Cost sharing is that portion of total project costs that are paid from sources other than the sponsor. Typically, cost sharing is a concept that is used by some federal agencies to demonstrate to Congress and others, a recipient's willingness to share in the project's expenses. Some agencies make a distinction between "cost sharing," "in-kind" and "matching." Generally, all these terms refer to the share of costs not charged to the sponsor. In some cases these terms can refer to cash contributions, donated services or facilities. When completing the MSU "Transmittal for Request and/or Acceptance of Gift, Grant, or Contract Support," which is required for all off-campus solicitations of research funds, cost sharing is considered to be all costs listed in the budget that are not requested from the potential sponsor.
Federal regulations regarding cost sharing are found 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). Subpart C, Section .23 of A-110 states in part:
- All contributions, including cash and third party in-kind, shall be accepted as part of the recipient's cost sharing or matching when such contributions meet all of the following criteria:
- Are verifiable from the recipient's records.
- Are not included as contributions for any other federally assisted project or program.
- Are necessary and reasonable for proper and efficient accomplishment of project or program objectives.
- Are allowable under the applicable cost principles.
- Are not paid by the Federal Government under another award, except where authorized by Federal statute to be used for cost sharing or matching.
- Are provided for in the approved budget when required by the Federal awarding agency.
- Conform to other provisions of this Circular, as applicable.
- Unrecovered indirect costs may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency...
Subpart C, Section .23 also delineates specific rules for valuation and documentation for volunteer services, donated supplies, property, buildings, and equipment. Contact the Office of Sponsored Programs or the Office of Contract and Grant Administration to discuss any items that fall within the preceding classifications.
Mandatory vs. Voluntary Cost Sharing
Mandatory cost sharing represents expenses that are paid from non-federal funds that were required by the sponsor in the project announcement, or costs that were clearly shown in the approved budget as MSU's share. For example, a program description may indicate that sponsor funds must be matched at x% in order to be eligible for the award.
Voluntary cost sharing includes expenses that have been contributed by MSU to the project in excess of the sponsor's requirements or those listed in the approved budget. For example, if Professor Jones actually spent 50% of his time working on the project instead of the 20% that he pledged in the proposed budget, the excess, 30% (50% - 20%) is considered voluntary cost sharing.
When necessary, what type of expenses should I use for cost sharing?
As can be seen from the above listing of federal regulations, cost sharing expenses must be documented and allowable project costs. As a result, it is important to pick the easiest category of expense to keep track of. In almost all cases, it is easiest to document salaries (and the related fringe benefits and overhead) than any other category of expense. Salary cost sharing is documented via MSU's effort reporting system, which is done once per semester and is called the Semester Effort Report or SER. Exceptions to the salary cost sharing rule are made for equipment grants where the documentation is also very easy. Since it is difficult to maintain auditable records of supplies and services that might be used as cost sharing, unless it is absolutely unavoidable, these items should not be used.
Conservative Use of Cost Sharing
Cost sharing pledges are a real commitment of limited university resources. As a result, cost sharing should only be listed in a proposed budget when absolutely necessary. Some examples where cost sharing may be appropriate include:
- When mandated by the sponsor
- When needed to accurately reflect the level of effort required to conduct the project, or
- When intended to otherwise make the proposal appear more competitive
However, many federal agencies that use to require cost sharing have reduced or eliminated the requirement and instead are basing their funding decisions on the technical merit of the proposal. Also, the National Science Foundation issued an important notice (No. 124) advising their program managers and grantees, among other things, that if a proposed budget is cut by 10% or more, a reduced scope of work is expected, and there will be no expectation of any uncompensated institutional contribution beyond that formally reflected as cost sharing. For details please see: http://www.nsf.gov/pubs/1999/iin124/iin124.htm