Policy number: 10.12

Policy section: Research

Revised Date: December 16, 2019

1. Definitions

Definitions of capitalized terms are set forth in Appendix A.

2. Policy Statement

In order to maintain consistency in the treatment of Cost Transfers, all charges to Sponsored Projects will be appropriate and well documented, and comply with Sponsor terms and conditions, government regulations, and other University Policies. This policy applies to all federal and non-federal Sponsored Projects.

3. Purpose

The purpose of this policy is to establish accounting requirements and responsibilities to provide that University charges to Sponsored Projects are appropriate and well documented, and comply with Sponsor terms and conditions, government regulations, and University Policies.

4. Cost Transfers

1. The University must provide responsible fiduciary stewardship for all Sponsored Project Funding. Proper management of Sponsored Project expenditures is essential to meeting this obligation.
2. The University recognizes that Cost Transfers are sometimes necessary to correct clerical errors, allocate costs of closely related work that may support more than one project, or to clear a cost overrun or disallowed cost. It may also be necessary to allocate costs paid from departmental or discretionary resources prior to receipt of a fully executed Award if those costs were incurred within the period of performance set forth in the Award.
3. Frequent, late and inadequately explained Cost Transfers, especially those made near or after the end of the performance period and relating to Sponsored Projects with cost overruns or unexpended balances, will require additional documentation related to the Cost Transfers and to internal fiduciary controls.
4. Sponsors and auditors regard as suspicious Cost Transfers with the following characteristics:
   1. Frequent Cost Transfers;
   2. Costs transferred long after the original charges were recorded;
   3. Cost Transfers supported by inadequate documentation or justification; and
   4. Cost Transfers made at the end of a Sponsored Project that relieve overruns or spend a Sponsored Project balance.
5. It is the policy of the University that costs be directed to the benefited Sponsored Project when first incurred. If it is necessary to transfer costs to a Sponsored Project subsequent to the initial recording of the charge, the transfer must be initiated promptly (within 90 days of the original transaction date or within 30 days of the Sponsored Project end date, whichever is earlier) and must contain sufficient documentation and justification in support of the Cost Transfer. Cost Transfers after this period will only be permitted under extenuating circumstances, and will require a written justification providing detailed documentation, signed by the Principal Investigator/Project Director or his/her designee and by the appropriate Chair or Director and Dean. Cost Transfers to correct errors must be completed, regardless of the timeframe, if the correction benefits the Sponsor, unless the Sponsor deems the dollar amount to be immaterial.
6. It is the responsibility of the Principal Investigator/Project Director to provide fiscally-sound management of Sponsored Project costs and to ensure that Cost Transfers to or from Sponsored Projects are made promptly, as described in the preceding paragraph.
7. Under no circumstances may costs that benefit one Sponsored Project be charged temporarily to another Sponsored Project (equivalent to a loan). This results in improper financial reporting and inappropriate reimbursement from the Sponsor(s). This practice is unallowable under federal regulations unless specifically approved in advance by an authorized signatory of the Sponsor(s).
8. Final approval of any Cost Transfer to or from a Sponsored Project will be made by the Office of Grant and Contract Accounting. If the Office of Grant and Contract Accounting becomes aware of an inappropriate charge on a Sponsored Project, the Principal Investigator/Project Director and the department and/or school Financial Business Manager will be notified to initiate a transfer to non-Sponsored Project resources. If this transfer is not initiated within five (5) working days from the date of Grant and Contract Accounting notification, Grant and Contract Accounting may transfer the charge to a departmental or Principal Investigator/Project Director overhead recovery account.

5. Roles and Responsibilities: Principal Investigator/Project Director

The Principal Investigator/Project Director is responsible for:

1. ensuring that expenditures are reasonable and are allocable to and allowable under a specific Sponsored Project;
2. reviewing Sponsored Project reports on a regular basis (at least monthly) to identify errors; and
3. determining the need for any Cost Transfers and ensuring they are initiated promptly with adequate documentation and justification.

6. Roles and Responsibilities: University Administrators

It is the responsibility of University officers and administrators to undertake oversight of requested Cost Transfers to ensure completeness, accuracy, and timeliness.

7. Roles and Responsibilities: Deans, Associate Deans, Assistant Deans, Directors and Department Chairs

The Deans, Associate Deans, Assistant Deans, Directors and Department Chairs are responsible for ensuring that:

1. direction, resources, and oversight are provided for each Sponsored Project; and
2. final reports are submitted on behalf of the Principal Investigator/Project Director when the Principal Investigator/Project Director is unable to meet Award Closeout obligations.

8. Roles and Responsibilities: Office of Research and Graduate Studies

It is the responsibility of the Office of Research and Graduate Studies to:

1. determine when Pre-Award Costs or Advance Expenditures are allowable and initiate a Pre-Award Project; and
2. obtain Sponsor approval for Pre-Award Costs or Advance Expenditures in cases where general terms and conditions do not address the need.

9. Roles and Responsibilities: Office of Grant and Contract Accounting

The Office of Grant and Contract Accounting is responsible for:

1. assigning Pre-Award Project numbers in the financial system, each based on an executed and approved Advance Expenditure Authorization;
2. reviewing and approving Cost Transfer entries and supporting documentation, including justification, in accordance with University Policies and Sponsor guidelines, policies, and procedures; and
3. entering Cost Transfers into the financial system and retaining documentation in the Sponsored Project file.

10. Sanctions and Risks of Non-Compliance

Abuse of Cost Transfers may result in disallowances and/or subsequent reduction in Funding by the Sponsor. Abuse may also result in more severe sanctions, fines, penalties, and audit criticisms applied against the University and/or individuals involved. See University Policy 10.6, Standards for Addressing Research Misconduct.

11. Related Policies, Procedures, and Guidelines

• University Policy 10.1, Sponsored Research and Activities
• University Policy 10.6, Standards for Addressing Research Misconduct
• University Policy 10.13, Sponsored Project Advance Expenditure Authorization
• University Policy 10.15, Sponsored Project Effort Reporting
• Research Handbook

Appendix A: Definitions

"Advance Expenditures” is generally synonymous with “Pre-Award Costs” except that the term “Advance Expenditures” is generally used in connection with Contracts and “Pre-Award Costs” is generally used in connection with Grants.

“Advance Expenditure Authorization” means the documented authorization to incur Pre-Award Costs or Advance Expenditures which provides for alternative Funding resources in the event that an Award is not received or accepted by the University

“Award” means a Grant, subgrant, Contract, subcontract or Cooperative Agreement that provides for Funding.

“Award Closeout” is the process of documenting and assuring the fulfillment of the terms and conditions of the Award, of certifying University compliance with applicable regulations and making final disposition of all Award by-products, such as final vouchers, reports, patent disclosures and property inventory, and the collection of outstanding accounts receivable and addressing deficit or residual balances.

"Contract" means a legally enforceable agreement between the University and a Sponsor that provides Funding when a primary purpose is delivery to the Sponsor of property or services for the benefit of the Sponsor, in addition to the research, educational, or service benefit to the University.

"Cooperative Agreement" means a legally enforceable agreement between the University and a Sponsor that provides Funding when substantial interaction between the Sponsor and the University is anticipated during the performance of the Sponsored Project.

“Cost Transfer” means the reassignment of a cost to a Sponsored Project after the cost was initially charged to another Sponsored Project or non-Sponsored Project resource. Also included are reassignments of costs from one Sponsored Project to another Sponsored Project or to a non-Sponsored Project resource. Cost Transfers include reassignments of salary, wages, and other direct costs. Reassignment of salaries and wages affecting a Sponsored Project are covered by Policy 10.15, Sponsored Project Effort Reporting.

“Funding” means financial support for a Sponsored Project, including money, property, services, or anything of value in lieu of money.

"Grant" means a legally enforceable agreement between the University and a Sponsor that provides Funding when:

1. the Sponsor has no expectation of delivery of a specific product or service other than a final written report;
2. no substantial interaction between the Sponsor and the University during performance is anticipated; and
3. the agreement contains general terms and conditions that stipulate a period of performance and minimal reporting requirements.

“Improper Cost Transfers” means Cost Transfers that violate the federal financial management requirements, such as Cost Transfers between or among Sponsored Projects for the purpose of:

1. using unexpended Funding;
2. avoiding or alleviating over-expenditure;
3. moving a cost that is unallowable on one Sponsored Project to another;
4. circumventing Award restrictions; or
5. reimbursing or making a temporary "loan" of Funding.

“Pre-Award Costs” means Sponsored Project costs incurred prior to receipt and execution of a new Award or incurred on an existing Sponsored Project while awaiting incremental Funding or a no-cost extension of the end date of an Award. The term “Pre-Award Costs” is generally synonymous with “Advance Expenditures” except that the term “Advance Expenditures” is generally used in connection with Contracts and “Pre-Award Costs” is generally used in connection with Grants.

“Pre-Award Project” means a project established for use prior to the beginning of an Award or prior to the University’s receipt of a fully executed Award. The Pre-Award Project number will become the permanent project number when the Award is effective and no cost transfers will be required, necessary, or allowed. A “Pre-Award Project” is also referred to as an “At-Risk Project.”

"Principal Investigator/Project Director” means the individual solely responsible for technical conduct of a Sponsored Project, technical contact with the Sponsor, expenditure of Sponsored Project Funding, and fulfillment of technical performance and reporting obligations under an Award. "Principal Investigator” (PI) includes an individual designated in an Award as "Project Director" (PD), when performing the functions of a Principal Investigator, or other individuals performing the functions of a Principal Investigator. For the period of the Award, the Principal Investigator/Project Director must be a full-time employee (staff, tenured or, tenure track faculty, Research Professor, Research Associate Professor, Research Assistant Professor, or, if approved by the Provost or his or her designee, a non-tenure track, non-tenure eligible faculty member) appointed pursuant to University Policy 2.3, Faculty Ranks, Academic Titles, and Voting Rights.

“Proper Cost Transfers” means Cost Transfers that are compliant with the federal guidelines that authorize Cost Transfers involving a Sponsored Project in the following instances:

1. when the Cost Transfer represents an adjustment for an erroneous charge;
2. when the Cost Transfer is for the purpose of assigning a portion of the cost to a Sponsored Project (split purchase); and
3. when costs are incurred in departmental or discretionary resources prior to receiving the fully executed Award. See Pre-Award Costs for the method to be used so that charges are made to a Sponsored Project as incurred.

“Proposal” means the document submitted to a Sponsor requesting Funding for a Sponsored Project which includes, without limitation, (i) Financial Obligations, Regulatory Obligations, Reporting Obligations or Accounting Obligations, as described under “Sponsored Projects”, (ii) a Statement of Work and (iii) a budget.

“Research Handbook” is a document maintained by the Office of Research and Graduate Studies specifying current procedures and requirements for the proposal, acceptance, execution, and oversight of Sponsored Projects.

"Sponsor” means any external entity that provides Funding to the University. Sponsors may be (i) governmental agencies (for example, federal, state or local governments, or their administrative organizations); (ii) nonprofit organizations (for example, universities, nonprofit corporations, foundations, or associations); (iii) for profit organizations (for example, corporations, partnerships, sole proprietorships, and other business entities); or (iv) individuals.

"Sponsored Projects” means all projects, programs, research, training, public service and other activities that receive external Funding through Grants to the University or through Contracts or Cooperative Agreements between the University and a Sponsor, where one or more of the following obligations applies:

1. Financial Obligation. The University is required to comply with conditions imposed when a Sponsor awards Funding for the performance of services or delivery of products described in a Statement of Work;
2. Regulatory Obligation. The University is required to comply with Sponsor regulations.
3. Reporting Obligation. The University is required to provide to the Sponsor technical performance reports or regulatory or administrative reports; or
4. Accounting Obligation. The University is required to establish a separate accounting record of Sponsored Project expenditures to demonstrate allowability of costs, to maintain financial accountability, to make financial reports to the Sponsor, and to preserve appropriate records for audit.

“Statement of Work” means the component of a Proposal or an Award that describes the specific work to be undertaken and the products that will be produced by the Sponsored Project.

“University Policies” means, for the purposes of this policy, all University Policies included in the University Policy Manual and all other procedures, guidelines, and requirements of the Office of Research and Graduate Studies and the Office of Grant and Contract Accounting included in the Research Handbook, and the procedures, guidelines, and requirements of all University colleges, schools, departments, centers, institutes, and divisions.

Revised: December 16, 2019

Adopted: January 15, 2015