A cost transfer is an after-the-fact reallocation of the cost associated with a transaction to/from an externally funded contract or grant account. Although costs should always be charged to the correct project, cost transfers are sometimes necessary. To comply with the cost allowability and allocability requirements of OMB Circular A-21 and federal agencies such as the National Institutes of Health, it is necessary to explain and justify transfers of charges into federal awards from other federal accounts, non-federal accounts or University accounts (including transfers from the departmental cost share fund to the sponsored project fund). Cost transfers should be prepared and submitted as soon as the need for the transfer is identified, but under most circumstances,
no later than 90 days from the original transaction date. Adjustments are allowed within 15 days after the end date of the grant provided expenses are incurred during the life of the grant.
Cost Transfer within 90 days
— Cost transfers involving sponsored projects that are processed within 90 days of the original transaction require approval signatures (email is acceptable) from the principal investigator (PI) or his / her authorized designee (see Grant Accounting’s Signature Authority Form), and the assigned Grant Accountant.
Cost Transfer over 90 days — Cost transfers over 90 days from the date of the original transaction require the completion and approval of a
Grant and Contract Cost Transfer Justification Request (see Section 3, “Documentation”).
(1) Active Sponsored Project — Sponsors have varying guidelines on cost transfers; departments should consult the Grant Accounting Office (GAO) or the Office of Research and Sponsored Program (ORSP) when in doubt about the acceptability of a proposed cost transfer. Cost transfers involving sponsored projects in the following circumstances are often encountered:
- Pre-award costs
- Error correction
- Costs benefiting more than one project
- Costs transferred in the event of an overdraft
- Continuation costs
(a) Pre-Award Costs —
For the effective and economical conduct of a sponsored project, it is sometimes necessary for costs to be incurred before the award document has been received. In such cases, departments should request ORSP to approve the opening of a new advance sponsored account. The advance account number becomes the permanent project account number when the award is effective; no cost transfers are needed. Sometimes an advance account number may not be feasible, or the need for one is unknown. When a department later determines that costs related to a sponsored project were charged to a departmental account, the costs should be transferred to the new sponsored project. If you must transfer costs on a sponsored project, perform the transfer as soon as possible, with a good justification.
(b) Error Correction — Correction of errors is required and must be fully explained. Errors may include clerical errors (such as typographical errors or transposition of digits). Other errors may be detected upon review of monthly expenditure reports. It may be that an individual’s effort was redirected, or a purchase was charged to a project other than the one that ultimately benefited from the use of the items purchased. All errors should be corrected as soon as they are detected. All costs must be moved from the general ledger account number that the cost was originally assigned to . Payroll cost transfers must be accompanied by a new certified Time and Effort Reporting Form if the transfer results in a distribution of effort different from that originally reported. The Time and Effort can be found on
(c) Costs Benefiting More than One Project — When a particular charge to a sponsored project benefits another sponsored project, because of the interrelationship of the work involved, that charge may be transferred to the other project, provided that:
- The initial charge could appropriately have been made to the other agreement
- The charge is contemplated in the approved budgets of both agreements
Example: If an equipment charge is to be transferred, both project budgets must have a line item for that equipment.
- The explanation for the transfer makes it clear why the particular charge is appropriate to either of the agreements
In some cases, transfers involving “related work” must be approved by the sponsoring agency.
(d) Costs Transferred in the Event of an Overdraft — Administrators should carefully manage sponsored projects. During review it may be determined that an overdraft might occur. If an overdraft is anticipated, the following actions may be taken:
- The costs may be transferred to another sponsored project that also benefited from the cost, if such transfer is allowable and allocable. Documentation of the benefit must be explicit.
- The cost must be treated in the same manner as cost sharing and/or transferred to a non-sponsored departmental account
(e) Continuation Costs — If a continuation award is anticipated after the end date of the current award and an advance sponsored account cannot be created, costs must be charged to the departmental account until the new award is set up, after which costs should be transferred in a timely fashion.
(2) Closeout of Sponsored Project —
Generally, no costs incurred after the project end date are allowable. Some guidelines for closeout are:
(a) Unspent Balances at the close of a project must, in most cases, be returned to the sponsor. Notable exceptions are fixed price contracts and sponsored agreements allowing carry-forward of funds.
For clarification of the terms of a specific sponsored project call the GAO or ORSP and/or refer to the award materials. Well before the close of the award the project director should ensure that:
- Expenses transferred to the project are allowable direct charges and are properly approved. The expenses should have been invoiced and incurred prior to the end date of the award. In some cases expenses incurred in the last month are considered pre-award costs when the project is ongoing and funding for the next period is assured.
- Commitments and approvals are in place for equipment, negotiated agreements, travel, service and report costs that have been incurred prior to the award expiration date but are unlikely to be paid by that date. Transfer of such costs to the closed award is allowable if justified, documented and acceptable under the terms of the agreement
(b) Adjustments of Facilities & Administrative costs are allowable.
(3) Documentation – Cost transfer s over 90 days from the date of the original transaction must be accomplished through a
Grant and Contract Cost Transfer Justification Request clearly documenting:
- That the expense directly benefits the receiving project.
- That the expense is allowable on the receiving project.
- The reason the original expense was charged incorrectly.
- That any systematic reasons which might cause this problem to be repeated have been addressed.
- The reason for any delay in the timely processing of the transfer.
Grant and Contract Cost Transfer Justification Request Form can be found
here. Note again that payroll cost transfers must also be accompanied by a new certified Time and Effort report if the transfer will result in a distribution of effort different from that originally reported. The Time and Effort Reporting Form can be found
(4) Signature – The Principal Investigator or the authorized designee signing the
Grant and Contract Cost Transfer Justification Request Form has the responsibility to notify responsible individual(s) whose project(s) will be affected by the cost transfer.
The responsibility for the proper use of sponsor’s funds remains with the Project Director (PD) or Principal Investigator (PI)