Cost Transfer Policy

EFFECTIVE DATE: July 1, 2010 |LAST UPDATED: August 29, 2016 | Policy Section: sponsored-research

Responsible Executive

Carolyn Ainslie, vice president for finance and treasurer

Responsible Office

Sponsored Research Accounting


Glynis Sherard, director of sponsored research accounting, (609) 258-4996

I. Policy StatementBACK TO TOP

The Cost Transfer Policy ensures that incurred costs (either payroll or other direct costs) transferred from any one sponsored or other project or program grant to a separate federally-funded sponsored project or program grant comply with sponsor terms and conditions, regulations, and University policies.

II. Who is Affected by this PolicyBACK TO TOP

This policy applies to all federally-funded sponsored projects and programs, including federal prime subawards received by the University through another entity. It should be understood by all University employees responsible for accounting transactions, including Principal Investigators (PIs), Grant Managers, Department Managers, staff within Sponsored Research Accounting (SRA), and staff within the Office of Research and Project Administration (ORPA).

III. Definitions

Cost Transfer

A cost transfer occurs when a cost is moved to a different project grant from the one to which it was initially charged. For the purposes of this policy, a cost transfer is defined as the reassignment of an expense to a federally-funded sponsored project after the expense was initially charged to another sponsored project or nonsponsored project.

Late Cost Transfer

A cost transfer onto a federally-funded sponsored project that is requested more than 90 days after the end of the month in which the cost was originally incurred (see Cost Transfer Policy).


All federal awards issued on or after December 26, 2014 must comply with OMB 2 CFR Part 200 (also known as Uniform Guidance).  Awards issued prior to that date must comply with OMB Circulars A-21 and A-110, but may incorporate elements of the Uniform Guidance when appropriate.  If an agency issues a new funding increment under Uniform Guidance to an existing award, then all activity incurred on or after December 26, 2014 will also be subject to Uniform Guidance.  Activity incurred prior to this date will continue to be subject to OMB Circulars A21 and A110.
For the purposes of this policy, please note a general reference to “federal regulations” is being used, in lieu of specific references to each of the following CFRs: 2 CFR Part 200 (Uniform Guidance), 2 CFR Part 215 (Circular A-21) and 2 CFR Part 220 (Circular A-110).  Please read the Notice of Award and the agency's terms and conditions regarding the applicability of these federal regulations.

Excerpts from the Department of Health and Human Services Grants Policy Statement (page II-43, January 1, 2007):

Cost transfers by recipients between grants, whether as a means to compensate for cost overruns or for other reasons, generally are unallowable; however, cost transfers by recipients (or subrecipients or cost-type contractors) may sometimes be necessary to correct bookkeeping or clerical errors. Recipients (and subrecipients and contractors) should have systems in place to detect such errors within a reasonable time frame. Untimely discovery of errors could be an indication of poor internal controls.

Permissible cost transfers should be made promptly after the error occurs but no later than 90 days following occurrence … The transfer must be supported by documentation… that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible official of the recipient, subrecipient, or contractor. An explanation merely stating that the transfer was made “to correct error” or “to transfer to correct project” is not sufficient.

Every effort should be made at the outset to charge salary and other costs to the appropriate sponsored project. However, cost transfers are sometimes necessary. Cost transfers include reassignments of salaries, wages, and other direct costs. Cost transfers must be timely and documented appropriately, as described below. A cost transfer is considered timely if it is submitted within 90 days from the end of the month in which the cost was originally incurred. Full documentation for such transfers must be retained in the department. Timely transfers do not require submitting a Cost Transfer Justification Form, but transfers are subject to review by Sponsored Research Accounting.

Late cost transfers raise additional questions concerning the propriety of the transaction. They could potentially heighten the level of scrutiny applied to all cost transfers university-wide. Consequently, late transfers must be approved by Sponsored Research Accounting.

Departments making such a transfer must complete the Cost Transfer Justification Form and send it to Sponsored Research Accounting in the month the transfer is made. In addition, the underlying expenditure must meet the following criteria:

  • Approved by an individual with appropriate authority
  • A University allowable expense
  • In compliance with the sponsor’s policies, regulations, and/or guidelines

Transfers of salary charges that have been certified raise special issues. Normally, any such transfers must be treated the same as an overdraft and moved to a departmental nonsponsored project grant.

Requests for late transfers will only be granted under extenuating circumstances. They must be fully documented and include a valid reason for the delay. The following are examples of circumstances that could justify a late cost transfer:

  • The official award document was received after the start date of the project.
  • The project grant number assignment was delayed because of award negotiation issues.
  • The sponsor’s approval for specific actions, such as a no-cost extension, was received after the expense transaction was processed.

The following are examples of reasons that would NOT be considered valid:

  • The PI is out of town.
  • An administrator is on vacation.
  • Department duties did not allow time for correction.
  • Work volume delayed charging the correct project grant.

Please note that the University is obligated to remove or correct any erroneous charges made to sponsored project grants, regardless of the time frame.


Clerical Errors
These are typically data entry errors such as transpositions.

Pre-Award Costs
Pre-awards costs are costs incurred in anticipation of receiving an award. Departments choosing to incur such costs must charge them to a departmental fund 20 project grant (DPT2XXX). In no case may an existing sponsored project grant be used as a holding account for pre-award costs on a pending award. Once the award has been received, a cost transfer request can be initiated. If for any reason the expected award does not materialize, the department will be responsible for any charges against the pre-award project grant.

Costs Benefiting More than One Project
Goods and services should be charged or allocated among awards at the time of the original purchase whenever possible and practical, in order to avoid unnecessary cost transfers. In limited situations, it may be permissible and appropriate to charge costs to a nonsponsored funding source initially with a subsequent reallocation to a sponsored project (e.g., recurring and routine allocations such as service center recharges, glass washing, and animal per diems). Such routine reallocations to federal awards are subject to the same 90-day limit as other cost transfers. The requirement of initially charging or allocating costs to the appropriate funding source should always be followed unless the costs benefit two or more projects or activities that are closely related, and the proportion of benefit received by each project cannot be specifically determined in advance. When this situation exists, costs may be transferred to the benefiting projects when the transfer meets the following conditions:

  • The initial charge could appropriately have been made to that project;
  • The charge was contemplated in the approved budgets of both projects;
  • The method of allocating the costs between the projects is reasonable and documented;
  • The transfer is supported by documentation that contains a full explanation and justification for the transfer;
  • The transfer is reviewed and approved by someone with transaction authority and is made within the 90-day limit.

    Example: If an equipment charge is to be transferred, each project budget must have a line item for that equipment and the transfer documentation must include an explanation of why the charge is appropriate to each project.

    Continuation of a Sponsored Project or Program
    Continuation awards do not always begin at the same time the initial project ends and may be given a new project grant, requiring cost transfers. Overruns in the initial award may legitimately be moved to the continuation award if in accordance with the terms of the continuation award.

    Transfers of Disallowed Costs and Cost Overruns

    Disallowed costs (e.g., an out-of-budget-period expenditure) and/or cost overruns must be moved to an appropriate, nonsponsored departmental project grant. If moving such costs to other than the departmental DDD295X series, consult with SRA.


    Overruns of federally funded projects may not be transferred to another sponsored project.  OMB federal regulations state that any cost allocable to a Federal award may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by regulations of terms and conditions of the Federal award, or for other reasons.

    Other inappropriate reasons for cost transfers to a sponsored project/ grant include:

    • Cost transfers solely for the purpose of utilizing unexpended funds of a sponsored award
    • Cost transfers used as a cost management strategy
    • Cost transfers for any other reasons of convenience


    Each cost transfer must be clearly explained with supporting documentation, as described below. There must be a full explanation of how the error occurred and a certification of the correctness of the new charge by someone with transaction authority for the new project grant. Explanations such as “to correct error” will not be accepted. The person initiating the charge has primary responsibility for fulfilling these requirements. The initiating department is responsible for maintaining related records in accordance with university and award requirements. The documentation should clearly address the following:

    • A description of the expense being transferred, including why and when the original charge occurred;
    • Explanation of why the receiving project was not originally charged;
    • Explanation of why it is appropriate to charge the receiving project;

    For all transfers of labor charges through Labor Accounting (LA), a full explanation should be supplied in the comments field in addition to whatever other documentation is required.

    Late cost transfers
    All late cost transfers must be approved by SRA, and a Cost Transfer Justification Form must be submitted to SRA in the month the transfer is processed. The requirements outlined above also apply to late transfers.

V. Procedures BACK TO TOP

Because the sponsored project PI, working with the department administrative staff, is responsible for all expenditures charged to the project, all cost transfers must be brought to the PI’s attention. A record of PI approval is part of the documentation for a cost transfer.

The distribution of salary charges for university faculty and staff should represent a reasonable reflection of total effort. These distributions must be reviewed on a regular basis and, if changes either have occurred or are anticipated, a new period should be entered into LA reflecting those changes. Corrections should be made to LA within 90 days of the end of the month of the change.

Every effort should be made to process known adjustments or cost transfers of salaries before effort has been certified through the effort certification process. Cost transfers made subsequent to the effort certification process are problematic because they raise doubt regarding the reliability of the initial certification. Certified effort should only be transferred from a sponsored project as a method of clearing an overdraft or removing an inappropriate charge and should normally be transferred to a nonsponsored research or cost sharing project grant.

A departmental business manager, grants manager, or other designated staff member should review sponsored project statements on a monthly basis with the PI in order to identify legitimate errors in a timely manner and communicate required changes to the business office promptly. Cost transfers should be made as soon as the error has been identified. The documentation must be retained for the appropriate time period. The cost transfer documentation should include proof of the following:

  • The expense directly benefits the receiving sponsored project,
  • The reason the expense was charged incorrectly to the initial project grant,
  • A statement in the file that any systematic reason which might have caused this problem to be repeated has been addressed, and
  • The reason for any delay in the timely processing of the transfer.

Late cost transfers, including changes to LA, require the approval of the SRA group. System developments are underway that will require that all such transfers be approved centrally before they are processed. For now, the Cost Transfer Justification Form should be sent to SRA at the time late transfers are submitted for processing. You will receive email notification if the transfer has been approved or if further documentation is required.

The following is a checklist for late cost transfers:

Have you clearly shown that:

  1. The expense directly benefits the receiving project grant?
  2. The expense is allowable on the receiving project grant (including
  3. Charging of Administrative or Clerical Salaries and General Expenses to Federal Sponsored Projects and Programs Policy)?
  4. There are no restrictions which preclude this transfer (e.g., restrictions on travel or equipment)?
  5. The expense was budgeted?
  6. The transaction meets all sponsor requirements?
  7. The transfer complies with all Princeton’s and sponsor’s policies? There is a valid reason why the expense was charged incorrectly to the first project grant?
  8. The reasons for any delay in a timely processing of the transfer are valid and fully documented?
  9. Any systemic problems which might cause this problem to be repeated have been addressed?

Any "No" answers on this checklist could result in delays or ultimately in the disapproval of the transfer.


VII. Contact Roles and Responsibilities BACK TO TOP

Department Administrator, Principal Investigator Identifies the need for a transfer of costs to a sponsored research project grant.
Principal Investigator Ensures personnel, travel, materials and other items are necessary to carry out the project
Department Administrator, ORPA, SRA Determines whether the cost can be appropriately charged to the sponsored research award under sponsor and University guidelines
Department Administrator, Principal Investigator Prepares and approves proper forms and documentation for the expense
Department Administrator, Principal Investigator Guides expense request through proper University channels
Principal Investigator, SRA Approval of late cost transfers
Department Administrator, SRA Files the supporting documentation in case of audit for the required retention period



Updated to reference OMB Uniform Guidance requirements.


No changes. Copied to web-based policy library.






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