90-Day Transfer Rule

 Often, end-of-award transfers happen and are frequently followed up by end-of-award corrections.

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.

• Often, a late transfer occurs due to someone:
  1. Forgetting to process a correction timely
  2. Parking charges temporarily on another sponsored account
  3. Misunderstanding PI's original intention for payment
  4. Is trying to spend to zero without sufficient justification
  5. Is treating sponsored awards like a checking account

 

We are resonsible for being aware of, adhering to, and advising our PIs and researchers about, the 90-day transfer rule.

This rule applies to salary, fringe, materials and supplies, equipment, travel - all costing categories.

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 following federal law and keeping us from being at risk when the next audit comes around.

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

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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