Cost Transfer Policy for Office of Sponsored Programs Funds

100.00 Introduction and Purpose

Cost transfers occur when expenditures are moved from one externally sponsored project fund to another. The administration of cost transfers is very important whenever federal or state funding is involved because expenditures may only be charged to a particular grant or contract if they can be specifically identified with the funded activity they benefit. Office of Management and Budget 2 CFR 200 Uniform Guidance states that expenses “. . . may not be shifted to other sponsored agreement in order to meet deficiencies caused by overruns or other fund considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience.” The Uniform Guidance also provides “Any cost allocable to activities sponsored by industry, foreign governments or other sponsors may not be shifted to federally sponsored agreements.”

When sponsored projects are reviewed, inappropriate or poorly documented cost transfers can result in auditors denying reimbursement of the expenditures or even in the imposition of sanctions against the University.

Effective financial management should generally make cost transfers unnecessary; however, under certain circumstances, transfers may be appropriate. This policy has been adopted to assure compliance with funding agency requirements by allowing cost transfers only when they comply with this policy and procedure.

200.00 Policy

210.00 OSP Approval Cost transfers to sponsored funded research accounts will be made only with the approval of OSP and in compliance with this policy.

220.00 No cost transfers unless allocable.  Costs allocable to a particular sponsored agreement may not be shifted to other sponsored agreements in order to meet deficiencies caused by cost overruns.

230.00 Expenditure corrections.  Expenditure corrections, including salary expenditure corrections that result in a cost transfer, should be made within 90 days of the date of their posting on MSU’s Banner finance accounting system. Request for cost transfers beyond the 90 day period will generally be approved only for transfer to departmental funds unless OSP determines that extraordinary circumstances warrant transfers to other OSP funds.

240.00 Pre-award spending.  Pre-award spending authorizations may be used to minimize the number of cost transfers associated with spending in advance of the actual receipt of award documents. In appropriate cases, the department should request OSP approval to open a new sponsored account.  The pre-award fund number will become permanent when the award is finalized, thus no cost transfers will be required.

250.00 PI responsibilities.  Principal Investigators (PIs) are responsible for ensuring that expenses charged to their sponsored project are appropriately allocable to that project. The PI should employ sound financial and accounting practices, including monthly fund reconciliation, to minimize errors and any resulting need for cost transfers.

300.00 Procedures

310.00 Approval requests.  Request for cost transfers to correct errors made within 90 days of their posting must be approved and signed by the PI or authorized signature on the finance expenditure correction form or payroll funding change form and submitted to OSP. An explanation of the cause of the error, a justification for the transfer of the expense, and assurances that the cause of the error has been corrected must accompany the request for the transfer.

In order to be considered by OSP, requests for cost transfers outside of the 90 day period require:  the approval and signature of the PI; an explanation of the cause of the error; a justification for the transfer of the expense and how it directly benefited the project it is being moved to; assurances that the cause of the error has been corrected; and a description of the extraordinary circumstances warranting transfer to the destination OSP fund.

320.00 Related work transfers.  When a particular charge to a sponsored agreement benefits another agreement, because of the interrelationship of the work, that charge may be transferred to the other agreement only if the PI establishes through clear and convincing explanation and documentation that: (1) the charge could have been made initially to the other agreement, and (2) the transfer is within 90 days of the original posting. Note that in some cases, transfers involving “related work” must be approved by the sponsoring agency.

330.00 OSP Routing.  OSP will forward approved cost transfers to the appropriate central office for processing. Denied cost transfers will be returned to the department.

[Reviewed January 04, 2023]