UC Santa Barbara Policy 5110
Policies
Issuing Unit: Administrative Services Date: January 1, 1986
EXPENDITURE ADJUSTMENTS (COST TRANSFERS)
I. REFERENCES:
A. Office of Management and Budget, Circular A-21, Cost Principals
for Educational Institutions.
B. DHHS Grants Administration Manual, Chapter 6-05, Cost
Transfers.
C. University of California Accounting Manual: Chapter P-196-13,
Payroll: Attendance, Time Reporting and Leave Accrual Records.
D. University of California Business and Finance Bulletins A-47,
University Direct Costing Policy; A-53, Official Documentation
Required in Support of University Financial Transactions; G-6,
Substantiating of Salary and Wage Charges to U.S. Government
Contracts and Grants.
E. University of California Payroll/Personnel System User Manual,
Section V-A, Expenditure Transfer.
F. UCSB Policies Manual, Policy 5115, Adjusting Expenditures.
II. POLICY:
It is University policy that costs be charged directly to the
account/fund to which they pertain. It is recognized, however, that
expenditure adjustments are occasionally necessary to correct book
keeping or clerical errors in the recording of original charges.
It is also recognized that closely related work may be supported by
more than one funding source and that in such cases an expenditure
adjustment of costs from one funding source to another may be
proper. However, departments should avoid frequent, tardy, and
unexplained (or inadequately explained) expenditure adjustments,
particularly where they involve Federal account/funds with budget
overruns or unexpended fund balances. Such adjustments raise serious
questions about the propriety of the adjustments themselves as well
as the overall reliability of the University's accounting system and
internal controls. Further, the University could be subject to audit
disallowances.
The late receipt of a fully signed contract or grant document is not
an acceptable reason for expenditure adjustments. The incurrence of
necessary preaward expense should be made only under the campus
advance expenditure procedures or with the written approval of
funding agencies.
A. Conditions Under Which Expenditure Adjustments are Appropriate:
Once an expense entry has been recorded in an
account/fund/subaccount/object in the Distribution of Payroll
Expense Report (PPP5302) or the Department Report of
Appropriations and Expenditures (GL060), expenditure
adjustments are appropriate only in the following situations:
1. To correct an erroneous recording such as when the
original source documents(s) (e.g., invoice, payroll,
purchase order) cited an incorrect
account/fund/sub/object).
2. To record a change in original decisions as to the use of
goods or services (e.g., a case of beakers originally
ordered for and charged to a teaching program may be
subsequently transferred to a research project). In
requesting an expenditure adjustment, a unit administrator
should bear in mind that the original recording was duly
certified as proper and legitimate against the
account/fund cited; this original certification is now
being invalidated and a new certification is being made
that the second account/fund is the correct one to charge.
3. To redistribute certain high numerical but small
individual and minor charges, such as copy machine rental
and paper costs, telephone charges, mailing charges, or
office supplies, that are billed to departmental
accounts/funds but a portion of which may apply to other
activities/projects/funds under the jurisdiction of a
department. If this type of expenditure adjustment is
identifiable as an entry on the Departmental Report of
Appropriations and Expenditures (GL060), reference is
required to the original document(s). If not identifiable,
departments must maintain internal records/log of such
usage to support the adjustment, and provide accounting
with the details of the calculation of unit costs (such as
xerox copies).
4. To change unrestricted (non-federal) fund sources due to
late budget allocations.
B. Expenditure Adjustment Criteria:
1. Adjustments (cost transfers) involving restricted funds
(i.e., extramural funds provided under a gift, endowment,
grant or contract for a specific purpose) must meet all of
the following tests:
a. It must relate to individual items of expenditures
(e.g., a cylinder of oxygen or fraction thereof, two
hours of secretarial time) incurred by the unit
requesting the adjustment. The number of units and
unit cost must be identified.
b. It must be in the same amount originally recorded in
the general ledger of the University (i.e., the whole
amount or the appropriate fraction charged to or paid
by the unit requesting the adjustment).
c. It must be fully explained, justified, and approved
by appropriate authorized officials to ensure
propriety, especially for audit purposes. An
explanation that merely states that the adjustment is
being made "to correct an error" or "to transfer to
correct project" is not sufficient. In the case of an
adjustment to correct an error, the explanation
should state how the error occurred. In the case of
an adjustment to transfer costs for closely related
work between funding sources, the explanation should
state how the costs will benefit the funding source
receiving the transferred costs.
d. It must be recorded via the appropriate form (such as
the Payroll Expenditure Transfer, Non-payroll
Expenditure Adjustment Request or Financial Journal).
e. It must be in compliance with applicable campus and
systemwide policies and terms of funding source
agreements.
f. It must be recorded in the general ledger within 120
days of the original charge. If because of
unavoidable circumstances an adjustment has to be
made beyond the 120-day period, a full explanation
including a well-documented account of all the events
leading to the tardy adjustment must be provided.
g. It must include certification and approval signatures
of the principal investigator, department head, or
other academic official.
2. Adjustments between unrestricted University funds must, at
a minimum, meet the requirements in items b, c, d, and e
above.
C. Responsibility for Review and Approval of Expenditure
Adjustments:
1. The Accounting Office is responsible for the review and
approval for processing of expenditure adjustments.
2. The ultimate responsibility for compliance with the
requirements of this Policy and Policy 5115 rests with the
principal investigator or department chair of the unit
concerned.
For questions or comments regarding the format of the above information, please contact webcontact@ucsbuxa.ucsb.edu.
Last Modified By: HMW, 5/21/97
Return to the UC Santa Barabara Policies Home Page