A cost transfer is the movement of an expense from one account to another. This may be necessary to correct an error, to move or split costs into accounts that did not exist when the original transaction was made, or for other reasons associated with a department’s financial operation. Transfers should be the exception, not the rule. Cost transfers must meet the guidelines for allowability, allocability, reasonableness and consistency. More stringent criteria apply for cost transfers to be allowable on federally funded projects.
PIs and co-investigators are responsible for reviewing their monthly reports of expenditures for allowability and allocability and to identify errors and omissions for resolution in a timely manner.
All cost transfers must be:
- Timely. The transfer must be recorded in the general ledger within 120 days from the close of the month in which the original charge posted to the ledger.
- Fully explained and justified. The reason why the original charge was incorrect and why the charge is allowable and allocable to the new account must be documented.
- Fully documented. The transfer transaction must contain a reference to the invoice, payroll, or other disbursement document(s) that were the basis of the original direct charge.
A high frequency of cost transfers can imply that financial transactions are not being properly reviewed and recorded when originally incurred. For this reason, cost transfers are highly scrutinized by auditors to determine the reason for the correction and the allowability of the charge to the project.
Initiating a cost transfer
PIs are responsible for initiating cost transfers.
Once an expense has been recorded, it is appropriate to initiate a cost transfer only in the following situations:
- To correct an erroneous recording.
- To record a change in the original decisions made as to the use of goods or services.
- To redistribute certain high-volume, low-value charges that may be shared among several projects under the jurisdiction of the department.
- To redistribute payroll costs based on the after-the-fact verification of effort reported through the campus effort reporting system.