As a State of Texas institution, there are certain purchasing policies and procedures that must be followed and certain sanctioned businesses TTUHSC is not allowed to do business with. There are also only a select few TTUHSC employees who are authorized to legally obligate the institution. A purchase order must be in place prior to obligating the institution to make a purchase in order to ensure we are following policies and procedures. A non-compliant P0 is one where an unauthorized employee obligates the institution to pay for a good or service before proper purchasing procedures can be completed.

A non-compliant invoice on a sponsored project fund creates an audit risk. When sponsored projects are audited, the auditor will not only audit against the grantor's policies and procedures, but against TTUHSC policies and procedures as well. If a non-compliant invoice is found in an audit, the auditor may determine that those funds will need to be returned. The offending department would have to cover that loss and the institution would have a reported audit finding, which could negatively impact future funding opportunities. Because of this audit risk, it is prudent to not allow non-compliant P0/payments on sponsored project funds.

Service departments are established for the purpose of providing goods or services to other TTUHSC operating departments. Examples of such activities include Copy and Mail Services and the Lab Animal Resources Center. Service departments recover the actual costs of their operations by charging users predetermined billing rates based on the actual use of goods or services.

There are certain items that must be considered in service department operation since a sponsored project fund may be charged.

• Service departments should establish billing rates to ensure equitable treatment of all clients regardless of funding source.
• Service departments should not accumulate a significant fund surplus or deficit.
• Service departments may only process billing transactions after goods or services have been provided. Pre-billing is not allowed.

An audit risk is created if a service department charges sponsored project funds and fails to comply with all required procedures. An audit finding could require return of funding and negatively impact future funding opportunities. For more information on service departments, please see HSC OP 50.17.

Costs should be charged to the appropriate funding source when first incurred. However, there are circumstances in which it may be necessary to move expenditures to a different funding source subsequent to the initial charge. It is important to provide detailed written explanations justifying transfers of costs (payroll and non-payroll) onto or off of sponsored project funds. Cost transfers are almost always part of an audit sample, making them an audit risk. Improperly documented cost transfers or unallowable cost transfers may lead to return of funding and could negatively impact future funding opportunities. The below are a few unallowable reasons for cost transfers on to or off of a sponsored project fund:

• To meet deficiencies caused by overruns or other fund considerations.
• To avoid restrictions imposed by law or terms of the agreement.
• To spend remaining funds on a project that is ending.
• To transfer expenses from one sponsored project to another unrelated sponsored project. Note that sponsored project funds should never be used as a source of interim funding for new sponsored agreements awaiting fund establishment.

For more information on cost transfers, please see HSC OP 50.18.