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Costing and Cost Transfers


Costing Basics. As a condition of receiving award funds from federal sponsors, OHSU is required to follow basic government regulations and Cost Accounting Standards (CAS) – PowerPoint PPT presentation

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Title: Costing and Cost Transfers

Costing and Cost Transfers
  • John Caruso
  • Campus Relations Manager,
  • Sponsored Projects Administration

  • This course is intended for department
    administrative staffincluding department
    administrators, division managers, department
    fiscal managers, department effort coordinators,

Costing Basics
  • As a condition of receiving award funds from
    federal sponsors, OHSU is required to follow
    basic government regulations and Cost Accounting
    Standards (CAS)
  • Agency regulations include the following
  • OMB Circular A-21
  • 2 CFR Part 215 (formerly OMB Circular A-110)
  • OMB Circular A-133
  • CAS 501, 502, 505 and 506

Circular A-21
  • Defines the rules for Direct and Indirect
    (Facilities Administrative) costs
  • Provides principles for determining if costs are
    allowable, allocable, and reasonable
  • Sets forth standards for Effort Reporting

Circular 2 CFR Part 215
  • Defines reporting requirements
  • Sets forth acceptable forms of cost sharing
  • Defines methods for handling program income
  • Explains when prior approvals are required for
    revisions to budget or program plans
  • Defines procurement standards and procedures
  • Sets forth accounting standards for equipment

Circular A-133
  • Provides the standards for consistency and
    uniformity in the auditing of states, local
    governments, and non-profit organizations
    receiving and expending federal funding

Cost Accounting Standards
  • CAS 501, 502, 505 and 506 were developed to
    create consistency in the following areas
  • Estimating, accumulating, and reporting costs
    (CAS 501)
  • Allocating costs incurred for the same purpose in
    like circumstances (CAS 502)
  • Accounting for unallowable costs (CAS 505)
  • Cost accounting periods (CAS 506)

Purposes of CAS
  • Cost Accounting Standards are designed to help
    promote consistency and fairness
  • It is essential to consistently follow OHSUs
    disclosed accounting practices on costs
  • http//

Direct Costs
  • Cost Accounting Standards reduce the risk of
    double dipping or charging expenditures as both
    direct and indirect costs
  • Department administrators need to understand OHSU
    accounting practices and be familiar with the
    regulations defining direct costs

Charging Direct Costs
  • Sponsor funds are available
  • Costs are allocable
  • Costs are reasonable
  • Costs are allowable
  • Like costs are treated consistently

Sponsor Funds Available
  • Appropriate direct cost items should be charged
    to sponsor funds
  • Expenditures must be between award start and end
  • Funds must remain unspent and uncommitted
  • If sponsor funds are unavailable, costs may be
    identified as Cost Sharing

  • To be allocable as a direct cost, the expenditure
    must benefit only one project, or must be easily
    and proportionally assigned to multiple projects
    that benefit

  • To be reasonable, costs must pass the prudent
    person test
  • Would the local press make a story out of the
    costs you are charging to taxpayer funds? If so,
    you might want to think again.

  • For costs to be allowable on a federally
    sponsored award, they must conform to any
    limitations or exclusions set forth in these
    federal principles or in the sponsored
    agreement as to types or amounts of cost items
    (OMB Circular A-21, C.2.d)

  • Costs incurred for the same purpose in like
    circumstances must be treated consistently as
    either direct or FA costs. Where an institution
    treats a particular type of cost as a direct cost
    of sponsored agreements, all costs incurred for
    the same purpose in like circumstances shall be
    treated as direct costs of all activities of the
    institution. (OMB Circular A-21, D.1)

  • Certain items are generally considered indirect
    (F A) costsunless a direct relationship to a
    specific sponsored project can be established
  • Salaries of departmental staff
  • Office supplies
  • Telephone expenses
  • Photocopying and postage
  • Etc

  • Principal Investigators, department
    administrators, and Sponsored Projects
    Administration (SPA) have specific roles and
    responsibilities related to the proper handling
    of costs

PI Responsibilities
  • The Principal Investigator (PI) is ultimately
    responsible for justifying the appropriateness of
    all direct costs budgeted and charged on
    sponsored projects, and must abide by the
  • overall government regulations
  • agency guidelines
  • terms and conditions specific to the individual
  • OHSUs policies and guidelines

Dept Admin Role
  • The role of departmental administrators is to be
    a resource to PIs
  • Advising on proper direct cost budgeting and
    charging practices
  • Helping with regular reports and review of
  • Maintaining copies of relevant documents (award
    terms and conditions, OMB Circulars, OHSU
    policies, etc)

Role of Dean/Director
  • The Dean/Director must ensure that guidance is
    provided to PIs and departmental administrators
    on the criteria to be used in budgeting and
    charging direct costs
  • The Dean/Director is also responsible for making
    sure mechanisms are in place to ensure
    accountability for budgeting and charging costs

SPA Responsibilities
  • SPA is responsible for providing guidance and
    assistance to PIs and departmental
    administrators in the proper charging of direct
  • SPA also oversees and assists with cost transfers

Cost Transfers
  • Cost Transfer the process for moving an item of
    expenditure between sponsored projects,
    expenditure types, or different types of funds
  • Cost Transfers need justification, documentation,
    and approval

Cost Transfer Overview
  • Rules governing Cost Transfers
  • Necessary approvals
  • Walk through of OHSU Adjustment Form
  • Cost Transfers and Audits
  • Strategies for Prevention of Cost Transfers
  • Examples

Avoid the Need
  • All project costs should be appropriately charged
    to accounts according to accepted accounting
    principles as well as OHSU policies and the
    regulations applicable to sponsoring agencies
  • Ideally, completed transactions should not need

Transfer When Necessary
  • However, in certain circumstances, changes are
    required to move expensesCost Transfer
  • Between projects
  • Between expenditure types
  • Between different types of funds
  • Cost Transfers need all of the following
    justification, documentation, and authorization

Federal Requirements
  • The Federal Government questions the propriety of
    Cost Transfers on federally funded projects
  • Cost Transfers can cast doubt on a grantees
    accounting system and internal controls
  • The Government expects documentation and an
    authorization process for all Cost Transfers on
    federally assisted projects

Federal Requirements
  • There are situations when Cost Transfers are
  • To correct a clerical or bookkeeping error
  • When work on a project has started, but the
    official notification of the award is delayed
  • To move payroll off suspense

Federal Requirements
  • Under no circumstances may a Cost Transfer be
    made with the sole intent of using up the
    unexpended balance in a federal account.

SPA Procedure
  • The Principal Investigator (or Dept Admin)
    initiates the OHSU Adjustment Form as soon as
    possible (within 90 days of expense being
  • The PI provides all information on the Formnote
    that to correct error is not sufficient cause
  • The Department Chair/Division Head reviews the
    Form, and forwards it to SPA if approved

SPA Procedure
  • SPA reviews the OHSU Adjustment Form for
  • Allowability
  • Acceptability
  • Propriety of charges
  • If the request does not meet these criteria, it
    will be returned to the PI
  • If the request is approved, SPA forwards the form
    for processing

Acceptable Reasons
  • Correction of errorbut be more specific
  • Charges benefit more than one program
    (distribution of costs based on benefits
  • Programs involve closely related work

Unacceptable Reasons
  • To reduce overruns if the transfer is from one
    federal project to another
  • For reasons of convenience
  • To use unspent money in a project
  • Because the bookkeeper was on leave, etc

Walk Through of Form
  • Make Cost Transfers using the OHSU (Transfer
    Between) Adjustment Form http//
  • There are also online instructions to this form

  • Cost Transfers can be a red flag to auditors
  • Auditors examine
  • Frequency
  • Justification
  • Remedies

Audit Questions
  • Are Cost Transfers supported by documentation
    which adequately explains and justifies why the
    transfers were made?
  • Are Cost Transfers caused by work which is
    supported by more than one funding source?
  • Are there Cost Transfers between projects which
    are in an overrun condition to those with
    unexpended balances?

Audit Questions
  • Are Cost Transfers which represent corrections of
    clerical errors made promptly after discovery?
  • Are Cost Transfers dated?
  • Is an explanation provided that fully explains
    how the error occurred?

Strategies for Prevention
  • Formal policies and related procedures governing
    Cost Transfers
  • Compliance training sessions
  • Awareness of the risks involved in making
    inappropriate transfers
  • Review of account balances, open orders, etc,
    three months prior to close out

Cost Transfer Case Study 1
  • An OHSU employee transfers expenses from one
    account to another and annotates the cost
    transfer to correct an accounting error
  • Is this an appropriate justification?
  • Why or why not?

Case Study 1
  • If it was an accounting error, the transfer must
    be supported by documentation that fully explains
    how the error occurred and a certification of the
    correctness of the new charge by a responsible
    organization official
  • Transfers made solely to cover cost overruns are
    not allowable

Cost Transfer Case Study 2
  • You are asked by a PI to stop at an office supply
    store on your way to work and pick up a few
    items. The PI also asked you to get donuts for
    the lab meeting that morning. When you arrive at
    work, the PI tells you that all the items should
    be charged to the grant
  • Your Department Administrator tells you that
    these purchases must come from departmental
    funds. Why?

Case Study 2
  • If the supplies are not specifically allocable to
    the grant, they are considered general office
    supplies and should not be charged as a direct
    cost to the grant account
  • Entertainment, such as food, is unallowable under
    the provisions of A-21

Cost Transfer Case Study 3
  • Dr. Miller purchases a much needed piece of
    specialized equipment for her research on
    hypertension. When preparing the purchase
    request, she realizes that the only account with
    enough money is her grant for research on sleep
    disorders. Because both grants are funded by
    NIH, she charges the equipment to the sleep
    disorder grant. Is this acceptable?

Case Study 3
  • The cost principles address four tests to
    determine allowability of costs
  • Allocability
  • Reasonableness
  • Consistency
  • Conformance

  • A cost is allocable to a specific grant if it is
    incurred solely in order to advance work under
    the grant and is deemed assignable, at least in
    part, to the grant

  • A cost may be considered reasonable if the nature
    of the goods or services reflect the action that
    a prudent person would have taken under the
    circumstances prevailing at the time the decision
    to incur the cost was made

  • Grantees must be consistent in assigning costs.
    Although costs may be charged as either direct
    costs or FA costs, depending on their
    identifiable benefit to a particular project or
    program, they must be treated consistently for
    all work of the organization under similar
    circumstances, regardless of the source of funding

  • Conformance with limitations and exclusions as
    contained in the terms and conditions of
    awardvaries by type of activity, type of
    recipient, and other variables on individual

Cost Transfer Summary
  • Cost Transfer is the process of moving an
    expenditure between research projects,
    expenditure types, or different types of funds
  • Cost Transfers should be an exception, not a
    standard means of operating
  • Cost Transfers need justification, documentation,
    and approval

Course Summary
  • This course has examined the importance of Cost
    Accounting Standards in the successful management
    of federal award funds
  • With proper planning and regular review, costs
    should be charged correctly the first time
  • When necessary, cost transfers can be used to
    correct errors, as long as they include proper
    justification, documentation and authorization

Some Useful Websites
  • Grants Page/OER homepage
  • http//
  • NIH Grants Policy Statement (12/03)
  • http//
  • NIH Guide for Grants and Contracts
  • http//

Cost Transfers
  • Questions?
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