The Department of Health and Human Services (DHHS) has warned that frequent, tardy and unexplained (or inadequately explained) transfers; especially those which involve projects with overruns or unexpended balances; raise serious questions about the propriety of the transfers. Clemson University’s record keeping system and controls are also suspect when costs are frequently transferred.
Documentation of transfers/corrections must contain a justification for the transfer and an explanation of how the error occurred and why the expenditure was not correctly charged the first time. The PI or his/her designee must sign all correction forms. DHHS specifies that an explanation stating "to correct error" or "to transfer to correct project" is neither sufficient nor satisfactory. DHHS also requires the documentation for the adjusting/correcting entries to be readily available at the time of audit.
A federal awarding agency may restrict the transfer of funds among direct cost categories or programs, functions and activities for awards in which the federal share of the project exceeds $100,000, and the cumulative amount of such transfers exceeds or is expected to exceed 10 percent of the total budget as last approved by the federal awarding agency.
Transfers of charges to and between government grants and contracts should be kept to a minimum. Account numbers should be properly reflected on requisitions, appointment forms, time sheets, etc. when initiated and when work orders are placed at service centers within the University.
To help ensure that cost transfers will meet audit requirements, any transfer of cost into or between federal government grants and contracts must meet several criteria to satisfy audit requirements:
- The transfer must be current (less than 90 days old). The area vice president must approve any cost transfers for payroll charges submitted more than 90 days from the date of the original charge.
- The transfer must be a proper and allowable charge to the grant or contract receiving the charge.
- The transfer must be supported by documentation, which contains a full explanation of how the error occurred and why it was not initially charged to the proper account.
- The transfer must be accompanied by justification for the need for the transfer.
- The transfer must contain a certification by the principal investigator(s) of the project(s) involved of the correctness of the charge being transferred.
- The transfer must be identified as a cost overrun or an account correction.
- Cost overruns should be transferred to a non-sponsored account with the same account type (field 2 of the account number).
- If supply charges are reclassified to equipment, a copy of the direct voucher and the invoice should be included with the correction. The decal number should be indicated on the form if the correction adds value to existing equipment.
Since audit dissallowances must be covered by other non-restricted funds in the department, individuals who process the correction should always obtain approval from the chairperson of the department.