Cost Transfers and Guaranteed
Funding/Advanced Accounts
Objectives
Increase the use of guaranteed
funding/advanced accounts
 Decrease the number of cost transfers
through pro-active grants management
approach
 Reduce compliance risks and audit
findings

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Cost Transfers Defined

Cost transfers defined:
◦ After the fact salary or non-salary expense
reallocation from one University chartstring to
another

Requirements under OMB Circular A-21
◦ Transfers must be timely (within 90 days) and
completely explained and justified
◦ Simply stating “to correct error” or “transfer to
the correct project” is NOT adequate
◦ Late cost transfer explanations must fully address
the reason for the lateness and corrective action
to prevent a reoccurrence
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Cost Transfers Background

UVM has significantly more cost transfers,
particularly late cost transfers, than similar
Universities
◦ Creates fiscal management difficulties
◦ Leads to delayed financial reporting
◦ Creates compliance risk for the University

Many Universities do not allow cost
transfers more than 90 days after the
original transaction
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Cost Transfers Background

Cost transfers were identified as a material
weakness in FY08 A-133 audit
◦ Due to the high volume of transfers and lack of
supporting documentation
◦ Lack of documentation to prove cost transfers from
one project to another were not solely to cover cost
overruns
◦ KPMG recommended UVM review its cost transfer
policy

The FY09 A-133 audit identified an additional
finding about lack of approvals and clear
documentation for cost transfers
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Cost Transfer Background

PeopleSoft is NOT designed to
accommodate multiple retroactive salary
distribution changes
◦ Leads to system processing failures and
reconciliation issues
◦ Significant resources are devoted to processing
retros and fixing errors
◦ Volume of retros indicate that quarterly review
of effort is not consistently taking place
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Cost Transfer Background

Cause of cost transfers
◦ Many units have a culture that embraces a reactive
approach, rather then proactive approach, to grants
management
 Untimely Purcard re-allocations and income/expense
billing
 Inconsistent monitoring of project budgets and expenses
 Irregular review of committed, actual, and distributed
effort on sponsored projects
◦ More than 90% of sponsored projects are setup
after start date
 Primarily due to delays in receiving the award document
from sponsors
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Cost Transfers: Who is affected?

Principal Investigators
◦ Fiscal management difficulties

Department & Dean’s Office Staff
◦ Time required to prepare & approve cost transfers
◦ Fiscal management difficulties

HRS, Cost Accounting Services & BPRT
◦ Significant resources to review, process & resolve errors
associated with retros

Grant and Contract Administrative Services
◦ Resources needed to review & approve cost transfers
◦ Delayed financial reporting

The University at Large
◦ Compliance risks, which could result in audit findings,
significant fines, and potential loss of funding from sponsors
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Cost Transfers: Compliance in
Perspective
Weill Medical College of Cornell
University - $2.6M, March 2009
 Yale University - $7.6M, December 2008
 St. Louis University - $1.0M, July 2008

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Cost Transfers: Solutions

Proactive and continuous monitoring of
sponsored projects
◦ Responsibility of PI to manage the grant, with
administrative assistance from unit administrator
◦ Effort must be reviewed quarterly for accuracy
 Prospective effort adjustments must be made
◦ Roles and responsibilities for those involved in the
grant lifecycle must be clearly defined
◦ Award cost share commitments must be
monitored closely from award setup to closeout
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Cost Transfers: Solutions

Once a chartstring is set up in PeopleSoft,
and you have implemented the quarterly
review process, retroactive salary
adjustments should not be necessary
◦ Rarely retros may need to be processed, for
instance due to a key punch error
 Must be properly documented and processed in a
reasonable time period (90 days)
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Cost Transfers: Solutions

Conditions for approval of a retroactive salary
distribution change:
◦ Cost allowable and allocable to the grant to which
it is transferred
◦ Transfer must be supported by a clear explanation
◦ Request must be authorized by all applicable
departments
◦ Request must be submitted immediately following
detection of the error
◦ Transfer must be in compliance with University
policies and federal regulations
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Cost Transfers: Solutions

Guaranteed funding/advanced accounts
should be used
◦ Ensures that chartstrings are set up and
personnel effort is distributed before work
on the project commences
◦ Essential to avoid retros on sponsored
projects since more then 90% of awards are
received after start date
◦ Under this practice, departmental suspense
should be used for encumbrances only, not
for actual expenses
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Cost Transfers: Future Solutions
Utilitize PeopleSoft functionality to attach
all back up documentation for non-salary
cost transfers to the journal entry (FY11)
 Cost transfer policy is being revised

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Guaranteed Funding/Advanced
Account Background

Guaranteed funding/advanced accounts
◦ Mechanism to establish an award and
associated chartstring(s) in PeopleSoft
 When a PI receives notification from sponsor that a
proposal will be funded, and
 A department chairperson and/or dean agrees to
accept the risk of covering expenses associated
with the project if the award does not materialize.
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Guaranteed Funding/Advanced
Account Background

Use of guaranteed funding/advanced
account:
◦ Reduces salary and non-salary cost transfers
◦ Allows for clear and more efficient fiscal
management of award
◦ Eliminates re-work for principal investigators,
department administrators, and staff in central
offices
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Guaranteed Funding/Advanced
Account: Solution

Work should not commence on a
sponsored project until chartstrings are
setup in PeopleSoft
◦ Either through guaranteed funding/advance
account or the receipt of the award
document
 Allows for both sponsored and cost share costs to
be allocated to the proper chartstring
 Will result in materially less cost transfers
 Reduces compliance risk, potential audit findings,
and possible fines and/or loss of funding
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Guaranteed Funding/Advanced
Account: Future Solution

New guaranteed funding/advanced
account policy and request form under
development
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Guaranteed Funding/Advanced
Account: Workflow

Requests are routed through the Office of
Sponsored Programs Pre-Award Services (PAS)
◦ Memo signed by PI and Chair indicating the intension
to guarantee funding. The form can be found at :
http://www.uvm.edu/~ospuvm/?Page=Forms/FormsMa
in.html
◦ Confirmation from the sponsor of the award and the
anticipated start date
Proposals must be routed
 All protocols must be approved for IACUC, IRB
and IBC

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Guaranteed Funding/Advanced
Account: Work Flow

Request must include the following:
◦ Confirmation from the sponsor of the award,
anticipated start date, and funding source
◦ Signed routing form
◦ Proposal
◦ Budget
◦ Appropriate protocol approval dates; if
applicable
◦ Memo of intention to guarantee the award;
signed by the PI and department chair
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Guaranteed Funding/Advanced
Account: Work Flow
 Requests
are forwarded to Grant and
Contract Administrative Services (GCA)
from PAS
 GCA then sets up award in PeopleSoft
◦ Project is setup with sponsored and cost
share chartstrings
◦ GCA notifies PI, department, and others as
appropriate
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Guaranteed Funding/Advanced
Account: Work Flow

Contract remains in guaranteed
funding/advanced account status until award
document is received
◦ Ensures sponsor is not billed and revenue is not
recognized

Upon receipt of executed award document,
◦ GCA modifies budget and other award
information, as needed
◦ Activates the contract to allow billing to begin
and revenue recognition to occur
◦ Chartstrings remain unchanged; thus no cost
transfers are required
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Guaranteed Funding/Advanced
Account: Required Practices

Culture change to one that is proactive

Guaranteed funding/advanced account
requests must be initiated in a timely manner

Department will be able to discontinue
guaranteed funding/advanced accounts on
individual awards as appropriate
◦ GCA would close down the award in PeopleSoft
after the department removes expenses
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Conclusion
Increase the use of guaranteed
funding/advanced accounts
 Decrease the number of cost transfers
through pro-active grants management
approach
 Reduce compliance risks and audit
findings

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Questions/Contact Info

Dean’s Office

Office of Sponsored Programs, Pre-Award
Services
◦ http://www.uvm.edu/~ospuvm/
◦ Main Campus Office & Funding Information, 340
Waterman Building, 6-3360
◦ Health Sciences Office, 231 Rowell Building, 6-4067

Grant and Contract Administrative Services
◦ http://www.uvm.edu/~gcaacct/
◦ 223 Waterman Building, 6-1459
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