90-Day Transfer Rule

 Okay, ya'll, this part about transfers is a little scary and A LOT important.

The federal government regards the following to be indicative of inadequate fiscal monitoring:

• Frequent cost expenditure corrections
• Late expenditure corrections
• Inadequately documented or explained corrections
    -especially on sponsored awards with overruns, unexpended balances and purchases in their last 90 days

 

What is Expenditure Correction –Re-allocation of an expense associated with a sponsored project after the expense was initially charged to another sponsored project or non-sponsored program.

• Plain-speak: An expense charged to one account, that's being moved to another account after-the-fact. 
   

Late Expenditure Correction – A correction made as described above, but done more than 90 days from the date of the original charge.

• Plain-speak... Someone:
  1. Forgot about needing to move something (an oversight, it happens)
  2. Is parking stuff temporarily on another sponsored award (not okay)
  3. Misunderstood and/or messed something up (an error, it happens)
  4. Is just trying to spend to zero without sufficient justification (not okay)
  5. Is treating sponsored awards like a checking account (not okay)

 

ALL OF US should be aware of, adhering to, and advising our PIs and researchers about, the 90-day transfer rule.

You won't find this rule in writing ANYWHERE at UT because our Office of Sponsored Projects and Office of Accounting and Financial Management have not published it anywhere.

• Yet how many times have people had a correction request returned with notes stating: 'Please provide explanation regarding the timing of this 90+ day correction and the benefit of the charge to the project the cost is being transferred to.' Clearly, the 90-day transfer/correction rule exists, just not explicitly.
  
  This rule applies to salary, fringe, materials and supplies, equipment, travel - all costing categories.
   
• It's not easy to point to a single federal policy that states overtly:
  'Corrections must be processed within 90 days of initial charge.'
  • The reason lies in how federal policy is written.
     
    • It states that the university is responsible for implementing an accounting system that meets all federal requirements.
       
    • Somewhere out there, in a rabbit hole too dang deep to continue pursuing, there exists an expectation about timing of payments. It probably lives in the Code of Federal Regulations in some obscure way, or within the Office of Federal Financial Management.
      
      It's the holy grail of compliance. -snort-
      But who's got the time to go down a rabbit hole so deep, it lets you out in Antarctica?!
       

      Sometimes, it's useful to just check out what other universities are doing to ensure compliance. Here are a few that make it pretty clear this is the norm:

      Ohio University 90-Day Rule
      Northwestern University 90-Day Rule
      University of Miami 90-Day Policy
      Harvard University Cost Transfer Policy
      Brown University Cost Transfer Policy
      Augusta University -this one starts with a great explanation
      Cornell University Cost Transfer Policy takes 13 pages to get to the actual policy, but it's clear
      University of Houston Cost Transfer Policy
      University of Delaware Cost Transfer Policy

  • The closest UT gets to putting anything in writing about the commonly adopted 90-day transfer policy is, oddly enough, via Payroll Services regarding Workday-related timing of transfers for funding sources aka costing allocations. The page was clearly created in time for the launch of Workday back in 2018, but it's still published, if you want to check it out.
     
    • From their Cost Transfer Information Page comes this gem:
      'All cost transfer documents involving grant accounts with service dates greater than 90 days from the current month route to the Office of Sponsored Projects for review and approval. Because of this, these documents can take more time to be final approved.'
      
      So, somewhere... behind the scenes, someone is reviewing these 90+ day cost transfer requests.
      Since these Workday requests don't contain a justification, the purpose of the review remains a mystery. 
       
    • There is also is a handout published on the OSP website that originated from an NCURA (National Counsel of University Research Administrators) workshop. The handout is called 'Post-Award Administration Chapter 3300'  --and the only way to find it is to do a search for it --there is no link to it on the OSP website. You can access it here. 

 So you can work this in 1 of 2 ways:

 

Ignore the recommendation and increase the risk of red flags in the event of an audit Provide explanation on a case-by-case basis upon inquiry from Office of Accounting ---if the accountant remembers to ask for it, and if someone realizes this is needed...

2. Incorporate the 90-day rule into your award management practices - make sure faculty members/PIs understand why this is an issue --(corrections processed more than 90 days after the initial charge are red meat for auditors) When late transfer/correction requests originate from the PI, remind them of these issues Avoid the 90+ day transfer practice by creating a system of reminders and steps for each correction/transfer Example: PI summer salary on CoLA stopgap account Plug in reminders to process transfer to remove stopgap account and/or to follow up with sponsor to inquire about the timing of expected funding increments If the sponsor is the reason you're pushing 90+day transfers, document it when you finally process the change request for the Workday BP! A papertrail is your friend during an audit.

In order to remain compliant with policy concerning timing of transfers, the following is required:

• Appropriately Justified
• Must contain full explanation of how error occurred and/or nature of the error
• Explanations such as 'to correct error' or 'to correct project balances' are unacceptable*
• Explanation of why it is appropriate to charge the receiving project
  • In other words: How does it benefit the project being charged
    
    * Explanations such as 'to correct an error' or 'to transfer to correct grant' are not sufficient. The requirement is to explain how the error occurred and/or the nature of the error or how/why the expense was assigned to the wrong project/account. It should also explain the direct benefit to the receiving sponsored project-this needs to tie into the Statement of Work.

What is: Sufficient Documentation?

A full explanation of how/why the error occurred
The relationship of the charge to the project being charged
Steps taken to avoid this in the future (for corrections > 90 days)

When your SPAA Analyst (Accountant) asks you for these things, they're not being difficult. They're following federal law and keeping us from being at risk when the next audit comes around. Audits have real consequences: Disallowed expenses. Don't let your expenses be the ones disallowed. Even if you tried to disuade your PI from the disallowed cost, it STILL doesn't feel good when it happens on your watch!  Follow these guidelines to protect yourself and your PIs!

What is: Completed in a Timely Manner?

Corrections (salary, fringe, tuition, materials and supplies, equipment, travel, etc.) – Processed within 90 days from the date of the original charge

In addition to the 90+ day time frame, salary and fringe corrections made after the effort certification has been completed are extremely high risk and should be an exception.

• Because of the lack of internal audits in the Workday system, late salary and fringe corrections are an area of extreme concern. Individuals responsible for award management who process salary and fringe corrections need to incorporate this timing rule into their operational activities to ensure compliance.
   
  • The best way to accomplish this is to:
     
    • Introduce a series of reminders in your schedule to ensure follow up and/or document the status of needed corrections/transfers
       
    • Recommend to your PIs to go a different route if/when requests are made to make corrections after the 90-Day mark
       
• As mentioned in the previous section about timing of transfers, Payroll Services seems to be the only central office that addresses the 90-day time frame directly: Cost Transfer Information  

 

Expenditure Corrections – Other Considerations

Transfer of costs (HR and non-HR costs) between sponsored projects is allowable only when there is a documented direct benefit to the project being charged

An overdraft or any direct cost item may not be transferred to another sponsored project just to resolve a deficit. Establishing benefit to the receiving project is required

UT is obligated to remove unallowable charges made to a sponsored project (active and inactive) regardless of timeframe

Expenditure corrections >90 days are considered high risk, subject to increased scrutiny, need to explain steps taken to avoid a reoccurrence

Grant Administration Approach to Transfers

Expenditure corrections must not be used as a means of managing cash balances
Project funds are not interchangeable; the integrity of each grant account must be maintained
Costs applicable to several projects cannot be charge solely to a single project
Costs not allocable to a project cannot be charged to that project (even temporarily)

Red Flags:
Frequent expenditure corrections in the same unit (should be rare, not a business process)
High volume of corrections on a specific award (especially near end of project period)
Corrections to corrections
Repeating the same mistake multiple times

IN SUMMARY

Any time a transfer is initiated, the assumption is that the transaction was not handled properly initially. If expenses are being transferred to a sponsored project, there will be considerable scrutiny of the reasons for the transfer and of the justification for moving those charges - especially for transfers/corrections that occur 90+ days after the initial charge

Frequent and poorly documented expenditure corrections may indicate problems in the management of sponsored projects

Federal auditors more closely scrutinize the allowability, allocability, and reasonableness of expenditure corrections

Federal sponsors are giving increased attention to the reason behind expenditure corrections from and to sponsored projects

There is a significantly increased audit risk for expenditure corrections made beyond the approved guideline

Late salary and non-salary expenditure corrections (>90 days) and salary expenditure corrections made after certification are extremely high risk, should be the exception 

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