Cost Sharing Basics
Cost sharing occurs when an applicant contributes resources to a sponsored project beyond the amount funded by the sponsor. Cost sharing may be “mandatory” or “voluntary.” Voluntary cost sharing may be “committed” or “uncommitted.” Each of these conditions is described below.
Mandatory Cost Sharing: When cost sharing is “mandatory,” the requirement for cost sharing will be described in the application guidelines. If the sponsor is silent about cost sharing or states that cost sharing is “encouraged,” cost sharing is not considered to be mandatory. For mandatory cost sharing the sponsor may require a certain percentage/type of cost sharing or that applicants “match” the sponsor’s contribution according to a certain formula. Any quantifiable cost sharing described in the proposal then becomes a condition of the award that results and must be documented and reported to the sponsor.
Voluntary Cost Sharing: Cost share is considered “voluntary” when an applicant describes a quantifiable amount of resources it will contribute to the project in the proposal even though the sponsor does not explicitly state in the proposal guidelines that cost sharing is required.
Voluntary Committed Cost Sharing: Federal sponsors view any voluntary cost sharing offered at the proposal stage as “committed” cost sharing at the award stage. This means that any quantified cost sharing offered in a proposal that is submitted to a federal sponsor becomes fiscally and/or programmatically auditable and must be documented and reported to the federal sponsor if the proposal is funded.
Voluntary “Uncommitted” Cost Sharing (VUCS): Voluntary uncommitted cost sharing (VUCS) refers to any effort or resources contributed to the sponsored project beyond that which is committed and budgeted for in a sponsored agreement. Such voluntary uncommitted cost sharing is not included in either the proposal budget or the narrative.
Berkeley principal investigators (PIs) are advised to always read and follow the sponsor’s guidelines on cost sharing and to contact their SPO Contract and Grant Officer with any questions about the sponsor’s requirements.
The following definitions of the terms associated with cost sharing at UC Berkeley and are presented to help the reader navigate the guidance below:
Third Party “In-Kind” Contributions: This is the computed value of any services and/or resources provided by a third-party in support of a sponsored project being administered by the University. Third-party in-kind contributions may be in the form of real property, equipment, supplies and other expendable property, or goods and services directly benefiting and specifically designated for the University’s project or program.
University “Cash” Contributions: The University can make a cash contribution to a sponsored project for cost sharing purposes in two ways:
- Contributing the computed value of the effort that University-paid personnel are expending on the project without reimbursement from the sponsor
- Contributing monies from a University gift, endowment and/or other unrestricted fund to pay for any of the direct costs associated with a sponsored project (e.g., salaries, fringe benefits, travel, equipment etc.)
Cost Sharing of Facilities and Administration (F&A) Costs: “F&A” refers to “facilities and administration” costs. F&A costs are considered “indirect” costs because, unlike direct costs, these costs cannot be linked to any particular project managed by the University. Instead, every four years the University negotiates with the U.S. Department of Health and Human Services (DHHS) to obtain a fair estimate of what it costs the University to house and administer different types of sponsored projects on and off the Berkeley campus. The F&A rates that result from these negotiations are charged to outside sponsors. See What are F&A Costs? for a more detailed explanation of F&A. F&A costs can be used as cost sharing in two ways.
- Contributed F&A: This refers to the F&A associated with any cash contributions being made to the project by the University. For example, if the PI plans to contribute time and effort to the project without compensation from the sponsor, the monetary value of this effort as well as the F&A associated with it may be offered as cost sharing. Similarly, if monies from an unrestricted University fund will be used to pay for the PI’s project travel both the amount of the travel funds and the F&A associated with this amount can be offered and reported as cost sharing. Contributed F&A (see examples below) always is calculated using the F&A rate appropriate for the activity that the University has negotiated with the DHHS. See Facilities and Administrative (Indirect Cost) Rates.
- Waived F&A: When F&A is “waived” the University agrees not to charge its federally negotiated F&A rate to the sponsor. The portion waived is considered “unrecovered F&A” and can be used as cost share if this is allowed by the sponsor. Campus/UCOP approval also is required in such cases. The University/UCOP will not waive F&A just to obtain cost sharing. PIs must work through SPO to obtain approval to waive F&A.
The following guidelines are presented to help PIs determine when cost sharing should be offered in a proposal:
The cost sharing should be necessary. PIs may think that they can be more competitive by providing voluntary cost sharing. This approach can backfire. For example, the National Science Foundation (NSF) will return any proposal that includes voluntary cost sharing without further review. PIs who feel it is important to show some sort of contribution to a proposed project should use the “good” examples provided at the end of this section to describe their commitment in qualitative rather than quantitative terms. Remember any voluntary cost share that is quantified in a federal proposal is auditable.
The cost sharing must occur during the period of performance. To be “counted” as cost sharing, contributed effort and resources must be expended not just obligated within the approved project period. For example, if an airplane reservation is made before the end date of the project for travel that will occur after the project ends, the travel costs cannot be counted as cost share even though the reservation was made during the project period because the payment for the trip will occur after the approved project end date.
The type of costs contributed as cost share must be considered “allowable” by the sponsor. The rule of thumb is that if the sponsor will allow a particular cost to be charged to the sponsor, the same cost can be contributed as cost share. For example, federal sponsors do not consider entertainment costs charged to a federal project to be allowable costs. Therefore, University or third party resources used for entertainment activities related to a federal project cannot be used to satisfy a cost sharing commitment. Federal sponsors also do not allow the funds supporting one federal project to be used as cost sharing for another federal project. Consult your SPO Contract and Grant Officer if you have questions about cost sharing of federal funds.
The costs must be allocable to the project. This means that any direct costs contributed as cost sharing must clearly benefit the sponsor’s project and not some other activity. For example, department administrator effort (e.g., secretaries, clerks) and office administrative expenses (e.g., telephone, supplies) are typically distributed across all the activities and objectives of a department and are not easily apportioned to any particular activity. It therefore would be difficult to document and use these costs for cost sharing purposes. It also would not be advisable to use all of the expenses associated with a large ongoing activity 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.)
The sponsor must approve the use of unrecovered F&A (indirect) costs as cost sharing. If the University/UCOP approves a reduction in the F&A rate that the University would normally charge to the sponsor, the sponsor still must approve the use of the waived F&A as cost sharing. Some sponsors allow unrecovered F&A to be used as cost share and some do not. PIs should discuss this type of cost sharing with a SPO Contract and Grant Officer.
As described above, when cost sharing is required, there are a number of ways that University and/or third-party resources can be used as cost sharing. The following section explains these options in more detail.
The “Value” of Computed Time and Effort
Faculty Time/Effort: The value of faculty time/effort can be offered as a cash contribution as long as this cost sharing occurs during the project period and while the faculty member is under a continuing contract with the University. For example, if the project period is from January 1 to December 31 (a calendar year) the typical faculty member would be able to cost share his or her effort during the nine-month academic year (AY) but not during the summer months when he or she is not under contract with the University. Note: This would be true even if the faculty member elects to have their nine-month salary paid/spread out over a twelve-month period. Faculty appointment periods do vary, so PIs should discuss the appropriate way use their effort as cost sharing with a Department/CSS Research Administrator.
By approving the proposal in Phoebe, or signing the Proposal Review Form (PRF), the chair/dean/director is approving the faculty member’s total effort (contributed and sponsored) on the project as described in the proposal. The chair/dean/director also is agreeing to ensure that the faculty member’s effort on sponsored projects combined with his/her other University duties and responsibilities will not exceed 1 FTE if the project is funded. Note: SPO does not approve or document faculty time commitments. This is a department/unit responsibility.
Administrative Staff Effort: Administrative costs typically are charged to a sponsor as part of the University’s F&A rate. In order to cost share the value of administrative staff time on a federal project, the administrative activity involved must be above and beyond the individual’s normal administrative duties and clearly be project related, i.e., “integral” to the project. The department/unit also must be able to document the administrator’s specific time and effort on the project. PIs are strongly encouraged to discuss this type of cost sharing with a SPO Contract and Grant Officer prior to including this type of cost sharing in a proposal.
Non-UC Berkeley Personnel Effort: Independent consultants and project volunteers can provide cost share under appropriate circumstances if the sponsor will accept the value of their time and effort as cost share. For example, if an independent consultant wishes to contribute his/her time to support a sponsored project being proposed by UC Berkeley, at the proposal stage SPO will need a letter of commitment from the consultant, the amount of time the consultant will devote to the project if funded, and an estimate of the value of the consultant’s time (based on prevailing market values). At the award stage, the department/unit will need to keep a written record of the consultant’s time and effort devoted to the project for reporting purposes. The value of volunteer time will need to be estimated at prevailing rates at the proposal stage and carefully documented and reported after the award for cost sharing purposes.
Internal Cash Contributions
If a campus unit or a PI wishes to contribute monies from an unrestricted University fund in support of a proposed sponsored project, at the proposal stage SPO will need a written commitment directly from someone with the authority to commit these funds. The authorized party should indicate the amount of the funding being committed, the source of the funding, and provide a detailed budget that indicates how the funds are to be used in support of the project. A detailed budget will allow SPO to determine if the expenditure of the contributed funds also will generate contributed F&A.
Third-Party Cost Share
Subrecipients: When UC Berkeley partners with another entity to carry out a sponsored project, the subrecipient may contribute cost sharing to the project. In such cases, at the proposal stage SPO will require a written commitment for the cost sharing from the subrecipient’s authorized representative. (Note: The guidelines above about acceptable cost share also apply to cost sharing provided by subrecipients.) This written commitment must include a detailed description of the amount, type, and source of cost sharing to be provided. After the subaward has been established with the subrecipient, the UC Berkeley department/unit will be responsible for monitoring the subrecipient’s performance and documenting and reporting the cost sharing provided by the subrecipient to the sponsor.
Other Collaborating Entities: Cost-sharing commitments can be made by entities other than subrecipients. If an organization that is “collaborating” on a Berkeley project wishes to commit personnel time, space, equipment, or other resources to a sponsored project being proposed by UC Berkeley, SPO will require written commitment directly from the authorized representative of that organization prior to the submission of the proposal. If the project is funded, the PI will be responsible for documenting and reporting the cost sharing provided by this third party to the sponsor.
It is not possible to compute the true value of University cash contributions without a detailed budget to show how the contributed funds will be used. This is because some direct costs are subject to computed F&A costs and others are not.
The F&A rate applied to any direct costs being contributed by the University for cost sharing purposes should be one of the University’s DHHS approved rates. The specific rate used is determined by the scope of work of the project and where the majority of the work takes place, i.e., on or off campus. To calculate the F&A associated with the University’s cash contributions, the appropriate rate is applied to the “Modified Total Direct Costs” or MTDC being contributed by the University. MTDC excludes certain costs, such as equipment, capital expenditures and tuition remission. For a complete list of exclusions, see the Current Rate Agreement.
Here are two examples of how the value of a University cash contribution of $10,000 can vary due to MTDC. (Note: All the rates used below are for illustrative purposes only. They are not actual University rates.)
|Example A||Example B|
@ 50% of MTDC:
@ 50% of MTDC:
|Total Cost Share:||$15,000||Total Cost Share:||$10,000|
In the example above, there is computed F&A on travel costs (Example A), but there is no computed F&A costs on equipment (Example B) because the calculation is based on the “Modified Total Direct Cost” (MTDC) base and equipment is excluded from this base.
The Value of Computed Personnel Time and Effort
When the University contributes University personnel effort as cost sharing, the total value of this cash contribution is calculated by adding together the value of the salaries as well as the fringe benefits related to the salaries. In addition, the F&A costs associated with the salaries and fringes also can be included as part of the cost sharing. The following is an example of how a cash contribution of 10% of a PI’s academic year time would be calculated using a fringe rate of 30% and an F&A rate of 50%. (Note: All the rates used below are for illustrative purposes only. They are not actual University rates.)
|10% of PI’s AY Salary:||$10,000|
|Related Fringe Benefits
@ 30% of Salary:
|Subtotal Salary & Fringes:||$13,000|
@ 50% of Subtotal:
|Total Cost Share:||$19,500|
The Value of Waived (Unrecovered) F&A
Waived (unrecovered) F&A is created when the sponsor’s written F&A policy states that the sponsor will not pay for F&A or will pay a lower percentage for F&A than the University’s federally negotiated F&A rates. The University may agree to this condition if the sponsor applies its written F&A policy consistently across all applicants or if the University determines that the project is of vital interest to the University. See the University’s vital interest F&A waiver policy.
When the sponsor pays for F&A but at a lower rate than the University’s federally negotiated rate for a particular type of project, the sponsor’s lower F&A rate is applied to all project direct costs. There typically are no exclusions. This is referred to as a “Total Direct Cost” base or TDC. The TDC base is typically used to calculate the F&A charged to the sponsor when the University is not allowed to charge it full F&A rate.
In example “D” below no waived F&A is generated because Berkeley is charging its federally negotiated rate (50% used as an example only) against an MTDC base (with equipment excluded). However, in Example “E” there is waived/unrecovered F&A to report because the sponsor only allows the University to charge an F&A rate of 10%. Note that this lower rate is applied to all project costs including equipment.
The result is that even though the MTDC base used in Example D is lower ($10,000) than the TDC base in Example E ($15,000) the actual F&A charged in Example D ($5,000) is higher than the F&A charged in Example E ($1,500) because the sponsor’s F&A rate is lower than the University’s F&A rate.
The waived F&A of $3,500 therefore is the difference between what the University should have charged ($5,000—see Example D) and what the sponsor allowed the University to charge ($1,500—see Example E).
|Example D||Example E|
|(no waived F&A generated)||(waived F&A generated)|
|PI Travel:||$10,000||$0||PI Travel:||$10,000||$0|
|Total Direct Costs (TDC):||$15,000||$0||Total Direct Costs (TDC):||$15,000||$0|
|UCB’s F&A Rate
@ 50% of MTDC:
|$5,000||$0||Sponsor’s F&A Rate
@ 10% of TDC:
|Waived F&A:||$0||Waived F&A:||$3,500|
|Total Project Costs:
(TDC plus F&A of $5,000)
|$20,000||$0||Total Project Costs:
(TDC plus F&A of $1,500)
Quantifiable cost sharing commitments that appear in the proposal narrative or in the budget/budget justification need to be included in Phoebe or, for units not yet using Phoebe, on the Proposal Review Form (PRF).
When cost sharing is not quantifiable it is not necessary to include this information in Phoebe or on the PRF. The following two examples illustrate the distinction between quantifiable and non-quantifiable:
- Non-quantifiable: Professor X will be providing expert advice and consultation to the project, as needed. (Not included in Phoebe or on the PRF)
- Quantifiable: Professor X will devote 20% of her time to the project at no cost to the sponsor. (Should be included in Phoebe or on the PRF)
- If cost sharing is included in the proposal, on the Questions Tab, the PI should answer “yes” to the following question: “Is cost sharing included as part of this proposal?”
- Under “Attachments/Notes” the PI should attach supporting documentation of all contributed personnel time and effort and/or other forms of cost share.’
- For cash contributions, a detailed budget of how the funds will be distributed across various cost categories should be provided to allow SPO to review/approve any associated F&A being used as cost share.
Proposals with the Proposal Review Form (PRF)
- The box under “Project Type and Budget” #4 “Cost Sharing” should be checked.
- Any contributed key personnel time also should appear in the Key Project Personnel Section of the PRF under “Committed Cost Share Effort.”
- Documentation of any financial commitments should be attached to the PRF.
- For cash contributions, a detailed budget of how the funds will be distributed across various cost categories should be provided to allow SPO to review/approve any associated F&A being used as cost share.
Committed cost sharing in a proposal to a federal agency represents a binding commitment by the University at the award stage and, as such, is subject to audit under federal and other sponsor regulations. Any quantifiable share cost offered in the proposal to a non-federal agency also may become a legally binding and accountable commitment of the University upon award.
Legally binding cost share commitments must be documented in the same way as other charges. The PI is required to measure, document, record, and report the commitment to the sponsor through CGA. For additional information on cost sharing from Contracts and Grants Accounting, please see Award Budget Set Up: Cost Sharing.
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. Please note: The cost sharing commitment made at the proposal stage is not automatically reduced if the anticipated award amount is reduced. Should the awarded amount be reduced from the proposed amount, the PI should work with SPO to adjust the committed cost sharing accordingly, particularly if the awarded budget requires a change in the scope of work.
To avoid financial liability as a result of audit disallowance, it is the responsibility of the PI to incur expenditures in accordance with applicable sponsor and University regulations and policies as well as applicable OMB cost principles.
When a Chair/Director or Dean approves the proposal in Phoebe or signs the 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 approval of the PI also indicates that the PI will be responsible for documenting 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/integral to the specific project in question).
The following checklist is provided to help both PIs and administrators make decisions about cost sharing:
Cost Sharing Checklist
- Is the cost sharing either mandatory or is there persuasive evidence that cost sharing is necessary?
- Is the cost sharing being proposed directly related and integral to this project?
- Will it be possible to document and document the cost sharing for reporting purposes?
- Is the type and source of cost share being proposed allowed by the sponsor?
- Will the cost sharing take place within the project period?
- Has the contributed effort of Berkeley project personnel been approved by each individual’s chair/dean or director?
- Have all University cash contributions been documented/approved by someone authorized to do so?
- Have all third party contributions been documented/approved by each organization’s authorized representative?
If the answer to any of these questions is, “No,” cost sharing should not be included in the proposal.
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 can be 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, PIs can commit to cost sharing, often unintentionally. In all instances where cost sharing is specified and quantified in a federal proposal, the PI and University will be obligated to account for and document these commitments along with funds awarded by the federal sponsor.
The examples below may be used in proposals to address the issue of academic or programmatic contributions or support when cost sharing is not required or intended. Also below are examples of language not to use when cost sharing is required by the sponsor.
- 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 PI).
- Professor X is PI 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 PI 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.
The following are “Red Flag” Terms that suggest cost sharing is present. Avoid using these terms unless cost sharing is required by the sponsor)
- Cost sharing
- Commit % or $
- Allocate % or $
- Exclusive Use
- Support at no cost
- 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 PI 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.
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. Please Note: Cost shared effort (even if included without dollar value in the proposal) also will need to be documented/reported via ERS.
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 Contract and Grant Officer as soon as possible.
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 your SPO Contract and Grant Officer to determine if the sponsor needs to be notified.
- Contracts and Grants Accounting Cost Sharing
- Contracts and Grants Accounting 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.
Back to Proposal Budget Basics: Cost Sharing