1. Cost Sharing: Yours, Mine, Ours
Randi Wasik
University of Washington
Urmila Bajaj
California Institute of Technology

2. Discussion Outline Cost Sharing Compliance
Definitions, Regulations, and Types (pre and post )
Roles and Responsibilities
-PI, Pre-Award and Post-Award Group
Case Studies

3. Definition per Federal Guidelines
OMB Circular A-110 defines cost sharing as
Project costs not borne by the sponsors but supported by contributions from the recipient and third parties, both cash and in-kind.
2CFR 200 (Uniform Guidance) defines cost sharing or matching as
Portion of project costs not paid by Federal funds (unless otherwise authorized by Federal statute)
References:
OMB Circular A-110, Subpart C.23. Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations
2CFR Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards

4. Definition in General Terms
Portion of research costs that are not covered by the sponsor
Primarily required by federal sponsors
Pledge can be a % of total project costs or a fixed amount
Obligation must come from non federal funds
Careful about:
federal flow through awards
non-federal sponsors may require prior approval

5. Federal Requirements Applicable to Cost Sharing
Cost shared expenditures are:
included in the approved budget
verifiable from the recipient’s records
not included as contributions for other federal projects
necessary and reasonable for project objectives (allocable)
allowable under applicable cost principles
not paid by the Federal Government under another award unless approved
approved by federal agency when unrecovered F&A is used

6. Cost Sharing Funding Source-Cash
General Budget
Gift
Non-federal Grant
Other Institutional
Funds
NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC

7. Cost Sharing Funding Source-Non Cash
Unfunded effort of key personnel –from collaborators
Donated property, certification for the value of donation
Sub-awardee cost sharing
NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC

8. In-kind Contributions
Unrecovered indirect costs-requires prior approval from the agency
Donated property-requires prior approval, valuation for cost sharing has to follow federal guidelines (value of remaining life or current fair market value, whichever is lesser unless approved by the agency)
Volunteer services by third party professionals-rates must be consistent with those paid for similar work, may be able to include paid fringe benefits
Services of an employee of a third party-valued at employee’s regular rate of pay, fringe benefits and indirect costs at the third party organization
Equipment, research supplies, etc. donated by a third party-valued at fair market price at the time of donation
Finally, for third-party in-kind contributions, the fair market value of goods and services must be documented and to the extent feasible supported by the same methods used internally by the non-Federal entity. (2CFR )

9. Common Traits Observed with Cost Sharing
Generally federal sponsors require cost sharing-more common in grants than contracts
Not common with industrial sponsors
Non-profits typically do not pay for certain costs
States typically decline to pay full overhead
NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC

10. Types of Cost Sharing Mandatory Voluntary References:
Award eligibility criteria
Sponsor imposed cap on salary
Voluntary
Committed
PI offered in proposal (pre ) and in proposal budget (post )
Uncommitted
PI did not quantify in proposal
References:
OMB, M-01-06, Memorandum for The Heads of Executive Departments And Establishments, Clarification of OMB A-21 Treatment of Voluntary Uncommitted Cost Sharing and Tuition Remission Costs
Award Eligibility Criteria per Proposed OMB Uniform Guidance (Reformed OMB Circular), Appendix II-Full Text of Notice of Funding Opportunity
2. Cost Sharing or Matching—Required. Announcements must state whether there is required cost sharing, matching, or cost participation without which an application would be ineligible (if cost sharing is not required, you must explicitly say so). Required cost sharing may be a certain percentage or amount, or may be in the form of contributions of specified items or activities (e.g., provision of equipment). It is important that the announcement be clear about any restrictions on the types of cost (e.g., in-kind contributions) that are acceptable as cost sharing. Cost sharing as an eligibility criterion includes requirements based in statute or regulation, as described in section ___.502 Standards for Financial and Program Management (f) of this guidance. This section should refer to the appropriate portion(s) of section IV. Application and Submission Information stating any pre-award requirements for submission of letters or other documentation to verify commitments to meet cost-sharing requirements if an award is made.
OMB Circular A-110, Subpart C.23, Post Award Administration, Cost sharing
OMB, M-01-06, Memorandum for The Heads of Executive Departments And Establishments, Clarification of OMB A-21 Treatment of Voluntary Uncommitted Cost Sharing and Tuition Remission Costs
NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC

11. Clarifications in 2CFR 200 (Uniform Guidance)
2CFR (to be implemented)
voluntary committed cost sharing is not expected in federal proposals
Federal agencies cannot use voluntary committed cost sharing as a factor during the merit review of proposals
Cost sharing requirement needs to be included in FOAs
Only mandatory or cost sharing specifically committed in the project budget must be included in the or base for computing F&A rate

12. Roles and Responsibilities
Office of Sponsored Research & PI/Department
Proposal phase
Review sponsor guidelines for proposal format
Prepare budgets and justifications including cost sharing budgets
Identify cost share funding sources
Obtain approval from department chair or dean
Obtain letter of commitment from sub-awardees, third parties

13. Roles and Responsibilities
Office of Sponsored Research & PI/Department
Award phase
Review awarded budgets
Set up companion accounts
Provide OSP with cost share funding source information
Record PI and key personnel %s of committed effort
Confirm cost share requirements are flown down to the sub-awardees or collaborators

14. Roles and Responsibilities
Sponsored Projects Accounting Office
Award phase
Review award budget, terms and conditions
Ensure companion account linked to main award
Monitor cost shared expenditures throughout the life of the award
Document cost sharing
Collect certifications from third party contributions

15. Relationship Between Proposed Budget, PI Effort and Cost Sharing
If effort is in the proposal = formal commitment
If original effort commitment is met and charged to the grant = no cost sharing
If original effort commitment is met, but not charged to the grant= voluntary committed cost sharing (NSF disallows voluntary committed cost sharing)
If higher effort is spent than committed, but not charged to the grant=voluntary uncommitted cost sharing

16. Effect of Increased Cost Sharing on F&A Rate
Cost shared expenditures are supported by general budget or non sponsored accounts, but are considered research costs and included in the University’s Organized Research (OR) base
When OR base increases, the F&A rate decreases
Voluntary committed cost sharing increases the OR base used for determining the F&A rate
Institutions discourage PIs to offer voluntary cost sharing

17. Proposal Submission, a Collaborative Effort

18. Principal Investigator Confirms that….
Program solicitation requires cost sharing
Cost sharing funding source is identified
Appropriate approval from Dean, Division Chair, Provost, etc. is obtained
Third party contributions are documented via letters of intent

19. Pre-Award Group Confirms that….
Program solicitation/sponsor guidance is reviewed carefully to interpret cost sharing requirements
Appropriate approvals from division heads, collaborators have been obtained
Letters of intent are acceptable by the University
No voluntary commitments are made inadvertently in the proposal
Under the new Uniform Guidance 2CFR 200, the proposal may not be peer reviewed if voluntary cost sharing is included

20. Voluntary Commitments in Proposals
Commitments included in the proposal budget that are not charged to the sponsor
“Unfunded” collaborators named as key personnel
Maintenance of equipment in instrumentation grants
Supplies and materials
Travel
Waiving or charging a lower indirect cost rate

21. Avoiding Voluntary Commitments
PI’s 1 calendar month effort, salary requested $0.00
PI will be available to provide advice
Purchase of Laser Interferometer-justified in the budget at $500K but not included in “Equipment” line item
PI has access to laser interferometer
Include under other support and rewrite as

22. Award Acceptance & Monitoring Cost Sharing

23. Post-Award Group Confirms that…..
Award is issued at the proposed budget
If award is issued at a reduced budget, cost sharing or other commitments are modified
Award notification includes cost sharing commitment
When appropriate, cost sharing companion account is set up

24. Post Award Office Responsibilities Continue…..
Sponsored Projects Accounting confirms
Commitment (labor and non-labor) is entered in the Award Management system
For cash contributions, companion account is linked to the main award
For Non-Cash contributions, cost sharing certification requirement is notified to the PI
Other Central Offices (Purchasing, Property Services, etc.) are notified of cost sharing obligations
NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC

25. PI and Department’s Responsibilities
PI’s Department Administrators confirm
Salaries, purchase orders and internal requisitions are set up in the system for the sponsored award as well as the cost sharing account
For cash contributions, companion account is linked to the main award
For Non-Cash contributions, the sources of cost sharing are documented
PI understands the University’s responsibility to track and report cost sharing to the sponsor
Sub-Awardee/s are aware of their cost sharing commitments
NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC

26. Important To Remember That……
Cost shared expenditures on sponsored projects are:
subject to audit
subject to federal cost principles
easily identifiable for F&A rate proposal
part of the official record (record retention)
NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC

27. Monitoring Cost Sharing
Cost sharing companion account is incurring expenditures at the same rate as the sponsored award
Expenditures are allowable, allocable and consistent
PI effort commitment is being met by charging PI salary directly or via cost sharing account to the project
Cost sharing certifications are received from third parties
Sponsored Projects Accounting and PI’s Department monitor that
NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC

28. Examples of Cost Shared Expenditures
The test is-could the cost be directly charged to the sponsored project?
Faculty salaries/benefits
Non faculty salaries/benefits
GRA assistantships and tuition
Equipment and M&S
Other direct costs
Program Income (with agency approval)
Unrecovered F&A (with federal agency approval)

29. Examples of Expenditures that Cannot Be Cost Shared
F&A costs (without agency approval)
Costs unallowable under OMB Circular A-21 section J
Costs not allocable (benefitting the research project)
Costs not allowed on an award

30. At Close Out Final reconciliation Reporting to sponsors
Expenditures are matching commitment
Cost sharing by sub-awardees are met
Companion account is funded and closed
Reporting to sponsors
SPA Office reports to sponsors
SF425, SF1034 (for subawards)
NSF via research.gov
PI reports to sponsors
Progress Reports
NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC

31. What Do The Auditors Look For
Was cost sharing commitment met?
What account was used to fund the cost sharing?
Was agency approval received for budget deviations?
Did the collaborators (sub-awardees) meet their cost sharing obligations?
What kind of documentation are maintained for in-kind cost sharing?

32. NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC
Conclusion
Any questions????
NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC

33. Case Study #1
Department of Interior issued a solicitation that requires cost sharing, with no limit on indirect costs. In fact DOI, being a federal agency, will honor the university’s negotiated indirect cost rate. Fresca University’s PI is responding to the proposal with the following budget:
Direct cost $100,000 + IDC $15,000 (Fresca’s IDC rate is 65% of MTDC, IDC is waived in the DOI portion)= $115,000
Fresca’s cost sharing budget is: $50K from the “waived” IDC
Can the PI include waived IDC as part of the matching requirement? Who needs to approve this proposed cost sharing commitment?
Response: It looks like Fresca is trying to achieve the 1:1 matching requirement of $115,000 through two different actions. First, they have waived $50,000 of the indirect costs that would have been charged to DOI and want to use that for part of the match. Second, they are contributing $65,000 toward the cost of the project ($40,000 direct and $25,000 indirect). Fresca can certainly waive a portion of the indirect costs that would be charged to the project if the full rate was applied. However, they can only use the waived indirect costs to meet the matching or cost sharing requirement with prior approval of the funding agency, DOI. If there’s time, you should contact DOI and request their approval to apply the waived indirect costs to meet the matching requirement. If there isn’t time, you should contact DOI as soon as possible after the proposal has been submitted and have a back-up plan in place in case DOI doesn’t allow it.

34. Case Study #2
Dr. Brenan submitted a research proposal to NSF for grant. He was happy that he could save $s by not charging any portion of his salary directly to the award, and managed to add a graduate research assistant in his proposal. Dr. Brenan made sure that he included 1 calendar month of his effort in the budget but did not request for salary support.
What type of cost sharing is this?
Would NSF consider awarding this proposal?

35. Case Study #3
Dr. Smith, from Presidency College, is the main PI of a cooperative agreement from NASA (award total is $4M) that requires a significant amount ($1M) of cost sharing. The collaborators are sub-awardees, PIs from three other universities, Eastern College, Northern University and Western University, committed to cost share a total of $800,000 toward the cooperative agreement. Dr. Smith’s university was going to cost share the balance, $200,000.
Breakdown of collaborator cost sharing: Eastern College: $400,000; Northern University: $200,000 and Western University: $200,000
Western University, unfortunately, could not meet their commitment of $200,000 and cost shared only $100,000. Total cost sharing from collaborators came to $700,000, instead of $800,000.
Who is responsible to oversee that the total cost sharing commitment has been met?
What action can Dr. Smith take to make up the shortfall?
Can Dr. Smith take any actions against the university that did not meet the commitment?
Response: As the prime grantee, Dr. Smith is responsible for meeting the cost sharing obligation contained in the prime award from NASA. Although Eastern University met its share of the cost sharing obligations, $400,000, they will have to make good on Western Institute’s $100,000 shortfall or face the possibility of having to return funds to NASA.
Does Western Institute’s failure to meet its cost sharing commitments create any obligation to Dr. Smith’s university? Since Western was only able to come up with $100,000 in cost sharing, what happens to the $1 million that they received in the subaward from Dr. Smith’s University?
Response: The most serious problem for Western Institute is that Eastern University may disallow a portion of the $1,000,000 contained in the subaward to Western Institute. A well-written subcontract and/or monitoring during the project would go a long way toward eliminating this problem before it occurred. The subcontract could have required the requisite matching when each invoice was submitted, before funds were released or it could have withheld a percentage of funds at the end of the project to ensure that all reports had been filed and all financial obligations had been met.
If Northern College met its $200,000 cost sharing requirement, but not in the same cost categories as originally proposed, does this pose any problems for Dr. Smith’s University? How could this situation have been avoided?
Response: As long as the NASA prime didn’t require that the cost sharing be met exactly as proposed in the Cooperative Agreement, e.g., in faculty contributed effort, Eastern can accept Northern College’s cost sharing of $200,000. However, if the prime award required that the cost sharing be only in the form of the purchase of a specific item of scientific instrumentation, then Eastern cannot accept Northern Colleges cost sharing contribution without going back to NASA to get their approval. Again, a well-written subcontract would have flowed down to Northern any budget restrictions contained in the prime award and good monitoring during the life of the project would have flagged the problem early on.