Best Practices for Removing
Unallowable Costs & Avoiding Audit
Findings Using Cost Transfers &
Effort Re-Certifications

Katherine King, Sr. Post Award Financial Specialist, Tufts University
Michael Healy, Sr. Grant Accountant Microbiology Department, Tufts University
Table of Contents
 Best Practices to Follow
 Suggestions for Proper Backup
Documentation
 Sample Audit Checklist
 How to Avoid These Types of Transactions
 Tips for Communicating
Cost Transfer
A procedure by which costs originally charged
elsewhere are moved to or from a sponsored
account or Department account in order to
allocate costs properly.
Back Up Documentation
Needed for a Cost Transfer
 Best practice- Create an Expense Transfer form to clearly show
transaction taking place
 Require that Expense Transfer forms be physically or digitally
signed by an authorized representative of each debit and credit
for the Department account (s) or grant(s) being used
 Form should explain the following:

Why was the expense not charged to the correct project originally?

How does the expense benefit the receiving award?

What corrective action has been taken to avoid this from happening
again?
Back Up Documentation
Needed for a Cost Transfer
 Attach a copy of the receipt or invoice of the expense(s) being
transferred
 Printout from the General Ledger transaction detail showing the
charge hitting the original fund
 Memo if date of the charge is over 90 days or greater:
 Needs to explain the reason for the delay in making this
request
Expense Transfer Form
Explanation Codes
Explanation codes are used to help identify the
reason why the expense transfer is needed.
These codes are located in the middle of the
form.
The explanation code is required for all
transactions involving grants.
Expense Transfer Form
Explanation Codes
A. Transfer to Continuation
Project
When an item is charged to a
grant that is no longer in use
and should be applied to a new
grant number that was set up
for a non-competitive
continuation. The charges to be
moved must be within the dates
of the continuation grant.
D. Transfer to Department account
Moving expenses to a hard
money account.
B. Transposition Error
When the digits of an account,
grant or Department account
number were transposed during
processing. Example: PV1234
was charged for an item that
was supposed to be applied to
PV1324.
E. P-card Allocation (missed pcard online system timeframe)
Missed the 21-day window of
time to move p-card charges to
grants and Department
accounts via the p-Card system
in PeopleSoft. The reason the
allocation was not done within
the given 21 days should be
noted.
C. Allocation of Expenses
Between Department account s or
Grants
When an expense needs to be
allocated between two or more
grants or Department accounts
for any reason. The
“methodology” used for
determining the splitting of the
costs needs to be included on
the transfer form.
F. Other
When none of the above
reasons accurately explain your
need for an expense transfer,
select this code and write your
reason in the space provided as
accurately and briefly as
possible.
Things to Consider When
Charging Expenses to a Grant
Account Codes Requiring
Re-Class Action
Options
A
Purchase Card
Transactions
B
Non-allocable Department
Account use only
C
D
Expense Recovery
/Reimbursement for
Unallowable
Expense
General Office
Supplies
*only Federal
awards
Tips to Avoid Cost
Transfers

Read through terms and conditions of award notice to ensure
understanding of what is and is not allowed
 For federal awards refer to CFR 200.400 Part E Cost Principles:
http://www.ecfr.gov/cgibin/textidx?SID=cb1561d39074c317ee949a
5cfb0e356f&node=2:1.1.2.2.1&rgn=div5#sp2.1.200.e

Allocate P-Card, etc. transactions on time

Update internal purchasing mechanisms when new awards come in or
awards end

Educate and update staff with access to make purchases
Sample
Central Office
Review
Checklist

Cost Transfer ChecklistJustification
 Why was the expense not charged to the correct project
originally?
 How does the expense directly benefit the receiving
award?
 Is the cost allowable, reasonable, allocable and consistently
treated?
 If applicable, why is the cost transfer over 90 days?
 What corrective action has been taken to correct if
systematic problem?
Cost Transfer ChecklistDocumentation

Do we have a description of the expense to be transferred?

Does the documentation include the date of the original charge?

Do we have a copy of the charge to the original account?

Is the cost an original charge? (ensure it has not already been cost
transferred)

Is the invoice or receipt attached?

If payroll transaction is a corrected QER or timecard attached?


Is there an authorized signature?

If not signed by the employee or PI, is there a suitable means form
attached?
Is the date that Central received the cost transfer clear on the documentation?
Cost Transfer ChecklistAward Review
 Did we check the start date?

If purchased before the start date do we have approval for pre-award
spending?
 Did we check the end date?

If purchased towards the end of the grant, is there a continuation or did
we document how purchases made at the end of the grant were
beneficial to the scope of the project?
 Is the expense in the budget?

If not, do we have re-budgeting authority?
 Is the expense allowable, allocable, reasonable and consistently
treated?
 Did we already submit a financial report?
Effort Re-Certification
A procedure by which labor originally charged
elsewhere is moved to or from a sponsored project or
Department account in order to allocate labor
properly. For non-exempt employees a recertification
needs to be done any time a change is needed after a
payroll has posted. For exempt employees this is done
any time a change needs to be made after the Effort
Reports have been certified and submitted.
Back Up Documentation
Needed for an Effort
Re-Certification
 Non-Exempt employees
 All timesheets for the period being adjusted
 Exempt employees
 A copy of the Effort Reports that was certified originally, that
has now been modified and includes the necessary changes
that are needed. The PI or designate is also required to resign and date the form.
 All re-certification requests must be accompanied by a
memo; Please see the next slide that outlines what
questions that need to be answered.
Sample Memo for Effort
Re-Certification
Tips to Avoid Effort
Re-Certifications
 Be proactive- Personnel Action Forms should be initiated as
soon as possible
 Advance Accounts should be requested whenever possible
 For Exempt and professional staff - remind your PIs that by
signing Effort Reports they are certifying that the distribution of
effort on that Effort Report reflects the actual effort devoted to
the projects being charged during that particular time period
 For Non-exempt Employees- ensure distribution represents an
accurate accounting of effort expended
Why We Want to Avoid Cost
Transfers & Effort
Re-Certifications

Auditors give cost transfers and labor adjustments the most scrutiny
A cost transfer or labor adjustment should never be used to spend out a grant

Adjustments at the end of the award are red flags to auditors

It is important for the Research Administrators and the PIs to communicate
frequently in order to avoid re-certifications

A high volume of cost transfers and effort re-certifications indicate a lack of
internal controls within a department

These types of changes could result in Central or the Department having to
revise financial or other reports that have already been submitted to the
sponsor
Keep in Mind…
All documentation is required every time you are moving an
expense that has hit a sponsored project. It doesn’t matter what
the transaction is: reclassing account codes, moving an expense
to a Department account, or transferring an expense to a different
to a sponsored project. Remember—an auditor will not know the
backstory of why this transfer is happening so you want to make
sure to make it as clear as possible so that, if your transfer is
chosen for audit, an auditor will easily be able to figure out what
happened.
Central Review
Occasionally, it may be necessary for Central to request
additional information and/or return the form for additional
information/documentation. Using the Audit Checklist should
be used as a guide during the preparation of transfer
documentation. This will lessen the need for follow up and
allow Central to expedite processing the transfer.
Expense Transfer Process
Step 5
Step 4
Submit to Central
Step 3
Step 2
Identify
incorrectly
Step 1
Monthly/Quarterly allocated expense
review of
transactions
Using audit
checklist-work
with PI to write
appropriate
explanation &
gather backup
documentation
Central reviews
expense transfer
and supporting
documentation
using audit
checklist, signs
off on and enters
into general
ledger
Institutional StructureSeparation of Duties
Department
Central

Working closely with the PI


Reviewing day to day
transactions
Reviewing Expense Transfersusing audit checklist

Requesting additional backup
documentation as needed

Signing off on and entering to
the general ledger

Initiating Expense Transfer
 Compiling backup
documentation
 Providing appropriate
explanation
Institution Review
3
Is the cost
allowable
on the
award?
4
2
1
Are all of
the required
documents
attached
and signed?
Are both
projects
still
active?
Has the
expense
been
transferre
d before?
Tips for Communicating
Be
accessible –
email, phone,
face to face
meetings
Meet face to
face once a
month/quarter
When new award
comes in
communicate,
educate, and update
PI/staff
Follow up to
ensure
resolution
Follow up
after
transaction
s are
posted
Be
empathetic
to roles
Provide
relevant
checklists
to all
parties
involved
Provide
training for
recurring
problems
Examples & Q&A