Cost Transfer Policy

EFFECTIVE DATE: July 1, 2010 |LAST UPDATED: February 28, 2017 | Policy Section: sponsored-research

Responsible Executive

Carolyn Ainslie, vice president for finance and treasurer

Responsible Office

Sponsored Research Accounting

Contact

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

I. Policy StatementBACK TO TOP

The Cost Transfer Policy ensures that a direct cost transferred to a federally-funded sponsored project, after it was initially charged to another sponsored project or a non-sponsored chartstring, complies 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 awards, and 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

For the purposes of this policy, a cost transfer is defined as the transfer of an expense to a federally­funded sponsored project after it was initially charged to another sponsored project or a non-sponsored chartstring.

Note: Expenses that are transferred within the same award or to a non-government sponsored award are not considered cost transfers.

Late Cost Transfer

A cost transfer that is requested more than 90 days after the end of the month in which the cost was originally incurred is considered late.   For example, if an original cost posted on 6/15/XX, then the 90 days would begin on 7/1/XX and end on 9/28/XX. Therefore, any cost transfer made on or after 9/29/XX would be considered late. 

IV. PolicyBACK TO TOP

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.

According to the Department of Health and Human Services Grants Policy Statement:

"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"

Every effort should be made at the outset to charge all direct costs (e.g. salaries, lab suppliers, equipment, etc.) to the appropriate sponsored award, but sometimes cost transfers are necessary. However, to be allowable, a cost transfer must comply with federal regulations, sponsors' award terms and conditions, and University policies.

APPROPRIATE REASONS FOR COST TRANSFERS

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 their temporary sponsored research holding fund (A0014). In no case may an existing sponsored project chartstring 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 incurred charges.

Costs Benefiting More than One Project

OMB federal regulations state that “if a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit.   If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then…the costs may be allocated or transferred to the benefited projects on any reasonable documented basis.” 

Goods and services should be allocated and charged to the benefiting awards at the time of the original purchase whenever possible and practical, based on proportional benefit or any reasonable documented basis, in order to avoid unnecessary cost transfers. The following guidance should be considered when allocating costs across two or more awards:

  • The initial charge could appropriately have been made to that project;
  • The charge was contemplated in the approved budgets of both projects; Example: If an equipment charge is to be transferred, each project budget should have a line item for that equipment and the transfer documentation must include an explanation of why the charge is appropriate to each project.
  • The method of allocating the costs between the projects is reasonable and documented.

See Procedures section for guidance on cost allocations across two or more projects.

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

Cost Transfer Checklist
Departments can use the Cost Transfer Checklist in the Procedures section to help determine if a cost transfer is appropriate.

INAPPROPRIATE REASONS FOR COST TRANSFERS

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.

Listed below are inappropriate reasons for cost transfers:

  • Cost transfers solely for the purpose of transferring overruns or deficit balances
  • 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
     

REQUIRED DOCUMENTATION

According to the Department of Health and Human Services, “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.”

Each cost transfer must be clearly explained, as described below:

PeopleSoft Prime Cost Transfer/Correction Journals

Departments initiating timely cost transfers via the PS Prime Cost Transfer Journal page are responsible for maintaining supporting documentation that fully addresses the following:

  • Description of the expense being transferred, including the original date incurred;
  • Explanation of how the error occurred on the wrong award;
  • Explanation of why it is appropriate to charge the receiving award

The certification of the correctness of the cost on the new award occurs when the authorized department personnel approves the journal.   It is recommended that departments use the Cost Transfer Justification Form as an option to fully document timely cost transfers.   
For late cost transfers processed as prime journals, the system requires completion of the Cost Transfer Justification Form to fully document the reason for the transfer and why the request is being made more than 90 days after the end of the month in which the cost was originally incurred.

Late cost transfers raise additional questions concerning the propriety of the transaction. Consequently, late transfers are not only approved by the authorized department personnel, but also by the Principal Investigator and Sponsored Research Accounting. These approvals serve as certification of the correctness of the transferred amount.

Labor Accounting (Salary) Cost Transfers

For all timely transfers of labor charges through the Labor Accounting (LA) system, a full explanation should be supplied in the comments field in addition to whatever other documentation is required. The certification of the correctness of the cost on the new award occurs when the authorized department personnel approves the salary transfer.   It is recommended that departments use the Cost Transfer Justification Form as an option to fully document their reasons for timely salary cost transfers.

Late cost transfers of labor charges require completion of a Cost Transfer Justification Form and approvals by the authorized department personnel, Principal Investigator and Sponsored Research Accounting. These approvals serve as certification of the correctness of the transferred amount.

Transfers of salary charges that have been certified raise special issues. Normally, any such transfers must be moved to a departmental non-sponsored chartstring, unless there are extenuating circumstances.  

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

V. Procedures BACK TO TOP

VI. Forms BACK TO TOP

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

VIII. Update Log BACK TO TOP

2/28/17

Updated to align with current business practices and our Prime systems implementation.

8/29/16

Updated to reference OMB Uniform Guidance requirements.

2/25/11

No changes. Copied to web-based policy library.

12/7/10

Updated

7/1/10

Approved


 

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