Cost Sharing Basics
Some funding agencies require the grantee institution to demonstrate its financial commitment to the project, or the commitment of other funding sources, by sharing the project costs.
- Cost sharing is defined as project costs not borne by the sponsor.
Cost sharing funds may come from an outside source in the form of cash contributions, volunteer services, or donated property; from the University’s own funds (e.g., personnel effort without salary recovery); or from shared resources or facilities. If the award is federal, only acceptable non-federal costs qualify as cost sharing.
- Matching funds, if required by the funding agency, are raised from non-federal outside sources to increase the level of support provided by the funding agency. Such funds must be identified by the donor or funding source for use as matching funds.
- In-kind contributions represent the value of non-cash contributions provided by the University or non-federal third parties to a sponsored project when such contributions directly benefit that project and are generally counted as cost sharing.
- Direct-cost cost sharing is the provision of faculty and staff time and related fringe benefits, dedicated equipment, tuition, computer support, and other resources as direct support for the project, as well as related indirect costs. Commitments made by departments, schools, or other units must be detailed in the proposal and appropriate approvals must be provided.
- Indirect (F&A) cost sharing occurs any time the University agrees to recover less than the federally negotiated indirect cost rate. Approval from the UC Office of the President is required if an indirect cost rate is lower than the university approved rate. The appropriate IDC rate can also be applied to direct-cost contributions on an MTDC base.
- Mandatory cost sharing is required by the sponsor as a condition of the award. Ordinarily this requirement will be indicated in the program announcement.
- Voluntary cost sharing is not required by the sponsor but is nevertheless offered in the proposal by the investigator. Often this is in the form of contributed effort. Cost sharing that is proposed voluntarily by the investigator becomes mandatory (also known as ‘voluntary committed’ cost sharing) once the award is made.
- Committed Cost Sharing is a contribution of effort or other costs that are quantified in the proposal narrative, budget, budget justification, or in the award document. Committed cost sharing may be either mandatory or voluntary.
Quantifiable cost sharing commitments that appear in the proposal narrative or in the budget/budget justification need to be included on the Proposal Review Form (PRF). First, the box under “Project Type and Budget” #4 “Cost Sharing” should be checked. Documentation of any financial commitments should be attached to the PRF. Any contributed key personnel time also should appear in the Key Project Personnel Section of the PRF under “Committed Cost Share Effort.”
- When cost sharing is not quantifiable it is not necessary to include this information on the PRF. The following two examples illustrate the distinction between quantifiable and non-quantifiable:
- Professor X will be providing expert advice and consultation to the project, as needed. (Non-quantifiable-not included on the PRF)
- Professor X will devote 20% of her time to the project at no cost to the sponsor. (Quantifiable-should be included on the PRF)
Committed cost sharing represents a binding commitment by the University to a sponsor and, as such, is subject to audit under federal and other sponsor regulations. Any quantifiable cost offered in the proposal becomes a legally binding and accountable commitment of the Universiity upon award. Cost sharing must be documented in the same way as other charges. Once a cost sharing commitment is made, the principal investigator is required to measure, track, record, and be prepared to report the commitment.
To avoid financial liability as a result of audit disallowance, it is the responsibility of the principal investigator to incur expenditures in accordance with applicable regulations and policies:
- The cost principles contained in Office of Management and Budget (OMB) Circular No. A-21, Cost Principles for Educational Institutions;
- Clarification of OMB Circular No. A-21 Treatment of Voluntary Uncommitted Cost Sharing and Tuition Remission Costs
- The standards contained in OMB Circular No. A-110 – Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations;
- The terms and conditions of each extramural award (including sponsor policies); and
- Any other applicable University policies.
Unfulfilled cost sharing commitments or lack of documentation may result in a reduction of costs allowed against the sponsored project and a return of funds to the agency. Also, the cost sharing commitment is not automatically reduced when an award is reduced. Should the awarded amount be reduced from the proposed amount, the committed cost sharing may need to be adjusted accordingly, particularly if the awarded budget requires a change in the scope of work.
When a Chair/Director or Dean signs the Proposal Review Form (PRF) and cost sharing is indicated on the form, the responsible administrator is indicating approval of the cost sharing commitments being made by the campus unit. The signature of the PI also indicates that the PI will be responsible for tracking and reporting the cost share to the agency. However, this is more than a PI responsibility. Failure to meet the pledged cost share can result in a reduction of agency funding, and this can impact department/unit/college resources. Therefore it is imperative that Chairs, Directors, and Deans only approve cost sharing commitments that are necessary, allowable, and allocable (related to the specific project in question).
The sections above describe the different forms of cost share that can be applied in a proposal. The following are criteria for department chairs, unit directors, and school deans to consider in evaluating cost share commitments.
Is it really necessary?
Often PIs will think they can “sweeten the pot” by providing voluntary cost share. This is rarely the case. Most funding agencies don’t want to have to track the cost share provided if it is not required. PIs that are concerned about showing voluntary effort on a proposal should be directed to read and use the “good” examples provided at the end of this section to describe their commitment in qualitative rather than quantitative terms. Remember voluntary cost share that is quantified in a federal proposal becomes mandatory at the time of award.
Is this allowable?
University-funded salaries of faculty and other employees directly engaged in the project, together with related employee benefits and indirect costs, constitute the most appropriate cost sharing contribution to federal research projects. Sabbatical leave pay may be claimed if it is identifiable with the project.
Departmental administrative expenses (e.g., telephone, secretaries, clerks, supplies) generally do not qualify as cost sharing since these expenses normally benefit and are distributed across all activities and objectives of a department and are, therefore, included in the determination of the indirect cost rate. University-furnished space or equipment (unless purchased specifically for the project and used only by the project) also cannot be claimed as cost share since these costs are reimbursed by application of the indirect cost rates.
A note on cost sharing indirect costs: This is allowable when the University is not allowed to charge its negotiated indirect cost rate, an indirect cost waiver has been obtained from the University, and such cost share is allowed by the funding agency. Contact SPO for assistance in determining if this is allowable before pledging this type of cost share.
Is it related to a specific project?
Costs financed by departmental budgets or any other non-federal fund source may be claimed as a cost sharing contribution if they are directly identifiable with the applicable federal research project and are contributed during the performance period of the grant or contract. This means:
- The same item of cost share cannot be used as cost share for two different projects.
- The PI also may not use one federal grant’s funds as cost share on another federal grant.
- The cost shared activity or purchase has to have occurred (not just obligated) during the project time period, not before or afterwards.
- All the support expenses for a large ongoing activity cannot be used as cost share for one part of the activity. (For example, all of the costs for an entire season of artistic performances cannot be used as cost share for just one of the performances.)
- Cost share only when absolutely necessary.
- Be prepared to track and report all cost share pledged or risk losing agency funding.
- Only cost share allowable direct costs that:
- Qualify as allowable costs under provisions of OMB Circular No. A-21;
- Will not duplicate the type of costs included in the University’s indirect cost rates;
- Have not been charged to any other federal contract or grant;
- Will occur within the project period.
Cost sharing is normally stated in the budget. However, cost sharing commitments can be stated in the budget explanation or justification or in the text of the narrative. No matter where cost sharing commitments are found within the proposal, statements of cost sharing commitment are legally binding on the institution should the proposal be funded, even when not required by the sponsor.
By using language in proposals that cites percentage of time, salaries, or specific levels of support, principal investigators can commit to cost sharing, often unintentionally. In all instances where cost sharing is specified and quantified, the principal investigator and University are obligated to account for and track these commitments along with funds awarded by the sponsor.
The examples below may be used in proposals to address the issue of academic or programmatic contributions or support without creating a contractual and auditable commitment to cost sharing. Also below are examples of language not to use because doing so would consitute cost sharing.
- The University of California, Berkeley fully supports the academic year salaries of Professors, Associate Professors, and Assistant Professors, but makes no specific commitment of time or salary to this particular project.
- Professor X will be providing expert advice and consultation to the project, as needed.
- The University demonstrates support to the project through the availability and expertise of the Project Director (or Principal Investigator).
- Professor X is Principal Investigator and requests 25% salary support for this project. She will provide additional support to the project, as needed.
- An annual stipend of $xx,xxx is requested for one full-time Graduate Student Researcher. It is University of California, Berkeley practice that Graduate Student Researchers are supported, in addition to their monthly stipend, through waived tuition costs for each semester enrolled.
- Professor X will direct all research activities associated with the project [specify...]
- Professor X will oversee [all aspects of] the project.
- Dr. Y will participate in the project at every stage [specify...]
- Professor X will provide scientific direction and supervision for the project [including...]
- Professor X will have significant involvement throught the project. She will be providing expert advice and consultation on all aspects of the research.
- Dr. Y is Principal Investigator and requests 30% salary support to the project. He will provide additional support as needed.
- Professor X’s laboratory is 800 square feet. She also has access to the departmental [equipment name] that is beneficial to the research.
- The University demonstrates support to the multistage project throught the availability and expertise of the project director.
- Dr. Y will be integrally involved in the project. He will have access to equipment that will ensure the successful execution of the proposed research and she will see the data analysis and report writing through to completion.
- The PI will have access to additional resources, such as [equipment name], to ensure the successful execution of this scope of work
- No salary support is being requested for Professor X; however she will provide intellectual direction for the project, will have direct and significant involvement throughout the project, and will co-author publications.
- As a faculty member at a state-supported institution of higher education, Dr. Y’s salary is paid by the State of California; she will devote 25% effort toward this project.
- The University of California, Berkeley is highly supportive of this project and agrees to be responsible for the salary of the PI for its duration.
- Effort equivalent to $xx,xxx in salary and benefits will be provided by the Professor X.
- An annual stipend of $xx,xxx is requested for one full-time Graduate Student Researcher. In addition, the University of California, Berkeley will cost-share the graduate student’s out-of-state tuition at an amount approximately totaling $xx,xxx per year.
- Professor X will devote 20% of her time to the project at no cost to the sponsor.
- Dr. Y is Principal Investigator and will devote 40% effort (30% salary support requested) to the project.
- The department will purchase a [equipment name] (cost $xx,xxx) for exclusive use in support of Professor X’s project.
- The University demonstrates support and will contribute to the multistage project through partial salary for the project director.
- Dr. Y will contribute a week of field work and the time required for data analysis and report writing, and he will supply all equipment.
- The PI will be contributing funds from other sources for use of [equipment name] to ensure that this scope of work can be performed on the proposed budget.
- Professor X will provide intellectual direction of the project and co-author publications. Her time (5% effort) will be contributed by the College.
BAD EXAMPLES: “Red Flag” Terms (can mean cost sharing commitment - do not use)
- Cost sharing
- Commit % or $
- Allocate % or $
- Exclusive Use
- Support at no cost
On the Notice of Award (NOA) you will receive from SPO you will be given information on your cost sharing commitments in one of two forms: You will either be told to refer to the funded proposal for information on your cost sharing commitments (if they are quite extensive) or you will find the cost share information (by source) as an attachment to the NOA. The information will be presented in the following format:
Reportable Cost Sharing Summary Form:
|A. Total Dollar Value of Cost Sharing described in Proposal:|
|B. Source of Proposed Cost Sharing:|
|VCR Central Campus||$|
|C. Cost Share Limited to Person Effort without Dollar Value||Yes _____|
The cost sharing commitments listed by SPO on the NOA will be those that were accepted by the sponsor of your project. (Please note: Even voluntary cost sharing commitments included in a proposal become mandatory when proposing to a federal funding agency.) When you receive this information, please review it against the cost share you offered in your proposal as well as the award document from the sponsor. If you feel the cost share listed is inaccurate or conflicts with the sponsor’s cost share requirements, please contact your SPO Research Analyst as soon as possible.
For information on the specific amount of cost sharing dollars associated with each of the cost categories (e.g. personnel effort, equipment, unrecovered IDC, etc.) and specific university and third party sources you will be required to refer to the funded proposal.
Cost sharing must be reported to the sponsor through Extramural Funds Accounting (EFA). See EFA’s web site for guidance. Remember the PI/Department is responsible for providing the total amount and/or source of cost sharing accepted by the sponsor. Should the actual value, source or type of cost sharing change, you will need to contact SPO to determine if the sponsor needs to be consulted.
Please Note: Cost shared effort (even if included without dollar value in the proposal) also will need to be tracked/ reported via ERS.
- Extramural Funds Accounting: Cost Sharing
- EFA Cost Sharing Contribution Report
- UCOP Contract and Grant Manual, Chapter Five - Cost Sharing
- UC Berkeley Procedures for Cost Sharing And Matching (memo on provision of central funds for cost sharing required in grant applications)
- Request for Central Campus Cost Sharing Form
- A Quick Introduction to Effort Reporting for UC Berkeley Faculty
- RAC Forum Presentation on Cost Sharing (March 2010)
- SPO has available for loan to campus departments an NCURA Cost Sharing Training Video. Please contact your SPO RA if you are interested in reviewing this video.
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