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Cost Sharing / Matching Policy

Applicable to: Deans, Directors, Department Chairs, Faculty, Research and Business Administrators, Finance Personnel, and Sponsored Project Personnel

Last Updated: April 21, 2009

Cost Sharing / Matching

Purpose

This policy and set of processes and procedures has been developed to ensure that Cost Sharing and Cost Matching on sponsored projects is proposed, accounted for, and reported in a manner consistent with the requirements set forth in federal regulations [Office of Management and Budget (OMB) Circulars A-110 and A-21], requirements of sponsoring agencies, and the policies of Northwestern University.

This document comprises the University's policy on Cost Sharing/matching and the procedures for monitoring project-by-project Cost Sharing and reporting such Cost Sharing to sponsoring agencies. The policy was developed for the following purposes:

  • To provide information to the University community regarding the contractual, financial, and administrative implications that result from the commitment to cost share.
  • To provide guidance regarding the circumstances in which committed Cost Sharing is permitted by the University, including what kind of services, expenditures, or assets may be cost shared.
  • To establish procedures by which the University can identify the Cost Sharing commitments it makes as a condition of obtaining external sponsorship and demonstrate that it has fulfilled such commitments.
  • To establish procedures for recording cost-shared expenditures in the University's accounting system in order to identify Cost Sharing as required by OMB Circular A-21, "Cost Principles for Higher Education."

Definition of Cost Sharing/Matching

Cost Sharing/Matching refers to the portion of the total project or program costs (direct and indirect) not borne by the sponsor.

Cost Sharing occurs when a cost specifically benefits a sponsored project, but is not charged to that project. The University, through funds derived from appropriate non-sponsored sources, will at times contribute its resources towards the objectives of a sponsored project.

Cost Matching, occurs when a sponsor agrees to fund a portion of project costs predicated on a University mandate to make an equal or proportionate contribution, i.e., essentially mandatory Cost Sharing.

Northwestern University's Position on Cost Sharing/Matching

Some sponsors require institutional Cost Matching on their grants and contracts as a matter of statute, regulation, or policy. Individual solicitations may also indicate a Cost Matching requirement. In these cases, the University follows its long-standing practice of meeting published mandatory Cost Matching requirements for targeted programs.

Northwestern University does not typically Cost Share on a voluntary basis, consistent with its objective of maximizing sponsor cost reimbursement to support the continued growth of the research enterprise. However, a voluntary Cost Sharing commitment can be made where the competitive forces and perceived institutional benefit of receiving the award are deemed to be sufficiently strong to warrant the commitment. It is prohibited to include voluntary cost-sharing commitments in all components of both solicited and unsolicited National Science Foundation proposals (NSB-09-20, Investing in the Future: NSF Cost Sharing Policies for a Robust Federal Research Enterprise, Appendix A: NSB Policy on Cost Sharing). For other funding agencies, voluntary Cost Sharing commitments must be supported by a well justified plan that aligns with the goals of the research or education program and clearly demonstrates the value added by the voluntary Cost Sharing commitment. The Cost Sharing plan and documentation of commitments from all units must accompany the proposal submitted to the Office for Sponsored Research (OSR). Moreover, the signature of the department chair and/or dean is required on all proposals to clearly indicate approval of the voluntary Cost Sharing commitment plan. The process for requesting non-mandatory Cost Sharing is detailed in the Section II, COST SHARING PROCESSES AND PROCEDURES, Processes for Obtaining Approval to Cost Share/Match and Requesting Unit Contributions below.

The NSB Policy on Cost Sharing may be found at: http://www.nsf.gov/pubs/2009/nsb0920/nsb0920_2.pdf

In all cases, the University reserves the right to proportionately reduce both the voluntary and mandatory Cost Sharing/Matching commitment if awarded funds are less than proposed, after communication with the sponsor.

For both voluntary and mandatory Cost Sharing/Matching, in-kind contributions should always be considered first. An in-kind contribution represents an item of cost for which faculty support is already in place (and, therefore, no new cash outlay is required), such as salary or tuition. Cash Cost Sharing/Matching contributions should only be considered if in-kind mechanisms do not suffice to meet sponsor requirements or competitive needs. A cash contribution represents a new, incremental cost such as for equipment, travel, or additional staff necessary to conduct the sponsored project.

Forms of Cost Sharing/Matching

Mandatory Cost Sharing/Matching is required by sponsors as a matter of statute, regulation, or policy; or is indicated in individual solicitations.

Voluntary Committed Cost Sharing is not mandated by sponsors, but is proposed by PIs to demonstrate significant institutional commitment. For example, voluntary Cost Sharing includes instances where there is a commitment of academic year faculty effort without a request for the commensurate portion of faculty salary and fringe benefits in the proposal budget.

In an OMB clarification to OMB Circular A-21 there is an indication that most Federally funded research programs should have some level of committed faculty (or senior researcher) effort, either in the form of a direct charge or committed voluntary Cost Sharing. If this effort is in the form of Cost Sharing, it is considered voluntary committed Cost Sharing. This effort can be provided at any time within the fiscal year (summer months, academic year, or both). Some types of research programs such as programs for equipment and instrumentation, doctoral dissertations, and student augmentation do not require committed effort.

Voluntary Uncommitted Cost Sharing is defined as effort that is over and above that which is committed and budgeted for in a sponsored agreement and is not monitored by the University. It is Cost Sharing that is not required by a sponsor, nor offered in a proposal, but occurs in the course of executing the project, primarily in the form of actual effort being greater than committed effort.

Salary Cap Cost Sharing is Cost Sharing that occurs when the University proposes (or later assigns), effort by individuals whose salary exceeds a sponsor-imposed limit for individual salaries. It may not be offered for Mandatory Committed Cost Sharing. Salary Cap Cost Sharing must be identified for cost accounting purposes.

Consequences of Cost Sharing/Matching Commitments

For both mandatory Cost Matching and voluntary committed Cost Sharing, when an award is received in which Cost Sharing/Matching is proposed, the Cost Share/Match becomes a binding commitment that the University must provide as part of the performance of the sponsored project. Failure to properly record Cost Sharing/Matching may result in audit findings that could result in cost disallowances that have to be refunded to the sponsor. In these cases, the total cost of the disallowance (directs + indirects) is divided among cognizant offices/parties, including the PI, managing the award following a full review of the situation. Moreover, the amount of Cost Sharing/matching committed, including both mandatory and voluntary committed Cost Sharing/matching, is the amount subject to audit and documentation requirements.

Institutional Commitment

If the awardee has pledged resources that are necessary to accomplish award objectives as part of an institutional commitment, then sponsors have a reasonable expectation that awardee organizations should fully complete the scope of work outlined in the proposal. Program Officers and reviewers can consider this in approving future funding amounts even if these amounts are not subject to formal Cost Sharing requirements. Failure to meet these pledges also could be identified as non-compliance with award terms and conditions.

Letters of Institutional Commitment or Support may be required by the sponsor as part of the proposal submission and review process. If the institutional commitments are detailed with specific dollar amounts, they may be construed by the sponsor as voluntary Cost Sharing commitments, and the University may elect to establish companion Cost Sharing funds to effectively manage the commitment.

Cost Shared Effort (Salary) and Effort Reporting

The fulfillment of mandatory or voluntary committed cost shared effort (salary) is demonstrated through the Effort Reporting System by indicating the percentage of activities on sponsored projects that include effort expended but not charged to the projects. Cost shared effort (salary) should be funded by non-sponsored sources. For further guidance on Cost Sharing/Matching and effort reporting refer to the Northwestern University Key Effort Reporting Policies document.

Federal Requirements for Acceptable Cost Sharing/Matching

In order for items proposed as Cost Sharing to be acceptable in supporting Cost Sharing commitments, contributions must meet the following criteria (per OMB Circular A-110, Section 23):

  • Are verifiable from the recipient's records.
  • Are not included as contributions for any other federally-assisted project or program.
  • Are necessary and reasonable for proper and efficient accomplishment of project or program objectives.
  • Are allowable under the applicable cost principles.
  • Are not paid by the Federal Government under another award, except where authorized by Federal statute to be used for Cost Sharing or matching.
  • Are provided for in the approved budget when required by the Federal awarding agency.
  • Conform to other provisions of OMB Circular A-110, as applicable.

Sources Appropriate for University Cost Sharing/Matching

Cost Sharing/matching is normally in the form of a direct cost that would otherwise be charged to the grant or contract, such as salary, capital equipment, or other direct cost items. In certain circumstances, usually requiring the sponsor's approval, Cost Sharing may also take the form of waived or reduced Facilities & Administrative(F&A) costs.

The following would be considered appropriate in-kind contributions that the University may use to meet Cost Sharing/matching commitments:

  • Faculty or other project personnel effort (related salaries and fringe)
  • Lab Supplies
  • Travel Expenses
  • Equipment
  • Space
  • Tuition* (only for proposals with a defined training program)
  • Third party contributions (subawardees or other collaborating organizations)
  • Unrecovered F&A costs (i.e. when F&A is waived or reduced) - usually with prior approval of the Federal awarding agency.
    * Please contact The Graduate School or your unit's research administrator regarding how tuition is monetized by the University for cost share purposes.

The following would be considered appropriate sources of funds, i.e., cash, that the University may use to meet Cost Sharing/matching commitments:

  • Gifts
  • Endowment
  • Unrestricted departmental funds

Costs that are Not Acceptable as Cost Sharing / Matching

The following costs may not be used as Cost Sharing/matching:

  • Costs pledged as Cost Sharing/matching for another funded project.
  • Costs funded by other sponsored programs.
  • Costs of construction or renovation of University buildings, except in rare circumstances and with express approval.
  • Costs that are included and reimbursed through the F&A rate (administrative salaries, office supplies, library expenses, and operations and maintenance expenses).
  • Salary dollars above a regulatory cap (e.g., NIH salary cap).
  • Overdrafts (unallowable under OMB Circular A-21)
  • Otherwise unfunded salary for effort that extends beyond the contractual appointment period (i.e. unfunded summer months for faculty with nine month academic appointments).
  • Costs associated with the scholarship component of the Research Assistant Scholarship (RAS) program.
  • Any costs not deemed to be necessary and reasonable for the proper and efficient accomplishment of project or program objectives.

Impacts of Cost Sharing

Cost Sharing reduces the University's ability to maximize its reimbursement from external sponsors. In addition, there are negative F&A calculation and administrative impacts when committing to Cost Sharing. These impacts are described in greater detail in the Appendix to this policy document.

III. COST SHARING PROCESSES AND PROCEDURES

Processes for Obtaining Approval to Cost Share/Match and Requesting Unit Contributions

Given that maximization of cost reimbursement from sponsors is necessary to support continued investment in and enable the growth of the research enterprise, voluntary committed Cost Sharing should be offered only when the competitive forces and perceived institutional benefit of receiving an award are deemed to be sufficiently strong to warrant the commitment. It is the responsibility of the PI to document and justify the need for this commitment.

Local (Department, Center, and School)
If cash Cost Sharing is mandated or proposed, requests to Central Administration (Office for Research and The Graduate School) for contributions should not be made until written confirmation of the school/center and department contributions is secured. School/center and department contributions are considered to be a significant measure of the proposal's relevance to the research mission. Some schools have formalized the process for requesting Cost Sharing/Matching, please refer to these additional resources as appropriate.

Office for Research
For the Office for Research to consider a request for mandatory cost sharing/matching, voluntary committed cost sharing, or financial institutional commitment of any kind, a formal request and the materials outlined in Section I. above must be sent to the Vice President for Research and the Executive Director for Planning, Finance, & Communication for consideration two weeks before the proposal deadline.

For single school proposals, PIs must first work with their school research deans to secure local (department/center/school) commitments. The school research dean will then forward a request to the Office for Research.

 

For multi-school proposals, PIs *must* first contact the Office of Research Development (ORD) for additional guidance no less than one month in advance of the proposal deadline.

There are special requirements for large/shared equipment proposals (e.g. NIH SIG, NIH HEI, and NSF MRI programs), PIs must refer to the additional information below for complete guidance.

Materials to be submitted to the Office for Research with all requests for any financial institutional commitment:

  • A detailed breakdown of the cost share/match or institutional commitment request budget with a complete explanation/justification;
  • Draft overall grant budget (all years);
  • Overview of the project;
  • List of participating faculty and their school/dept, noting which faculty will have academic year salary charged directly to the grant;
  • Commitments from all school, department, and center units compiled into a single file (PDF or Word);
  • The Office for Research will consider requests for up to 50% of the overall request

Graduate School
The Office for Research does not control or allocate graduate student support (e.g., University Fellowships), requests for such support (stipend + tuition) must be made directly to The Graduate School (Simon Greenwold, Pat Mann, and Ruth Allee) after securing commitments from local units. For multi-school proposals, Alden Chang will be able to work with you to develop an appropriate request.

Documentation Required to Adequately Support and Justify Cost Sharing/Matching

It is imperative that all documentation of Cost Sharing/Matching clearly describe how those items and resources pledged are both necessary and reasonable for the proper and efficient accomplishment of the project. All Cost Sharing/Matching must be verifiable, thoroughly documented, and, like all project-related documentation, retained for 3 years (or per award terms) following the submission of the final financial report or completion of audit, whichever is first. Although documentation requirements are often the same for non-federal and federal agreements, if the award is non-federal, please check the specific award terms for the required retention periods.

Proposal Budget Justification
Committed Cost Sharing/Matching becomes an official part of the budget and should be documented on the proposal budget justification page.

Documentation at the Time of Proposal Submission
Investigators are asked to notify OSR of their intentions to respond to a solicitation that requires or will include Cost Sharing/Matching. A copy of the administrative shell, which includes the budget and budget justification, along with the Cost Sharing/Matching documentation (which includes the rationale/justification and written documentation of all commitments), should be submitted to OSR at least five full working days in advance of the sponsor's deadline. The Cost Sharing/Matching documentation consists of 1) a single PDF or Word document containing all written confirmations of Cost Sharing/Matching from every unit providing support, indicating the amount and source for each item (a compilation of email communications is sufficient).

Salary Commitments
The fulfillment of cost-shared effort (salary) commitments is demonstrated through quarterly effort reports, by indicating percentages of activity on sponsored projects that include the effort that was expended on but not charged to the projects. In expending and reporting effort, it is acceptable for percentages of effort to fluctuate between quarters, so long as the aggregate effort at least equals the commitment made to the sponsor for the budget period. If the PI's actual aggregate effort will represent a reduction of 25 percent or more from the original commitment, prior approval from the sponsor must be obtained. Notification should be sent to OSR for review and endorsement with an OSR-2 form prior to submitting the correspondence (including e-mail) to the sponsor. In any given period (academic year quarter or summer month[s]), the amount of salary charged to a sponsored project must be equal to or less than, but can never exceed, the actual effort expended. For example, a 10 percent academic year effort commitment may be met by expending 5 percent effort in the first two quarters and 20 percent in the third quarter, but only 5 percent of the salary may be charged to the project during those first two quarters.

Third Party Cost Sharing and Contributions
Typically, subcontractors on Northwestern proposals are expected to Cost Share/Match at the same percentage as Northwestern's commitment.

At the time of submission, the provider of the Cost Share/Match for the third party must send a letter or report to the PI, unit administrator, or ASRSP that includes detailed information: name; number of hours worked, hourly rate of pay, and dates; tasks/deliverables; non-personnel expenses; and/or unrecoverable F&A costs . This letter or report must be on the organization's letterhead and written after the individual has contributed the effort. Estimates cannot be accepted. The letter or report must be signed by an authorized representative of the organization and his/her title must be included.

NSF Proposals
Pursuant to NSF policy, Cost Sharing can only be put on line M of the NSF proposal budget form when it is mandatory Cost Matching and a specific requirement in the program solicitation. In such an instance, the total amount of Cost Sharing documented in the budget justification must match the amount indicated on Line M. In situations where academic year effort is be provided as voluntary committed cost share in order to meet the requirements of OMB Circular A-21 requiring that some level of PI and key personnel effort be committed to all research projects, such voluntary contributed effort is not detailed in the budget or budget justification, but should be recorded on the OSR-1. The cost shared commitment will then be fulfilled and demonstrated through the Effort Reporting System and Current and Pending Support Forms.

Direct Charging Cost Share Commitments

The process stated in this section will go into effect upon implementation of the University's new financial system, Project Café, anticipated December 8, 2008.

The fulfillment of non-salary Cost Sharing commitments is demonstrated through use of fund 191 "Mandatory Cost Sharing and Voluntary Committed Non-Salary Cost Sharing" on sponsored projects. All mandatory and voluntary committed non-salary Cost Sharing expenditures should be charged to fund 191. Salary that is over the NIH salary cap or voluntarily committed will be direct charged to fund 192 "Over-the-cap and Voluntary Committed Salary."

These Cost Sharing funds will be established by the Office for Sponsored Research (OSR) whenever applicable for a sponsored project. Please contact OSR staff if a Cost Sharing fund is missing or requires budgetary adjustment.

IV. CONTACTS

Questions or concerns regarding Cost Sharing/Matching processes or procedures should be directed to the Office for Sponsored Research (OSR), the Office for Research Development (ORD), or your school research dean:

Other contacts include:

V. APPENDIX I - COST SHARING IMPACTS

Organized Research Definition

Organized research includes all research and development activities of an institution that are separately budgeted and accounted for that requires a formal application and approval process and includes:

  • Sponsored Research - All research and development activities that are sponsored by Federal and non-Federal agencies and organizations
  • University Research - All research and development activities that are separately budgeted and accounted for under an internal application of University funds.

The Organized research base is used by the University for development of its Facilities and Administration (F&A, also known as indirect costs) rate. The formula for development of this rate is: Research Pool Expenses/Organized Research Base

Financial Impact

Cost Sharing of direct expenditures represents a redirection of departmental, school, and/or central resources from other mission-critical uses to support sponsored agreements. Every dollar of Cost Sharing results in the University forfeiting not only the recovery of the direct cost, but also the recovery of the associated F&A cost (except in the case of cost shared capital equipment or tuition for which there is no associated F&A).

F&A Calculation Impact

The University's total amount of salary and non-salary Cost Sharing (mandatory and voluntary committed) must be included in the denominator or base of the F&A rate calculation. This increase in the base serves to decrease the University's overall F&A rate.

Administrative/Compliance Impact

When Cost Sharing of any kind is represented in a proposal, upon award that Cost Sharing becomes a commitment that must be met and tracked for sponsor verification in the University's records. Cost Sharing imposes a substantial burden on both the PI and the department to account for and provide supporting documentation, whether the sponsor requires a central administration accounting of it in a financial report or not. The amount of any obligation included in the original proposal and/or subsequently through negotiation must be documented. All Cost Sharing expenditures are subject to audit.

All exceptions to this policy must be discussed and approved first by the Office for Sponsored Research (OSR) and may also require school/center approval.

VI. APPENDIX II - OTHER COST SHARING RESOURCES
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