Reducing Cost Transfers to Lower Hefty Settlement Risk
As proven by Yale University’s recent $7.6 million settlement, cost transfers can have a devastating effect on an institution. Beyond the initial cost of fines and settlements, the University’s ability to obtain future funding is negatively impacted along with its reputation.
University policy states that costs transferred to a sponsored project must be allocable, allowable and reasonable for the project and that errors must be corrected within 90 days of discovery, all of which must be documented.
Auditors recognize that cost transfers are necessary. However, frequent, late, and poorly explained cost transfers raise questions about the appropriateness of expenditures and the effectiveness of the University’s internal controls.
Steps to reduce cost transfers:
- Follow the guidelines for Pre-award spending (if allowed by sponsor) to reduce the need to transfer expenses at a later date
- Routine project review to ensure appropriateness of costs charged
- Ensure personnel are trained and familiar with University policies and procedures regarding cost transfers
The key to successfully completing a cost transfer is to provide sufficient back up documentation explaining how the expense is allocable, allowable and reasonable for the receiving project and how the error will be prevented in the future.
Remember: Cost transfers cannot be used as a money management tool which includes transferring to or from a project for the sole purpose of spending down the funds or transferring costs between sponsored projects to remove a deficit balance.
Please contact SPFM for more information at rafm@llu.edu or 909-558-4589.
Helpful Links & Tools
- Information on Cost Transfers in the LLU Grants Guide
- LLUAHSC policy & procedure (H-5): Cost Transfers on Sponsored Projects.
- Cost Transfer form