The University of Iowa

Cost Transfers

  1. Definition
  2. Basis for Cost-Transfer Policy
  3. University of Iowa Cost-Transfer Policy and Guidelines
  4. Types of Cost Transfers

a. Definition

A cost transfer is an expense that is transferred from one account to another after the expense was initially recorded in the financial accounting system.

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b. Basis for Cost-Transfer Policy

Project sponsors expect the grantee institution to establish and maintain adequate financial management practices and policies so that costs are appropriately charged at the time incurred and significant adjustments are not generally required.

The federal government has established policies concerning the assignment of costs to federally sponsored agreements, including the general government policies outlined in the Uniform Guidance as well as federal and nonfederal agency-specific policy requirements.

Uniform Guidance Requirements

To comply with the cost allowability and allocability requirements outlined in the Uniform Guidance (200.400 - Subpart E - Cost Principles), the institution must be able to explain and justify all charges transferred onto federal awards, whether the costs are transferred from some other federal account, a non-federal account, or a University account. Any necessary cost transfers should be completed in a timely manner and with a complete explanation, as these are, per the principles outlined in the Uniform Guidance (200.400 - Subpart E - Cost Principles), critical factors in supporting allowability and allocability.

Specific Agency Example

The National Institutes of Health, our largest source of federal research funding, has included within its Grants Policy Statement the following guidelines in relation to cost transfers:

Cost transfers to NIH grants by recipients, consortium participants, or contractors under grants that represent corrections of clerical or bookkeeping errors should be accomplished within 90 days of when the error was discovered. The transfers must be supported by documentation that fully explains how the error occurred and a certification of the correctness of the new charge by a responsible organizational official of the recipient, consortium participant, or contractor. An explanation merely stating that the transfer was made "to correct error" or "to transfer to correct project" is not sufficient. Transfers of costs from one project to another or from one competitive segment to the next solely to cover cost overruns are not allowable.

To comply with the Uniform Guidance (200.400 - Subpart E - Cost Principles), as well as sponsor-specific requirements, The University of Iowa has set forth the following policy and procedures to approve and process cost transfers.

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c. Universit​y of Iowa Cost-Transfer Policy and Guidelines

Each department is responsible for ensuring compliance with the following policies and procedures. Any penalties, disallowances, or losses of funding caused by non-compliance with this policy will be assessed against the department in violation of the policy.

  • It is expected that the Principal Investigator (PI) or authorized delegate will review the fiscal status of the PI's sponsored project accounts regularly -- a monthly review is recommended -- and promptly correct expense transactions that are incorrectly recorded.
  • The University recognizes that transfers of costs from one sponsored project account to another are occasionally necessary to correct bookkeeping or clerical errors in the original charges. The University also recognizes that closely related work may be supported by more than one funding source and that in such cases a transfer of costs from one funding source to another may be proper. However, frequent, delayed, or unexplained cost transfers, particularly when they involve projects with cost overruns or unexpended fund balances, raise serious questions about the propriety of the transfers themselves as well as the overall reliability of the University's accounting system and internal controls.
  • When the need for a cost transfer to a sponsored project account (fund 500 or 510) arises, the Cost Transfer Explanation and Justification Request Form must be completed by the Department and certified by the PI or an authorized delegate. The explanation for the cost transfer must be clearly stated and must be 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.
  • When transferring expenses to a sponsored project account, cost transfers should be accomplished within 90 days of the original entry's effective date. If a particular sponsor's cost-transfers policy is more restrictive than 90 days, the more restrictive policy will apply. No time limit exists for removing expenditures from a sponsored project account. If inappropriate expenditures are discovered on sponsored project accounts, they must be moved to a non-sponsored departmental account without regard to time limits.
  • Cost transfers that are made only for the intention of spending down sponsored project funds or as a matter of convenience are not allowed. Expenses transferred to a sponsored project account are very prone to audit and must be clearly supportable. Transferring costs because of a deficit or other reasons of convenience is not appropriate. Any shared costs should be pro-rated among the applicable accounts at the time the costs are incurred to the maximum extent possible. Charging costs to one sponsored project with the intention of repaying that sponsored project when an award is received is also not appropriate.

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 d. Types of Cost Transfers

Cost Transfers may fall within either of two major categories -- Transfers of Non-Salary/Fringe Expenditures or Transfers of Salary/Fringe Expenditures -- with proper procedures depending on type:

Transfers of Non-Salary/Fringe Expenditures

  • Cost transfers involving non-salary and fringe expenditures for sponsored project accounts should be performed using the Web CV. The GL Journal Entry application should not be used.
  • If moving a transaction onto a sponsored project and the original entry had an effective date less than 90 days in the past, the requester should complete Question 1 and 2 on the Justification Form.
  • If moving a transaction onto a sponsored project and the original entry had an effective date greater than 90 days in the past, the requester should complete all questions on the Justification Form.
  • Distribution of phone, copier, or similar type of charge does not require a Justification Form to be completed, provided a log or other tracking mechanism is maintained in the department to document the charge.

Transfers of Salary/Fringe Expenditures

  • The preferred method for cost transfers involving salary and fringe transactions is the use of the Change of Status mechanism in the University's Human Resources Information System. For those occasions when the Change of Status is not appropriate, the Pay CV should be used.
  • If moving a transaction onto a sponsored project and the original entry had an effective date less than 90 days in the past, the requester should complete Question 1 and 2 on the Justification Form.
  • If moving a transaction onto a sponsored project and the original entry had an effective date greater than 90 days in the past, HRIS will automatically request a justification be completed. The Justification Form must be completed and approved by the requester and others in the workflow path. Grant Accounting will automatically be added to the workflow path. Grant Accounting will review the justification and if it is determined to be adequate, it will be approved and the HR system will be updated and the Web Payroll Change Voucher will then be completed centrally.
  • Effort report: Cost transfers that involve payroll charges require special treatment. If such a transfer is made after effort certification for the period in question has been accomplished, a revised effort certification form may need to be completed and signed by the affected employee.

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