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).
     

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.

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.

Charging a Cost Sharing Account

The cost sharing index will include the direct allowable expenditures that correspond to the sponsored program index. Allowability of costs on mandatory cost sharing accounts is identical to allowability on associated sponsored program indexs.

Criteria

• Must be verifiable from records;
• Are not included as contributions for other federally assisted programs;
• Are reasonable and necessary to project;
• Are allowable charges;
• Are not paid by federal government under another assistance agreement;
• Are provided for in the approved budget when required

Accounting For Cost Sharing

The cost sharing index is a supplemental index to an existing primary index in another ledger, and in special circumstances it may be a 5-ledger index. The budget and expenses in the cost sharing index may "roll-up" with the primary index and count as one index for University reporting. For federal reporting purposes, the cost sharing index is a part of the research activity of the University. Organized Research includes cost sharing in the base for the University Research Facilities and Administrative Costs (F&A costs) Rate Proposal.

1. Creating a Cost Sharing Account

A cost sharing index created in any ledger has its own budget  and expenses associated with a specific sponsored agreement.

The cost sharing index will include the direct allowable expenditures that correspond to the sponsored program index. Allowability of costs on mandatory cost sharing is identical to allowability on the associated sponsored program index.

The PAF will show the cost sharing index number and the associated sponsored program index. 

Budget transfers from designated or gift funds (ledger 6) to the cost sharing supplemental index may be on a project period basis, but budget transfers of E&G funds may only be on a fiscal year basis. It is preferable that transfers from gift funds also be handled on a fiscal year basis. It is also preferable that cost sharing for a given fiscal year be identified at the beginning of the year when possible. The PI should identify the budget source on the Cost Sharing Authorization form and secure approval by an authorized signator.

One sponsored index may have multiple accounts set up to monitor cost sharing when the related cost sharing is coming from different schools and /or departments. Also if there are multiple salaries to closely monitor, the department should request additional cost sharing accounts. The same school and/or department channel should be used to open multiple accounts.

Each sponsored program with mandatory cost sharing will have at least one associated cost sharing index. The department should monitor the index monthly and update the budget as needed. Cost sharing accounts may not be in a deficit at the end of the University’s fiscal year. Departments should make a budget transfer rather than an expense transfer to resolve the deficit in the cost sharing index.

Departments may use the voluntary uncommitted cost sharing practice to handle cost overruns. Cost overruns occur when accumulated costs for specific cost objectives are greater than the accumulated award amount after applying any appropriate expense transfers, refunds, etc. For cost transfers, follow the Cost Transfer procedures in the Financial and Budget Policies and Procedures Manual. The costing practice (i.e., setting up a separate index) is not used for a cost overrun, since the overrun will not be tracked. Cost overrun is considered uncommitted cost sharing.

If a sponsor imposes a specific salary cap, the University will not charge the sponsor above that rate but will treat that salary portion as voluntary committed cost sharing. The University will not report voluntary committed cost sharing to the sponsor but will capture it for the F&A costs rate, therefore, charging the salary to a separate voluntary cost sharing index.

4. Subawardee Cost Sharing Commitment

The subawardee will provide the PI a certified statement of the cost-shared expenditures at the final billing of the subaward. The PI must approve the expenditures' statement to verify that the subawardee provided the committed services or assets in the performance of the sponsored agreement.

The PI will supply the cost-shared confirmation statement to Grants and Contracts Accounting. Grants and Contracts Accounting will document the file and report the mandatory cost sharing to the sponsor.

The PI will obtain a written confirmation of the value of cost-shared goods and services. The PI must approve the cost sharing statement to verify that the third party provided the committed services or assets in the performance of the sponsored agreement.

The PI will supply the cost-sharing confirmation statement to Grants and Contracts Accounting. Grants and Contracts Accounting will document the file and report the mandatory cost sharing to the sponsor.

EXAMPLES OF SALARY COST SHARING

Assume an NIH grant with faculty members paid over the salary cap ($166,700 as of January 2002). The department may charge cost sharing to one, or multiple 1-, 2-, 4-, or 6- ledger cost sharing to index(s). Charge mandatory cost sharing and voluntary committed cost sharing to same accounts; however, they may be charged cost sharing to different ledgers. In practice, an NIH grant is very unlikely to have mandatory cost sharing.

1. None of proposed effort is volunteered as cost sharing.

John Doe’s annual salary is $250,000. He will commit 20% effort with no salary cost sharing requested on his NIH grant. Charge the salary as follows:
 

Fund Source	Account	Object Code	Amount
Grant Budget Account	5-ledger	1126	$33,340	Not cost shared ($166,700 @ 20%)
Cost Sharing Account	1-ledger	1126	$16,660	Salary Cap (Voluntary committed) ($83,300 @20%)

2. All of proposed effort is volunteered as cost sharing.  

Note that salary cap is only a limit on the amount the sponsor will reimburse.

Sally Roe’s annual salary is $250,000. She will commit 20% effort with no salary requested on her NIH grant. Charge the salary as follows:
 

Fund Source	Account	Object Code	Amount
Cost Sharing Account	1-ledger	1126	$50,000	Voluntary committed ($250,000 @20%)

3. Part of proposed effort is volunteered as cost sharing, and faculty member’s salary exceeds cap.

Mary James’ annual salary is $200,000. She will commit 20% effort with only 10% salary requested on her NIH grant. Calculate the salary as follows:
 

Fund Source	Account	Object Code	Amount
Grant Budget Account	5-ledger	1126	$16,670	Not cost shared ($166,700 @ 10%)
Cost Sharing Account	2-ledger	1126	$23,330	Voluntary committed

(Computation)

$200,000 salary       x 20% total committed effort       = $ 40,000
$166,700 cap salary x 10% capped payment by grant  = $(16,670)
$Balance is voluntary committed including salary cap   = $ 23,330

Cost Sharing Policy

Salary Cap Administration

 

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