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Cost Transfers

Click here to access the Cost Transfers section of the Post-Award Sponsored Projects Guide on page 34.

Cost Transfers

A cost transfer involves the recording of an expense in a sponsored project that had previously been charged elsewhere. UMBC permits cost transfers since the University recognizes that occasionally it may be necessary to transfer costs to a sponsored project from a different University account due to an error or because additional information becomes known after the charge is initially processed.

Cost transfers should be considered “the exception, rather than the rule” and kept to a minimum. Frequent errors in the recording of costs may indicate the need for improvements in accounting practices and the strengthening of internal controls at the departmental level.

Costs transferred to a sponsored project must meet the criteria for a direct cost. They must be allowable, timely, reasonable, consistent, of benefit to the sponsored project that is the recipient of the cost, and adequately documented. The mechanism for doing a cost transfer is to complete a journal entry (JE) or a payroll expense transfer (Retro). More information about cost transfers is available in the Cost Transfer Procedures on Sponsored Projects section of OCGA’s website.

Procedures for Cost Transfers

There are six steps to completing a cost transfer:

  1. Identify a cost that has been recorded incorrectly through the monthly review of PeopleSoft Grant Detail Ledgers
  2. Evaluate the cost transfer criteria i.e., proration, allocation
  3. Prepare the online JE or Retro to record the cost transfer transaction
  4. JEs require OCGA approval
  5. Review the monthly PeopleSoft Grant Detail Ledgers to verify the correct recording of the cost transfer transaction
  6. Retain documentation pertaining to the cost transfer

Some of the steps listed above reflect fundamentals of sound financial management, while others pertain directly to cost transfers.

Evaluate the Criteria

Prior to transferring a cost onto a sponsored project, all of the following direct cost criteria must be met. The cost being transferred must be:

  • Allowable
  • Reasonable
  • Allocable
  • Treated consistently
  • In conformance with any limitations or exclusions set forth in Uniform Guidance or in the sponsored agreement
  • Timely
  • Beneficial to the project and
  • Adequately

Examples of Cost Transfers

Principal Investigators, project directors, and departmental administrators should charge expenses in a manner that matches the cost with the benefits received from the activity, thereby eliminating the need to move expenses at a later date. Recognizing, however, that legitimate reasons can exist for the adjustment of expenses, certain exceptions are permitted.

Circumstances in Which Cost Transfers Are Normally Acceptable

  • Correction of technical errors, such as a typo or transposition error
  • Prorating or apportioning expenditures on an after-the-fact basis when an appropriate—and either self-evident or documentable—accounting technique is used to allocate the cost in accordance with the benefits
  • Redistribution of payroll from the previous pay period, when it is a one-time change from the individual’s appointment
  • Transfers when prior written approval has been received from the sponsor of the award to be charged, and the sponsor is fully informed of all circumstances surrounding the

Cost Transfers That May Be Allowable, But Which Raise Serious Questions

  • Transfers of expense from a sponsored project that is overspent to a different sponsored project
  • Transfers that only use up unexpended balance
  • Transfer or correction of payroll distribution that was previously certified
  • Transfer of an expense that was previously transferred
  • Transfers after the end date of a project.

Cost Transfers That Are Generally Unallowable

  • Transfer of an unidentified expense or lump-sum expenses to an award. Each expense transferred to an award must be specifically identified. In addition, each transfer must explain how the cost will benefit the activity of the project receiving the charge.
  • Transfers that fail to indicate how the cost benefits the receiving project, or that provide no explanation regarding why the cost was not correctly charged in the first place
  • Transfers for which expenditures are apportioned between projects, and the basis for determining the split is inappropriate or undocumented
  • Transfers of expenses that were not incurred during the project period, unless specifically allowed by the sponsor
  • Transfers of costs on the basis of available budget. For example, a transfer of cost during the last months of a project from one project to a different a project that has unexpended funds—for the sole purpose of using up the available budget— is not allowed
  • Transfers of costs from any project in overdraft status to a sponsored project, for the sole purpose of eliminating the overdraft, are not allowed
  • Random or regular rotation of costs (i.e., arbitrary charging of pooled costs such as lab supplies).

Cost transfers must be prepared and submitted within 90 days from when the transaction appears on the award. Cost transfers made after this period require additional scrutiny.  All cost transfers affecting sponsored chartstrings that occur more than 90 days from the original charge being corrected must also contain an explanation as to why the error was not discovered and corrected within the required 90 day timeframe and must be signed by the PI.