Cost sharing policy

Cost share sample budget

Cost share authorization form

This page 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 Uniform Guidance (2 CFR § 200.306).

Cost sharing: rationale and description   

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.


I. Definition of project cost sharing

Cost sharing for a grant or other sponsored agreement represents that portion of the total project costs borne by the University (or a third party), rather than the sponsor. Providing resources for committed cost sharing (mandatory or voluntary) of direct costs is the responsibility of the department or school. Cost sharing of Facilities and Administrative costs (F&A costs) is the responsibility of the Vice President for Research, upon the recommendation of the department and school.

Committed cost sharing of direct costs of Organized Research projects becomes a component of the Organized Research Base for purposes of computing F&A (formerly called "Indirect") cost rates. Increasing the organized research base will reduce the F&A cost rate and, consequently, lower F&A costs reimbursement.

Federal policies related to inclusion of cost sharing in federal grants and cooperative agreements are listed in Uniform Guidance (2 CFR § 200.306).

II. The costing commitment

When the University accepts an award with a cost sharing commitment, it is making an agreement, subject to audit, that it will provide the stated (or equivalent) services or assets in the performance of the sponsored project. The cost effectiveness and the expected benefits of each cost sharing commitment should be carefully weighed prior to making such commitments. In addition to the direct costs of these commitments, the administrative requirements and responsibilities inherent in the cost sharing commitment upon the Principal Investigator (PI), departmental administrators, and central administrators should be considered.

In preparing a proposal offering cost sharing, it is the PIs responsibility to:

  • Include all committed cost sharing, in dollar amounts, in the proposal budget
  • Identify mandatory cost sharing
  • Provide verification of the cost sharing commitment at the time the proposal is submitted internally for University approval

In accepting an award including cost sharing, it becomes the University’s responsibility to:

  • Track the committed cost sharing amounts
  • Report the mandatory cost sharing to the sponsor as required and ensure proper treatment of mandatory and voluntary committed cost sharing in the Facilities and Administrative Cost Proposal


Expenditures which may be cost-shared

Cost sharing may consist of several types of direct costs or resources, or of F&A costs. Some examples are shown on the Sample Proposal Budget (Attachment A). Frequently, cost sharing comprises faculty and staff contributions of time and effort and the related employee benefits and F&A costs. Other direct expenses, with their related F&A costs, may be contributed as cost sharing, e.g., supplies or travel expenses. (As noted later, non-payroll cost sharing is discouraged because of difficulty in documenting these costs.) The proposal budget must reflect any committed cost sharing offered and its monetary value. It is not appropriate simply to disclose the intent to cost share and its monetary value in the narrative. Committed cost sharing of any direct expense requires documentation and evidence of a direct contribution to the project.

Direct costs

1. Faculty, Student, or Staff Effort

It may be appropriate to contribute faculty, student, or staff effort to the performance of a sponsored project. This commitment to provide such cost sharing binds the University to actually contribute to the effort and also to track, record, and report the associated expenditures. Therefore, the source of funds for cost sharing must be identified as described below, in Section III. 

The cost of faculty, student, or staff effort above any sponsor imposed salary cap (see "Salary Cap Administration," elsewhere) MUST be absorbed by the University. It may not be proposed, recorded or reported as mandatory cost sharing. However, these costs must be identified for purposes of computing the F&A costs rate. 

Employee benefits related to cost-shared effort are cost shared at the benefits rates for the type of index supporting the cost sharing, which is usually different from the pooled benefits rates approved for direct costs to sponsored program accounts. 

Within the School of Medicine, faculty effort may be cost shared from clinical income. This cost sharing is treated as third party cost sharing.

2. Equipment

The process of accounting for committed cost-shared equipment is very complicated and requires significant effort on the part of both departmental and central administrators. Equipment may be cost shared only if title to the equipment is in the University’s name and it was acquired with non-Federal funds. Cost sharing the cost of purchase -- or, a portion of the cost of purchase -- for a piece of equipment means not only that a trail of documentation must be created, but that the piece of equipment must be tracked separately in perpetuity within the University’s Fixed Asset Accounting System. Capitalized equipment will be offered for cost sharing only with the approval of the Vice President for Research and normally will be considered ONLY when obtaining the award is dependent upon this type of cost sharing.

In lieu of committing equipment for cost sharing, the PI should characterize it in the proposal as: "This equipment will be made available for the performance of this project at no cost to the sponsor."

3. Other Direct Costs

Direct costs other than salaries, fringe benefits, or capitalized equipment may be listed by the PI as committed cost sharing in the proposal budget. The written approval of a representative with budgetary authority is needed on the Cost Sharing Authorization form. Because of the complexity of record keeping, cost sharing of this type is discouraged.

4. Third Party Cost Sharing 

VCU may offer as committed cost sharing both time and effort and goods and services contributed by third parties, often a subawardee under its prime award. VCU is responsible for securing records of, and reporting, such third party cost sharing. This may occur in two situations. The most common is when a potential subawardee makes a cost sharing commitment, which will appear in the subawardee budget of the proposal. The second situation occurs when cost sharing is provided by a third party who is not a subawardee, for example, volunteer effort by any individual or group that contributes to the project, or space and facilities provided for a community outreach program.

5. Program Income

On federal awards, program income may be used as committed cost sharing if the cost sharing alternative for use of program income (the second alternative, at Uniform Guidance 2 CFR Part 215) is proposed and agreed to by the sponsor. Prior to proposing this type of cost sharing, the PI must consult with the Office of Sponsored Programs Administration (OSPA) for details.

Facilities and Administrative Costs (F&A Costs) 

F&A costs are real costs of conducting instruction and research. When direct costs are cost shared, the F&A costs associated with those direct costs are AUTOMATICALLY cost shared. PIs should take advantage of this automatic cost sharing of F&A costs, and include them in the proposal budget to meet any mandatory cost sharing requirement.

F&A costs do not disappear simply because a sponsor does not pay for them; the University must fund any unreimbursed F&A costs associated with direct costs paid by the sponsor. Unless prohibited by sponsor regulation, unreimbursed F&A costs constitute cost sharing, so long as they have been budgeted, and can be used to meet mandatory cost sharing requirements. All reductions or waivers of F&A on sponsor-paid direct costs must follow the University’s policy on approval to waive F&A costs.

Expenditures which may NOT be offered as cost sharing

The following expenses represent cost borne by the University, but not allowed by federal regulations to be counted as mandatory cost sharing: 

  • Administrative salaries, services, supplies and any other costs which are reclassified as F&A costs, rather than direct costs.
  • Unallowable costs.
  • Salary dollars and associated benefits in excess of regulatory salary caps.
  • Unallowed F&A costs which are not approved for use as cost sharing.

Funding cost-shared expenditures

Identifying and providing resources for committed cost sharing mandatory or voluntary) of direct costs is always the responsibility of the PI. The PI may NOT utilize funds from another federal award as the source of cost sharing on a federal award, except as authorized by statute (which is very uncommon). The PI may utilize funds from non-federal awards as the source of committed cost sharing on a federally funded project unless prohibited by the non-federal sponsor, so long as the goals of the projects are closely related; however, this takes special record keeping and requires making prior arrangements with OSPA and Grants and Contracts Accounting.

The University will fund F&A costs associated with cost-shared direct costs from sources other than departmental/school accounts.

The sources of all cost-shared direct costs must be identified by the PI as part of the proposal preparation and approval process. The Proposal Budget should show committed cost sharing (and its sources if reasonable). A Committed Cost Sharing Authorization Form is required for OSPA review of proposal involving committed cost sharing. Once an award requiring cost sharing is made, Grants and Contracts Accounting will request a cost sharing index from, and supplement to, the index provided as cost sharing sources. They will notify the PI of these index numbers at the time notification of the project index number is made.

Attachment A is a sample Proposal Budget showing cost sharing and the index which will be the sources of each item of committed cost sharing. This is a convenient technique to use when the sponsor does not specify a specific budget format. Note that the column documenting the source index is an internal matter only, and should not appear on the budget submitted to the sponsor.

Attachment B is a sample Committed Cost Sharing Authorization Form. Again, this is an internal matter only, and should not be submitted to the sponsor. 

For any proposal with third party cost sharing, there must be written commitment, from an individual with authority to bind the third party, that this cost sharing will occur. The party should be aware that the University will require auditable documentation that the agreed to level of committed cost sharing has been provided. 

Recording committed cost-shared expenditures

The following are general guidelines for recording committed cost-shared expenditures. More detailed procedures are included under the "Accounting for Cost Sharing." Cost sharing indexes will be established in the same ledger as, and supplement to, the index identified as the source of cost sharing. 

Direct costs

1. Faculty, student or staff effort

Committed cost sharing of effort will be entered on the Personnel Action Form (PAF), attributed to the cost sharing index(es) in the same manner as direct effort is charged to the award’s index. Cost sharing resulting from imposition of a salary cap shall be charged to a separate cost sharing index from that one recording other cost-shared effort. The expended cost sharing of effort will be explicitly listed on effort certification reports so that only changes need to be entered when completing the effort certification report.

The related cost-shared employee benefits expenses will be automatically calculated and charged to the cost sharing index where the cost-shared pay is charged.

2. Equipment

Because of the unique nature of cost sharing documentation for equipment, the PI shall consult with OSPA and Grants and Contracts Accounting regarding necessary documentation prior to presenting the proposal for review.

3. Other direct costs

Committed cost sharing expenditures will be charged to the appropriate cost sharing index(es) which was created based on information provided in the proposal process.

4.Third party cost sharing

If a potential subawardee makes a cost sharing commitment which appears in the subawardee budget of the proposal, OSPA will require in the subaward agreement that the subawardee maintain records and report the cost sharing in its financial reports to the University. These reports will be due to VCU earlier than the date the University’s financial report is due to its sponsor.

If committed cost sharing is provided by a third party who is not a subawardee, the PI will gather documentation that the cost sharing occurred and its value. As part of project initiation, OSPA will provide Grants and Contracts Accounting a copy of the commitment.

5. Program income

If an award includes program income as committed (mandatory or voluntary) cost sharing, OSPA will so notify Grants and Contracts Accounting after acceptance of the award by requesting that a separate program income index be established. Grants and Contracts Accounting will flag the index as reportable cost sharing.

Facilities and administrative costs (F&A) 

The accounting system is not capable of tracking cost-shared F&A costs; they will not appear in the expenditure statements. Grants and Contracts Accounting will impute the cost shared F&A costs based on the direct expenditures recorded in cost sharing index, using the approved rate for the period(s) of the direct expenditures. 

Cost sharing reporting 

The University is responsible for demonstrating that it has met mandatory cost sharing commitments. Grants and Contracts Accounting is responsible for reporting this cost sharing to the sponsoring agencies as required. In addition, Cost Analysis is responsible for appropriate inclusion of cost sharing expenses in F&A costs computations.

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