Cost Sharing Basics
WHAT IS COST SHARING?
Cost sharing commitments are committed institutional investments that either Arizona State University (ASU) is quantifying (e.g. placing a value on) within a proposal or that the Sponsor is requiring to be included, as identified in the funding announcement, or both. These cost sharing commitments are costs not paid for by the sponsor but rather is covered by ASU and/or third parties.
IS COST SHARING THE SAME AS MATCHING COSTS?
The terms cost sharing and matching costs are often used interchangeably. ASU defines both cost sharing and matching costs as project costs supported by funding sources other than the sponsor.
WHAT IS THE DIFFERENCE BETWEEN IN-KIND AND CASH CONTRIBUTIONS?
In-kind contributions refer to resources ASU already has available such as existing state-funded faculty and staff time/effort which can be devoted specifically to the project. Cash contributions, on the other hand, are new expenditures ASU would make in support of the project. An example of a cash contribution would be travel funded from a local account.
WHAT ARE ASU’S GUIDING PRINCIPLES WHEN CONSIDERING COST SHARE?
The guiding principles for cost share are the same when considering F&A Waivers.
- Sponsor Requirement. Is the cost share commitment required by the Sponsor as identified in the funding announcement? Is it required by statute?
- ASU and/or KE Strategic Initiative Alignment. Is the cost share commitment tied to an ASU or KE Strategic Initiative? Does this request align with our investment strategy, ASU goals and objectives?
- Sponsor Type. Who are we doing business with? Is this a federal, state, local government, charitable organization or industry Sponsor?
- Sponsor, ASU Relationship. Do we have an existing partnership with this Sponsor? Is this a strategic partnership? Would winning this award be prestigious at the institutional level?
- Public & Social Impact. Will any investment contribute to the social good? Are we addressing a public policy question or social problem? Does this project support an under-represented population? Does the project make a local impact?
- Risk-Return Trade-Off. What is the level of return to be gained from this investment? Every investment has risk as we may lose out on another opportunity these funds could be invested in. We must consider the risk-return trade-off at the time of investment to meet our goals.
ASU’s objective is to maximize sponsor cost reimbursement to support continued growth of the research enterprise. By minimizing cost sharing when not required, ASU:
- Is able to make more money available to fund cost sharing where it is required to be a viable proposal;
- Reduces the time faculty and administrators must spend on tracking and documenting cost sharing;
- Lessens the university's exposure to audit findings caused by insufficient or improperly documented cost sharing; and
- Curtails impacts on ASU's facilities and administrative rates.
The university’s decision to authorize the use of internal resources to supplement funding of a sponsored project is based on the availability of funds and ASU’s guiding principles when considering cost sharing.
MY PROGRAM OFFICER HAS INDICATED COST SHARING EVEN IF NOT REQUIRED BY THE SPONSOR WILL INCREASE MY CHANCES FOR FUNDING, IS THIS TRUE?
No. Proposals are generally only impacted when cost sharing is required or where the request for proposal or funding announcement states that cost sharing is a review criterion. Some sponsors, such as NSF, have now gone so far as to prohibit cost sharing unless specifically required by a solicitation.
ARE THERE DIFFERENT TYPES OF COST SHARING?
Yes – Mandatory and Voluntary. Mandatory cost sharing is required by the sponsor either as a stated proposal requirement or as a condition of obtaining an award. . A written policy stating the requirement is required in order to categorize the commitment as mandatory cost sharing. Voluntary cost sharing represents resources offered when there is no requirement in the sponsor's funding announcement. ASU strongly discourages voluntary cost sharing. If it is unclear if cost sharing is mandatory, contact the assigned Proposal GCO.
WHY IS VOLUNTARY COST SHARING DISCOURAGED?
All proposed cost sharing, whether mandatory or voluntary, becomes a binding commitment to the sponsor. It must be carefully tracked by the financial lead units and reported to ORSPA in a timely manner. In the event that the unit does not meet its cost sharing commitments, the sponsor may have the right to reduce or rescind its award to ASU. Units become responsible for any expenditures disallowed by the sponsor.
ARE EXPENSES USED FOR COST SHARING AUDITABLE?
Yes, they are auditable. In the event that any of the costs are disallowed, the PI/Unit is responsible for reimbursing the University for the costs.
WHAT COSTS CAN BE COST SHARED?
- Contributed effort
- Unrecovered F&A
- Other direct project costs
- Third party cash and/or donated goods and services
All of the following criteria must be met to qualify as cost sharing:
- Able to be documented from ASU and/or third party records
- Funds to be used are not already committed to another sponsored project
- Not paid by a federal award (except as authorized by statute)
- Necessary and reasonable to accomplish the project
- Allowable under 2 CFR 200 (Uniform Guidance) or other sponsor regulations. Considerations include:
- Timing – Only costs incurred during the period of performance of the project receiving the cost sharing can be included in the valuation.
- Sponsor Expense Approval Requirements – Any costs which would require sponsor approval if charged directly to the project receiving cost sharing also need sponsor approval to be cost shared.
- Allocability – Since the expense benefits two projects, the cost must be reasonably allocated between them.
- Provided for in the approved budget when required by sponsor of the project receiving the cost sharing. The sponsor receiving the cost sharing may restrict cost sharing by expense category and require their prior approval to rebudget categories.
This form of cost sharing should rarely be used because most projects are funded based on a specific scope of work. However, it is possible for two awards to have interrelated scopes of work and therefore be used as cost sharing. For more information about using sponsored projects as cost sharing, see the Documenting Cost Sharing Job Aid.
In every case, the following items will be required:
- The award notice for the project providing cost sharing may not contain language that prohibits the use of its grant funds as cost sharing
- The proposals and scope of works must clearly indicate the projects are interrelated
IF THE SPONSOR DOESN'T ALLOW AN EXPENSE CATEGORY SUCH AS SALARY OR TRAVEL, CAN THOSE EXPENSES BE INCLUDED IN THE COST SHARING BUDGET?
No. Only those direct costs that are allowable charges to the sponsor are allowable as cost sharing unless otherwise stated in the funding announcement
IF A SALARY EXCEEDS THE NIH CAP, DOES THE DEPARTMENT HAVE TO COST SHARE THE REST?
Departments must identify personnel exceeding the salary limitation and ensure that the amount of salary above the cap is paid from non-sponsored resources and properly reflected on effort reports. No Cost Sharing Allocations Smart Form is needed.
Can subcontractors provide cost sharing for a project on which ASU is the lead?
Yes. However, if a subcontract offers cost sharing in their proposal, they are bound by that commitment and must provide ASU documentation of the expenses. List the subcontractor(s)' contributions as third party on the Cost Sharing Allocations Smart Form.
Are ASU Foundation Funds able to be cost shared?
Yes. They should be listed on the Cost Sharing Allocations Smart Form as third party contributors.
CAN FACILITIES AND ADMINISTRATIVE COSTS BE USED AS COST SHARING?
When ASU receives less facilities and administrative (F&A) costs than its full federally negotiated rate, it is said to have foregone or unrecovered F&A costs. These unrecovered costs may be shown as cost sharing providing the sponsor does not prohibit it.
WHICH COSTS ARE RECOMMENDED FOR COST SHARING?
ASU suggests that state funded faculty/staff time and effort be used in the majority of cases. Cost shared effort, reported through ASU’s effort reporting system, is accepted by most sponsors and frequently used. It is the easiest type of cost sharing to track.
WHICH COSTS ARE NOT RECOMMENDED FOR COST SHARING?
The most difficult costs to document are third party contributions.
WHICH COSTS cannot be used FOR COST SHARING?
Infrastructure costs such as laboratory space or existing equipment cannot be cost shared. PIs should take care in preparing proposals not to commit use of facilities as cost sharing, but rather to characterize the facilities as "infrastructure available for the performance of the sponsored project."
HOW IS INFRASTRUCTURE SUPPORT DIFFERENT FROM COST SHARING?
|Infrastructure: Resources available to conduct research, in general, which cannot be represented to sponsors other than perhaps in very general and non-monetary terms||Cost Sharing: Resources dedicated to the conduct of a specific project which are identified in the proposal and which attach a specific dollar value|
|May be used for multiple projects simultaneously||Can be reasonably allocated the specific project proposed|
|Not legally binding||Legally binding|
|Extensive documentation not required||Extensive documentation|
|Is not reported to the sponsor||Must be reported to the sponsor|
|Does not result in a loss of funding||Can result in a loss of funding for failure to meet the promised commitment|
|Is not generally audited||Is a key component in all external audits of ASU|
Where should cost sharing be described in the proposal?
Cost sharing should only be described and quantified in the budget justification, unless otherwise specified by the funding announcement.
Where should cost sharing not be described?
Cost sharing should not be discussed in the technical narrative or the facilities and resources statement.