PURPOSE OF THIS POLICY

The Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), 2 CFR 200.400, Subpart E, Cost Principles, requires that the institution must be able to explain and justify all charges transferred onto federal awards, whether the costs are transferred from some other federally-sponsored account, a non-federal account, or a University account. Section 200.405(c) states:

“Any cost allocable to a particular Federal award under the principles provided for in this part may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards, or for other reasons.”

Colorado State University expects costs to be charged to the appropriate sponsored project account when first incurred, but there are some circumstances in which it may be necessary to transfer expenditures to or from a sponsored account after the initial recording of the charge in the general ledger. This policy provides requirements and guidance to be followed to ensure sound financial management of sponsored projects accounts, accurate reporting, and compliance with federal law.

APPLICATION OF THIS POLICY

This policy applies to all university employees and academic and business units engaged in sponsored activities.

EXEMPTIONS FROM THIS POLICY

None.

DEFINITIONS USED IN THIS POLICY

Cost Transfer: an after-the-fact reallocation of expenses to or from a sponsored project. It is a reassignment of an expense from one account to another after the expense was initially recorded in the financial accounting system.

Direct Costs: “Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy.” as specified by the federal Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), 2 C.F.R. § 200.413.

Unallowed or Disallowed Costs: expenses that cannot be charged to a sponsored project because they don't meet the criteria of allowability, allocability, and reasonableness outlined in federal regulations.

POLICY STATEMENT

Proper management of funds is essential to uphold the fiduciary responsibilities of the University. Frequent, late, and inadequately documented and unexplained transfers, especially those that involve sponsored projects with overruns or unexpended balances, may raise serious questions about the propriety of the transfers, and may result in expenditure disallowances and/or subsequent reduction in funding. Knowledge of award and policy requirements and ongoing monitoring will improve the quality of financial reporting, improve compliance with regulatory requirements, and reduce the administrative burden and risks inherent in document corrections.

 Cost transfers are permissible only when they are timely, reasonable, allocable, allowable, and consistently applied as Direct Costs of the sponsored project (as defined by institutional policy and the sponsor’s policy). Typically, the purpose of a Cost Transfer is to correct errors in processing the original charges, move costs between accounts for closely related work that is supported by more than one funding source, or to transfer pre-award costs in accordance with the provisions of the Uniform Guidance.

Because the sponsored project principal investigator (PI), working with unit personnel and in the context of the system of controls, is responsible for all expenditures charged to the sponsored project account, the fiscal officer will discuss all Cost Transfers with the PI prior to initiating a transfer.

Transferring costs between accounts will only be allowed if the transfer is in accordance with university policies and is also fully compliant with all contractual terms and conditions, agreements, and external regulations and guidelines.

POLICY PROVISIONS

1.      Items that are Appropriate for Transfer

The following are examples of transactions that may be appropriate for transfers between accounts:

• An error correction, including typographical errors or transposition of digits in account numbers or amounts. All errors must be corrected promptly after detection.
• A purchase charged to an account other than the one that benefitted from the use of the item (e.g., where an expenditure was charged to a departmental source pending identification of the sponsored project to which it should be charged).
• A reallocation of salary costs to reflect actual expended effort.
• The routine allocation of shared services and service center charges.
• The removal of Unallowable Costs.
• While the use of advance accounts is preferred, in the absence thereof, the transfer of pre-award expenses from non-sponsored accounts.
• A transfer to clear potential or actual cost overdrafts. 

2.     Tests for Appropriate Transfer

Cost transfers must be reasonable, allocable, and allowable in accordance with the terms and conditions of the sponsored agreement and applicable Federal and State regulations. For a Cost Transfer to be considered appropriate, the expenditure being transferred must meet all of the following criteria:

• Submitted within 90-days of the original transaction date
• Approved by the individual with the authority to allow the transfer
• An allowable business expense in accordance with the Uniform Guidance
• Within the approved project budget
• In compliance with the sponsor’s policies, regulations, and/or guidelines
• In compliance with university policies and procedures (see the References section of this policy)
• Appropriately documented as defined below.

3.     Appropriate Documentation

• Each Cost Transfer must be clearly justified and include supporting documentation. The transfer request must be supported with a full explanation of the reason for the transfer, how any errors occurred, and a certification of the correctness of the new charge by a responsible administrator (usually an individual with payment authority who has received assurance from the PI). The following information is required in Cost Transfer documentation:
• A description of the costs being transferred, including why and when the original charges occurred, and why the receiving account was not charged.
• A description of how the cost being transferred benefitted the receiving account/project.
• A copy of the original receipt, if applicable, and/or additional documentation supporting the transfer.
• If splitting a cost between sponsored accounts, a description of the allocation method used to determine how much belonged on each project.
• If a Cost Transfer involves effort that has already been certified in ECRT, an explanation of how and why the effort was certified in error, and why the adjustment was not made prior to certification. If an ECRT record has been reopened multiple times, additional Cost Transfers impacting those certification periods may be disapproved.
• A late transfer—defined as one initiated more than 90 days after the original transaction date—requires an explanation of the extenuating circumstances that prevented timely processing, as well as the measures taken to ensure that similar errors are corrected within the appropriate timeframe in the future.

4.      Cost Overruns

During review and prior to the award expiration date, it may be determined that an overdraft might occur. If an overdraft is anticipated, the department may move the costs to a non-sponsored account with the same function and treat it similar to cost sharing (see University Policy on Cost Sharing for Sponsored Projects), or to another research-related gift account or sponsored project account that also benefitted from the expenditure. Documentation of the benefit must be fully explained as noted above.

Continuing Awards: An expenditure overrun may not occur in cases where there is a continuing award budget period, where the sponsor permits the award to be treated as a single period. In such cases, the termination date on the account is changed to coincide with the new budget year. An example is a five-year award where each year’s budget is carried forward from the previous year for a cumulative total. An overdraft in year two can be covered by the year three budget and no transfer would be needed. At the end of the five-year award, the expenditures must not exceed the total five-year budget.

5.      Costs That Benefit More Than One Project

• In limited situations, charging costs to a non-sponsored funding source initially and later reallocating these charges to sponsored projects may be necessary. However, this should only be done in unusual or special circumstances. The requirement of initially charging costs to the appropriate funding source should be followed unless the costs benefit two or more projects or activities that are closely related, and the proportion of benefit received by each project cannot be specifically determined in advance. When this situation exists, costs may be transferred to the benefitting projects when the transfer meets all of the following conditions (Note: Transfers between related projects must still comply with the 90-day transfer period.):
• The initial charge could appropriately have been allocated to either activity/account.
• The method of allocating the costs between the projects is reasonable and documented.
• The transfer is supported by documentation that contains a full explanation and justification for the transfer.
• The transfer is reviewed and approved by a responsible financial or administrative official of the organization in accordance with payment authority.

6.      Transfers of Unallowable or Disallowed Costs

If Unallowable Costs are accidentally charged to a sponsored account, they must be removed immediately upon discovery. If a disallowance is identified, such as an out-of-budget-period expenditure, and approval making the cost allowable (e.g., sponsor approved budget change or project extension) has not been received, then the cost must be moved to an appropriate, non-sponsored account to prevent recovery through the facilities and administrative (F&A) cost rate.

7.      Inappropriate Reasons for Cost Transfers to a Sponsored Project Account

Inappropriate reasons for Cost Transfers will be disapproved, and include – but are not limited to – the following:

• Missing or inappropriate justification and/or documentation
• Solely for the purpose of utilizing unexpended funds of a sponsored award
• As a cost management strategy
• Between unrelated sponsored projects to avoid or eliminate cost overruns
• To circumvent pre- and/or post-award restrictions
• For reasons of convenience
• To clear an unexpended balance.
  

A Cost Transfer, with appropriate documentation and justification, from a sponsored account to an unrestricted institutional account is always permitted.

8.      Pre-Award Expenditures

Many federal grants (as opposed to contracts) allow costs to be incurred 90 days prior to the award effective date. For the efficient and economical conduct of a sponsored project, it is sometimes necessary for costs to be incurred before the award start date. In such cases, departments/units are strongly encouraged to request an advance account through the appropriate channels and procedures. The advance account number becomes the permanent number when the award is fully executed by all parties; no Cost Transfers are needed.

Departments/units incur these pre-award expenditures and obligations at their own risk; should the agreement fail to become fully executed, then the advance account must be cleared by transferring the expenditures to a non-sponsored account.

Under no circumstances should pre-award expenses for an incoming award be charged to a different sponsored account while awaiting the establishment of a 53 account.

9. Closeout of Sponsored Project Accounts

Administrators of sponsored project accounts must be particularly careful to manage and monitor their accounts to avoid costs that are not reimbursable. Generally, no costs incurred after the award end date are allowable. Ongoing correction of incorrectly charged expenses is necessary throughout the project period to avoid most adjustments at the end of the project.

Cost overruns may not be transferred to another sponsored project account. Transfers of such costs must be to an appropriate, non- sponsored account. Unspent balances at the close of a project will not, in most cases, be requested for reimbursement from the sponsor. Notable exceptions are fixed price contracts and sponsored agreements allowing carry-forward of funds. For clarification of the terms of a specific sponsored project, contact the Office of Sponsored Programs.

Known adjustments or Cost Transfers of salaries and wages must be processed before effort has been certified through the effort certification process; payroll distribution and effort as certified must coincide. Cost transfers made subsequent to the effort certification process are problematic because they result in a break of certification.

Careful consideration must be given to personnel adjustments to ensure that accounts (projects) that benefit are charged properly and that further adjustments are not required.

COMPLIANCE WITH THIS POLICY

Compliance with this policy is required. Failure to comply may result in disallowance of costs or Cost Transfers, unit responsibility for Unallowable Costs, or violation of federal regulations. For assistance with compliance, contact the Office of Sponsored Programs.

REFERENCES

Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), 2 CFR 200.400, Subpart E, Cost Principles

CSU Policy: Cost Sharing for Sponsored Projects

CSU Policy: Effort Reporting

APPROVALS

Approved by:  Anthony A. Frank, President, November 5, 2018

Revision approved by Bendan Hanlon, Vice President for University Operations, on September 9, 2025