A personnel cost transfer is the reallocation of salary, fringe benefit, or tuition expenses between sponsored awards, IOs, or other institutional accounts. These are typically processed via Labor Distribution plan and occasionally through journal entries (locked plans for previous fiscal, system limitations, etc).

There are two categories of Labor Cost Transfers (also referred to as Labor Adjustments): Realignment of Budget Estimates and Labor Transfers. Policy RA67 Cost Transfers

Realignment of Estimate​

• Estimate realignments may occur frequently and are a normal, expected operational activity, as the initial labor distribution is established using the Plan Confirmation method which means effort is allocated in advance and can be adjusted afterward to reflect actual effort.
• Must be completed within three (3) months of the month in which the pay period was paid when an estimate revision is needed.
• Revisions for current and future pay periods for employees paid on the salary clearing cost center may be made at any time through the labor distribution plan ONLY

Labor Transfer

• Adjustments that are requested more than three (3) months after the pay period in which the labor was paid. ​
• Given that a timely review of salary charges is expected, labor transfers should occur infrequently.​

1. An explanation of why the expense was charged to the wrong cost collector
   • Initiators must explain the “what happened” in answering this question. It is not enough to say, “correcting an error” or “to transfer cost to correct grant.” For instance, if there was miscommunication or a delay in setting up the award, this must be described.
2. An explanation of why the expense should be allocated to a different cost collector
   • Initiators must explain how the expense will benefit the grant to which it is being transferred. If a cost is being reallocated off a grant and onto a non-sponsored award, it is acceptable to state that a cost was deemed unallowable after-the-fact or the award is overspent and therefore costs had to be removed from the grant.
3. A description of the actions taken to diminish the likelihood of such errors occurring in the future
   • Initiators must describe what steps they will take to reduce cost transfers in the future. While there will always be some cost transfers, they should be considered exceptional, not the norm. Initiators may have to monitor budgets more regularly or review cost allowability standards, rules, or regulations more often in the future.

Why Compliance Matters
Proper documentation and timely processing of cost transfers are critical to maintaining Penn State’s integrity, accountability, and eligibility for future sponsored funding. Cost transfers are among the most closely scrutinized transactions in federal and institutional audits because they often occur after the original expense has been posted, making them inherently higher risk. When cost transfers are untimely, unsupported, or poorly justified, they raise red flags for auditors and sponsors. Failure to comply can lead to audit findings and repayment of disallowed costs, potential liability under the False Claims Act, and damage to Penn State’s reputation and sponsor confidence.