A cost transfer form should be completed within 90 days of the expense posting for any expenditures on sponsored project accounts (fund 500 or 510). Cost transfers after 90 days will only be allowed in extenuating circumstances, such as late issuance of the award or contract after the start date. Reasons such error just discovered or late notice from PI are not acceptable.  It is the responsibility of the PI and Department to ensure proper stewardship over sponsored projects in accordance with the sponsor’s policies and regulations, including those relating to regular monitoring of expenditures and timely correction of errors and reallocation of expenses.

The explanation for the cost transfer must be clearly stated and sufficient for an independent reviewer (i.e. an auditor) to understand the transfer and conclude that it is appropriate.  According to Federal regulations, “An explanation which merely states that the transfer was made ‘to correct an error’ or ‘to transfer to correct project’ is not sufficient.”

The following are the questions included on the Cost Transfer Explanation and Justification Request form along with a brief description of what should be included in the response to the question.

Note: Question 1 & 2 are always required.  Question 3 & 4 are required when the cost transfer is not completed within 90 days of the original transaction.  Please note all transfers greater than 90 days require Grant Accounting Office approval.

Question 1: Why was this expense originally charged to the account from which it is now being transferred (in other words, explain the error or circumstance for originally charging the incorrect account)?

The response should explain why the cost was originally charged to the wrong account.  For example, this may have been the result of a keying error or misinterpretation of instruction.  

Question 2: Why should this charge be transferred to the proposed sponsored research project account (in other words, provide an explanation as to how this expense benefits the project)?

The response should describe why the particular cost is necessary for the sponsored project.  For example, explain why the item, service or faculty/staff time is specifically necessary for the project and how it benefits completing the project objectives.

Question 3: Why is this cost transfer being requested more than 90 days after the original transaction?

The response should indicate why it took more than 90 days to determine that a cost transfer was necessary.  Note:  all errors should be discovered during the monthly reconciliation process.

Question 4: How will you prevent this type of error from happening in the future?

The response should describe how processes and procedures will be modified in the department to prevent a similar cost transfer in the future.  The same justification cannot be used for all cost transfers.

Listed below are some examples of cost transfer responses that do not meet the requirements described in the University’s Cost Transfer Policy & Guidelines, a description of the improvements needed in the documentation, and a suggestion as to how the response might be improved to meet the requirements:

Questionable explanation: Transfer of supplies that were charged to the department account in error.

Issue: This explanation does not adequately explain why the wrong account was charged and why/how the charge is appropriate to the account being debited, nor does it describe how the error occurred.  The explanation should be expanded to better describe the reason why the account being charged is appropriate and how the amount being transferred was determined.

Acceptable explanation: [Explain how the items being transferred will benefit the scope of the project.]   The supplies being transferred were purchased using a procurement card (p-card).  The administrative assistant did not review the p-card transactions by the deadline, causing the transactions to be expensed to the department account.  Going forward, the administrative assistant will review all p-card purchases and assign the correct account number, if applicable, to be charged prior to the deadline.

Questionable explanation: To correct account incorrectly charged due to clerical error.

Issue: This explanation seems to indicate that a deficit is being moved from one grant to another, which is prohibited.  Costs should be allocated according to the benefit to the project.   Costs that are incurred on related projects should be pro-rated at the time the costs are incurred.  Charging costs to one sponsored project with the intention of repaying another sponsored project is not appropriate. 

Acceptable explanation: The supplies to be transferred are used on related projects.  Supplies should be shared equally on both projects; thus 50% of the cost of these items is being transferred.

Questionable explanation: To correct account incorrectly charged due to clerical error.

Issue: Insufficient explanation of why and how the clerical error occurred and why the error was not corrected earlier.  In general this explanation is only adequate if a transposition error occurred and such circumstances should be included in the description.

Acceptable explanation: [Explain how the items being transferred will benefit the scope of the project.] The research assistant in the lab who ordered the supplies used an account number of a project that was terminated.  He has been instructed to use the new account number.  In the future, all supply orders will be reviewed and approved by the PI or an appropriate department administrator prior to submission of the order so that errors can be prevented.

Questionable explanation: Change of Status form was not processed in time.

Issue: The explanation does not adequately address why the Change of Status form was not processed in time.  The description should be expanded to better explain the circumstances of the delay in processing the appointment and the specific plan to avoid such occurrences in the future.

Acceptable explanation: The administrator was informed of a faculty member’s effort distribution change after the deadline for payroll appointments for the January payroll.  The faculty member has been requested to review effort monthly and communicate changed in effort in a timely manner in the future in order to avoid such circumstances.

Questionable explanation: To charge a portion of the lab technician’s salary to the project.

Issue: The reason for the transfer is missing and there is no indication of why the payroll appointment was incorrectly made at the time the charge was generated.  The description should be expanded to include a description of the individual’s role on the project, the portion of salary being moved, and how the portion of the salary was determined.

Acceptable explanation: During monthly reconciliation it was discovered 50% of the lab technician’s salary had not been moved to Dr. X’s NSF project.  This individual performed experiments with mice and split his time equally between Dr. X’s NIH project and his NSF project.  We have talked with the lab technician and Dr. X to ensure that more information about the projects is shared in the future, which will better ensure that no such errors will occur in the future.

Questionable explanation: Move charge from department.

Issue: The reason for the transfer is not stated.  The description should be expanded to explain how the charge benefits the grant being charged and why the charge was not originally posted to the grant.

Acceptable explanation: The start date of the grant was December 1.  However, the account number was not established in the accounting system until January 15.  The PI needed to purchase some materials to begin work on the project in December, thus the costs for materials were charged to the department until the account was established.  In the future, we will request an advance account for such charges.

See the Cost Transfer Policy & Guidelines or Cost Transfer FAQs for more information.

Last Updated: 05/26/2025