Carnegie Mellon University

Cost Transfer Policy for Sponsored Programs

POLICY TITLE: Carnegie Mellon University Cost Transfer Policy for Sponsored Programs
DATE OF ISSUANCE: This policy was originally issued to vice presidents, deans, department heads and business administrators on June 3, 1994.
ACCOUNTABLE DEPARTMENT/UNIT: Office of the Vice President for Research. Specific questions about policy content should be directed to associate vice president for research and academic administration, ext. 1975.
ABSTRACT: Contains policy for transferring incurred costs on sponsored programs from one expenditure cost center to another.

Payroll Reallocation Form


This statement sets forth policy for transferring incurred costs on sponsored programs from one expenditure cost center to another.


This policy applies to all sponsored programs, federal, state and private, and all cost categories, including payroll costs.

Original Charges to Cost Center

The first step in charging costs is to be certain that the initial charge is appropriate. Therefore, the initial labor certifications and other charges should be reviewed and authorized by someone who has knowledge of the appropriate cost center to which the charge should be made.

Cost Transfers

A cost transfer is any adjustment or transfer of expenditures to/from an externally funded contract or grant cost center by means of a university (1) payroll reallocation form or (2) journal entry form. A payroll reallocation form is used to adjust an allocation of effort that was processed in a prior month. A journal entry is used to adjust any non-salary charge that had previously been posted to a cost center (e.g., travel, materials). Diligent review of financial records and timely communication between principal investigators and departmental administrators should prevent the necessity for transfers; however, under certain circumstances transfers may be appropriate. Nevertheless, it is less burdensome and questionable to charge costs to the correct cost center at the time they are incurred.

The administration of cost transfers is extremely important and sensitive when federal funding is involved. Federal agencies which sponsor agreements at Carnegie Mellon University are especially concerned that costs can be specifically identified with the funded activity they benefit. The Office of Management and Budget Circular A-21 explicitly states that costs ". . . may not be shifted to other sponsored agreements in order to meet deficiencies caused by cost 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 Circular goes on to say, "Any cost allocable to activities sponsored by industry, foreign governments or other sponsors may NOT be shifted to federally-sponsored agreements."

When contract records are reviewed, numerous or poorly documented cost transfers can result in federal regulators denying reimbursement of questionable charges or suspending our participation in federal programs. Therefore, it is essential to provide detailed written explanations justifying all cost transfers. Special care must be taken with cost overruns. Salaries, wages, services and goods that do not benefit another agreement may not be transferred to another account. Such cost overruns are considered "cost sharing" and must be handled in the manner described by the policy entitled Cost Sharing.

Cost Transfer Requirements

The Office of Sponsored Research is responsible for reviewing and approving all cost transfers, payroll or non-payroll, before they can be processed into the accounting records. To be considered allowable, cost transfers must be timely, documented and explained in detail, adhere to the sponsor's standards, and have all appropriate authorizing signatures. Cost transfers should be prepared and submitted as soon as the need for the transfer is identified, but under most circumstances, not later than 90 days from the original transaction date or the original date of labor certification. (Note: labor certification is the official approval of effort allocations, currently performed on a monthly basis, which assigns salary and benefit costs to the appropriate university cost centers. This process takes place within the On-Line Effort System.)

Cost Transfers within 90 Days

Cost transfers involving sponsored research projects (including payroll reallocations) that are processed within 90 days of the original transaction require approval signatures from the principal investigator (PI), the departmental administrator (DA), and the Office of Sponsored Research.

Cost Transfers over 90 Days

Only in the case of exceptional circumstances will cost transfers (including payroll reallocations) be permitted more than 90 days after the original charge or effort certification. The reasons for a cost transfer over 90 days after the original charge must be documented in detail and will require the signature of the principal investigator(s), the departmental business administrator, the associate dean of the college, the Office of Sponsored Research, and the associate provost for research and academic administration.

Cost Transfer Considerations

In general, cost transfers will result from one of the two situations detailed below. In either of these cases, it is critical that the specific situation necessitating the transfer be fully documented and supported by all relevant backup material. Relevant backup material would include a copy of the original accounting report expenditure and a written justification of why the transfer is appropriate.

  1. Clerical error correction. Correction of typographical errors is allowable provided that the correction is made within the applicable time limits and is fully explained.

    It is not sufficient to note that the cost transfer is necessary due to a clerical error. For example, an adequate explanation would be:

    To correct entry error: account number 7104 should have been 8104.


    To correct transposition error: cost center 1-54000 should have been 1-45000.

  2. Costs benefiting more than one agreement. When a particular charge to a sponsored agreement benefits another agreement, that charge may be transferred to the other agreement provided that: (1) the initial charge could appropriately have been made to the other center, (2) the charge is represented in the approved budgets of both cost centers, (3) the transfer explanation is clear as to why the particular charge is appropriate to either of the cost centers, and (4) the transfer is processed within 90 days of the original transaction.

Issues Related to Cost Transfers

The situations detailed below are often encountered in the administration of sponsored research projects. The proper treatment of these situations will generally, but not always, preclude the need for cost transfers. The Office of Sponsored Research can provide guidance and assistance when these issues arise.

  1. Pre-award costs. For the effective and economical conduct of a sponsored project it is sometimes necessary for costs to be incurred prior to receipt of the award document and actual funding. In such cases, departments should request the Office of Sponsored Research to open a new research center. The early center number will become the permanent center number when the award is effective and no cost transfers will be required. If the anticipated funding is not received, these costs will need to be covered as an institutional expense as described by the policy entitled Cost Sharing.
  2. Continuation Costs. If a continuation award is anticipated after the end date of the original contract or current contract modification, costs may continue to be charged to the current active cost center. If the continuation award is denied, these costs must then be covered as an institutional research expense as described by the policy entitled Cost Sharing.
  3. Close-out of Sponsored Project Cost Centers. Principal investigators and departmental administrators overseeing sponsored research cost centers should be particularly careful to manage and monitor their expenses to avoid incurring costs that are not reimbursable. Principal investigators and departmental administrators should check the original contract and/or the Office of Sponsored Research if they are uncertain about the allowability of a certain expense prior to charging the sponsored research cost center. If unallowable costs have been incurred, they must be removed from contract and charged to an appropriate departmental account following the procedures previously outlined. Generally, costs incurred beyond the project end date are not allowable. Ongoing correction of incorrectly charged expenses is preferable to adjustments in the last month of the sponsored agreement.
    • 3.1. Unexpended balances. Unexpended sponsored funding at the close of a project must, in most cases, be returned to the sponsor. Exceptions are fixed price contracts, agreements allowing carry-forward of funds, and agency-approved no-cost extensions. For clarification of the terms of a specific sponsored agreement, contact the Office of Sponsored Research.