Cost Sharing Overview and Requirements
Cost sharing occurs when the University of Michigan contributes resources to a sponsored project. Learn about types of cost sharing, U-M policies, how to document cost sharing and more.
Cost sharing is the financial and non-financial support contributed by the University of Michigan 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 and in the accounting and reporting of subsequent expenses in the financial reports to both federal and non-federal sponsors.
Cost sharing is generally the responsibility of the U-M unit(s) proposing the work. In some instances, however, cost sharing may come from a number of sources, including other units, colleges/schools, central administration and third parties.
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 sponsor’s specific requirements.
Cost sharing definitions
U-M Cost Sharing (also known as Mandatory or Voluntary Committed Cost Sharing) occurs when U-M states in a proposal that it will provide a specific, quantified resource without asking for funding to cover the cost.
Examples: 10% of a faculty member’s effort, $5,000 in research supplies.
U-M Other Commitments (also known as Voluntary Uncommitted Cost Sharing) occur when U-M states in a proposal that it will provide a resource to the project but the item is unquantified.
Examples: Unspecified faculty effort beyond what is budgeted and accounted for in the proposal, running samples at no cost and without mentioning value.
Internal U-M Agreements occur when one or more unit(s) of U-M make(s) a commitment to provide a resource if the project is funded, but the arrangement is not referenced in the proposal and has not been shared with the sponsor.
Examples: Provision of additional lab space, coverage of fringe benefits that the sponsor will not fund.
Non-U-M Cost Sharing and Other Commitments occur when a proposal includes contributions from an entity external to U-M (also known as third-party commitments). The contributions may be quantified in the proposal or may be unspecified.
Examples: A local community organization’s commitment of volunteer time, a corporation’s donation of a $10,000 piece of equipment.
Characteristics of different types of cost sharing
| Mandatory and Voluntary Committed Cost Sharing | Voluntary Uncommitted Cost Sharing |
|||||
|---|---|---|---|---|---|---|
| U-M Cost Share | Non-U-M (Third Party) Cost Sharing – Quantified | Non-U-M (Third Party) Cost Sharing – Not Quantified | U-M Other Commitment | Internal U-M Agreements | ||
| Required by sponsor? | Yes (mandatory cost sharing) | No (voluntary committed cost sharing) | Yes, if meeting mandatory cost sharing requirement. No, if provided voluntarily. | No | No | No |
| Qualitatively described in proposal? | Yes | Yes | Yes | Yes | Yes | No |
| Quantified in proposal? | Yes | Yes | Yes | No | No | No |
| Tracked In M-Pathways? | Yes | Yes | Yes | No | No | No |
| Obligation of award? | Yes | Yes | Yes | Yes | Yes | Yes |
| Included in financial report to sponsor? | Yes | Check with Sponsored Programs | Check with Sponsored Programs | No | No | No |
| Subject to audit? | Yes | Yes | Yes | No | No | No |
Reminders on cost sharing
- Cost sharing requires the prior approval of the U-M units providing the cost-share before the submission of a proposal to the sponsor. Project directors are urged to discuss proposed cost sharing in advance of the submission deadlines to avoid “eleventh-hour” problems and misunderstandings.
- Cost sharing that is quantified, whether provided by U-M or a third-party, 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.
Documenting cost sharing
Cost sharing must be documented whenever it is a stated requirement of the sponsoring agency or is quantified in the proposal or award. U-M will consider committed cost-sharing to be mandatory if it is explicitly identified in the proposal or is required as a condition of the award. The AWD will reflect the U-M’s committed cost-sharing to the project.
To meet the reporting and auditing requirements of the University and sponsoring agencies, U-M Cost Sharing commitments must be charged either to a separate cost sharing account related to the specified project or to the sponsored project account, as follows:
- 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 U-M cost sharing will be transferred to the appropriate U-M account.
Departments/units are responsible for designating on the PAF the appropriate amounts and sources of cost sharing. The account number(s) for U-M Cost Sharing will be provided at the time an award is received and a sponsored project account is established.
Any time and effort of the faculty and staff designated as part of U-M Cost Sharing will be monitored. 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 is responsible for ensuring that faculty and staff 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 U-M 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 U-M at the time of the award. This consistency between budget commitment and expenditures is essential to ensuring compliance with the cost accounting standards.
Sponsor treatment of cost sharing
Federal sponsors
In order to qualify as cost sharing under a federal award, the non-federal contribution must meet the requirements of the Uniform Guidance (2 CFR 200.306). As stated in sections b and c under “Cost sharing,” those requirements are:
For all Federal awards, the Federal agency or pass-through entity must accept any cost sharing funds (including cash and third-party in-kind contributions, and also including funds committed by the recipient, subrecipient, or third parties) as part of the recipient’s or subrecipient’s contributions to a program when the funds:
- Are verifiable in the recipient’s or subrecipient’s records;
- Are not included as contributions for any other Federal award;
- Are necessary and reasonable for achieving the objectives of the Federal award;
- Are allowable under subpart E;
- Are not paid by the Federal Government under another Federal award, except where the program’s Federal authorizing statute specifically provides that Federal funds made available for the program can be applied to cost sharing requirements of other Federal programs;
- Are provided for in the approved budget when required by the Federal agency; and
- Conform to other applicable provisions of this part.
Unrecovered indirect costs, including indirect costs on cost sharing, may be included as part of cost sharing with the prior approval of the Federal agency or pass-through entity. Unrecovered indirect cost means the difference between the amount charged to the Federal award and the amount which could have been charged to the Federal award under the recipient’s or subrecipient’s approved indirect cost rate.
While the rules for what constitutes allowable cost sharing do not change, the cost sharing requirements of individual sponsors may vary. For example, some sponsors may require a 1:1 match. Others may specifically stipulate that cost-sharing is not required. Some go so far as to say that cost sharing may not even be proposed.
Private sponsors
Industry sponsors generally do not require cost sharing. Nonprofit organizations will often seek cost sharing by declining to pay certain costs (e.g., faculty time, staff benefits, indirect cost, etc.).
OVPR cost sharing
The U-M Office of the Vice President for Research (OVPR) may commit institutional financial support to proposals that are aligned with institutional strategies and goals. The following guidelines will be applied when considering OVPR cost sharing:
- Proposals that support interdisciplinary, cross-unit research from more than one school, college or unit.
- Proposals that will provide research equipment or facility renovation and will benefit multiple investigators from multiple schools/colleges/units. The faculty involved will agree to list the available equipment for campus use on Research Cores.
- Proposals that may advance institutional prestige.
- Proposals from a single school will be considered only when it is part of a larger strategic initiative or has the potential to enhance institutional reputation or status.
- The ability for the unit to self-fund in support of the research.
When reaching a decision, OVPR will consider whether the cost-sharing is required by the sponsor, the unit’s contribution, as well as the unit and institutional priorities. OVPR will consider cost-share on training grants for trainees at or above the postdoctoral level. OVPR prioritizes contributing cost share when at least two other units are contributing and are providing at least 2/3 of the total cost.
Requests must be received no later than three weeks before the submission deadline unless the sponsor has provided less time between its solicitation and the deadline. The request must be submitted by the research associate dean or assigned delegate in order to give adequate review time. Late requests will be given lower priority.
To request OVPR cost sharing, download the OVPR cost-share request form and obtain all necessary approvals at the department or school/college level. Follow the directions on the bottom of the form to complete application processing.
For questions about OVPR cost sharing, contact [email protected].