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Cost Sharing Requirements

Cost-sharing is the financial support contributed by universities to sponsored projects. Compliance with federal cost accounting standards requires that cost-shared expenses be treated in a consistent and uniform manner in proposal preparation, award negotiation and the accounting of these expenses in the financial reports to sponsors.  (Also see information on UMOR Cost Sharing, specific to U-M Office of Research.)

What is Cost Sharing?

Cost sharing is the financial support contributed by universities to sponsored projects. Compliance with federal cost accounting standards requires that cost shared expenses be treated in a consistent and uniform manner in proposal preparation, award negotiation and the accounting of these expenses in the financial reports to both federal and non-federal sponsors.

Cost sharing generally is the responsibility of the University unit(s) proposing the work. In some instances, however, funds may come from a number of sources, including department, college/school, and central administration.

Subject to AuditSubject to Audit

Cost sharing is subject to audit and is a condition of the award when included in a proposal or an award budget. It is most important, therefore, that any cost sharing commitments be reflected in the project accounts once an award is received.

The general practice of U-M is to provide cost sharing only when required by the sponsor and only to the extent necessary to meet the specific requirements. All cost sharing commitments must be included on the Proposal Approval Form (PAF) and must be approved by the U-M unit responsible for these funds. 

Commitments Require Prior Approval of Units

Cost sharing commitments require prior approval of the appropriate U-M units before the submission of a proposal to the sponsor. Project Directors are urged to discuss proposed cost sharing commitments well in advance of the submission deadlines to avoid "eleventh-hour" problems and misunderstandings.

Cost Sharing vs. Other U-M Commitments

Other U-M Commitments (sometimes referred to as voluntary uncommitted cost sharing) are not considered to be cost sharing, are not quantified, and are not reflected in the final agreement between U-M and the sponsoring agency. Other U-M Commitments include statements in the proposal narrative that identify the available capacity and facilities of U-M to carry out the proposed research and such capacities and facilities are not quantified.

Cost sharing will be considered a specific commitment and mandatory in terms of subsequent documentation requirements when it is a stated requirement of the sponsoring agency or is quantified in the proposal or award. U-M will consider a cost sharing commitment to be mandatory if it is explicitly set forth in the proposal or is required as a condition of the award agreement. The Project Award Notice (PAN) will reflect the University's cost sharing commitment to the sponsor.

Documenting Cost Sharing

To meet the reporting and auditing requirements of the sponsoring agencies, cost sharing commitments must be charged either to a separate cost sharing account related to the specified project or to the sponsored project account. Cost sharing commitments for faculty and staff salaries, benefits, materials and supplies, travel, printing, and other operating costs should be recorded in a cost sharing account. Cost sharing commitments in support of graduate student tuition and fees and equipment acquisitions should be recorded in the sponsored project account (unless other arrangements are made). The portion of these charges that represent University cost sharing will be transferred to the appropriate University account.

For example, the Project Director has committed to cost share 15% of his or her academic appointment in support of a sponsored research project. This commitment should be charged to the assigned cost sharing account. If the cost sharing commitment is to provide partial tuition support for GSRA's assigned to the sponsored project, the full tuition charges should be made to the sponsored research project and the cost shared portion of these charges will be transferred to the appropriate University account. Cost sharing commitments for equipment acquisitions should also be charged to the sponsored project account and funds transferred into this account from the appropriate cost sharing sources.

Departments/units are responsible for designating on the Proposal Approval Form the appropriate amounts and sources of cost sharing. The account number(s) for the cost sharing amount will be provided on the Project Award Notice (PAN) which is issued by ORSP at the time an award is received and a sponsored project account is established. The use of the PAN as the "trigger" will facilitate the tracking of cost sharing commitments.

Any time and effort of the faculty and staff designated as part of the cost sharing commitment will be monitored. If appropriate salary charges are not made in the cost sharing account, the department/unit will be contacted to remind them effort must be accounted for. At the end of the budget period, funds will be transferred from the appropriate sources (e.g., general fund accounts) to cover the actual expenditures recorded in the cost sharing account. The department/unit will be responsible for ensuring that the cost sharing amounts shown on the PAN are correct and that the appointments are submitted on a timely basis.

These procedures will ensure that all of the project costs--those costs covered by the sponsor and those committed by the University as cost sharing--are recorded in the sponsored project account and the associated cost sharing account and reflect the budget commitments approved by the sponsor and agreed to by the University at the time of the award. This consistency between budget commitment and expenditures is essential to ensure compliance with federal cost accounting standards.

Sponsor Treatment of Cost Sharing

Federal Sponsors

The federal Uniform Guidance (2 CFR 200.306) states that:

“For all Federal awards, any shared costs or matching funds and all contributions, including cash and third party in-kind contributions, must be accepted as part of the non-Federal entity's cost sharing or matching when such contributions meet all of the following criteria:

(1) Are verifiable from the non-Federal entity's records;

(2) Are not included as contributions for any other Federal award;

(3) Are necessary and reasonable for accomplishment of project or program objectives;

(4) Are allowable under Subpart E—Cost Principles of this part;

(5) Are not paid by the Federal government under another Federal award, except where the Federal statute authorizing a program specifically provides that Federal funds made available for such program can be applied to matching or cost sharing requirements of other Federal programs;

(6) Are provided for in the approved budget when required by the Federal awarding agency; and

(7) Conform to other provisions of this part, as applicable.

Unrecovered indirect costs, including indirect costs on cost sharing or matching may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency. Unrecovered indirect cost means the difference between the amount charged to the Federal award and the amount which could have been to the Federal award under the non-Federal entity's approved negotiated indirect cost rate.”

The cost sharing requirement of sponsors vary. Cost sharing requirements may be a specific expectation in federal program authorizations. 

Some federal agencies specifically stipulate that cost sharing is not a program requirement. Some stipulate cost sharing may not even be proposed!

Private Sponsors

If allowed by the sponsor, unrecovered indirect costs may be included as part of cost sharing. Industry sponsors generally do not require cost sharing. Nonprofit organizations generally will seek cost sharing by declining to pay certain costs (e.g., faculty time, staff benefits, indirect cost, etc.).

Cost Sharing At-a-Glance

  U-M Cost Sharing Other U-M Commitments 
Qualitatively Described in Proposal Y Y
Quantified in Proposal Y N
Tracked In M-Pathways Y N
Award Obligation Y N
Reported to Sponsor Y (usually) N
Subject to Audit Y N