.
Finance Office
Slide 3
Cost Transfer on Projects
in Deficit Status
Finding:
• Journal entry description and the supporting documentation did not clearly
support or explain why the transfer should be charged to the new
speedtype. If new speedtype is another project, why this expense was
necessary to complete the scope of work for the new speedtype.
•
Transfer was from a National Science Foundation (NSF)-sponsored project
to a NIH-sponsored project. Because the validity of the transfer was not
adequately explained, it was not possible to determine whether the charge
was allowable, allocable, reasonable, or consistent.
Finance Office
Slide 4
Inadequate Journal Entry
Descriptions
Guidance:
• The Cost Transfer Policy requires the “long description” on the journal entry
to include the cause of the error and how/why is the expense necessary to
complete the scope of work of the project charged.
•
Without adequate journal entry descriptions, OGC may not be able to
determine whether the cost transfer is allowable, allocable, reasonable,
consistent, and timely.
Finding:
• There were cost transfers that did not contain an adequate journal entry
description as required by the policy
Finance Office
Slide 5
Long Description
Finance Office
Example #1
Inadequate Description Identified by Internal Audit:
“To transfer income/expenses from HRSA grant”
Suggested Description:
“To transfer salary expenses from HRSA sponsored project (ST
63054321) that is over budget due to personnel costs being greater
than planned. Expenses transferred to an allowable unrestricted
departmental funding source (ST62612345).
Finance Office
Slide 7
Example #2
Inadequate Description Identified by Internal Audit:
“To redistribute expenses in order to close out and balance speedtypes”
Suggested Descriptions:
“To Transfer expenses from Adolescent Research (ST 6306789) to
Adolescent Research (new segment and new ST 63010293).
Expenses were incurred during budget period of new segment, but
purchase was not updated to new speedtype.”
Finance Office
Slide 8
Example #3
Inadequate Description Identified by Internal Audit:
“To move lab supplies from one speedtype to the new project
speedtype where they should’ve been reported”
Suggested Description:
“To transfer lab supplies from ST6302223 NIH training grant to
ST63033345. Lab supplies were required by ST63033345 in order to
complete INUITRO studies for the grant. Expenses were originally
booked wrong due to a miscommunication in lab order request”
Finance Office
Slide 9
Untimely Cost Transfers
Guidance:
• The Cost Transfer Policy requires cost transfers to “happen immediately
on the discovery of an error or as soon as possible, but not more than
90 days after the discovery of the error”
•
90-day timeframe is also in agreement with NIH and HHS guidance
•
Untimely cost transfers could be disallowed and can have
consequences on financial statements and/or the project closeout
process
•
Re-submitting financial reports are often looked upon negatively by the
sponsor because (1) of the rework it cause the sponsor and (2)
potential internal control weaknesses this suggests to the sponsor.
Often, the sponsor will reject the re-submission.
.
Finance Office
Slide 10
Untimely Cost Transfers
Finding:
• Cost transfer tested did not occur in a timely manner.
• The need for the transfer to properly account for a change in primary
awardee was first documented in June 2009 but the transfer did not
occur until January 2011.
Finance Office
Slide 11
Incomplete, Insufficient or Illegible
Supporting Documentation
Guidance:
• The Cost Transfer Policy requires transfers to be:
“clearly supportable” and “supported by documentation that contains a full
explanation of how the error occurred and a certification of correctness of the
new charge by a responsible CU Denver organizational official”
•
The policy further explains that sufficient supporting documentation will “promote
understanding of why the JE is required, including how and/or why the error was
made; why it is appropriate to charge the expenses to the project referenced in the
JE; and assurance that the charges are reasonable, allowable, allocable, and in
accordance with award terms”
•
The documentation requirement is also in agreement with NIH and HHS guidance
•
Without complete, sufficient, and legible supporting documentation, OGC may not be
able to determine whether the cost transfer is allowable, allocable, reasonable,
consistent, and timely.
Finance Office
Slide 12
Incomplete, Insufficient or Illegible
Supporting Documentation
Finding:
• Cost transfers tested did not have complete or sufficient supporting
documentation.
• One cost transfer had an illegible report as supporting
documentation.
Finance Office
Slide 13
Examples – Incomplete/Insufficient
Supporting Documentation
• Supporting documentation doesn’t indicate how the $ amount
transferred was arrived at
• Incomplete because there were Invoices to support most of the
journal lines but not all.
• Unclear how the supporting documentation and the cost transfer
relate
• The supporting documentation was an expense report with numbers
highlighted that add up to the number transferred; no other
explanation of who determined the numbers highlighted or why they
were determined to be transferred was included
Finance Office
Slide 14
Example – Illegible Supporting
Documentation
Additional Items
• JEs create additional work & weaken internal controls. It’s
best if booked (or allocated) appropriately @ point of
purchase
• Have method for communicating new speedtype for same
award in Lab
• Defendable basis for allocation of commonly used supplies
purchased in bulk or shared by multiple projects
• Example of Allocation Basis:
– Based on FTE on each project
– Based on proportion of budgeted expenses – if budgeted
supplies based on bottom up usage estimate.
Finance Office
Slide 16
Resources
o Processing a journal entry – Guidance
http://www.ucdenver.edu/about/departments/finance/Documents/Financ
eFiles/Processing_Actual_JE.pdf
o Finance Contacts
• Shaun McMullin, Deputy Controller
Shaun.McMullin@ucdenver.edu or 303-315-2270
• Ryan Yu, Associate Director of Accounting Services
Ryan.Yu@ucdenver.edu or 303-315-2256
• Caroline Kirkwood, Financial Compliance Auditor
Caroline.Kirkwood@ucdenver.edu or 303-315-2286
o Office of Grants & Contracts
•
Post Award Administrator
Finance Office
Slide 17
Conclusion
Items to Remember:
• Journal entry description should clearly support and explain how the
error occurred, the appropriateness of the transfer and why the
expenses were necessary to complete the scope of work – direct
relationship to scope of work is key
• PeopleSoft allows 254 characters in the long description
• Timely booking of cost transfer w/in 90 days after discovery of error
• Complete and sufficient supporting documentation
Finance Office
Slide 18
Questions?
Finance Office
Slide 19