A cost overrun occurs when direct costs charged to a sponsored project (grant, cooperative agreement or contract) are in excess of the awarded amount. Deficit spending on these funds is inappropriate and should rarely occur. When such an occurrence exists, the deficit must be moved from the sponsored project to a departmental fund.

The departmental fund to which the charges are being transferred should have the same function as the grant, cooperative agreement or contract. Specifically if the deficit fund has a function of research, the departmental fund should have a function of research. The same would follow if the function was instruction or public service (other).

If the deficit is incurred in anticipation of additional funding, these costs should be treated as pre-award costs, and a memo should be prepared by Research Administration and sent to the Grants & Contracts Administration office. See Pre-Award Costs for criteria.