Cost Sharing
REG 10.05.2
Authority: Vice Chancellor
for Finance and Business
History: First Issued: July 1, 2002. Last Revised: March 3, 2004. Additional
History Information.
Additional References: After the Fact Cost Sharing Memo
Contact Info: Assistant Director, Systems and Compliance, (919) 515-8018,
Office of Contracts
and Grants.
1. Definitions
1.1. Cost Sharing is the portion of total project costs not borne by the
sponsor agency. Other terms used include matching, third-party, and in-kind
contributions.
1.2. Mandatory Cost Sharing is cost sharing that is mandated by the sponsoring
agency. This can be in the form of a specified dollar amount or a certain percentage
of total costs.
1.3. Required or Committed Cost Sharing is cost sharing that has been included
in the proposal and accepted by the sponsor regardless of whether it was mandatory
or voluntary. The amount included in the proposal becomes part of the legal
requirements of the contract or grant.
1.4. Voluntary Cost Sharing is cost sharing that has not been required by
the sponsoring agency or committed to in the proposal. Once cost sharing has
been identified as voluntary it must be disclosed to the sponsoring agency if
the agency requires reporting of cost sharing.
2. Post-Award Cost Sharing Issues
2.1. The Employee Activity Reporting System (TEARS) is the approved method of documenting
effort on a project for monthly employees. Cost sharing should be documented
when the Principal Investigators and other University employees spend a significant
amount of time on sponsored projects that is not reimbursed by the sponsor.
This is true even if their time was not included in the proposal or award agreement
as cost sharing (voluntary). Significant effort should be determined based on
a review of the individual facts and circumstances of each sponsored project.
This judgment would normally be based on the percentage of time an individual
will spend on the project and the resulting contribution made to the project.
2.2. Since the definition of significant is determined by individual project review,
it is difficult to establish a set percentage to use as a guideline when determining
whether effort is significant or not. Historically, 5% or greater has been considered
significant. However, the project review could prove that a percentage less
than 5% is significant for that particular project. For example, some federal
projects require prior approval when the Principal Investigator has not been
working on the project consecutively for three months or more. In this case,
1% would be considered significant and the effort would need to be documented
in TEARS unless prior approval is obtained from the agency.
2.3. What is considered significant is ultimately left up to the judgment of the
Principal Investigator. However, there are certain circumstances when effort
must be documented in TEARS. If there will be any direct charges associated
with an individual (for example travel or tuition), effort for this individual
should be documented either as a direct charge to the project or cost shared.
If the salary dollars are needed to meet cost sharing commitments or if it is
necessary to document levels of effort as committed in the proposal, the cost
sharing must be documented in TEARS regardless of the percentage of time spent
on the project. In these special circumstances, effort cannot be considered
"insignificant" and thus omitted from TEARS.
2.4. The only exception is situations where travel for a large skilled labor pool
is needed for isolated instances of work. The labor pool would need to be individuals
with specific and specialized skills. The nature of the work and skills required
are such that it would be cost prohibitive to hire outside the University. The
work should be infrequent, should be of short duration and should not take time
away from the employees normal work assignments. An example would be a project
that required measurement of a large number of trees over a weekend. Travel
can be paid to University employees in these circumstances even though the effort
is insignificant and not documented in TEARS. In these situations labor should
be documented on a log that lists the employee name, Human Resources number,
dates worked, hours worked, project number and a brief description of the work.
This documentation should be kept in the account file maintained by the College
and available upon request under an audit situation.
2.5. Federal regulations require that significant cost sharing, regardless of whether
it was required by the sponsored agreement, be documented to ensure accurate
financial reporting and regulatory compliance in the development of the University's
F&A cost rates. Cost sharing is a significant factor in the calculation
of the F&A cost rates. Failure to document and report cost sharing could
result in inaccurate F&A cost rates and the refund of F&A cost revenues.
2.6. Cost sharing may become a requirement through reductions in award amounts (as
compared to what was requested in a proposal) unless comparable reductions are
made in the scope or objective of the work. The reasons for reductions in award
amounts should be clearly documented during negotiations with sponsors to avoid
unplanned or unnecessary cost sharing. Examples of reasons for a reduction in
award amount include original cost estimate was too high, the scope or objective
of the proposal was reduced, or the sponsor wants the University to bear more
of the project cost.
2.7. Cost sharing may also be required to maintain the committed level of effort
on sponsored projects when rebudgeting results in significant decreases in salaries
of the principal investigator or other personnel funded from the project that
could impact the outcome of the work.
3. Allowable cost sharing at NCSU:
3.1 Cost sharing must be verifiable from University records.
3.2 Expenditures documented as cost sharing must be necessary and reasonable
for the proper and efficient accomplishment of project objectives.
3.3 Expenditures documented as cost sharing must be the types of charges that
are allowable according to federal cost principles
3.4 Cost sharing cannot be used or reported more than one time. If cost sharing
benefits more than one project, it should be prorated in an equitable manner
among the projects (e.g., based on % of each project's cost to total combined
project costs).
3.5 Unless otherwise authorized, expenditures by the federal government under
other agreements may not be used as cost sharing for federal projects.
3.6 Mandatory cost sharing must be disclosed in approved budgets when required
by the agency.
3.7 Cost Sharing must meet requirements of Cost Accounting Standards (CAS)
if it supports a project subject to CAS.
3.8 Cost Sharing must be incurred during the award period.
4. Documentation Requirements for Cost Sharing
4.1 Effort
The effort of University employees for whom the University will fund salaries
and related fringe benefits for the time that they work on a sponsored project.
The college should complete a TEARS Cost Sharing Set-Up for each monthly-paid
employee who will be working on but not paid from a project, within 60 days
of receipt of a new award or continuation/renewal. Cost sharing established
by the TEARS Set-Up will appear on the employee's effort report for their review
and certification.
The TEARS Cost Sharing Set-Up Form must be used to establish cost sharing percentages
(regardless of the level of involvement) in the effort reporting system for:
4.1.1 Significant amounts of time spent on projects beyond the award requirements.
4.1.2 Cost sharing performed in order to maintain committed levels of effort
on sponsored projects.
4.1.3 Cost sharing performed in order to meet committed dollar amounts or
% of award amounts.
4.1.4 Any award where there will be direct charges associated with an individual
(travel, tuition, etc.), unless the exception discussed under "Post-Award
Cost Sharing Issues" above can be met.
The purpose of the TEARS Cost Sharing Set Up Form is to establish cost sharing
percentages in the system before effort reports are printed so that the requested
percentages are reflected on the effort reports.
Cost sharing by EPA 9-month faculty during a summer period and bi-weekly paid
employees must be documented by an after-the-fact memo. After-the-fact memos
documenting cost sharing must be submitted to the Office of Contracts and Grants.
4.2 Non-Salary MTDC
This includes supplies, travel, special service facilities use rates, and other
MTDC costs [except salaries and fringe benefits] which the University will fund.
Documentation such as purchase orders, use logs, IDT's, vendor invoices, journal
vouchers, payment authorizations, travel authorizations and travel reimbursements
should be maintained by the college.
4.3 Equipment and Tuition
This includes the cost of equipment, tuition and other non-MTDC expenditures
which the University funds. Documentation such as purchase orders, journal vouchers,
vendor invoices, and payment authorizations should be maintained by the college.
4.4 Other Contracts and Grants
4.4.1. In some cases, cost sharing requirements may be met through expenditures on
other contract and grant accounts. When this type of cost sharing is used, the
accounts must be identified by the college/school. If less than total expenditures
of the other contract or grant will be used to meet cost sharing requirements,
account codes must also be provided. Based on project numbers and account codes
provided by the colleges, actual charges documented in the financial system
will be used to support this category of cost sharing.
4.4.2. For other contracts and grants to qualify as allowable cost sharing, the technical
relationship between the projects must be established. The technical relationship
to the project requiring cost sharing can be established by information cited
in the other contract/grant proposal linking the work of the projects or by
a certification from the college's Associate Dean for Research stating they
have reviewed the other contract/grant and determined it to be technically related
to the project requiring cost sharing. This memo should be provided to the Office
of Contracts and Grants.
4.4.3. Special Note: In general you cannot cost share one federal contract or grant
against another federal contract or grant. In order to cost share federal dollars
against other federal dollars you must receive approval from both federal sponsors.
This may be done by clearly disclosing in the proposals. If it has not been
disclosed in the proposals written approval must be obtained from the sponsor(s).
4.5 Subcontractors
Subcontractors who have agreed, as part of their contract with the University,
to participate in our cost sharing requirements make up this category of cost
sharing. A standard clause should be included in subcontract agreements citing
the subcontractor's cost sharing and reporting responsibilities. Because subcontractors'
cost sharing will never appear in the University's accounting system, it is
important to obtain this information from them periodically. Their documentation
of actual cost sharing to-date should be reported by expenditure category (salaries,
fringes, equipment, their F&A costs, etc.). Copies of cost sharing documentation
obtained from subcontractors must be provided to the Office of Contracts and
Grants.
4.6 Third Party/Other
Cost sharing by a third party is not identifiable in the University's financial
system. This type of cost sharing must be reviewed to ensure that it is allowable
according to the University's agreement with the sponsor and that prior approval
for this type of cost sharing has been obtained from the sponsor when necessary.
In some cases, federal regulations will govern the valuation of third party
contributions. Contact the Office of Contracts and Grants to discuss allowability.
Documentation provided by third-parties should identify cost sharing by category
(salaries, fringes, equipment, etc.) and the value of each. Copies of cost sharing
documentation obtained from third-party and other sources must be provided to
the Office of Contracts and Grants.
4.7 Multiple Projects Under Parent
This category of cost sharing can be viewed as a second-tier of cost sharing
which can develop when multiple projects, referred to as segments, are established
under one award. Segments are typically set up to facilitate the work of multiple
principal investigators or colleagues of the principal investigator. In other
words, when the approved budget is split for reasons internal to the University,
some of the responsibility for cost sharing may accompany the segments. When
this type of arrangement for meeting the University's cost sharing requirements
occurs, the college/school must identify the segment numbers which have been
delegated cost sharing requirements for the Office of Contracts and Grants.
The cost sharing requirements for each segment should be quantified by the categories
described above (#1 through #6) and are subject to the same documentation and
follow-up requirements as the parent project.
4.8 Facilities and Administrative Costs
4.8.1. Applicable to Cost Sharing F&A costs may be calculated and claimed
as cost sharing, if not prohibited by the sponsor, on overhead-bearing
direct costs that are allowable and documented as cost sharing (effort,
supplies, current services, etc.). No documentation by the colleges, other
than that required for direct cost sharing, is required.
4.8.2. Waived on Sponsor Costs Cost Sharing in the form of waived or reduced
F&A costs is the difference between the applicable University F&A
cost rate and the F&A cost actually awarded by the sponsor. Waived
F&A costs, if allowed by the sponsor, will be calculated on actual
project-to-date MTDC charged to the contract or grant. No documentation
by the colleges is required.
5. Unallowable Cost Sharing
Cost sharing must meet the same criteria as direct costs. In addition to specific
costs that are unallowable according to Federal OMB Circular A-21, the following
types of cost sharing are unallowable:
5.1 Federal to federal
Federal appropriations and contracts and grants funded directly or indirectly
through non-federal sponsors by the federal government are not allowable as
cost sharing for another federal project unless the source of cost sharing was
explicitly disclosed in both proposals and accepted as cost sharing by the federal
agencies or written approval was obtained from both federal sponsors. Federal
contracts and grants may be used as cost sharing on any non-federal contract
or grant unless prohibited by either sponsor.
5.2 Expenditures included in F&A rate
Costs that are recovered through the University's federally-approved F&A
cost rates, such as building and equipment use, utilities consumption, departmental
administrative support and departmental office supplies, are not allowable as
cost sharing. Questions regarding expenditures that are recovered through F&A
cost rates should be directed to the Office of Contracts and Grants.
5.3 Double counting
Cost sharing can only be committed and reported as cost sharing once. If cost
sharing expenditures relate to two or more projects, the expenditures should
be prorated in an equitable manner among the projects so that, in total, it
is only used and reported once.
5.4 Expenditures incurred prior to award
Expenditure transactions that have already taken place in a period prior to
a project’s begin date are not normally eligible as cost sharing. For
example, "cost sharing" the PI's effort during the previous summer
for an award with a project begin date of October 1 would not be eligible as
cost sharing. If equipment purchases or lab renovations included as part of
a proposal have already been completed, these may not qualify as cost sharing.
Depending on the agency, the terminology used and the particular situation,
each of these cases would require a review by the Office of Contracts and Grants
to determine if the expenditures would be allowable by the sponsor.
5.5 Lack of technical relationship
If no technical relationship can be demonstrated between other contracts and
grants used as cost sharing and the project requiring cost sharing, the other
project expenditures are not allowable as cost sharing.
6. Non-Compliance with Cost Sharing Requirements
Failure to meet cost sharing obligations or to adequately document cost sharing
can result in cost disallowances by sponsors. It is the responsibility of the
principal investigator and the college administrative officers to ensure University
compliance with cost sharing regulations and procedures.
7. Procedures for Confirming Cost Sharing
7.1 Upon receipt of a new award, the Office of Contracts and Grants will review
each project for cost sharing requirements.
7.2 If the Office of Contracts and Grants determines that cost sharing is
required for a particular project, a cost sharing confirmation memo will
be prepared and sent to the college business officer.
7.3 The college will be responsible for confirming all categories and amounts
of cost sharing, supplying additional information needed for certain categories,
and returning the memo to the Office of Contracts and Grants within 30 days
of receipt.
7.4 Colleges are also required to monitor actual cost sharing during the term
of a project. For those projects with a project period longer than one year
the Office of Contracts and Grants will prepare and distribute to the colleges
a standard follow-up report for this purpose. The report is intended to
help the colleges monitor their cost sharing commitments through the life
of the project.
Note: Some agencies require that the University meet their cost sharing commitments
by budget period rather than by project period. Based on agency regulations,
the frequency of financial reporting and the project period, the Office of Contracts
and Grants may determine that cost sharing confirmation on a more frequent basis
is necessary to ensure compliance and accuracy of financial reporting.
7.5 Unresolved differences between college responses to confirmation memos
will be resolved between the Director of Contracts and Grants, the College
Business Officer and the principal investigator.
7.6 At the close of a sponsored project, total project-to-date cost sharing
by category that has occurred must be reported by the college on the cost
sharing report (attached to close-out form) prepared by the Office of Contracts
and Grants.
