Administrative Policies and Procedures Manual - Policy 2450: Cost Transfers

Date Originally Issued: 06-01-2006
Revised: 12-01-2006, 01-01-2008
Subject to Change Without Notice

1. General

Cost transfers are after-the-fact allocations of direct charges (including labor redistributions) to, from, or between federally sponsored projects. Cost transfers are subject to the same direct cost requirements as the original cost as discussed in Section 3.2.1. of "Accounting for Federally-Defined Allowable and Unallowable Costs" Policy 2410, UBP. Also refer to Overexpenditures, Losses, and Gains on Contracts and Grants" Policy 2485, UBP.

2. Cost Transfer Requirements

Four (4) requirements must be met before a cost transfer is submitted: the transfer must be allowable, reasonable, allocable, and timely. Supporting documentation must accompany the submission. Federal allowability is defined in Office of Management and Budget (OMB) Circular A-21 and the Federal Acquisition Regulations (FAR), Part 31.3. See Section 4.2. of "Accounting for Federally-Defined Allowable and Unallowable Costs" Policy 2410, UBP for a discussion of allowability and reasonableness according to University policy and federal regulations.

2.1. Reasonable Costs

Costs are considered to be reasonable if the goods or services acquired and the dollar amount of the cost:

• reflect a prudent and responsible action,
• are necessary,
• are in accordance with all applicable external regulations and terms, and
• are consistent with University policies governing the action.

2.2. Allocability

Allocability is another criterion for allowability. As a general rule, costs are chargeable or assignable to a specific sponsored project in accordance with the relative benefits received or any other equitable relationship. A cost is allocable to a sponsored project, and may be transferred to that agreement, if it:

• is incurred solely to advance the work under the sponsored project, or
• benefits both the sponsored project and other work of the institution, in proportions that can be approximated through reasonable methods, and
• is necessary to the overall operation of the institution, and, in accordance with OMB A-21 principles, is assignable in part to sponsored projects.

2.3. Timeliness

A cost transfer must be made as soon as the need for it is identified. Supporting documentation for any cost transfer submitted later than ninety (90) days after the original date of the transaction must include an explanation for the delay and approval of the dean or director. A more restrictive deadline may apply if required by the sponsoring agency. It should be noted that corrections in the government's favor have no time limit, and the close-out of a sponsored project does not affect the obligation of the University to return funds due as a result of later refunds, corrections, or other transactions.

2.4. Supporting Documentation

Supporting documentation must accompany all cost transfer submissions and must include:

• description of the cost,
• reason for transfer,
• explanation as to how the receiving sponsored award benefits from the cost,
• justification of allowability of the cost to receiving sponsored award,
• corrective action taken to ensure transfers are not required in the future (if applicable), and
• signature of dean or director and an explanation for delay if correction exceeds ninety (90) days after original charge.

3. Compliance Risk

Cost transfers are always an audit target and can be a significant compliance risk. The following types of cost transfers are subject to audit scrutiny because they are an indication of activities deemed unallowable by federal regulations and University policy:

• numerous cost transfers,
• cost transfers with insufficient documentation,
• cost transfers made more than ninety (90) days after original charge,
• cost transfers made more than sixty (60) days after the end date of the sponsored project,
• cost transfer decisions based on available funding (caution: do not move excess funds from one sponsored project to an overspent sponsored project), and
• inappropriate effort certification for redistributed salaries.