Cost Transfers

Federal regulations require written or documented justification for any expense transfer or reassignment to or from a federally funded project, even if the cost was initially placed against another grant (for the purposes of this document grant means grant, contract, or other award). The regulations recognize that record-keeping errors will occur, but that they should be identified and corrected promptly. Therefore, it is essential that Principal Investigators (PIs) be provided with accounting information regularly (i.e. monthly but no less frequently than quarterly) to identify transaction posting errors.

The government expects that a recipient’s financial system is predicated on the principle that the initial assignment of a cost is in direct relationship and benefit to the activity to which the expense is initially charged. An auditor will assume that any correcting entries, after the initial cost assignment, must be the result of some form of error. Errors in initial coding must carry some form of explanation and as time lapses require increased levels of justification and documentation.

Cost transfers that have the effect of reducing costs assigned to a grant that is in deficit may be particularly difficult to justify or approve.

All direct costs charged to grants and contracts must be allowable under the terms of the agreement, reasonable in relation to the cost and benefit derived, and necessary for grant and contract completion. Cost transfers will be reviewed by Sponsored Projects Services (SPS) for compliance with the terms of award and other applicable regulations, such as the Office for Management and Budget (OMB) Circular 2 CFR Part 200: Cost Principles for Educational Institutions.

Cost Transfers are done by either Journal Voucher (JV), PHAREDS (electronic version of PAA-only accepted during open payroll quarter), or Payroll Accounting Adjustment (PAA) (approved by Post Award Sponsored Projects Administrator or SPA).

*Allowable means compliance with OMB Circular 2 CFR Part 200 Cost Principals; is within the project period; is not prohibited by law or statute, etc.


  • Within the first 90 days after the appearance of the incorrect transaction in the Banner Financial Information System (FIS). The adjustment must be submitted within 90 days to avoid the necessity of a PI’s statement regarding the specific benefit of the transaction to the grant.
  • After a period of 90 days has lapsed the justification must include the reason for the error, the reason for the failure to detect the error in a timely manner, AND specific details of how the effort (personnel or for consultants), supplies or services, travel or equipment provided direct benefit to the grant to which the transfer is requested. The justification should be specific enough to provide a direct tie to program objectives. The additional documentation requirements must involve project technical personnel (PI or project director) providing the specific justification and a signed certification that the costs were necessary to conduct the work on the grant.

    Since most grant audits occur years after the project is over and current personnel at that time may not be able to answer these questions, it is imperative to have this documentation available at the time of audit.

Timeliness of Transfers:

  • SPS staff reviews cost transfers to determine if there is adequate justification of the transfer, and requires noting the original posted document number in the document reference field of the journal voucher (JV long Form FGAJVCD).
  • Costs Transfers that are beyond 90 days from the original transaction posting date come under additional scrutiny by auditors and require further justification for approval. The PI must complete a Cost Transfer Justification Form, route to PI and unit head for approval.  The completed form routes within the system to the SPS Post Award for review and approval.

Items to Consider when Processing Cost Transfers:

  1. An explanation of why the expense was charged incorrectly to an award.
  2. An explanation of how the expense benefits the new receiving award.
  3. If correction is beyond 90 days, need further explanation in Cost Transfer Form.
  4. The cost transfer done on a journal voucher needs to be corrected line by line, document by document. The original document number needs to be shown in the document reference number field in the form FGAJVCD (JV long form). All other transfers that have occurred since the original posting, should show the JV numbers in the text explanation field.
  5. JVs should clearly show in the text explanation field a contact name that lists first and last name, department name, and phone extension.
  6. Should have supporting documentation for the cost transfer.
    Banner or Data warehouse reports showing the transaction detail.
    1. E-mail or other written documentation from PI requesting, approving, or confirming change.
    2. Financial Report that includes correction that has been reviewed and approved by PI by displaying PI’s initials or signature.
  7. Cost transfers require PI approval to be on file.  In a case where a PAA form or Cost Transfer Form is required, the PI and unit head signatures are required.


  • All JVs transferring expenditures to grants must include the following:
    1. Date of transaction (FIS posting date of expense)
    2. FIS document number
    3. Sequence number (if transferring a portion of a journal voucher)
    4. Description of expense item
    5. Reason for transfer
    6. Requester identification and phone extension
  • JVs processed over 90 days after the posting of the original transaction must also include the Cost Transfer Justification Form.
  • All corrections must be processed before 60 days has elapsed after the termination date of a grant.
  • Cost Transfers to or from a sponsored award that represent corrections should be processed promptly after the errors are discovered. The cost transfer must be supported by a full explanation of how the error occurred and the correctness of the new charge.

Types of Appropriate Cost Transfers:

  • Correction of Error- The transfer represents the correction of a simple error or system limitation. Error must be corrected promptly after discovery. Requires a detailed explanation.
  • Unallowable Cost-Cost determined to be not appropriate for a sponsored award should be transferred to unrestricted funds.
  • Shared Costs-The charges directly benefit more than one program and, therefore, a distribution of the costs is justified based on the benefits received; the allocation method should be described in the transfer documentation.

Cost transfers are NOT appropriate:

  • to reduce overruns on other grants, contracts or institutional funds;
  • to avoid restrictions imposed by law or by the terms of the agreement OR;
  • for the purpose of utilizing unexpended balances and the expenses to be transferred have been of NO or of insignificant direct benefit to the grant;
  • or for other reasons of convenience.

Facilities and Administrative Costs (F&A, formerly known as Indirect Costs)

F&A costs are those costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity (OMB Circular 2 CFR Part 200, section E.1). F&A Costs are necessary expenses for the maintenance of an environment that is conducive to research.

The University of Oregon (UO) periodically negotiates the Facilities and Administrative rate with our Cognizant Audit Agency-U.S. DHHS (Department of Health and Human Services). The negotiated rate is based upon a review of the university’s costs and assessments, and the reasonableness of the charges. To read further on factors reviewed during the F&A negotiation process, see OMB Circular 2 CFR Part 200, section F1.