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Post Award Financial Administration Policies

Accounting for Cost Sharing

Summary

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.

Procedures

1. Creating a Cost Sharing Index

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

  • The Department will identify the budget source at the time of the proposal submission. It will forward to the Office of Sponsored Programs Administration any changed information prior to inception of the project.
  • Office of Sponsored Programs Administration will transmit to Grants and Contracts Accounting the cost sharing source index provided by the department when it forwards information on the new award.
  • Grants and Contracts Accounting will request or create the index with a cost sharing attribute and title.
  • Grants and Contracts Accounting will inform the department of the new grant or contract index and corresponding cost sharing index.
  • The Department will submit the budget reallocation document to the appropriate Finance and Administration Department (depending upon the ledger) to enter the budget for the cost sharing index.
  • 2. Charging a Cost Sharing Index

    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. 

  • The Effort Certification report will show the related cost-shared salary charged and the Principal Investigator (PI) will certify accordingly.
  • Grants and Contracts Accounting will report mandatory cost sharing to the sponsor. Where mandatory and committed voluntary cost sharing are inadvertently co-mingled, the cost sharing reported will be up to the amount authorized in the agreement.
  • Grants and Contracts Accounting will terminate the cost sharing index at the same end date as 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. 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.

    3. Salary Cap as Voluntary Committed Cost Share

    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.

    5. In-kind Cost Sharing Commitment

    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 ($185,100 as of January 10, 2016). The department may charge cost sharing to one, or multiple 1-, 2-, 4-, or 6- ledger cost sharing to index(es). Charge mandatory cost sharing and voluntary committed cost sharing to different indexes; however, it is not necessary to charge 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 Index Account Code Amount  
    Grant Budget Index 5-ledger 5XXXXX $37,020 Not cost shared ($185,100 @ 20%)
    Cost Sharing Index 1-ledger 5XXXXX $12,980 Salary Cap (Voluntary committed) ($64,900 @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 Index Account Code Amount  
    Cost Sharing Index 1-ledger 5XXXXX $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 Index Account Code Amount  
    Grant Index 5-ledger 5XXXXX $18,510 Not cost shared ($185,100 @ 10%)
    Cost Sharing Index 2-ledger 5XXXXX $21,490 Voluntary committed

    (Computation)

    $200,000 salary       x 20% total committed effort       = $ 40,000
    $183,300 cap salary x 10% capped payment by grant  = $(18,510)
    $Balance is voluntary committed including salary cap   = $ 21,490