Definition of cost sharing
In order to accomplish the goals or objectives of a research project, the University of Houston will incur costs that may be covered either by using funds that the sponsor has provided, by using University resources or by using resources from individuals or agencies outside of the University and the sponsoring agency. All allowable costs incurred in the performance of a project, and all contributions made by UH or by the third parties to accomplish the goals of the project are called project costs. Cost sharing and matching represent that portion of the project costs not paid for by the sponsor’s funds. The federal government makes no distinction between the terms “cost sharing” and “matching.” However, in general, OCG uses the term cost sharing when describing a University commitment of any size, and uses matching to describe a cost sharing commitment of a dollar-for-dollar contribution.
Types of cost sharing
Cost sharing can take the form of either cash contributions or in-kind contributions. Cash contributions are made when UH spends non-sponsored project cash in support of a sponsored project. In-kind contributions consist of the value of non-cash contributions provided by UH or by non-Federal third parties, such as facilities or equipment use, personnel assigned from any private or non-sponsored source, indirect cost, or the value of goods and services directly benefiting and specifically identifiable with the project.
Mandatory and voluntary committed cost sharing
Mandatory cost sharing is required by the sponsor in the proposal solicitation or in award negotiation as a condition of eligibility for receipt of the award.
Cost sharing is voluntary if it is committed by the PI in the proposal when no mandatory cost sharing requirement is included in the proposal solicitation, or if it is in excess of mandatory cost sharing requirements. Whether cost sharing is required by the sponsor or is offered by the P.I. voluntarily in the proposal, once the award is accepted, all cost sharing becomes a commitment under the terms of the award, which must be fulfilled and documented. Both are forms of committed cost sharing (mandatory committed and voluntary committed). Uniform Guidance (for new awards effective December 26, 2014) and A-21 (prior awards) provisions require that faculty document, in the payroll accounting system, all compensated effort, including effort provided as mandatory or voluntary committed cost sharing.
OMB defines voluntary uncommitted cost sharing effort as "university faculty (including senior researchers) effort that is over and above that which is committed and budgeted for a sponsored agreement." This effort "is faculty-donated additional time above that agreed to as part of the award." OMB has excluded voluntary uncommitted cost sharing effort from payroll accounting and reporting requirements. It is not considered to be part of the effort for which faculty are compensated by UH. Therefore, there is no associated UH cost. Also, it is not required to be reported on the effort reports.
Documentation and valuation requirements for cost sharing
In general, cost sharing should be valued in accordance with the allowability principles of the Uniform Guidance (for new awards effective December 26, 2014) and A-21 (prior awards) and/or the award terms. Under-recovery of allowable indirect costs may be included in cost sharing only with the written prior approval of the federal awarding agency. The basis for determining the valuation of cost sharing MUST be documented.
Documentation must reflect the fair market value of item that is being cost-shared, prorated over the period of use. For example, lease rates must reflect what is generally charged per square foot for that area, and the basis for the calculation of rates must be clear. If donated space is being cost shared, the number of square feet and going rate per square foot must be shown. All rates must be reasonable and verifiable. UH will accept a letter from the donor stating the value of contribution, but the donor should have documentation, such as rate sheets, on file. In no case can the value of donated space exceed the fair rental value of comparable space as established by an independent appraisal of comparable space and facilities in a privately-owned building in the same locality.
The most common way of meeting cost-sharing requirements is in the contribution of academic year time and effort, usually of the Principal Investigator or co-Principal Investigators. It is important that the Principal Investigator realize that if he/she intends to meet cost-sharing requirements in the form of academic year time and effort, this option may only be utilized if it conforms with the college's current faculty workload policy. When cost-sharing is met by contributing time and effort, the University may, with written agency authorization, claim as cost-sharing the indirect costs that it would have collected had that time and effort been charged as a direct cost to the grant. Time and effort cost sharing is different from release time for sponsored project activity and does not result in an additional charge to departmental accounts. Document time and effort of personnel on the monthly time and effort report, which must show the rate of pay and level of effort and which must include a certification that that individual worked on behalf of the project by someone who had first-hand knowledge of the individual’s activity.
Cost sharing of operating expenses requires "hard-dollar" cost sharing, usually in terms of charges to departmental operating budgets for research supplies, equipment purchases or services in connection with award activities. The justification on the expenditure document must reference the project number for which this expense will serve as cost sharing.
Documentation of outside services and/or consultants must include an invoice that shows the dates of service, rate of pay, description of services, and names of individuals that did work. Rates must be current, verifiable amounts that that firm or individual charges to paying customers. If an employer other than UH furnishes the services of an employee, the employee’s regular rate of pay must be used to value the services.
Facilities charges may be used for cost sharing only if the firm or entity normally charges for facilities, and you can obtain published rates. You must show dates of use and description of functions.
Rates for volunteer services must be consistent with those paid for similar work at UH or with those paid in the normal labor market. Volunteer services may be counted as cost sharing or matching only if the service is an integral and necessary part of the project.
The value of donated supplies (expendable equipment, office supplies, lab supplies, or workshop and classroom supplies) must be reasonable and must not exceed the fair market value of the property at the time of the donation.
Donated equipment must be valued at the fair market value of equipment of the same age and condition. If equipment or computers are being contributed, either as 100% up front donation or a lease equivalent, values used must be backed up with quotes from a vendor who sells like models. The value of loaned equipment cannot exceed its fair rental value.
The department must document all cost sharing contributions, including third party in-kind contributions, and must provide this information to Research Financial Services in a timely fashion so that RFS may include the information in the financial reports or invoices that they must submit to the sponsor. In order to adequately report cost sharing expenditures, each department or center must follow these steps:
- A “Cost Sharing” file must be created for each sponsored project, and copies of the expenditure documents that support the cost sharing must be kept in this file. Such documents may include timesheets, purchase requisitions, consultant contracts, etc. A spreadsheet must be created for each sponsored project in order to summarize the cost sharing expenditures to date. The spreadsheet should be identified by project and should include all of the key data elements to identify and describe the nature of each item of cost. By the 10th of each month, a copy of the cost sharing spreadsheet(s) should be sent, preferably as an email attachment, to the Manager of Fiscal Reporting. Usually, the spreadsheet will suffice for reporting purposes, but in the event the sponsor of the project requires the university to provide detailed documentation of cost sharing, you will be asked to also send copies of all of the documents added to your file during the most recent period.
- Immediately following the expiration of the sponsored project, a final review and reconciliation of the cost sharing expenses must be done. A final copy of the spreadsheet (and copies of supporting documents, if requested) must be provided to Research Financial Services.
- All of the cost sharing documents must be retained for a minimum of three years after the end of the project unless the Notice of Award specifies a longer retention period.