Federal Grants Cost Transfer Policy

 Responsible Office or Person: Business Office

Each Principal investigator (PI) is responsible for complying with and enforcing the following policies and procedures.

It is expected that the PI or their delegate will review the fiscal status of their sponsored project accounts regularly (monthly review is recommended) and promptly correct expense transactions that are incorrectly recorded.  The PI, or their delegate, is responsible for preparing and submitting the cost transfer.

The University recognizes that transfers of costs from one sponsored project account to another are occasionally necessary to correct bookkeeping or clerical errors in the original charges.  The University also recognizes that closely related work may be supported by more than one funding source and that in such cases a transfer of costs from one funding source to another may be proper.  However, frequent, delayed, or unexplained cost transfers, particularly when they involve projects with cost overruns or unexpended fund balances, raise serious questions about the propriety of the transfers themselves as well as the overall reliability of the University’s accounting system and internal controls.  Cost transfers for federal grants should occur infrequently on an exception basis.

When the need for a cost transfer to a sponsored project account arises, the Expense Transfer Request form must be completed and approved by the PI or their delegate.  The completed request is forwarded to the grants accountant for further review and approval.  The explanation for the cost transfer must be clearly stated and must be sufficient for an independent reviewer (i.e. an auditor) to understand the transfer and conclude that it is appropriate.  According to Federal regulations, “An explanation which merely states that the transfer was made ‘to correct an error’ or ‘to transfer to correct project’ is not sufficient.” 

Cost transfers should be accomplished within 90 days of the effective date of the original entry.  The 90-day time limitation applies when transferring expenses on to a sponsored project account.  If a particular sponsor policy on cost transfers is more restrictive than 90 days, the more restrictive policy will apply. No time limit exists for removing expenditures from a sponsored project account.  If inappropriate expenditures are discovered on sponsored projects, they must be moved to a non-sponsored departmental account without regard to time limits as soon as reasonably possible after discovery.

Cost transfers that are made only for the intention of spending down sponsored project funds or as a matter of convenience are not allowed. Expenses transferred on to a sponsored project account are very prone to audit and must be clearly supportable.  Transferring costs because of a deficit or other reasons of convenience is not appropriate.  Any shared costs should be pro-rated among the applicable accounts at the time the costs are incurred to the maximum extent possible.  Charging costs to one sponsored project with the intention of repaying that sponsored project when an award is received is also not appropriate. 

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