CTAHR eXchange

Cost sharing FAQ's are also available at:  http://www.ctahr.hawaii.edu/vincent/Cost_Sharing_FAQ.pdf

Cost Sharing FAQ

By Doug Vincent
Special Program Director for Contracts and Grants

Introduction

Many new requests for proposals for grant programs have a cost sharing requirement and as such, require additional effort to establish commitments to a proposal prior to proposal submission.  Recent audits of the University of Hawaii have criticized the processes with respect to managing cost sharing and as such, additional consideration must be done to ensure that cost sharing can be accomplished and documented.  Below is a FAQ about cost sharing.  Some of the information is based upon ORS documentation; other information is based upon discussions with the CTAHR Fiscal office.  Please remember that if you propose cost sharing and your grant is funded, the cost sharing is a "commitment" over the life of the project.  We are assuming for the sake of argument we are talking about a federal proposal requiring non-federal cost sharing. 

This information is provided to assist you in your understanding of cost sharing in preparation of a grant proposal.  If you have further questions, please contact the CTAHR Fiscal Office or the University of Hawaii Office of Research Services.

1. What can be used for cost sharing?
   
   See ORS Cost Sharing 101.  Any direct costs to the project, paid for by non-federal sources, but must fall into the following criteria:
1. Costs must be incurred within the project period and can not be incurred before or after the project period.
2. Costs must be allowable as direct costs per OMB Circular A-21.
3. Costs must be verifiable from the University's accounting records - salaries and fringe benefits are the most easily verifiable.
4. If other items are cost shared, such as supplies or equipment, they must be documented and an annotation must tie it to the project.
5. Travel used for cost sharing must be documented under the UH travel policies and be identified with the project.
6. Cost sharing must be REQUIRED by the funding agency and reasonable for the proper and efficient accomplishment of the project objectives.
7. Cannot be included as contributions toward other projects and programs (no double counting).
   
   
2. Can other federal grant funds be used to cost share on a federal grant?
   
   No, federal dollars from formula funds or other federal grant support can not be used to cost share on a new grant proposal.  Also note that federal funds that "pass-through" another state agency are still considered federal funds and cannot be used for cost share.
   
   
3. Can salaries and fringe benefits be cost shared?
   
   Yes, but it depends on several factors.  First, a time commitment to the project for the individual has to be estimated.  Then the salaries and fringe benefits have to be calculated for that individual based upon the FTE committed.  Remember that a time commitment is over the life of the proposed research.  Be sure to include increases in salaries over the life of the project.  Fringe benefits can be included but only a portion i.e. 22% See ORS documentation: http://www.hawaii.edu/ors/filecabinet_rates_costsharing.html
   
   Because CTAHR receives federal formula funds (Hatch, McIntire-Stennis, Smith-Lever) to support research and extension activities, CTAHR must "off-set" dollar-for-dollar the funds received through federal formula funds using state dollars.  CTAHR uses State of Hawaii salaries "G"-funds to off-set the formula funds.  So an individual writing a grant proposal wishing to use her/his salary for cost sharing may not be able to do so if their salary commitment may be currently used to cover the federal formula funds "matching".  CTAHR does have some flexibility in moving salaries used to cover the federal formula funds off-set but not as much as in previous years.  So it is important to recognize that cost sharing of an individual's salary may already be occurring and as part of the process, the individual should allow some time to determine how much of their salary is already committed.
   
   
4. What about ag techs at experiment stations, student help or other technical support?
   
   As long as the individual is non-federally funded, his or her salary and fringe benefits can be committed to cost share.  If you intend to use these individuals on a grant proposal, you must verify this with the County Administrator, Department Chair or Farm Manager.  Best to get this documented before hand.
   
   
5. Do indirect costs have to be cost shared?
   
   It depends upon the RFP.  In some RFPs only direct costs are required to be cost shared; in other RFPs, total costs, including indirect costs must be cost shared.  Read the RFP carefully.  Check with the funding agency, with some agencies with capped indirect costs, the difference between the fully negotiated indirect cost rate and the capped indirect cost rate can not be used as a cost share. 
   
   
6. What if the agency doesn't permit indirect costs?  Can the indirect costs not received be used as a cost share?
   
   Generally, yes.  Indirect costs foregone can be used as a cost share.  If a proposal does not permit indirect costs or at a reduced percentage less than the fully negotiated indirect cost rates, the indirect costs "foregone" can be used as a cost share.  Only those direct costs allowable for calculation of indirect costs can be used as cost share as unrecovered indirect costs. 
   
   
7. What is "in-kind" cost sharing?
   
   In kind contributions represent the value of non-cash contributions provided by the University or non-federal third parties to a sponsored project when such contributions directly benefit that project.  Such contributions can be considered as cost sharing.  However, any property purchased with other federal funds may not be used to as a contribution to cost sharing for a federally-sponsored project.

8. Can space be cost shared?  Or CTAHR experiment station land?
   
   Generally, no.  If UH space or experiment station land used for research is included as part of the project, AND indirect costs are included as part of the proposal, then it cannot be included.  If indirect costs are not permitted in the proposal, then indirect costs foregone could be used for cost sharing.
   
   If space or land is leased from a third party and directly related to the experiment, then the fair market rental costs can be used for cost sharing.

9. What is "third-party" cost sharing?  See ORS Cost Sharing 102 for more information.
   
   Third parties are non-federal, non-UH institutions that contribute directly to objectives and proposed objectives of a project.  Some examples of "third party" cost sharing:
1. Non-university employees - services should be valued at the employee's regular rate of pay, including fringe benefits.
2. Volunteers - the effort should be valued at the rate of pay for similar work at the University.
3. Supplies and equipment - values assigned to donated supplies should be reasonable and not exceed fair market value at the time of the donation.  The value assigned to donated equipment should not exceed the fair market value of the equipment at same age and condition at the time of the donation.
4. Rentals - valuation of loaned equipment should not exceed its fair rental value; values of loaned space shall not exceed the fair rental value of comparable space.
   
   
10. Do I need to document third party cost sharing when I submit my proposal?
    
    Yes, most definitely.  The UH requires a commitment letter (on letterhead) from the third party that includes the dollar amount of the cost sharing and a signature of a person that is authorized to bind the organization to the agreement.  See ORS example of the information needed to include from third parties for third party cost sharing.  See pre-award documentation.  Cost sharing is a commitment by the University of Hawaii and/or other third parties to the funding agency.  Proper documentation pre-award, and post-award, if funded must be kept. 

Acknowledgements:  The author would like to acknowledge the review and helpful suggestions given by members of the CTAHR Fiscal Office.  Thanks.