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Cost
Sharing Policy
Revised: November
07, 2007
Introduction
The following document comprises the
University’s policy on cost sharing and the procedures for monitoring
project-by-project cost sharing and reporting such cost sharing to
sponsoring agencies. The policy was developed for the following
purposes:
1. To provide guidance regarding the
circumstances in which committed cost sharing is permitted by the
University, including what kind of services, expenditures, or assets
may be cost shared.
2. To provide information to the University
community regarding the contractual, financial, and administrative
implications that result from the commitment to cost share.
3. To establish procedures by which the
University can identify the cost sharing commitments it makes as a
condition of obtaining external sponsorship and demonstrate that it
has fulfilled such commitments.
4. To establish procedures for recording
cost-shared expenditures in the University’s accounting system in
order to identify cost sharing as required by OMB Circular A-21,
"Cost Principles for Higher Education" (A-21).
Cost
Sharing: Rationale and Description
For many years both the Federal Government and
most charitable foundations have considered it the role of universities
to conduct research, training and other activities. These sponsors will
"assist" universities by supporting these activities, but many
awards do not equal 100% of the cost of the projects. The difference is
"cost sharing",
and is sometimes a required condition of
receiving awards. The magnitude of cost sharing can range from 1% to
over 50% of the total project cost. Cost sharing is sometimes called
"matching."
Technically, cost sharing from the
University’s resources is "cash" cost sharing, because a
precise dollar amount can be shown in the University’s accounts. Cost
sharing from third party sources may be "in kind," because the
goods or services can be identified, but may not be subject to a precise
monetary evaluation. However, "in-kind" is sometimes used by
some sponsors to mean any cost sharing.
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Summary
of Four Types of Cost Sharing
Mandatory Cost Sharing
is cost sharing required by a sponsor as
a condition of making an award. If Mandatory Cost Sharing is required,
the requirement is always specified in the published description of
federal programs. The requirement is usually expressed in terms of a
percentage of the total project cost or a percentage of the sponsor
share of the total project cost although occasionally it is expressed as
a fixed dollar amount. Mandatory cost sharing expenses must be
identified for cost accounting purposes and must be reported to the
sponsor in the financial report of the project. Failure to document the
agreed upon cost sharing during the conduct of the project will
generally result in reduction of funds available from the sponsor.
Voluntary Committed
Cost Sharing is cost sharing the University may
offer in a proposal to reflect accurately the total resources necessary
to complete a project, or to make a proposal competitive. This offer is
included in the award directly or by reference. Voluntary Committed cost
sharing expenses must be properly identified for cost accounting
purposes, but are not generally included on financial reports to
sponsors.
Salary Cap Cost
Sharing is Cost Sharing which occurs when the University
proposes (or later assigns), effort by individuals whose salary exceeds
a sponsor-imposed limit for individual salaries. It may not be offered
for Mandatory Committed Cost Sharing. Salary Cap Cost Sharing must be
identified for cost accounting purposes. Under OMB definition, Salary
Cap Cost Sharing is classified as voluntary committed cost sharing, but
for ease of understanding, it is defined separately in University
documentation.
Voluntary
Uncommitted Cost Sharing is cost sharing that is not
committed or budgeted for in a sponsored agreement. It need not be
tracked for cost accounting purposes or reported to the sponsor, and if
it arises from faculty or other personnel effort, it is excluded from
separate identification in effort reporting. Voluntary Uncommitted Cost
Sharing most commonly results from a cost overrun on a project, or from
researchers’ effort which is over and above that committed and
budgeted for in a sponsored agreement.
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Policy
I. Definition of Project
Cost Sharing
Cost sharing for a grant or other sponsored
agreement represents that portion of the total project costs borne
by the University (or a third party), rather than the sponsor.
Providing resources for committed cost sharing (mandatory or
voluntary) of direct costs is the responsibility of the department
or school. Cost sharing of Facilities and Administrative costs
(F&A costs) is the responsibility of the Vice President for
Research, upon the recommendation of the department and school.
Committed cost sharing of direct costs of
Organized Research projects becomes a component of the Organized
Research Base for purposes of computing F&A (formerly called
"Indirect") cost rates. Increasing the organized research
base will reduce the F&A cost rate and, consequently, lower
F&A costs reimbursement.
Federal policies related to inclusion of
cost sharing in federal grants and cooperative agreements are listed
in OMB Circular A-110, "Uniform Administrative Requirements for
Grants and Agreements With Institutions of Higher Education,
Hospitals and Other Non-Profit Organizations" (A-110).
II. The Costing Commitment
When the University accepts an award with a
cost sharing commitment, it is making an agreement, subject to
audit, that it will provide the stated (or equivalent) services or
assets in the performance of the sponsored project. The cost
effectiveness and the expected benefits of each cost sharing
commitment should be carefully weighed prior to making such
commitments. In addition to the direct costs of these commitments,
the administrative requirements and responsibilities inherent in the
cost sharing commitment upon the Principal Investigator (PI),
departmental administrators, and central administrators should be
considered.
In preparing a proposal offering cost
sharing, it is the PIs responsibility to:
A. include all committed cost sharing, in dollar amounts, in the
proposal budget;
B. identify mandatory cost sharing, and
C. provide verification of the cost
sharing commitment at the time the proposal is submitted
internally for University approval (Attachment B).
In accepting an award including cost
sharing, it becomes the University’s responsibility to:
A. track the committed cost sharing amounts; and
B. report the mandatory cost sharing to the sponsor as required and
ensure proper treatment of mandatory and voluntary committed cost
sharing in the Facilities and Administrative Cost Proposal.
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Procedures
I. Expenditures Which
May Be Cost-Shared
Cost sharing may consist of several types of
direct costs or resources, or of F&A costs. Some examples are
shown on the Sample Proposal Budget (Attachment A). Frequently,
cost sharing comprises faculty and staff contributions of time and
effort and the related employee benefits and F&A costs. Other
direct expenses, with their related F&A costs, may be
contributed as cost sharing, e.g., supplies or travel expenses.
(As noted later, non-payroll cost sharing is discouraged because
of difficulty in documenting these costs.) The proposal budget
must reflect any committed cost sharing offered and its monetary
value. It is not appropriate simply to disclose the intent to cost
share and its monetary value in the narrative. Committed cost
sharing of any direct expense requires documentation and evidence
of a direct contribution to the project.
A. Direct Costs
1. Faculty,
Student, or Staff Effort
It may be appropriate to contribute
faculty, student, or staff effort to the performance of a
sponsored project. This commitment to provide such cost
sharing binds the University to actually contribute to the
effort and also to track, record, and report the associated
expenditures. Therefore, the source of funds for cost sharing
must be identified as described below, in Section III.
The cost of faculty, student, or staff
effort above any sponsor imposed salary cap (see "Salary
Cap Administration," elsewhere) MUST be absorbed by the
University. It may not be proposed, recorded or reported as
mandatory cost sharing. However, these costs must be
identified for purposes of computing the F&A costs rate.
Employee benefits related to
cost-shared effort are cost shared at the benefits rates for
the type of index supporting the cost sharing, which is
usually different from the pooled benefits rates approved for
direct costs to sponsored program accounts.
Within the School of Medicine, faculty
effort may be cost shared from clinical income. This cost
sharing is treated as third party cost sharing.
2. Equipment
The process of accounting for
committed cost-shared equipment is very complicated and
requires significant effort on the part of both departmental
and central administrators. Equipment may be cost shared only
if title to the equipment is in the University’s name and it
was acquired with non-Federal funds. Cost sharing the cost of
purchase -- or, a portion of the cost of purchase --
for a piece of equipment means not only that a trail of
documentation must be created, but that the piece of equipment
must be tracked separately in perpetuity within the
University’s Fixed Asset Accounting System. Capitalized
equipment will be offered for cost sharing only with the
approval of the Vice President for Research and normally will
be considered ONLY when obtaining the award is dependent upon
this type of cost sharing.
In lieu of committing equipment for
cost sharing, the PI should characterize it in the proposal
as: "This equipment will be made available for the
performance of this project at no cost to the sponsor."
3. Other
Direct Costs
Direct costs other than salaries,
fringe benefits, or capitalized equipment may be listed by the
PI as committed cost sharing in the proposal budget. The
written approval of a representative with budgetary authority
is needed on the Cost Sharing Authorization form. Because of
the complexity of record keeping, cost sharing of this type is
discouraged.
4. Third
Party Cost Sharing
VCU may offer as committed cost
sharing both time and effort and goods and services
contributed by third parties, often a subawardee under its
prime award. VCU is responsible for securing records of, and
reporting, such third party cost sharing. This may occur in
two situations. The most common is when a potential subawardee
makes a cost sharing commitment, which will appear in the
subawardee budget of the proposal. The second situation occurs
when cost sharing is provided by a third party who is not a
subawardee, for example, volunteer effort by any individual or
group that contributes to the project, or space and facilities
provided for a community outreach program.
5. Program
Income
On federal awards, program income may
be used as committed cost sharing if the cost sharing
alternative for use of program income (the second alternative,
at OMB Circular A-110--.24 (b)(2)) is proposed and agreed to
by the sponsor. Prior to proposing this type of cost sharing,
the PI must consult with the Office of Sponsored Programs
Administration (OSPA) for details.
B. Facilities and
Administrative Costs (F&A Costs)
F&A costs are real costs of
conducting instruction and research. When direct costs are
cost shared, the F&A costs associated with those direct
costs are AUTOMATICALLY cost shared. PIs should take advantage
of this automatic cost sharing of F&A costs, and include
them in the proposal budget to meet any mandatory cost sharing
requirement.
F&A costs do not disappear simply
because a sponsor does not pay for them; the University must
fund any unreimbursed F&A costs associated with direct
costs paid by the sponsor. Unless prohibited by sponsor
regulation, unreimbursed F&A costs constitute cost
sharing, so long as they have been budgeted, and can be used
to meet mandatory cost sharing requirements. All reductions or
waivers of F&A on sponsor-paid direct costs must follow
the University’s policy on approval to waive F&A costs.
II. Expenditures Which May
NOT Be Offered as Cost Sharing
The following expenses represent cost borne
by the University, but not allowed by federal regulations to be
counted as mandatory cost sharing:
A. administrative salaries, services,
supplies and any other costs which are reclassified as F&A
costs, rather than direct costs, per A-21, Section F.6.b.;
B. unallowable costs as defined in A-21, Section
J
C. salary dollars and associated benefits in excess of regulatory salary
caps;
D.
unallowed F&A costs which are not approved for use as cost
sharing in the agency implementation of OMB Circular A-110,--.23. As
of June 2001, this applies to thedifference between the 8% rate
limit applied by U.S. Department of Education to training grants and
the University’s negotiated rate, but to no other major federal
sponsor of University awards.
III. Funding Cost-Shared
Expenditures
Identifying and providing resources for
committed cost sharing mandatory or voluntary) of direct costs is
always the responsibility of the PI. The PI may NOT utilize funds
from another federal award as the source of cost sharing on a
federal award, except as authorized by statute (which is very
uncommon). The PI may utilize funds from non-federal awards as the
source of committed cost sharing on a federally funded project
unless prohibited by the non-federal sponsor, so long as the goals
of the projects are closely related; however, this takes special
record keeping and requires making prior arrangements with OSPA and
Grants and Contracts Accounting.
The University will fund F&A costs
associated with cost-shared direct costs from sources other than
departmental/school accounts.
The sources of all cost-shared direct costs
must be identified by the PI as part of the proposal preparation and
approval process. The Proposal Budget should show committed cost
sharing (and its sources if reasonable). A Committed Cost
Sharing Authorization Form is required for OSPA review of proposal
involving committed cost sharing. Once an award requiring cost
sharing is made, Grants and Contracts Accounting will request a cost
sharing index from, and supplement to, the index provided as
cost sharing sources. They will notify the PI of these index
numbers at the time notification of the project index number is
made.
Attachment A is a sample Proposal Budget
showing cost sharing and the index which will be the sources of
each item of committed cost sharing. This is a convenient technique
to use when the sponsor does not specify a specific budget format. Note
that the column documenting the source index is an internal matter
only, and should not appear on the budget submitted to the sponsor.
Attachment B is a sample Committed Cost
Sharing Authorization Form. Again, this is an internal matter only,
and should not be submitted to the sponsor.
For any proposal with third party cost
sharing, there must be written commitment, from an individual with
authority to bind the third party, that this cost sharing will
occur. The party should be aware that the University will require
auditable documentation that the agreed to level of committed cost
sharing has been provided.
IV. Recording Committed
Cost-Shared Expenditures
The following are general guidelines for
recording committed cost-shared expenditures. More detailed
procedures are included under the "Accounting for Cost
Sharing." Cost sharing accounts will be established in the same
ledger as, and supplement to, the index identified as the source
of cost sharing.
A. Direct Costs
1. Faculty, Student
or Staff Effort
Committed cost sharing of effort will be
entered on the Personnel Action Form (PAF), attributed to the
cost sharing index(s) in the same manner as direct effort is
charged to the award’s index. Cost sharing resulting from
imposition of a salary cap shall be charged to a separate cost
sharing index from that one recording other cost-shared
effort. The expended cost sharing of effort will be explicitly
listed on effort certification reports so that only changes need
to be entered when completing the effort certification report.
The related cost-shared employee
benefits expenses will be automatically calculated and charged
to the cost sharing index where the cost-shared pay is
charged.
2. Equipment
Because of the unique nature of cost
sharing documentation for equipment, the PI shall consult with
OSPA and Grants and Contracts Accounting regarding necessary
documentation prior to presenting the proposal for review.
3.Other Direct Costs
Committed cost sharing expenditures will be
charged to the appropriate cost sharing index(es) which was
created based on information provided in the proposal process.
4.Third Party Cost Sharing
If a potential subawardee makes a cost
sharing commitment which appears in the subawardee budget of the
proposal, OSPA will require in the subaward agreement that the
subawardee maintain records and report the cost sharing in its
financial reports to the University. These reports will be due
to VCU earlier than the date the University’s financial report
is due to its sponsor.
If committed cost sharing is provided by
a third party who is not a subawardee, the PI will gather
documentation that the cost sharing occurred and its value. As
part of project initiation, OSPA will provide Grants and
Contracts Accounting a copy of the commitment.
5. Program
Income
If an award includes program income as
committed (mandatory or voluntary) cost sharing, OSPA will so
notify Grants and Contracts Accounting after acceptance of the
award by requesting that a separate program income index be
established. Grants and Contracts Accounting will flag the
index as reportable cost sharing.
B. Facilities and Administrative Costs (F&A)
The accounting system is not capable of
tracking cost-shared F&A costs; they will not appear in the
expenditure statements. Grants and Contracts Accounting will
impute the cost shared F&A costs based on the direct
expenditures recorded in cost sharing index, using the
approved rate for the period(s) of the direct expenditures.
V. Cost Sharing Reporting
The University is responsible for demonstrating
that it has met mandatory cost sharing commitments. Grants and
Contracts Accounting is responsible for reporting this cost sharing
to the sponsoring agencies as required. In addition, Cost Analysis
is responsible for appropriate inclusion of cost sharing expenses in
F&A costs computations.
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