What are cost transfers, and what do we need to know to ensure compliance?
In sponsored project administration, a cost transfer is the process of moving expenses from one funding source or accounting category to another. There are only a couple of instances when a cost transfer might be necessary:
- Correction of Errors: Sometimes, expenses may be initially charged to the wrong project or budget category due to clerical errors or oversight. Cost transfers are used to correct these mistakes and ensure accurate financial reporting.
- Allocation Changes: As projects progress, it may become necessary to assign a portion of the cost to another sponsored project which is also benefitting from the purchase. These are known as split purchases.
There are several improper and unallowable usages for cost transfers between or to sponsored projects:
- To expend unused funds.
- To avoid an over expenditure situation
- To transfer an unallowable cost to another project
- To circumvent award restrictions
- To reimburse a “loan” of funds from another sponsored project.
These expenditures can be either payroll, or non-payroll in nature.
Cost Transfer Examples
Non-Payroll:
A researcher initially charges $1,000 of laboratory supplies to a sponsored research project. Later, it's determined that $200 of those supplies were used on another non-sponsored project.
To correct this, a cost transfer would be initiated to move $200 of the expense total to a non-sponsored project. In this case, a Departmental Online Journal Entry (DOL), would need to be completed.
Payroll:
During a reconciliation, a departmental research administrator realizes that the salary budget is overspent because a graduate student was appointed to the wrong project.
In this situation, the graduate student’s salary would need to be moved to the correct project via an Electronic Retroactive Distribution of Funding (eRDF) through OMNI HR.
Cost Transfer Justification Form
Cost transfers to a sponsored project must be submitted to Sponsored Research Administration (SRA) within 90 calendar days from the end of the month in which the error occurred, or within 30 calendar days of the expiration of the project. A Cost Transfer Justification form will need to be completed and submitted to SRA along with the eRDF or DOL. Please note that cost transfers which are sent to SRA after the 90-day deadline will require additional explanation on the Cost Transfer Justification form and receive a higher-level review from SRA Management.
However, moving charges to a non-sponsored fund, such as E&G or SRAD, does not require the Cost Transfer Justification form.
Final Thought – Limit Use, Ensure Compliance
While cost transfers are necessary for maintaining compliance and accuracy, they should be minimized and justified appropriately. Excessive or unjustified cost transfers may raise red flags during audits and could lead to questions concerning financial management practices. Therefore, it’s best practice to avoid cost transfers, when at all possible, by practicing responsible financial accounting oversight. Additionally, it’s critical that cost transfers are used in accordance with the policies and procedures outlined above.
If you have any questions, please reach out to your central office grants officer.