The transfer of costs associated with a sponsored program generally occurs for one of three reasons:
- when it is discovered that a cost charged to a project is not allowable within the sponsor's policies;
- when, upon review, it is found that a cost was charged inappropriately and is allocable to a different project;
- when a project budget is overspent and the excess is charged back to an institutional account.
Cost transfers should be the exception, and not at all common. If they occur frequently, then administrative staff and the PI should review their accounting practices and correct internal procedures to ensure that costs are charged properly as they are incurred.
When transfers are required, they should be done as quickly as possible and the reasons documented. Since project budgets are now online, errors can be recognized quickly if budget reviews are done in an effective and timely manner. Timeliness is a major audit concern. Occasionally, an error is not recognized within thirty days, but in no instance should cost transfers be done more than ninety days after the original charge. If they are done after ninety days, then in addition to the usual justification explaining the need for the transfer, the PI must submit justification for why the cost transfer is being done more than ninety days after the original charge was made.
As a cautionary note, charges should never be made to a project for convenience. The following is a good example of a situation that arises frequently. Project A is nearing completion and has limited funding remaining. The PI would like to buy certain materials that would benefit the work of Project A. Charging them to Project A, however, would virtually exhaust the available funding and make it impossible to pay the salaries of the individuals working on the project. It is not appropriate to charge the expense for the materials to Project B since they are not allocable to that project's work. It may be convenient to charge the expenses to Project B, but doing so is a willfully improper act and can result in severe penalties. The only options available are to charge the cost of the materials to an institutional account, or to forego the expenditure entirely.