Research Administration Policies

RA50 Cost Sharing

Policy Status
Active
Subject Matter Expert
John Hanold, 814-863-0768, jhh6@psu.edu
Policy Steward
Senior Vice President for Research and the Associate Vice President for Budget and Finance

Contents:


PURPOSE:

To establish policies with respect to the proper use and accounting for cost sharing for sponsored awards. Cost sharing or match is defined in the Uniform Guidance 2 CFR 200.1 as the portion of project costs not paid by Federal funds.

The Uniform Guidance 2 CFR 200.306 Cost sharing or matching outlines cost sharing requirements for grants and cooperative agreements and provides specific guidance on cost sharing. Individual agencies may have guidelines that vary slightly from those identified herein, so one should verify an agency's specific requirements prior to taking any action.

DEFINITIONS:

There are two basic categories of cost sharing, committed and uncommitted. Committed cost sharing is specifically identified in a grant proposal.  Uncommitted is cost sharing which was not identified in the grant proposal, but must be treated as cost sharing to assure appropriate allocation and treatment of costs.

COMMITTED -

  • Mandatory: Required as a condition to receive an award and specified by the agency in the proposal guidelines or program announcement. This would be the minimum cost sharing required by the agency. Anything committed beyond the minimum becomes Voluntary Committed cost sharing.
  • Voluntary: Committed by the University through the inclusion in the proposal as a specific commitment. This commitment could appear in the proposal either in the administrative/business section (e.g. budget or budget justification) or the narrative.   Note that per the Uniform Guidance 2 CFR 200.306(a): "Voluntary committed cost sharing is not expected. The Federal agency may not use voluntary committed cost sharing as a factor during the merit review of applications or proposals for Federal research grants unless authorized by Federal statutes or agency regulations and specified in the notice of funding opportunity. Federal agencies are also discouraged from using voluntary committed cost sharing as a factor during the merit review of applications for other Federal financial assistance programs. If voluntary committed cost sharing is used for this purpose for other programs, the notice of funding opportunity must specify how an applicant's proposed cost sharing will be considered."

Committed Cost Sharing - both mandatory and voluntary - are accounted for in the same ways and must be properly documented for cost accounting purposes. Note: The nature of uncommitted cost sharing (see below) changes to committed as soon as it is included in the proposal budget or award.

UNCOMMITTED -

  • University expenses, such as faculty salaries, over and above that which is committed and budgeted for in a sponsored agreement.

Uncommitted cost sharing is not and must not be identified specifically in the proposal budget or award or any modification and must not be documented or accounted for as part of the award.

Additionally, uncommitted cost sharing, per clarification in Memorandum M-01-06, dated January 5, 2001, "must be treated differently from committed effort and should not be included in the organized research base for computing the F&A rate or reflected in any allocation of F&A costs." Given this requirement, uncommitted cost share has specific requirements for documentation, which are outlined in RAG50 Documentation of Cost Sharing.

SPECIFIC GUIDANCE:

Any shared costs or matching funds and all contributions, including cash and third party in kind, must be accepted by the Federal agency as part of the University's cost sharing or matching when such contributions meet all of the following criteria. Per 2 CFR 200.306(b):

  1. Are verifiable from the University's records;
  2. Are not included as contributions for any other Federal award;
  3. Are necessary and reasonable for achieving the objectives of the Federal award;
  4. Are allowable under the applicable cost principles;
  5. Are not paid by the Federal Government under another Federal award, except where authorized by Federal statute to be used for cost sharing or matching;
  6. Are provided for in the approved budget when required by the Federal agency; and
  7. Conform to other provisions of the Uniform Guidance (2 CFR 200), as applicable.

See also Penn State's Cost Sharing FAQs for additional detail.

VALUATION:

University Services and Property

Values for University contributions of services and property must be established in accordance with the applicable cost principles of Uniform Guidance 2 CFR 200 Subpart E – Cost Principles. If a Federal agency authorizes the University to donate buildings or land for construction/facilities acquisition projects or long term use, the value of the donated property for cost sharing or matching purposes shall be the lesser of:

  1. The value of the remaining life of the property recorded in the University's accounting records at the time of donation, or
  2. The current fair market value. However, when there is sufficient justification, the Federal agency may approve the use of the current fair market value of the donated property, even if it exceeds the value at the time of donation to the project (Uniform Guidance 2 CFR 200.306(d)).

Volunteer Services

Volunteer services furnished by third-party professional and technical personnel, consultants, and other labor may be counted as cost sharing or matching if the service is necessary for the program. Rates for third-party volunteer services must be consistent with those paid for similar work in the University's organization. In those instances in which the required skills are not found in the University organization, rates must be consistent with those paid for similar work in the labor market in which the University competes for the kind of services involved. In either case, fringe benefits that are allowable, allocable and reasonable, may be included in the valuation (Uniform Guidance 2 CFR 200.306(e)).

Third Party Employer Services

When an employer other than the University furnishes the services of an employee, these services must be valued at the employee's regular rate of pay plus an amount of fringe benefits that is reasonable, necessary, allocable and otherwise allowable, and indirect costs at either the third-party's approved federally negotiated indirect cost rate or a rate in accordance with Uniform Guidance 2 CFR 200.414(d), provided these services employ the same skill(s) for which the employee is normally paid. (Uniform Guidance 2 CFR 200.306(f))

Donated Equipment or Property

Donated property from third parties may include such items as equipment, office supplies, laboratory supplies or workshop and classroom supplies. The assessed value of donated property included as cost sharing must not exceed the property's fair market value at the time of the donation (Uniform Guidance 2 CFR 200.306(g)).

Per 2 CFR 200.306(h), the method used for determining the value of donated equipment, buildings and land for which title passes to the University may differ according to the following:

  1. If the purpose of the Federal award is to assist the University in acquiring equipment, buildings or land, the aggregate value of the donated property may be claimed as cost sharing.
  2. If the purpose of the Federal award is to support activities that require the use of equipment, buildings or land, only depreciation for equipment and buildings may be made. However, the fair market value of equipment or other capital assets and fair rental charges for land may be allowed if provided in the terms and conditions of the Federal award.

Per 2 CFR 200.306(i), the value of donated property must be determined in accordance with the accounting policies of the University, with the following qualifications:

  1. The value of donated land and buildings must not exceed its fair market value at the time of donation to the University as established by an independent appraiser (e.g., certified real property appraiser or General Services Administration representative) and certified by a responsible official of the University,
  2. The value of donated equipment must not exceed the fair market value at the time of donation,
  3. The value of donated space must not exceed the fair rental value of comparable space as established by an independent appraisal of comparable space and facilities in a privately owned building in the same locality,
  4. The value of loaned equipment must not exceed its fair rental value.

Per 2 CFR 200.306(j), fair market value of third-party in-kind contributions must be documented and, to the extent feasible, supported by the same methods used by the University for its own internal transactions.

DOCUMENTATION OF COST SHARING:

Grants and contracts that have any component of committed cost sharing – mandatory or voluntary – must appropriately document the requirement.  See RAG50 Documentation of Cost Sharing for detail.

COST SHARING OF F&A COSTS:

Per 2 CFR 200.306(c), unrecovered indirect costs, including indirect costs on cost sharing or matching, may be included as part of cost sharing or matching with the prior approval of the Federal agency. 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 University's approved indirect cost rate.

Before seeking prior approval of the Federal awarding agency, PIs must obtain internal approval to include F&A costs in cost sharing. Although the University is firmly committed to assisting faculty in the pursuit of external funding for research initiatives and program development, the resources available for cost sharing are limited. Therefore, all cost sharing must be approved by appropriate institutional officials who administer the sources of cost-sharing funds. All cost sharing must be documented in accordance with University and sponsoring agency policies.

Requests for cost sharing of F&A costs or for institutional cost sharing through the use of F&A costs must be submitted to the Office of Sponsored Programs or the Office of Budget and Finance as detailed in Policy RA30 – Facilities and Administrative (F&A) Costs.

SPECIAL ADDITIONAL RULES FOR PROPERTY AND EQUIPMENT:

Property/Facilities purchased or provided in fulfillment of committed cost sharing must be reported to Cost Analysis and Property Inventory by the Business Area Financial Officer (or delegate).

Equipment: There are additional actions that must be taken to ensure that equipment is properly coded in the University's Property/Inventory records. The equipment should be accounted for in the appropriate cost sharing cost collector and reported to Cost Analysis and Property Inventory.

UNIVERSITY MATCHING FUNDS:

The University may provide matching funds to be used for committed cost sharing purposes. Essentially, these matching funds are used to offset the committed cost-sharing requirement for a particular area. These allocations, approved by the Senior Vice President for Research, should be accounted for as part of the budget in the Cost Sharing internal order under the applicable grant. In addition, any cost sharing committed at the college or departmental level should also be accounted for as part of the budget in the Cost Sharing internal order.

If matching funds provided by the University are treated as uncommitted cost sharing (such as for NSF grants which do not permit committed cost sharing), these costs must be managed and reported as per RAG50 Documentation of Cost Sharing under Voluntary Uncommitted Cost Share.

The University has several guidelines to manage the allocation of central matching funds:

RAG51 Central Matching Funds Program for Research Equipment

RAG52 Central Matching Funds Program for Research Assistantships/Traineeships

RAG53 Coordination Process for Matching Funds and Other University Contributions to Multi-Unit Proposals

Requests for University matching funds must be submitted a minimum of 10 days before the proposal is due. Retroactive requests after the proposal is funded will not be approved.

FURTHER INFORMATION:

For questions, additional detail, or to request changes to this policy, please contact the Office of the Senior Vice President for Research or the Office of Budget and Finance.

CROSS REFERENCES:

Other Policies should also be referenced, especially the following:

RA10 Costing Principles for Sponsored Awards

RA30 Facilities and Administrative (F&A) Costs

RAG50 Documentation of Cost Sharing

RAG51 Central Matching Funds Program for Research Equipment

RAG52 Central Matching Funds Program for Research Assistantships/Traineeships

RAG53 Coordination Process for Matching Funds and Other University Contributions to Multi-Unit Proposals


Revision History:

  • October 13, 2024 - Updated to reflect editorial changes to 2 CFR 200, effective 10/1/24
  • July 11, 2023 - Editorial changes:
    • References to the Corporate Controller changed to the Associate Vice President for Budget and Finance
    • References to the Office of the Corporate Controller changed to the Office of Budget and Finance
  • March 11, 2021 - Updated to reflect new SIMBA terminology
  • November 28, 2020 - Updated to reflect UG revision
  • August 8, 2020 - Updated to reflect changes resulting from SIMBA implementation
  • September 18, 2019 - Changed Vice President for Research to Senior Vice President for Research
  • February 26, 2016 - This new policy (incorporating parts of old RA02 and RAG10) has been created as part of the policy reorganization brought about by implementation of the Uniform Guidance (2 CFR 200).
  • March 7, 2005 - Editorial changes to correct link to “The Clarification of OMB A-21 Treatment of Voluntary Uncommitted Cost Sharing and Tuition Remission Costs."
  • New Policy Guideline; formerly University procedure CR2074 - University "Matching" Funds.
Date Approved
Date Published
Effective Date