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 Consolidated USMH and UM Policies and Procedures Manual

University of Maryland Policies and Procedures



   

IV-4.00(A) UNIVERSITY OF MARYLAND POLICY AND PROCEDURES FOR COST SHARING

APPROVED BY THE PRESIDENT, November 19, 1999;

Effective December 1, 1999

1.0 PURPOSE

The University must ensure that cost sharing requirements of sponsored agreements are proposed, accounted for and reported in a manner consistent with the requirements set forth in federal regulations, primarily the Office of Management and Budget (OMB) Circulars A-110 and A-21.This document clarifies and strengthens the UM requirements and cost sharing procedures.Specifically, this document details the procedures for monitoring project-by-project cost sharing and reporting such cost sharing to sponsoring agencies.This policy is effective for proposals submitted and awards negotiated on or after July 1, 1999.

1.1 Introduction

The University should make cost sharing commitments only when required by the sponsor or by the competitive nature of the program. Cost sharing should never be assumed to be a gratuitous gesture.Cost sharing commitments included in the proposal budget and/or in the text of the proposal are to be reflected on the UM internal for sponsored projects routing form. If cost sharing is other then the Principal Investigator’s (PI) or Co-PI’s effort explicitly stated in the proposal, the responsible University officials must guarantee the cost sharing commitment in writing. Proposals may not be signed by the Office of Research Administration and Advancement (ORAA) on behalf of the University unless cost sharing documentation, with all guarantees completed, is on file.

As a recipient of federal grants and contracts, the University of Maryland must comply with Office of Management and Budget (OMB) Circular A-21 "Cost Principles for Educational Institutions." A-21 includes the following four Cost Accounting Standards (CAS) applicable to educational institutions:

__CAS 501 - Consistency in Estimating, Accumulating, and Reporting Costs

__CAS 502 - Consistency in Allocating Costs Incurred for the Same Purpose

__CAS 505 - Accounting for Unallowable Costs

__CAS 506 - Cost Accounting Period

CAS 501 requires the University to use consistent accounting practices to estimate the cost of a project in the proposal and to accumulate and report the actual costs of the project, including cost sharing.

 

The Cost Sharing Policy is intended to:

  • Help units determine when cost sharing is required and/or permitted by the University; including types of expenditures and in-kind contributions that qualify as cost sharing under federal regulations;
  • Ensure that the commitments for cost sharing within the institution have been identified and guaranteed.
  • Provide information regarding the contractual, financial, and administrative requirements that result from cost sharing commitments;
  • Establish procedures for recording cost sharing in the Institute's accounting system and for the reporting of cost sharing expenditures to ensure that the Institute has fulfilled any cost sharing commitments it has made as a condition of an award;
  • Limit cost sharing commitments to only those instances where cost sharing is required by the sponsor or is necessary to make UM's proposal competitive.

1.2 Definitions

Cost sharing or matching (the terms may be used interchangeably) means that portion of project or program costs not borne by the sponsor.These costs represent an implied or explicit agreement on the part of the University to assure that non-sponsor resources are contributed to a project, either from sources within or external to the University.The term cost sharing is also known as cost matching, cost participation and other similar phrases.

Cash Contributions are actual funds from internal or external sources.Cost sharing from the University’s resources is generally considered "cash" cost sharing, because a precise dollar amount of expenses can be shown in the University’s accounts.

In-Kind Contributions are non-cash contributions generally from outside the University, such as, volunteer services or donations of equipment.As the contribution of these resources is not under the control of the University, much care must be exercised before entering into agreements promising such contributions.Once the project is funded, in-kind contributions should be monitored on an on-going basis to assure that the cost sharing agreement will be fulfilled.Failure to meet, or adequately document in-kind contributions, could result in a portion of the University incurred cost being disallowed and the creation of a financial problem for the department and the University.

2.0 COST SHARING COMMITMENTS ON RESEARCH PROPOSALS OR AWARDS

Cost sharing should be limited only to those situations where it is mandated by a sponsor or the University has determined that such a contribution is necessary to ensure the success of a competitive award or proposal.Where cost sharing is not required by the sponsor or necessary to ensure the competitiveness of a proposal, PIs and departments should refrain from making such commitments voluntarily.In all situations, the use of cost sharing should be kept to a reasonable level because of the burden that cost sharing places on the University or departmental resources.

Cost sharing may include effort of the PI or other personnel committed to the project at no cost to the sponsor.In order to qualify as cost sharing, the effort must be necessary and reasonable for the performance of the project objectives.

Cost shared effort must be directly related to the project's objectives and must not include time spent on administrative or instructional activities (unless directly related to the project's objectives).

A program announcement or application may include a requirement to cost share or the sponsor may insist during the negotiation of an agreement on a specific contribution to the project as a condition of the award.There may also be situations as described above where the University has determined that a cost sharing contribution is necessary to ensure the success of a competitive proposal.In instances where a contribution has been committed, the direct cost dollars of such a commitment should be moved from a non-sponsored account to a cost sharing account at the time of award.

PIs and departments should commit specific cost sharing contributions (i.e. a percentage of effort, dollars of salary, or number of person-months) sponsored project budgets only under the following circumstances:

  • Mandatory cost sharing is specified in a program announcement or application package;

  • The project sponsor insists on a specific cost sharing contribution to the project during the negotiation of an award;

  • An individual expects to contribute 5% or more of his/her total effort to a sponsored project (whether or not the sponsor requires a cost sharing contribution as a condition of award).

Once awarded, all explicit commitments of effort referenced in a proposal or award become mandatory cost sharing, and must be accounted for as a cost of the project.These costs must be separately identified and reported and, if effort, certified in the labor distribution system.For more information on accounting for cost sharing effort, please refer to the UM "Policy on Effort Reporting."

In those instances where cost sharing is not required as a condition of award, and less than 5% of an individual's total effort is expected to be contributed to the project, the statement "UM supports salaries of Professors, Associate Professors, and Assistant Professors, but makes no specific commitment of time or salary to this particular research project" may be inserted somewhere in the text of the proposal or, preferably, in the budget justification.This statement assures the funding agency that the faculty member will make a contribution to the project but that the expected level of effort is not a significant portion of the individual's overall effort.

Since not all proposals get funded, it is possible to include commitments of more than 100% of total effort taking into consideration existing workload requirements and all outstanding proposals.However, in preparing proposals, PIs must be careful not to over-commit themselves or others.

It is important to realize that whether cost sharing is required by the sponsor or is offered by the University or PI voluntarily, once an award is made all cost sharing commitments are considered to be mandatory and as such, represent binding obligations of the University.

3.0 Sources of Cost Share

Cost sharing may be met from the following sources:

  1. University funds provided for the benefit of the specific project (i.e. department, college accounts.)
  2. Facilities and Administrative Costs (overhead) on direct expenses identified as cost sharing.
  3. Unfunded or Waived Facilities and Administrative Costs (F&A). Waived F&A costs are indirect costs that are otherwise available to be recovered, but the University has agreed to accept less than the full amount. The difference between the indirect costs accepted by the University and the amount that would have been provided at the full rate may be used as cost sharing, if approved by the sponsor.
  4. Another sponsored project account. This is rare and allowable only if approved by both sponsors. (Note that federal funds may not be used as cost sharing on other federally funded projects).
  5. Third-party contributions. This is support from a non-University source.

4.0 Criteria for Cost Sharing

To be acceptable to be used as cost sharing, an expenditure must satisfy all of the following criteria: (OMB A-110, Section 23)

  1. Be verifiable from official University accounting records;
  2. Not be used as cost sharing for any other sponsored program;
  3. Be necessary and reasonable for proper and efficient accomplishment of projectobjectives;
  4. Be allowable under the applicable cost principles, OMB Circular A-21;
  5. Not paid by the federal government under another agreement.
  6. Be incurred during the effective dates of the grant or contract.

4.1 Acceptable Expenditures

In general, costs normally treated as direct costs and allowable under A-21 on sponsored projects may be used to meet a cost sharing obligation; costs normally treated as indirect on sponsored projects may not be used to meet cost sharing obligations.

  1. Examples of expenditures which may be used as cost sharing include:
    1. Faculty, staff, or student salaries and applicable fringe benefits;
    2. Laboratory supplies;
    3. Travel (U.S. air carriers only);
    4. Overhead (F&A Costs) on all allowable cost shared expenditures;
    5. Unrecovered F&A, if approved by sponsor.

  2. Examples of expenditures which may not be used as cost sharing are:
    1. Expenditures normally treated as indirect, such as administrative salaries and office supplies;
    2. Unallowable costs under A-21, such as alcoholic beverages, entertainment and memberships in community organizations
    3. Travel on foreign air carriers.

5.0 Establishing Separate Cost-Sharing Accounts

When ORAA initiates an Award Transaction Summary (ATS) for the sponsored project, the Office of the Comptroller will initiate the establishment of a cost sharing companion account(s) in ledger 2 (effective July 1, 2000) where appropriate. The departments will then create the journal voucher necessary to transfer the cost sharing funds into the ledger 2 account(s).The Office of the Comptroller will monitor the cost sharing accounts.Cost sharing expenses will be charged against the cost sharing account (including faculty effort where that constitutes the cost sharing).

Funding for cost-shared faculty effort should be in the companion account and faculty effort should be charged against the companion account for the appropriate effort percentages and time period.During the period of performance, cost-shared effort that was specified in a proposal or award, or contributed effort of 5% or greater should be charged to the appropriate companion account.The amount initially calculated as cost sharing will not be changed during the life of the project unless there is a significant change in the amount of the cost shared effort.Contributed effort less than 5% which was not specifically committed in a proposal or award should continue to be classified as Instruction and Departmental Research on effort reports and should not be charged to the companion account.

5.1 Documentation

When cost sharing or matching is accepted by the sponsor, it becomes a commitment of the University.Throughout the project’s life, the principal investigator and the administrating unit must maintain sufficient documentation to substantiate the actual cost sharing contribution and make those records available to the funding agency, if required.The specific type of documentation required is based on the nature of the award, taking into consideration the type of cost sharing, the terms of the sponsored agreement, and other circumstances of the award.

5.2 Faculty, Student, or Staff Effort

When the effort of a University employee is committed to an award as cost sharing, the University is bound to contribute the effort and, to track, record, and report the associated expenditures. Cost sharing must be recorded each semester on the employee’s effort report. Effort reports are produced automatically only if an employee is paid from a sponsored project or companion account.A few blank effort reports will be sent to each department and are to be completed for any employee whose effort was promised as cost sharing but was not paid from a sponsored account or cost sharing companion account.Additional effort report forms may be obtained from the Office of Cost Accounting or from the forms section of the ORAA website, www.inform.umd.edu/oraa.

5.3 Equipment Used as Cost Sharing

Equipment may be cost shared only if title to the equipment is in the University’s name and it was acquired with non-federal funds, i.e. cost sharing companion accounts, during the period of the award. The department must maintain documents proving that federal funds were not used to acquire the equipment.

Under federal cost principles, (OMB A-21) universities are allowed to depreciate equipment purchased with non-federal funds.However, if the equipment is purchased in whole or in part with non-federal funds, the university is not allowed to depreciate this equipment.Therefore, the PI or the PI’s department must notify the Department of Inventory Control of any equipment that has been cost shared so that is may be removed from the depreciation calculation of the F&A cost proposal.

In lieu of committing equipment for cost sharing, the Principal Investigator could characterize the equipment in the proposal as: "available for the performance of the sponsored agreement at no direct cost to the sponsor."

5.4 Third-Party Cost Sharing

UMCP may offer as cost sharing both: (a) time and effort and, (b) goods and service and (c) facilities, contributed by third parties such as a subcontractor under its prime award.The Principal Investigator is responsible for securing records of and reporting such third party cost sharing.

If a potential subcontractor makes a cost sharing commitment which appears in the budget of the proposal,the subcontractor is required tomaintain records and report the cost sharing in its financial reports to the University.This requirement should be part of the terms and conditions on any subcontract agreement issued by the University.

If cost sharing is provided by a third party who is not a subcontractor, the Principal Investigator must provide documentation proving the value of the contributions if other than cash.

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