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Principal Investigator Responsibility for Overspending or Unallowable Costs

Purpose

This policy establishes clear guidelines for the financial responsibility of Principal Investigators (PIs) when sponsored projects incur deficits or unallowable expenses. It is intended to ensure accountability, compliance with sponsor and university requirements, and proper stewardship of funds by outlining how overspending and unallowable charges on sponsored projects must be resolved.

Scope

This policy applies to all sponsored projects at the University, including those funded by federal, state, or local government agencies, foundations, industry partners, and other external sponsors. It covers all Principal Investigators and any personnel involved in the financial administration of sponsored projects.

Definitions

  • Principal Investigator (PI): The lead researcher or scholarly individual designated to direct a sponsored project. The PI has primary responsibility for the technical, programmatic, and financial management of the project.
  • Sponsored Projects: Externally funded grants, contracts, cooperative agreements, or similar arrangements. This policy addresses the handling of overspending (project deficits).
  • Overspending (Deficit): The condition in which total project expenses exceed the sponsor-approved budget or funding amount for the award. An overspent balance or deficit is the amount by which expenditures surpass available sponsor funds.
  • Unallowable Cost: Any expenditure that is not permitted to be charged to a sponsored project under the terms of the sponsor agreement or applicable regulations. Such costs are ineligible for sponsor reimbursement and must be removed from the sponsored project. Examples include alcohol for personal use, fines and penalties, or other disallowed items per sponsor rules.
  • Alternative Funds: University funds not tied to a specific external sponsor or restricted by sponsor terms. These include departmental funds, discretionary research accounts, or other general funds available to the PI or academic unit.
  • Organized Research Unit (ORU): An official University research center or institute that operates alongside Schools. For purposes of this policy, an ORU is treated similar to a School and the ORU Director fulfills a role comparable to a Department Chair or Dean in oversight of research projects within the unit.
  • Research Administrator: University staff (CGA or ORU) responsible for day-to-day research project administration, including budget monitoring, expense processing, and financial reporting.

Policy Statement

  1. PI Financial Responsibility: Principal Investigators are ultimately responsible for managing their sponsored project budgets and ensuring that only allowable, allocable, and reasonable costs are charged to their awards. PIs must monitor expenditures to prevent overspending and avoid charging any unallowable costs. If an overspend or unallowable charge occurs, the PI is accountable for resolving it in a timely manner. All such costs must be removed from the sponsored project and charged to an appropriate alternative funding source.
  2. Use of PI’s Unrestricted Funds: The first source of funds to cover any project deficit or unallowable cost is the PI’s available alternative funding sources. This includes discretionary accounts or other non-sponsored funds under their control. The expense must be transferred off the grant and onto a PI’s alternative funds, or other appropriate funding sources. If a PI does not identify a fund to cover the expense, it will be moved to a School account by default. PIs should proactively identify an available fund to expedite resolution.
  3. School/Unit Coverage if PI Funds Insufficient: If the PI lacks sufficient alternative funds to cover the deficit or unallowable charge, the PI must notify their academic unit leadership. In consultation with the Department Chair, Dean, or ORU Director, the PI is responsible for identifying an alternate non-sponsored funding source. The Dean’s office or ORU Director will designate a departmental fund to absorb the charges. If neither the PI nor the School/ORU has funds available, the Dean or ORU Director must coordinate with campus leadership to secure a fund source.
  4. Prompt Resolution and Transfer of Costs: Overspending or unallowable charges should be corrected as soon as they are identified. The PI and School/ORU must process the necessary transfers promptly—ideally within ninety (90) days of the occurrence. If unresolved, research administrators will transfer the overrun to a default non-sponsored account in the PI’s School/ORU. PIs and Schools/ORUs must cooperate fully in these transfers. Failure to resolve deficits may result in corrective actions or impact future award decisions.
  5. Enforcement and Compliance: Contract and Grant Administration will monitor project accounts for deficits and unallowable costs. If the PI or School/ORU fails to resolve them, the University will transfer costs to an alternative funding source within the PI’s School or ORU. Deans and ORU Directors must ensure compliance within their units. Repeated non-compliance may result in additional oversight or restrictions on proposals. The University will not assume responsibility for disallowed costs, except in cases of confirmed administrative error.

Roles and Responsibilities

  • Principal Investigators: Monitor budgets, ensure costs are allowable, address deficits promptly, and identify unrestricted funds when necessary. PIs must educate project staff on spending rules and initiate cost transfers when required.
  • Department Chairs / Deans / ORU Directors: Oversee financial compliance in their units, assist in identifying funds for unresolved deficits, and ensure administrative errors are corrected by the responsible party.
  • Research Administrators (CGA or ORU): Support compliance by reviewing transactions, correcting errors, and working with PIs and other campus departments to resolve issues. When errors occur, administrators must document the issue and arrange for appropriate transfers.
  • Contract and Grant Administration: Monitor accounts, notify appropriate parties of issues, enforce deadlines, and ensure final reports to sponsors are accurate. Responsible for ensuring unallowable or over-budget charges are removed from awards.
  • Project Portfolio Financial Management: Ensure final reports/invoices are submitted to sponsors on time.