A "cost transfer" is a transaction that moves an expense that was incorrectly placed on one account to the correct account. At MSU, we use a General Error Correction (GEC) to move expenses from one account to another for non-payroll expenses. Payroll cost transfers occur in SAP or as an email request to MSU's Payroll Office.
Not all transfers are considered a cost transfer. For example, Service Center Billings (Chem Stores, Genomic Lab, etc.) & P-Card reallocations performed within 90 days of the charge, and transfers between parent and sub accounts under the same award number are considered a "cost reallocation" and not a "cost transfer." The guidance in this memo applies to "cost transfers" only. Cost reallocations do not represent errors but instead established processes for distributing expenses on a regular basis and should be processed as a Distribution of Income and Expense (DI). The guidance below applies to "cost transfers" only.
While it is always correct to remove an inappropriate charge from a restricted account (whenever discovered), there are specific guidelines for when these charge(s), i.e."cost transfer(s)" can placed onto a restricted account. The Public Health Service (PHS) has a policy that frequent, tardy and unexplained (or inadequately explained) transfers, especially those which involve projects with overruns or unexpended balances, will raise serious questions about the propriety of the transfers. The reliability of the grantee's record keeping system and controls are also suspect when there are frequent cost transfers. PHS specifically indicates that an explanation which states merely to correct error or to transfer to correct project, is not sufficient or satisfactory.
To help ensure that "cost transfer" request(s) are kept to a minimum and will meet audit requirements, cost transfer requests charging a state or federally funded RC account should satisfy all of the following:
- be within 90 days from when the charge appeared on the Operating Statement. Cost transfer requests to transfer expenses over 90 days old to a federal or state funded RC account must be accompanied by a completed Cost Transfer Form. The greater the time between when it appeared on the Operating Statement and when it is being transferred, the more likely that it will not be approved as a charge onto a restricted account.
It is assumed that Operating Statements for restricted accounts are reviewed monthly, and therefore errors discovered outside the 90 day window should normally be moved to a non-restricted account. Exceptions to the 90 day rule will be considered depending on the strength of the information provided.
- the charge must be proper, allowable and have a provided benefit to the account receiving the charge. For example, "while the departmental administrator was on leave, an incorrect account number was used to purchase equipment. This equipment is listed in the approved budget and was used to support analysis on this project beginning in mm/yyyy". Examples such as this will be considered for approval depending on: where the project is in its life cycle, i.e. more likely to be approved if the project is not about to end, and where the project is in relation to its budget, i.e. more likely to be approved if the cost transfer doesn't appear to be the result of one account having excess funds or an overdraft. Additional guidance concerning allowability can be found at in the following link: cga.msu.edu/PL/Portal/134/FederalStateCostPolicy
- be supported by backup documentation. This may include copies of the original PO, invoice, vendor printout listing items, etc. This information should be attached to the transaction in the event of an audit.
Beginning July 1, 2015, a completed Cost Transfer Form is required with high risk cost transfer requests, meeting the following criteria.
- Includes a transfer to an RC account that is funded by a federal or State of Michigan entity, AND
- Is requesting the transfer of an expense(s) that was incurred more than 90 calendar days from the date CGA receives the request.
The Cost Transfer Form should be included with the transaction as an attachment in the General Error Correction or the SAP cost redistribution, or in the email request to Payroll. Please note that additional information may be requested by CGA upon review of the transaction.
The form is not required for transfers between parent and sub accounts under the same award number, nor for transfers that are only crediting an RC account (and transferring the expense(s) to an unrestricted account).
Please note that a Principal Investigator from the RC account being charged must sign the form. Since audit disallowances must be covered by other unrestricted funds in the department, if the amount being transferred to any one RC account is greater than $10,000, the form must also be signed by that department’s Chair. For cost transfers processed on General Error Corrections, the PI and/or Chair may be ad hoc’d as an approver instead of signing the form.
Please contact firstname.lastname@example.org with questions regarding the Cost Transfer Form or go to Cost Transfer Form FAQ’s for more information.
COST TRANSFER FORM (PDF)
COST TRANSFER FORM INSTRUCTIONS (.docx)
Cost Transfer Form FAQs