A cost transfer is an after-the-fact reallocation of the costs associated with a transaction from one WBS element
or cost center to another. Institutions receiving federal funds are potentially subject to audit disallowances without sufficient
control and documentation of cost transfers.
For a cost transfer, just as for any other expenditure transaction, the federal government is looking for documentation to establish that the expenditure is appropriate
for the WBS element or cost center receiving the charge, i.e., that it is generally allowable, reasonably allocable, and
directly applicable to the activity represented by the project.
Additionally, the timing of cost transfers is important. For example, federal auditors will often assume that a late
transfer of costs into an under-expended WBS element or cost center from an over-expended WBS element or cost center
has been made simply to cover the over-expenditure. Also, frequent errors in the recording of costs may indicate to federal auditors the need for improvement
in the departmental or university's controls.
This policy is applicable to all cost elements, except for the timing aspect
of the transfer of salary charges. Note the university's effort certification
policy found in FI0205,
SPONSORED GRANTS AND CONTRACTS for timeliness guidelines
relative to salary transfers resulting from effort certification. However,
all charges, including salaries, must be processed within 60 days after
the grant or contract end date to ensure the timely submission of final financial
Correct errors in original charges within 90 days of the error and provide an
appropriate explanation of the error;
Properly allocate costs to the appropriate WBS elements or cost centers using a verifiable and reasonable method in
accordance with cost accounting principles;
Transfer charges between WBS elements or cost centers supporting closely related work for reasons
other than covering over-expenditures.
Under no circumstances can costs that directly benefit nonfederal projects be transferred to federal
projects, whether or not interrelated, if the federal project does not also benefit from the expenditure.
Any costs allocable to a particular sponsored project under the standards provided in this policy may not be
transferred to other sponsored projects in order to meet deficiencies caused by overruns or for other reasons of convenience.
In all cases, the transfer must be made promptly. This is particularly critical when approaching the end of a budget period; otherwise,
sponsor reports may be filed including inappropriate charges. In this context, "promptly" means that all cost transfers should
be made no later than 90 days after the original transaction, and in all cases 30 days prior to the due date of the
final financial report to the sponsor.
Any cost transfer cost requests greater than 90 days require administrative
approval. The department chair must sign requests for cost transfers to be
processed between 91 and 120 days. If under some rare circumstances it should
be necessary to make a cost transfer beyond 120 days, the dean's signature
will be required in addition to the department chair. Requests for late cost
transfers should include an explanation of the extenuating circumstances that
prevented the transaction from being made earlier. Note the COST
TRANSFER EXPLANATION FORM (APPENDIX A).
The principal investigator's signature certifies that the expenditure is appropriate for the sponsored project
WBS element and that the expenditure complies with the terms and restrictions governing that sponsored project WBS element.
The department chair and dean's signature certifies that the expenditure and documentation have been
reviewed to ensure compliance with both internal policies and the sponsored project terms and restrictions.
Requests to transfer costs later than 90 days after the original transaction without an approved
explanation of the extenuating circumstances will be denied, and the department or college will be responsible
for all costs.
Specific identification of the original charge (a copy of the charge must be attached);
Justification of the appropriateness of the charge to the receiving WBS element or cost center; and
A full explanation of why the transfer is necessary.
The federal government expects the official documentation for a cost transfer
to include complete explanation of the reason the transfer is being made.
The federal "Public Health Service (PHS) Grants Policy Statement" indicates
that explanations such as "to correct error" or "to transfer to correct account"
are not sufficient. See Chapter 7 of the PHS Grants Policy Statement, http://grants.nih.gov/grants/policy/gps/.
A COST TRANSFER EXPLANATION FORM (APPENDIX A) must accompany all cost transfers and be signed by the principal investigator. The department chair must sign the COST TRANSFER EXPLANATION FORM, if the cost transfer is between 91 and 120 days after the original transaction.
The dean must sign the COST TRANSFER EXPLANATION FORM, if the cost transfer is more than 120 days after the original transaction.
When the work supported by one sponsored project is determined to represent work closely related
to that of another sponsored project, a cost transfer from one of the WBS elements or cost centers to the other may be made when the following conditions are met:
The projects are scientifically and technically related.
The projects are under the direction of the same principal investigator and/or co-principal investigator.
There is no change in the scope of the sponsored projects involved.
The relating of the costs will not be detrimental to the conduct of work under each award.
The relatedness will not be used to circumvent the terms and conditions of the awards.
A cost transfer cannot be processed on a closed WBS element or cost center.
A cost transfer that will overspend a WBS element or cost center will not be processed,
unless an increase in funding is indicated.
If the amount being transferred differs from the amount indicated on the backup documentation, the
written explanation must include a justification for the difference.
A cost transfer with charges or credits more than 120 days old must have appropriate signatures
and an explanation of the extenuating circumstances that prevented the transaction from being made earlier.
Charges or credits under this circumstance that are not approved must be funded by the department or college.
Requests to transfer costs later than 90 days after the original occurrence without an approved explanation
of the extenuating circumstances will be denied and all charges must be covered by the department or college.
Any cost transfer should be so complete or detailed that a person completely removed from the situation
(e.g., an auditor) will be able to look at the request five years from now and understand what and why
the entry was made.