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Documenting Cost Sharing
Cost-sharing commitments must be documented (accounted for) if they are explicitly set forth on the Proposal Approval Form (PAF) or are required as a condition of the agreement. Cost-sharing commitments should 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. 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 department/unit is responsible for ensuring that the cost-sharing amounts shown on the PAN are correct and that appointments are up-to-date.
If the cost-sharing commitment is to provide partial tuition support for Graduate Student Research Assistants assigned to the sponsored project, the full tuition charges should be made to the sponsored research project and the funds required to cover the cost-shared portion of these charges will be transferred into the sponsored project 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.
These procedures ensure that all project costs are recorded in the sponsored project account or the associated cost-sharing account in accordance with 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.
- Cost sharing of direct costs up to a $10,000 should be addressed by the department or school/college.
- Requests for direct cost sharing amounts above $10,000 are reviewed by UMOR on a competitive basis.
- For major federal equipment grant programs (e.g., DOE, NIH, DOD), UMOR will assist the academic unit to provide up to 10% of the cost of the equipment that is being requested from the sponsoring agency or an equivalent amount toward the cost of facilities needed to house such equipment.
- For research grant proposals to sponsors (e.g., NSF) that require matching by the institution for major equipment items, UMOR will attempt to match what the unit can provide. (The UMOR share normally will not exceed 25% of total equipment item cost.)
Cost-sharing funds are available to enable U-M faculty to gain access to support from external sponsors that require University cost sharing beyond the level that can be provided by the principal investigator's academic unit.
In some circumstances, funds may be used for facilities and infrastructure development that is strongly associated with securing sponsor funding. Other situations will be considered by the Associate Vice President for Research, Sponsored Projects on a case-by-case basis.
Most sponsors' cost sharing requirements should be met through salaries and fringe benefits provided by the applicant's unit and the University's contribution of the indirect costs applicable to those salaries and fringe benefits.
U-M Office of Research (UMOR) funds are primarily used to meet sponsor requirements for cost sharing for necessary research equipment or facilities renovation, though GSRA support will be considered on a case-by-case basis for large center grants.
UMOR or ORSP can provide detailed information about University policies and practices in connection with cost sharing on sponsored projects.
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.
The policy of the University is to assume a cost-sharing commitment only when required by the sponsor or by the competitive nature of the award, and then to cost share 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 University unit responsible for these funds.
Cost sharing commitments frequently consists of academic or calendar year faculty time (with related staff benefits) and the associated indirect costs. Other cost-sharing commitments require prior approval of the appropriate University units prior to the submission of a budget 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.
The cost-sharing requirement of sponsors vary. Cost-sharing requirements may be a specific expectation in federal program authorizations. Grants often are viewed as a form of financial assistance, and some sponsors consider it necessary to obtain cost-sharing to ensure that the University has a commitment to the proposed project. Agencies offering equipment grants often seek cost sharing, often on a matching basis.
Some federal agencies specifically stipulate that cost sharing is not a program requirement. With increasing frequency, however, federal agencies require/expect some cost-sharing commitment to be clearly identified within the budget proposal. These agencies stipulate that any cost-sharing included in an award budget is a condition of the award and is subject to audit. It is most important, therefore, that any cost-sharing commitments be reflected in the project accounts once an award is received.
OMB Circular A-110 states that:
"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 applicable cost principles (i.e., A-21)
- 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."
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 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 considered significant to the negotiation of the award. The University will consider a cost-sharing commitment to be significant if it is explicitly set forth on the Proposal Approval Form (PAF) 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, including any changes in the programmatic or financial scope of the project that may have occurred during negotiations.
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 at the end of the budget period.
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/research units will be responsible for designating on the Proposal Approval Form the appropriate amounts and sources of cost-sharing dollars. The account number(s) for the cost sharing amount will be provided on the Project Award Notice (PAN) which is issued by DRDA 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.
The 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/or 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.
Voluntary commitments, not required as a condition of the award, will not be reflected in the final budget agreement between the University and the sponsoring agency, and therefore, are not identified in the University's accounting and personnel records. Examples of voluntary commitments include statements in the proposal narrative that identify the available capacity and facilities of the University to carry out the proposed research. When cost-sharing is not a specified requirement of the sponsor, it may be desirable to reflect an "anticipated supporting commitment (not auditable)" in lieu of cost-sharing. Such a commitment is not considered a part of the proposed budget.
Please contact ORSP Project Representatives for further detailed information about University policies and practices concerning cost sharing.