To ensure compliance with federal costing and cost sharing requirements as set forth in OMB Circulars A-21 and A-110. This policy establishes procedures for recording cost share expenditures in the university's accounting and effort certification systems for sponsored projects.
A number of sponsors require mandatory direct or facilities and administrative (F & A) cost sharing,
matching, or other financial obligations from the university. In general, these obligations of university resources
should be minimized as much as possible while maintaining harmonious relations with such sponsors. The following guidelines should be used
when preparing budgets for applications, proposals, and award agreements and accounting for cost sharing.
Cost sharing is the portion of the total project costs of a sponsored
agreement that is not paid by the sponsoring agency. There are primarily three
types of cost sharing that may occur on sponsored projects: mandatory cost
charing, voluntary committed cost sharing, and voluntary uncommitteed cost
sharing. Matching is another common term used to describe cost sharing.
Mandatory Cost Sharing: This is cost sharing that is
required either by statute or by administrative regulation. The requirement
for such cost participation is explicitly set forth in project announcements
or guidelines issued by the sponsor, and is a requirement for eligibility
to participate in the project and will be specifically identified within
the university's proposal. For example, National Science Foundation requires
a mandatory 1 percent cost share of most of their awards to the university.
Whenever it is possible or permissible to do so, grant and contract proposals
should reflect mandatory cost sharing as a percentage of total costs rather
than as an allocation of specific direct costs.
Voluntary Committed Cost Sharing: This is cost sharing that is not required by the
sponsor, but which is included voluntarily in the university's proposal to the sponsor. Once the sponsor has accepted
the proposed cost share, the university is then obligated to meet the cost-sharing amount. For example,
voluntary committed cost sharing would be when a principal investigator commits to spend 15% effort on the project
but does not expect the sponsor to provide funding to cover these costs. In this case, the 15% effort on the project was a requirement
for proposal submission in the RFP, but was included at the discretion of the PI (or other project personnel) in an
attempt to leverage the proposal.
Voluntary Uncommitted Cost Sharing: This is cost sharing that is neither mandatory nor voluntary
committed. It represents contributions by the university to a sponsored project that were not required by the
awarding sponsor and were not volunteered in the university's proposal to the sponsor. Voluntary uncommitted cost sharing is not
reported back to the sponsor. For example, voluntary uncommitted cost sharing occurs when the principal
investigator's effort is greater than what was committed to the sponsored project.
It is the preference of the university that only mandatory cost sharing be proposed to sponsoring agencies.
This preference does not preclude exceptions that may be judged appropriate under certain circumstances to leverage a project.
Mandatory cost sharing requirements are usually defined by law, statute, sponsor regulations, or written in the application guidelines
for a specific program. When mandatory cost sharing is required, a copy of the RFP, regulations or guidelines must be submitted
with the proposal along with a written commitment from the individual authorized to commit the resources to the campus research
office. All cost sharing is to be reviewed and committed in writing in accordance with campus procedures.
Mandatory and voluntary committed cost sharing must be recorded in the university's
accounting and effort certification systems to meed federal requirements specified
in OMB Circular A-110.
In order for an expenditure to qualify as cost sharing, it must meet the following criteria:
Cost sharing must be identifiable and verifiable in the university's records.
Expenditures must be necessary and reasonable for proper and efficient accomplishments of project or
Expenditures are allowable and allocable under the applicable cost principles.
Expenditures are allowable under the cost principles as stated in OMB
Expenditures must not be included as cost sharing for any other project or program.
Cost sharing expenditures may not be from funds supported by the federal government under another
award, except where authorized by federal statute to be used for cost sharing.
Costs are described in the approved budget and/or terms of the sponsored agreement when required
by the awarding sponsor.
Third-party contributions offered as cost sharing require a commitment
letter on company letterhead signed by an individual who is in a position
to commit the in-kind contribution. After-the-fact reporting to the university
will be necessary. For contributions other than cash, see APPENDIX
Afor valuation methods.
Listed below are some examples of acceptable cost sharing expenditures.
Any potential direct cost that may be used as cost sharing must also qualify
as a direct expense on the project and not be an expense that would normally
be included in the facilities and administrative costs. See FISCAL
POLICY FI0205, sections 11-15
for more information on direct and F & A costs.
Faculty, staff, or student salaries
Allowable staff benefits related to the cost shared salaries
F & A costs
F & A associated with the direct cost share expenditures
Unrecovered F & A
Caution: Not all F & A is allowable as cost sharing. Prior approval
from the sponsor is required.
Examples of expenditures that are not allowable
cost sharing expenditures:
Cost sharing sources that come from other federally sponsored projects
that have not obtained prior approval from both federal sponsors involved
Expenditures that are normally included in the university's F & A rate
Expenditures that were incurred outside award period
Expenditures that are considered to be outside the scope of the project.
The following guidelines should be used when preparing budgets for applications,
proposals, and contract agreements.
Mandatory Direct Cost Sharing. Several agencies require
mandatory direct cost sharing in varying amounts or percentages of direct
costs. Total direct costs as reflected in the approved budget for the grant
or contract must be expended through the WBS element. Whenever it is possible
or permissible to do so, grant and contract proposals should reflect mandatory
direct cost sharing as a percentage of total direct costs rather than as
an allocation of specific direct costs.
By this preferred method, the cost sharing will be a monthly, computer-generated
transaction based on the cost-sharing percentage on Restricted
Budget Form (APPENDIX B - FORM T-1).
This percentage will be applied to the direct expenditures for the month.
The resulting charge will be made to cost element 544400 (cost sharing)
against the cost object designated on the FORM T-1.
If the mandatory cost sharing is an allocation of specific direct-cost line
items, periodic manual accounting entries are necessary.
Mandatory Matching. There are many variations of matching
requirements among agencies. Some require that the university obtain matching
funds before a grant or contract is awarded. Others require detailed matching
expenditures to be reported periodically throughout the project term. The
principal investigator must provide the Controller's
Office with detailed information on how the matching requirement will
be met at the beginning of the project term.
Mandatory Facilities and Administrative Cost Sharing.
Many departments and agencies of the state and federal government have refused
to recognize the concept of "full cost reimbursement" and will not allow
the inclusion of the full facilities and administrative cost recovery rates
in contracts with the university. Campuses and institutes contracting with state
and federal agencies should negotiate for the best F & A cost rate permissible.
Facilities and administrative costs and mandatory facilities and administrative
cost sharing are calculated each month as direct costs are expended through
the WBS element. These monthly, computer-generated transactions are based
on the percentages shown on the FORM T-1.
These amounts are included on the Grant and Contract Budget and Expenditure
Report, or the "R ledger sheet," with the cost element 501000 for facilities
and administrative costs and 501990 for facilities and administrative cost
RESTRICTED BUDGET FORM (FORM T-1). This form must be completed for each
grant and contract when the proposal is completed. Upon execution by the
university, the original grant or contract documents should be forwarded
to the campus or institute business office for the official files so that the
required WBS elements can be established. A campus or institute receiving direct
grants that do not require official acceptance by the chief financial officer
(or designee) should immediately forward copies of all pertinent documents,
accompanied by a completed FORM T-1,
to the campus or institute business office so that the required WBS elements
can be established and the documents filed. Restricted WBS element numbers
generally will not be assigned in the Treasurer's Office or appropriate
campus or institute business office.
However, provisions may be made for assigning an advance restricted WBS
element by contacting the appropriate campus or institute business office. Refer
to the REQUEST
FOR ADVANCE WBS ELEMENT (ADVANCED ACCOUNT REQUEST) FORM,
Supplemental Budget and Cost Information. Each
campus or institute chief business
office and the research
office should develop supplemental budget and cost information forms
to use in reviewing grant and contract proposals. Such supplemental budget
and cost information forms should (1) require that the total costs involved
in the proposed project be given and (2) reflect any portion of both direct
and facilities and administrative costs being borne by the department or
the university as joint-effort cost sharing that is in addition to the mandatory
direct or F & A cost sharing proposed for the project budget.
Impact of Cost Sharing Direct Expenditures: If the funds for direct cost sharing are coming from a cost center,
this commitment ties up the funds that might otherwise be used elsewhere. The department must carefully review
to ensure that cost sharing commitments are reserved and available.
Impact of Cost Sharing on the University's F & A Rate: Cost sharing has a negative impact on
the university's facilities and administrative cost rate. The total amount of cost sharing is incorporated
into the formula used in the negotiation of future F & A rate. By having a lowered F & A rate, this may also
impact the amount of F & A returned from the campus to the colleges/departments/principal investigators.
Documentation for cost sharing begins at the proposal stage and ends with the closeout
of the project.
When a proposal is submitted for review with the campus research office, all
mandatory and voluntary committed cost sharing information will be included in the budget narrative as well as
the budget. The proposal is signed by the principal investigator and department head to note that cost sharing resources are committed and
The campus research office will review the budget to ensure compliance
with OMB Circulars A-21
When a project is awarded with an amount different from the proposed budget, adjustments must be made to the budget
and cost share amount.
Upon receipt of either a fully executed award or REQUEST
FOR ADVANCE WBS ELEMENT (ADVANCED ACCOUNT REQUEST) FORM,
the campus business office will establish the project and WBS element(s)
depending on the cost sharing requirements. All UT cost sharing
expenditures (mandatory and voluntary committed) must be recorded on the
project WBS element(s) or its related match cost center. Listed
below are the approved methods:
Single WBS element. Under this method, all project expenditures
(including cost sharing expenditures) are posted to one WBS element. Cost sharing will be
recorded via a settlement rule or manually to the appropriate cost center or in
rare cases, a gift fund. Typically, this method will be used to record unrecovered F & A costs.
Companion WBS element. Under this method, more than one WBS element will be created for the
project. One WBS element will be used to record sponsor related expenditures while a second WBS element will be used to capture
cost sharing expenditures. At the end of each period, the costs on the cost sharing WBS element will be
settled to an appropriate cost center or gift fund.
Other. A method to be determined and approved by the campus business office to document cost sharing
when methods a. and b. are simply not possible. This option will be used very sparingly and in only
In addition, all salary used for cost sharing on a project must be appropriately
accounted for in the university's effort certification system. Instructions
for the effort certification process can be found at http://ecr.tennessee.edu.
See the effort certification sections 20-23 in FISCAL
Any cost sharing from a third-party source must be included in the proposal.
Documentation must include a letter from such party on company letterhead signed by an individual
authorized to commit the resources.
The cost sharing criteria are the same for the third party as it is for the university.
Because these expenditures will never appear in the university's accounting system, it is the principal
investigator's responsibility to obtain an after-the-fact documentation of the cost sharing in a timely manner. The cost
share documentation should include the expense categories and cumulative cost share expenditures and signature
from the third party contributor. This documentation must be forwarded to the appropriate campus business office
to file in the university's official record. It should be noted that this documentation is subject to audit.
Unmet cost sharing by a third party will become the responsibility of the principal investigator and his/her department.
Principal Investigator. The principal investigator (PI) is responsible to ensure that
cost sharing expenditures are recorded on the correct WBS element in a timely manner. It is the PI's responsibility to obtain acceptable documentation of any third-party cost sharing
and to forward to the appropriate campus business office. Failure to meet cost sharing obligations or to adequately document cost sharing can result in cost
disallowances by sponsors. It is the responsibility of the principal investigator and the department to ensure university
compliance with cost sharing regulations and procedures.
Departmental. The department is responsible for ensuring
that funds are budgeted or otherwise available to meet the cost sharing requirements.
In addition, the department is primarily responsible for ensuring that cost
sharing is in compliance with OMB Circulars A-21
College. The college is responsible for assisting the
department and ensuring university
compliance with cost sharing requirements.
Campus Research Office. The campus research office is responsible for reviewing the proposed cost
share information to ensure compl
iance with OMB Circulars A21 and A-110 and ensure that the cost share is in the best
interest of the university. In addition, if the proposed cost share amount differs from the award cost share amount, the research office and principal investigator
must adjust the budget accordingly.
Campus Business Office. It is the responsibility of the campus business office or other appropriate
administrative office to review cost sharing and ensure that adequate documentation is provided in the official file to support the cost sharing
requirements as required by the award agreement and OMB Circulars A-21 and A-110.