Prepare a cost transfer.
A cost transfer is an after-the-fact reallocation of costs associated with a transaction from one Project-Task-Award (PTA) to another.
Costs should be charged to the PTA for the benefiting sponsored project when first incurred. However, at times it may be necessary to transfer a cost to a sponsored project subsequent to the initial recording of that cost. Such transfers require careful monitoring for compliance with Stanford University policy, federal regulations and policies, and the federal cost principles that underlie all fiscal activities of sponsored projects.
The cost transfer procedure requires thorough documentation to support the transaction. In addition, the transfer must be timely, complete, and comply with allowability, allocability, and reasonableness requirements.
A cost transfer invites the assumption that the transaction was not handled properly initially. The charge will be scrutinized for allowability and allocability to the benefiting sponsored project. The documentation or justification for moving charges will be scrutinized as well.
Cost transfers that represent corrections of errors should be completed within three months of when the error is discovered, and no later than six general ledger (GL) months after the original expense is posted to an award. Errors found during the required monthly expenditure statement review process should be corrected upon discovery.
For example, expenses for winter quarter (January, February, March) must be certified by the PI by the end of May. If a transaction posted during the January GL month was discovered during the review and certification process, it must be corrected no later than the July month end close.
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GL MONTH |
JAN-16 |
FEB-16 |
MAR-16 |
APR-16 |
MAY-16 |
JUN-16 |
JUL-16 |
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Original* transaction posts in GL month |
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Qtr ends |
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Last month to review Winter Quarter expenses w/PI |
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Any corrections for transaction that posted in JAN-16 must post before this GL month closes |
*This applies to the original transaction only. It does not apply to a journal of a previous journal.
Exceptions to time restriction of cost transfers
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Exception |
Discussion |
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Transactions necessitated by unforeseen circumstances |
These are not considered error corrections. Examples:
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Transfers between tasks of the same sponsored project |
These are not considered error corrections because the expense remains in the same award. |
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Changes in expenditure types within the same sponsored project |
Charges that do not impact changes to capital expenditure types. |
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Incorrect charges |
Charges must be transferred off the non-benefiting sponsored project regardless of age of the expense. |
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Refunds and unexpected credits |
Refunds benefiting a sponsored award must be allowed to post to the award even if it may necessitate a closeout correction. |
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Transfers onto sponsored PTAs after six months or after award closeout
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Late charges are generally not allowed and must be transferred to a cost sharing PTA unless the expense also benefited a non-sponsored award, in which case it can be transferred to the other benefiting non-sponsored account. Only OSR or RFCS may authorize a transfer onto a sponsored PTA after six months with the concurrence of a school level approval. |
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Clearing an overdraft |
At the end of a project to either a Cost Sharing PTA or to an unrestricted PTA depending upon the specific circumstances. See Section F of this policy “Overdrafts”.
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Allocations from service centers or clearing accounts, changes caused by account setup errors, situations where new funding comes through an unexpected mechanism, etc. are not considered error corrections.
Effective for transactions with a GL date of January 2017
Large cost transfers that exceed $10K or 10% of the award, and transfers within the first or last 90 days of a project, and transfers that do not meet the timeliness criteria receive additional central review. For the transfer of all non-salary charges subject to the above criteria, a PDF of the general ledger** showing the expenditure(s) requesting to be moved MUST be attached to the cost transfer transaction by the originator. Attaching detailed documentation for these transfers will facilitate their timely review by the Office of Sponsored Research (OSR).
**Acceptable versions of the general ledger include ReportMart3 279, OBI 285 Expenditure Detail Report, OBI 149 - Quarterly Review and Certification, OBI CER Expenditure Balance and Expenditure Details reports, and Expenditure Transactions (PTD) screens of FFIT.
All cost transfers must be supported by documentation that fully explains the error. An explanation merely stating that the transfer was made "to correct an error" or "to transfer to correct project" is not sufficient. The cost transfer documentation for a sponsored project should be reviewed by the PI. The documentation must include a justification.
The justification must explain why you are taking an expense off of one PTA, and why it is appropriate to put it on another PTA. If you are moving the charge to another sponsored project, your explanation must make it clear why the charge is ALLOCABLE to that project, and how the project received a benefit from this expense. The justification should clearly show the following.
Cost transfer documentation must include a justification that clearly shows:
1. How the expense directly benefits the receiving PTA
2. How the expense is allowable on the receiving PTA (e.g., attach documentation of sponsor approval)
3. The allocation methodology used if transferring expenses to multiple PTAs
4. The reason the expense was charged incorrectly to the first PTA
5. That any systematic reasons which might cause this problem to be repeated have been addressed
6. The reason for any delay in the timely processing of the transfer
In addition, large cost transfers that exceed $10K or 10% of the award, and transfers within the first or last 90 days of a project, and transfers that do not meet the timeliness criteria receive additional central review. For the transfer of all non-salary charges subject to the above criteria, a PDF of the general ledger** showing the expenditure(s) requesting to be moved MUST be attached to the cost transfer transaction by the originator. Attaching detailed documentation for these transfers will facilitate their timely review by the Office of Sponsored Research (OSR).
**Acceptable versions of the general ledger include ReportMart3 279, OBI 285 Expenditure Detail Report, OBI 149 - Quarterly Review and Certification, OBI CER Expenditure Balance and Expenditure Details reports, and Expenditure Transactions (PTD) screens of FFIT.
Sponsor Requirements
Sponsors may have more restrictive guidelines on cost transfers; departments should consult the Office of Sponsored Research or Research Financial Compliance & Services (RFCS) when in doubt about the acceptability of a proposed cost transfer.
Tips for Writing the Justification
A good justification will allow anyone reviewing the cost transfer to understand how the expense benefits the receiving PTA. It should be easily understood by anyone reviewing the journal, and provide enough detail to inform approvers and auditors about the action taken. Think, "if I leave, will an auditor be able to understand this two years from now?" it should answer: who, what, where, when, and why.
- Who: the person, organization, or department name(s) that caused or played a role in the journal
- What: what events or circumstances are causing the journal
- When: the month of occurrence or the key date related to the cause
- Where: the location of the event or occurrence (if it is significant)
- Why: why a change is required
The trick to writing a complete justification is to try to answer all possible questions. It is important to state explicitly how the project which will pay this expense benefits from the transfer. Include a statement like: "The direct benefit to Project XXX of this expense was __". Indicate whether the sponsor approved the transaction. If you wonder if you have included enough information, you probably haven't. Do not use abbreviations or acronyms in a justification. Above all, remember, you cannot transfer expenses to a new PTA just because it has money!
Examples of documentation to include: Allocation methodology, an invoice or packing slip, notes on an expenditure statement, “per PI …”
Sample Wording to Document a Salary Transfer
- Charges are being transferred onto this award because the appointment paperwork for Grad Student X was not received in time to allocate her salary correctly. Consequently, this month’s charges for Grad Student X are incorrect.
- The efforts of Grad Student X directly benefit the scope of work for Project Y - OR - Grad Student X conducted experiments related to the Project Y statement of work (be specific, but brief)
- These salary charges are allowable on this award per the Project Y agreement.
- PI Smith has reviewed the charges and assessed the efforts of Grad Student X.
- Appointment paperwork is now fully approved, and the Labor Distribution Schedule corrected for Grad Student X so that her salary will now be charged correctly.
Ask OSR, RMG, ERA or School Compliance Officer for help making sure your documentation is adequate.
Compare Justifications
Inadequate Justification: |
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To allocate chemicals from an expenditure allocation PTA to appropriate project PTA |
Better Justification: |
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Department X expenditure allocation PTA is used to collect all department chemical charges. All charges to sponsored projects were proposed and approved consistent with Stanford and sponsor policy. Documentation, including allocation methodology, is in departmental files. |
Explanation: |
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The inadequate justification does not address the questions of whether or not the chemical charges are allowable and allocable to the PTAs to which they are being charged through the cost transfer. The better justification states that the department is aware of the documentation requirements for these charges, attests that all requirements have been met, and states where the documentation records can be found. The length of a justification is irrelevant. A justification must include the pertinent facts, and easily understood by anyone who may read it now and in the future. |
Use journals to transfer costs.
- Use New Journals to transfer non-salary or student aid expenses.
- Use Labor Distribution Adjustments to transfer salary expenses.
- Use Allocation Journals to distribute costs based on proportional benefit to a project. Allocation Journals are used when it is difficult to determine in advance how much to charge each account for a shared supply or service. Allocations are often used to distribute costs from Service Centers, Auxiliaries, or expenditure allocation service types. Often allocations are repetitive, or are required on a repetitive basis. To process an allocation journal, you must comply with Administrative Guide Memos 3.2.2 and 3.2.3 and have written approval on file from those with signature authority over the PTAs you will charge. You must be able to certify that:
- The allocation has been processed in accordance with policy
- The cost is an appropriate charge to the PTAs sharing the expense
- The expenditure PTAs actually benefited from the cost of the goods and services
- The transaction is documented according to policy
Keep in mind: Federal regulations require an expense solely advance the work under the sponsored agreement, or benefit both the project and other work in proportions that can be approximated through reasonable methods.
A cost that benefits more than one project should be allocated at the time of the expenditure. At no time should a sponsored project be used as a holding account for costs that will subsequently be transferred elsewhere. Clearing accounts are appropriate for certain situations
Read RPH15.8 Cost Transfer Policy for Sponsored Projects
All cost transfers must be documented with a detailed justification of why the cost is being transferred. Use the Cost Transfer Checklist
In Related Items below, see the link to information on iJournals.
