Cost Transfers

Policy Approval Authority President
Responsible Division Division of Research and Innovation Partnerships
Responsible University Office Sponsored Programs Administration
Responsible Officer(s) Assistant Vice President
Contact Person Dara Little, dlittle@niu.edu
Primary Audience Faculty
Staff
Status Active
Effective Adoption Date 07-01-2016
Last Review Date 07-01-2016
Policy Category/Categories Finance / Risk Management
Human Resources / Employment
Research Ethics / Intellectual Property

Purpose

To ensure that project expenses post to sponsored awards in a timely manner and in accordance with Federal regulations and sponsor policies.

Reason for Policy

Federal regulations (2 CFR §200.405) require NIU to explain cost transfers to sponsored awards to ensure that the transfer is not occurring for the following reasons.

  • To overcome deficiencies caused by overruns or other financial considerations.
  • To avoid restrictions imposed by law or by the terms of the sponsored agreement or for other reasons of convenience.

A cost transfer is an after-the-fact reallocation of costs to a sponsored award. Costs incurred for a specific sponsored project should be charged to the award at the time expenses are incurred to ensure the cost is properly vetted for allowability and adherence with applicable sponsor regulations, as well as provide an accurate accounting of expenses to support the timely receipt of payment from the sponsor and realize indirect cost recovery.

Auditors and sponsors routinely monitor cost transfers to assess the internal controls NIU has in place to ensure charges to a sponsored award are allowable, reasonable, and provide a direct benefit to the project. It is recognized that transfers may be necessary to correct bookkeeping or clerical errors or to allocate closely related work, but transfers need to be done in a timely manner. An acceptable timeframe is within 90 days of the original transaction date though NIU’s year-end financial reporting requirements may limit this timeframe.

To avoid compliance findings that can affect NIU’s eligibility for funding, NIU should avoid cost transfers with the following characteristics:

  • Costs transferred more than 90-days after the original transaction date.
  • Transfers lacking adequate documentation or justification.
  • Transfers made for convenience or to circumvent award restrictions.
  • Transfers made to another grant account at the end of a project to relieve cost overruns.
  • Transfers made from a local cost center or a grant account to spend out a project.

Intended Audience

  • Senior Administration – Vice Provosts, Associate Deans
  • Director, Department Chair, Division Head
  • Faculty and Staff
  • Departmental/Divisional Business Administrators
  • Finance Personnel
  • Sponsored Programs Administration Personnel

Definitions

Allowable: A cost is allowable when it meets the following:
  • is necessary for the conduct of the project;
  • is allowed by the terms and conditions of the award;
  • is consistently treated between sponsored and non-sponsored funds;
  • is not included as cost share against another sponsored project.

Closely related work: When the interrelationship of the work across multiple awards makes it difficult to assign costs to two or more projects or activities without undue burden, the cost is allocated to each award based on documentation that the cost is
reasonable for the project. Where the purchase of equipment is specifically authorized under a Federal award, the cost is assignable to that Federal award regardless of the use that may be made of the equipment after it is no longer needed for original award.

Direct benefit to the project: When a cost is in direct benefit to a project, it is deemed to be allocable in that the cost is incurred specifically to carry out the scope of the award and is distributed against the award and NIU budgets based on the proportional benefit to the project. Costs benefitting two or more projects or activities should be allocated to each project when the allocation can be determined without undue effort or cost.

Original transaction date: The date when the expense posts to the university general ledger in PeopleSoft or the HR/GL Personnel Detail Report

Position Request Form (PRF): This form is used by Human Resource Services to establish employment positions and includes information such as position number, title, department, and funding distribution [cost center(s) charged]. For charging employee costs for work on a sponsored award, this form needs to be completed and signed by the Department and College and is then submitted to the Grants and Contracts Associate.

Personal Action Form (PAF): This form is used by Human Resource Services to establish the position to which an employee is assigned and for which his/her salary will be charged. For charging employee costs to a sponsored award, it is important to be sure the Position Number on the PAF matches the Position Number on the PRF.

Reasonable: A cost is reasonable when it does not exceed that which would be incurred by a prudent person given the circumstances during the time of the decision and does not deviate significantly from institutional policy so as to result in an
unjustifiably higher cost to the sponsor. A basis for determining reasonable costs may include market prices for comparable goods or services in the geographic region.

Policy

SPA will only allow cost transfers for sponsored awards (44 Funds) when the expense meets all of the following conditions:
  • The expense is allowable in accordance with the terms and conditions of the award and is reasonable for the project;
  • The transfer includes supporting documentation justifying the transfer;
  • The transfer occurs within 90 days of the original transaction date or receives an exception from the SPA Associate Director for Award Support if the transfer is after 90 days of the original transaction date.
SPA will only allow cost transfers after 90 days in extenuating circumstances.

Procedure

Cost transfers within 90 days of the original transaction date:

The Principal Investigator (PI), or his/her designee, must submit an email to the SPA Grants and Contracts Associate requesting the cost transfer. The email must include the following justification.

Non-salary expenses:

  • An explanation of why the charge was not originally applied to the award and how cost transfers will be avoided in the future;
  • A description of how the cost is a direct benefit to the project;
  • The date the service was provided or cost incurred;
  • The date and document number of original transaction (e.g. XXXX);
  • A copy of the original transaction, invoice, journal, etc.

Salary expenses:

  • A complete Position Request Form (PRF) or Position Action Form (PAF) outlining the timeframe for which the percentage of salary should be charged to the project;
  • An explanation of why the salary was not originally applied to the award and how cost transfers will be avoided in the future; and
  • The Preparer’s name and telephone number.

The Grants and Contracts Associate will review non-salary and salary expenses and upon approval, will prepare the appropriate accounting form to process the transfer.

Cost transfers after 90 days of the original transaction date:

After 90 days of original transaction date, SPA will allow cost transfers only in extenuating circumstances and with the approval of the SPA Associate Director for Award Support.

The Principal Investigator, or his/her designee, must submit the Cost Transfer Request Form to provide the necessary information for considering the request.

Documentation

Justification for cost transfers and extenuating circumstances for delay do not include:

  • Reallocation of expenses because the grant has unexpended funds.
  • An inability to obtain an explanation of why the error occurred and how the expense is appropriate to the project.
  • The need to expedite the grant purchase.
  • The Principal Investigator was out of town or unavailable to incur or approve the charge.
  • The department was understaffed.
SPA will maintain journal vouchers and supporting documentation in the award file in accordance with 2 CFR §200.333.
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