Effective Date: July 1, 2007

Revised: December 1, 2021

The official version of this information will only be maintained in an online format. Any and all printed copies of this material are dated as of the print date. Please make certain to review the material online prior to placing reliance on a dated printed version.

Policy Statement

To comply with allowability and allocability requirements of the Office of Management and Budget (OMB) Uniform Guidance, it is necessary to explain and justify the transfer of charges to federal awards from other accounts. OMB federal requirements prohibit the use of cost transfers for the purpose of “convenience,” i.e., a transfer largely for the purpose of using unexpended funds on an award that is ending. Timeliness and completeness of transfer explanations are important factors in supporting allowability and allocability in accordance with federal requirements.

• OMB Uniform Guidance
• Cost Transfer Request Form [PDF]
• Uniform Administrative Requirements, Cost Principles and Audit Requirements

University Position on Implementing Cost Transfer Policy

Brown University (Brown) expects its faculty, staff and students, when dealing with federal and other sponsored projects, to comply with all government and sponsor rules and regulations and follow established standards for determining when it is appropriate to initiate a cost transfer. Brown expects that costs be charged to the appropriate award when first incurred but acknowledges that there are circumstances where it may be necessary to transfer expenditures to another award subsequent to the initial recording of the charge.

Typically, cost transfers are appropriate when they are allowable direct costs of the sponsored project and their purpose is to:

• correct errors in processing the original charges;
• move costs between funds for closely related work as defined by the project scope that is supported by more than one funding source;
• reallocate shared services; or
• transfer pre-award costs in accordance with the provisions of OMB federal requirements, (Circular A-110 Section C.25 or Uniform Guidance 2 CFR 200.308 Section d.1), if incurred within 90 calendar days prior to the award or more than 90 calendar days with prior approval of the federal awarding agency.

Inappropriate circumstances include, but are not limited to, the following:

• Transfers solely for the purpose of utilizing an unexpended balance
• Transfers for the purpose of avoiding a cost overrun by charging another, unrelated sponsored agreement
• Transfers that circumvent pre- and/or post-award restrictions
• Transfers to avoid restrictions imposed by law or by terms of the sponsored agreement
• Transfers to activities sponsored by industry, foreign governments or other sponsors shifted to federally sponsored agreements
• Other transfers for reasons of convenience

Transfers That Do Not Require Cost Transfer Form

The following are not considered cost transfers and do not require the completion of a Cost Transfer Request Form.

• Transfers of true overdrafts (off sponsored awards to unrestricted accounts). These transfers may be made in lump sum entries rather than identifying individual transactions
• Transfers of expenditures between grants under the same award (i.e., between main and/or sub accounts), in cases where there are no sponsor restrictions on the funds set aside in a particular sub account
• Transfers of pre-award expenditures that were charged to a departmental account, if the costs are allowable and allocable, and were incurred within 90 days before the beginning date of the award
• Transfers of expenditures incurred within the period of performance of the award but charged to a departmental, unrestricted or other nonsponsored account while awaiting the fully executed sponsored agreement (To avoid unnecessary cost transfers, an advance account should be requested from Sponsored Projects by completing the University Prior Approval System (UPAS) form.

• Transfer of an incorrect charge from a sponsored account to a nonsponsored account

Caution: An account for an existing sponsored agreement must never be used as a holding account for any pre-award expenses, including labor.

Transfers That Require Cost Transfer Form

The following are considered cost transfers and require the completion of a Cost Transfer Request Form:

• Transfers to correct data entry or clerical errors (i.e., to correct data entry or transposition error: GR527364 should have been GR527346)
• Transfer of expenditures from a nonsponsored account to an existing award (i.e., to transfer project costs from the departmental account to the sponsored award because the sponsor issued a modification to the existing agreement rather than issuing a new award and therefore the account number remained the same)
• Recurring and routine transfers to allocate direct expenses (i.e., telephone toll charges and service center recharges). The costs must be allowable, charged in a timely manner, and allocated based on the benefit derived.
• Transfers of expenditures from the prior year account to the competing or noncompeting continuation account if permitted by the terms of the award. The explanation should contain the sponsor award number for both the prior year and the competing or noncompeting continuation award. 

To avoid unnecessary cost transfers, an advance account should be requested from Sponsored Projects by completing the UPAS form.

Brown recognizes that there may be extenuating circumstances for cost transfers to be processed after the 90-day limit. Transfers which are not made promptly, due to extenuating circumstances, must include an adequate explanation for the delay. All cost transfers made after the 90-day period will be considered only after careful review and approval of the Director of Sponsored Projects or their designee. Transfers over 90 days will require an explanation indicating the measures that have been put in place to prevent future occurrences. In addition, additional information may be requested if Sponsored Projects determines that late transfer is indicative of a systemic problem.  

Certain circumstances that necessitate a late cost transfer include but are not limited to the following:

• The official award document, including amendments or modifications, was received after the start date of the project, causing a delay in the establishment of an account number.
• The account number assignment was delayed because of negotiation issues which prolonged the award acceptance.
• The official approval from the sponsor for specific expenditures was received after the expense transaction(s) was processed.
• The official approval from the sponsor for specific actions, such as a no-cost extension, was received after the expense transaction(s) was processed.

NOTE: Extenuating circumstances do not include absences of principal investigator (PI) or responsible administrator, and/or shortage or lack of experience of staff. It is the responsibility of Brown and the PI to ensure the availability of qualified staff to administer and exercise stewardship over sponsored projects in accordance with policies and procedures. This includes those related to regular/timely (typically monthly) monitoring of expenditures and timely correction of errors and reallocation of expenses.

Payroll Accounting Adjustments (PAAs) are considered cost transfers and must be in compliance with the University’s Cost Transfer Policy. For PAAs, the cost transfer request form is a part of the Workday business process and must be completed.

Departments are responsible for periodically reviewing effort distribution for appropriateness and accuracy of effort expended on all projects. It is recommended that the review be done monthly or no less frequently than quarterly. OMB federal requirements require adjustments to salary allocations in response to significant changes in work activity. Failure to adjust salary allocations in a timely manner will result in errors to salary charges to grants, leading to over/under recovery of salaries.

Each cost transfer request must be clearly explained with supporting documentation. For all nonpersonnel cost transfers, the Cost Transfer Request Form must be completed. The cost transfer form for personnel/PAAs is a part of the Workday business process. The person initiating the transaction has primary responsibility for fulfilling these requirements and maintaining the related records. All records must be retained in accordance with the record retention requirements of the sponsored agreement and the University.

If the cost transfer is made within 90 days of the fifth business day of the following month in which the charge was originally transacted, please answer questions 1 and 2 on the form.

If the cost transfer is after 90 days, please complete all questions 1 through 4.

Transfers made after 90 days must include a justification for lateness. Explanations such as “to correct a clerical error” or “to transfer to a correct project” are not adequate and will be denied. Transfers of costs from one budget period to the next solely to cover cost overruns are not allowable.

Use the Cost Transfer Calculator Tool to calculate if over 90 days.

For journals, submit the completed nonpersonnel form, copy of Workday ledger with original charge and copies of invoices/receipts via email to your grants and contracts accountant in Sponsored Projects with the following subject line: SF00000XXXXX.

Related Resources

Cost Transfer Calculator [XLS]

Explanation and Documentation

The written explanation and supporting documentation must clearly address all of the following:

• Provide the account originally charged and the award/account to be charged. For expenses being split between more than one account, please also include the cost allocation methodology
• Include a description of the expense(s) being transferred
• Include the date of the original charge(s)
• Include documentation for the original charge(s) if not executed in Workday (i.e., for PCard charges, provide original credit card receipt and PCard log) or operational transaction ID (i.e., ER-12345) if executed in Workday and/or other documentation that describes and supports the business transaction
• Note why the receiving account was not originally charged
• Note why it is appropriate to charge the receiving account

Procedure for PAA Made Prior to the Certification of Effort

1. Modify the employee’s costing allocation in Workday if necessary.
2. Submit a PAA for any retroactive changes in effort.
3. Submit a certified effort report.

The PAA must include the appropriate justification as noted above.

PAA Made After Effort Report Has Been Signed

It is strongly recommended that PAAs be requested before the effort report has been created for the period. However, it is recognized that there may be reasons or extenuating circumstances for labor to be redistributed after the certification statement has been issued and in some cases signed.

Once an effort report has been signed and returned to Sponsored Projects, no further adjustments to that individual’s distribution of effort are allowed unless approved by Sponsored Projects. Changes to previously certified effort erode the credibility of the certifier as well as the entire effort certification process.

Changes to a certified effort report are not allowed except in limited circumstances and require the following:

• Sufficient documentation that supports allowability and allocability, and why the effort was originally certified incorrectly
• Approval of the Director of Sponsored Projects or their designee

Advance Account

An advance account is one that is established in the general ledger prior to the receipt of an award.

Allowable Costs

Allocable

Allocable costs are incurred solely to advance the work under the sponsored agreement and are benefits to both the sponsored agreement and other work of the institution, in proportions that can be approximated through use of reasonable methods. They are necessary and deemed to be assignable in part to the sponsored agreement.

Reasonable 

Reasonable costs are necessary for the performance of the sponsored agreement, reflect the action a prudent person would take under the prevailing circumstances, in accordance with the sponsored agreement terms and conditions and consistent with established institutional policies and practices.

Consistently Treated

Consistently treated costs are uniformly applied across all funds, incurred for the same purpose, in like circumstances, and are treated as either direct costs or indirect (facilities and administrative) costs.

Cost Transfer

A cost transfer is an after-the-fact reallocation of costs, either labor or nonlabor, to a sponsored funded award.

To be permissible, cost transfers must meet the criteria established for both timeliness and appropriateness. Cost transfers should be initiated as soon as possible after the original transaction, preferably within 90 days of the fifth business day of the following month in which the charge was originally transacted. Requests for transfers after 90 days must include sufficient documentation and justification and will be considered on a case by case basis. The University is obligated to immediately remove incorrect charges made to sponsored accounts, regardless of time frame.

Direct Costs

Direct costs can be identified specifically with a particular sponsored project and can be directly assigned relatively easily to a project with a high degree of accuracy.

Effort

Effort is the proportion of time spent on activities related to a PI’s or employee's duties, for which University compensation is received. Total effort must always equal 100%. External activities such as consulting are not included.

Facilities and Administrative Costs

Facilities and administrative (F&A) costs are incurred for common or joint objectives and therefore cannot be identified readily or specifically with a particular sponsored project. F&A costs include such items as utilities and other plant costs and certain general expenses (e.g., salaries of administrative and clerical staff, office supplies, postage, photocopying) that are to some degree attributable to the project/program. Costs normally treated as F&A costs cannot be charged directly to a sponsored project unless the specific activities related to the project are clearly different in type or significantly different in scale from the University norm.

Late Cost Transfer

A late cost transfer is one that is requested to be made 90 or more days after the fifth business day of the following month in which the charge was originally transacted. 

Sponsored Project

A sponsored project is a project/program funded by a grant, contract or cooperative agreement under which the University agrees to perform a certain scope of work, according to specific terms and conditions for a specified budgeted amount.

The major responsibilities each party has in connection with the University’s Cost Transfer Policy are as follows.

Cost Center Manager (CCM)

• Review sponsored accounts on a regular (e.g., monthly) basis to ensure that all expenditures charged, both personnel and other costs, are correct and appropriate.
  • This review should include the determination that the charges are reasonable, allowable, and directly support the scope of work for that project.
  • Personnel charges should represent a reasonable reflection of the employee’s effort.
  • Any errors discovered must be corrected in a timely manner.
• Establish effective processes and controls to ensure compliance with this policy.
• Ensure sponsor funds are expended in a manner consistent with the policies and procedures of the University and the terms and conditions specified by external sponsors.
• Assume responsibility for or assign an administrator to process the expenditure in compliance with appropriate University policies and procedures and departmental guidelines.
• Ensure appropriate documentation has been obtained (i.e., original receipt, written justification) to support the transaction.
• Ensure appropriate approvals have been obtained.

Principal Investigator / Employee / Graduate Student

• Ensure sponsor funds are expended in a manner consistent with the policies and procedures of the University and the terms and conditions specified by external sponsors.
• Ensure appropriate documentation has been obtained (i.e., original receipt, written justification) to support the transaction.
• Ensure appropriate approvals have been obtained.
• Review sponsored accounts on a regular (e.g. monthly) basis to ensure that all expenditures charged, both personnel and other costs, are correct and appropriate.
  • This review should include the determination that the charges are reasonable, allowable, and directly support the scope of work for that project.
  • Personnel charges should represent a reasonable reflection of an employee's effort.
  • Any errors discovered must be corrected in a timely manner.

Sponsored Projects

• Develop and implement cost transfer policies, procedures, and training in accordance with the regulations set forth in OMB federal requirements.
• Distribute effort reports for all employees identified as expending effort on sponsored projects.
• Monitor cost transfers to ensure compliance with the University’s Cost Transfer Policy.
• Audit and confirm the allowability of cost transfers and facilitate any necessary corrections with the cost center manager.
• Report questionable practices and recurring problems to the Associate Vice President for Research and the Director of Internal Audit Services.
• Work with external auditors as they monitor the University’s compliance with cost transfer regulations.

Internal Audit Services

• Independently evaluate compliance with cost transfer policy and procedures.