Controller's Office Policy CO 09 98a
A. Purpose: This statement explains cost sharing, the different types of cost sharing, and the proper documentation for each type. It also contains the procedures which will be followed to verify that cost sharing commitments are being fulfilled and to periodically obtain cost-sharing data from the Principal Investigator (PI) for financial reporting purposes. Also included in the statement are examples of costs that are not allowable as cost sharing.
B. General Guidelines/Applicable Policies
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.
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.
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.
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.
Post-Award Cost Sharing Issues
Cost sharing should be documented when the Principal Investigator 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.
If there will be any direct charges associated with that employee (for example, travel), then that employee's cost sharing must be documented in UNCP'S Time and Effort Report, regardless of the percentage of time spent on the project. In these special circumstances, effort cannot be considered "insignificant" and thus omitted.
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 indirect-cost rates. Cost sharing is a significant factor in the calculation of the indirect cost rates. Failure to document and report cost sharing could result in inaccurate indirect-cost rates and the refund of indirect-cost revenues.
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.
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.
University cost sharing must meet the following criteria in order to be allowable:
1. Cost sharing must be verifiable from University records.
2. Expenditures documented as cost sharing must be necessary and reasonable for the proper and efficient accomplishment of project objectives.
3. Expenditures documented as cost sharing must be the types of charges that are allowable according to Federal cost principles (See "Unallowable Cost Sharing" below and "Allowable Costs" in Direct Costs - Allowable and Unallowable).
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).
5. Unless otherwise authorized, expenditures by the Federal Government under other agreements may not be used as cost sharing for Federal projects.
6. Mandatory cost sharing must be disclosed in approved budgets when required by the agency.
Documentation Requirements for Cost Sharing
For documentation and reporting purposes, the University has classified cost sharing into the following categories:
Effort is funded University salaries and related fringe benefits for the time that employees work on a sponsored project. The principal investigator should complete a UNCP Time & Effort Report for each monthly-paid employee who will be working on but not paid from a project. These reports must be filed with Controller's Office, Grant Accounting, at the end of each quarter.
The UNCP Time & Effort Report must be used to establish cost-sharing percentages (regardless of the level of involvement) in the effort reporting system for:
a. Significant amounts of time spent on projects beyond the award requirements.
b. Cost sharing performed in order to maintain committed levels of effort on sponsored projects.
c. Cost sharing performed in order to meet committed dollar amounts or % of award amounts.
d. Any award where there will be direct charges associated with an individual (travel, etc.) unless the exception discussed under "Post-Award Cost Sharing Issues" above can be met.
The purpose of the UNCP Time & Effort Report is to document cost-sharing percentages.
2. Non-Salary Cost Sharing
Non-Salary Cost Sharing includes supplies, travel, special service facilities-use rates, equipment, and other costs (except salaries and fringe benefits) which the University will fund. Documentation such as, purchase orders, use logs, vendor invoices, journal vouchers, payment authorizations, travel authorizations, and travel reimbursements should be maintained by the principal investigator.
3. Other University Accounts, Contracts, or Grants
In some cases, cost-sharing requirements may be met through expenditures on other accounts, contracts, or grant accounts. When this type of cost sharing is used, the accounts must be identified by the principal investigator. If less than total expenditures of the other accounts will be used to meet cost-sharing requirements, notify the Controller's Office, Grant Accounting. Identify accounts, object codes, and percentages to be used.
For such costs 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 linking the work of the projects or by a certification from the Director of the Office of Grants stating they have reviewed the other entity and determined it to be technically related to the project requiring cost sharing. This memo should be provided to the Controller's Office, Grant Accounting. Unless clearly disclosed in the proposal and accepted by the sponsor, a Federal contract or grant cannot be used as cost sharing for another Federal project.
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 re ported by expenditure category--salaries, fringes, equipment, their indirect costs, etc. Copies of cost sharing documentation obtained from subcontractors must be provided to the Controller's Office, Grant Accounting.
5. 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 Director of the Office of 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 Controller's Office, Grant Accounting.
6. Multiple Accounts Under Prime
This category of cost sharing can be viewed as a second tier of cost sharing which can develop when multiple accounts, referred to as subaccounts, are established under one award. Subaccounts are typically set up to facilitate the work of multiple PI's or colleagues of the PI. 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 subaccounts. When this type of arrangement for meeting the University's cost sharing requirements occurs, the department must identify the subaccount numbers which have been delegated cost-sharing requirements for the Controller's Office, Grant Accounting. The cost-sharing requirements for each subaccount should be quantified by the categories described above (#1 through 5) and are subject to the same documentation and follow-up requirements as the prime account.
7. Indirect Costs
a. Applicable to Cost Sharing Indirect 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 PI, other than that required for direct cost sharing, is required.
b. Waived on Sponsor Costs Cost sharing in the form of waived or reduced indirect costs is the difference between the applicable University indirect cost rate and the indirect cost actually awarded by the sponsor. Waived indirect costs, if allowed by the sponsor, will be calculated on project-to-date cost. No documentation by the PI is required.
Unallowable Cost Sharing
Cost sharing must meet the same criteria as direct costs. Cost sharing must be Reasonable Allocable Timely Allowable
In addition to specific costs which are unallowable according to Federal OMB Circular A-21, the following types of cost sharing are unallowable:
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 the proposal and accepted as cost sharing by the Federal agency. Federal contracts and grants may be used as cost sharing on any non-federal contract or grant unless prohibited by either sponsor.
2. Expenditures Included in OH Rate
Costs that are recovered through the University's Federally-approved indirect 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 indirect cost rates should be directed to the Controller's Office, Grant Accounting.
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.
4. Expenditures Incurred Prior to Award
Expenditure transactions which 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 Director of the Office of Grants to determine if the expenditures would be allowable by the sponsor.
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 eligible 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 Director of the Office of Grants to ensure University compliance with cost sharing regulations and procedures.
1. Upon receipt of a new award, the Controller's Office, Grant Accounting, will review each project for cost sharing requirements.
2. If the Controller's Office, Grant Accounting, determines that cost sharing is required for a particular project, a cost sharing confirmation memo will be prepared and sent to the PI. If effort is included in cost sharing, a UNCP Time & Effort Report will be attached to the memo.
3. The PI 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 Controller's Office, Grant Accounting, within 30 days of receipt.
4. The PI is also required to monitor actual cost sharing that has occurred every six months for those accounts with a project period longer than one (1) year. A standard follow-up report will be prepared and distributed to the PI for this purpose by the Controller's Office, Grant Accounting. The report is intended to help PI's 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 Controller's Office, Grant Accounting, may determine that cost sharing confirmation on a more frequent basis is necessary to ensure compliance and accuracy of financial reporting.
5. Unresolved differences between PI responses to confirmation memos will be resolved between the Director of the Office of Grants, the Controller's Office, and the principal investigator.
6. At the close of a sponsored project, total project-to-date cost sharing by category must be reported by the PI to the Controller's Office, Grant Accounting, along with any required technical reports. These reports are due not more than 45 days after the grant is completed. Such reports may be required sooner if so mandated by the grantor; in such case, the grant accounting office will notify the PI.