Cost Sharing:
Management, Challenges,
and Impacts
Kelly Morrison
Grant and Cost Share Officer
Office for Sponsored Research
Elizabeth Adams
Executive Director, Evanston
Office for Sponsored Research
What is Cost Sharing?
• Cost Sharing represents the sponsored project or program
costs (direct and indirect) that would normally be borne
by the sponsor but instead are covered by an institution
or a third party, such as a subcontractor or an unfunded
collaborator.
• “Cost matching” is often treated interchangeably with the
term “cost sharing”
• Term “cost matching” often refers to cost sharing
agreements in which the amount of sponsor
funding is based on an equal or proportionate
commitment (e.g., 1:1) from the University.
Mandatory Cost Sharing
• Required by the sponsor as a condition of eligibility for an
award
• Typically, a mandatory cost sharing requirement must be
communicated in a proposal solicitation
• In mandatory situations, a proposal must
demonstrate/commit to the required cost sharing
• Typically is explicitly referenced in an award document
• Must be properly documented and tracked for cost
accounting and compliance purposes
Voluntary Committed Cost Sharing
• Not required by the sponsor as a condition of eligibility for
an award but provided at the discretion of the institution
• Referenced within the proposal and becomes a binding,
auditable obligation
• Often (though not always) referenced in an award
document
• Must be properly documented and tracked for cost
accounting and compliance purposes
Voluntary Uncommitted Cost Sharing
•
•
•
•
Not required by the relevant program solicitation
Not referenced in the proposal or award
Not formally tracked (or auditable)
For example, faculty or researcher effort additional to the
level of effort originally committed to the sponsored
project
Forms of Cost Sharing - Cash
• Cash contributions used to cost share must come
from allowable, non-sponsored sources
– Appropriated, Gift, Endowed, Discretionary
• Can be used to fund salaries, fringe benefits, travel,
equipment, supplies, and other allowable direct
costs as defined by OMB Circulars A-21 and A-110
Forms of Cost Sharing - Effort
• Effort commitment represents a contractual
obligation to a project, whether the effort is charged
or cost shared.
• Cost shared effort can occur either at the proposal
stage as a commitment or at the award stage.
• When an investigator makes an effort commitment
without requesting the associated salary, the
investigator is establishing a cost share commitment.
• Salary Cap Cost Sharing
Forms of Cost Sharing - Unrecovered F&A
• Facilities & Administrative costs (F&A or indirect
costs) are real costs associated with conducting
sponsored activity.
• If an allowable direct cost is cost shared, the indirect
costs associated with these direct costs cannot be
assessed – but they still represent a quantifiable loss
and should be considered cost sharing.
• Intention to count unrecovered F&A as cost sharing
should be presented at the proposal stage.
Forms of Cost Sharing – Graduate Student Fellowships
• Graduate student fellowships represent the
salary/stipend, any associated fringe benefits, and
tuition provided to support graduate students.
• These are funded by non-sponsored funds (including
general appropriations and endowments) and can be
used as cost sharing when provided by the
department, school, or The Graduate School.
Forms of Cost Sharing – Third-Party
• Third party contributions represent cost sharing
provided by an entity external to the University.
• Commitments and expenditures must follow the
same guidelines that the University follows in order
for them to be considered allowable and appropriate
cost sharing.
• Examples include subawardee cost sharing and
contributed time or services from an extramural
party.
Why Cost Share?
• Eligibility issue for certain programs
• Makes an institution’s proposal more competitive
• Helps institutions allocate resources to areas of
strategic national importance
Cost sharing can help a university fulfill its mission as a
premier research institution.
Institutional Impacts
Negative
•
•
•
•
•
Financial
Administrative
Compliance
Investigator
F&A Rate
Financial Impact
• Cost sharing can redirect resources from
departments, schools, and/or central units, limiting
those units’ capabilities.
• Inherent forfeiture of indirect costs produced by cost
sharing represents a further University subsidy.
Administrative Impact
• Cost sharing represented in a
proposal becomes a binding
obligation at the award stage
that the University must
monitor, document, and report
on.
• This represents a significant organizational
administrative burden across many units
and management levels at the University.
Compliance Impact
• In general, cost sharing increases the compliance risk
of a sponsored project.
• Cost sharing increases the University’s audit
exposure, and any audit findings determining that
cost sharing did not occur or did not occur to the
committed level could result in consequences
including, but not limited to:
• Disallowance of Costs
• Termination of Award
Investigator Impact
• In situations where faculty effort is cost shared in
support of a mandatory or voluntary committed cost
share requirement, faculty members’ ability to
conduct other research may be limited.
• Investigators can also be
affected by the burden to
monitor, document, and report
on cost sharing.
F&A Rate Impact
• The University’s total amount of mandatory and
voluntary committed cost sharing (salary and nonsalary) must be included in the direct cost base for
calculating the F&A rate.
• The higher the overall amount of cost sharing, the
lower the overall F&A rate for Organized Research.
Cost Share Officer
• Manage institutional process of requesting cost
share support
– Proposal Stage
– Post-Award Award Establishment
• Provide daily guidance to departmental, school, and
central administration
• Serve as resource and subject-matter expert on cost
sharing policy, process, and guidelines, and other
more complex compliance issues.
Institutional Policy
“A University policy is defined as one with broad
application throughout the University, that helps
ensure coordinated compliance with applicable laws
and regulations; promotes operational efficiencies;
enhances the University's mission; or reduces
institutional risk.”
• Cost Sharing Policy identified for review (May 2012)
Cost Sharing Policy
• Critical University policy relating to both research
administration and finance
• Determined that significant rewrite was necessary
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Financial Value & Risk
External and Internal Changes
Ownership
Process vs. Policy
Northwestern’s Position on Cost Sharing
Northwestern University engages in cost sharing when
it is in the best overall interest of the University, but
limited to situations in which it is mandated by the
sponsor per solicitation or policy guidelines, or deemed
appropriate in light of specific and compelling
circumstances.
Northwestern’s Position on Cost Sharing
• Cost sharing helps Northwestern fulfill its mission as
a premier research institution.
• However, cost sharing represents an administratively
complex and high-risk business objective. Cost
sharing also increases the audit risk of a sponsored
project.
Northwestern’s Position on Cost Sharing
• Northwestern does not typically cost share on a
voluntary basis, consistent with its objective of
maximizing sponsored cost reimbursement
to
support the continued growth of the
research
enterprise.
• A voluntary cost sharing commitment should be
made only when the competitive forces and
perceived institutional benefit of receiving the award
are deemed to be sufficiently strong to warrant the
commitment.
Process of Obtaining Institutional Support
• All requests for institutional (Office for Research) cost
share support should be directed to the Cost Share
Officer in the Office for Sponsored Research.
• In both mandatory and voluntary cost sharing situations:
– Any commitment of University resources is at the
discretion of the Office for Research typically in
consultation with the appropriate Deans’ Offices.
– Provision of institutional cost share is contingent upon the
grant being awarded in the amount proposed, and upon
the fulfillment of all department and school cost share
commitments. A decrease in awarded budget typically
reduces the cost share proportionally.
Institutional Cost Share Requests
• Used for investigators requesting institutional
resources
• PI Appointments drive cost share distribution
• Cash requests leveraged
Department(s) make commitments,
School(s) match total department commitments,
Office for Research matches total school and
department commitments
Process of Obtaining Institutional
Cost Share Support
1.
2. Development
Notification to
of Cost Share
OSR Cost Share Officer by
Budget,
PI
Justification, and
Letter of Support
• PI or designate
advises Cost Share
Officer of
upcoming
proposal
• OSR-EZ is
developed
through
collaboration
between
department and
Cost Share Officer
3. Negotiation
and Formal
Request of
Cost Sharing
Commitments
• Cost Share Officer
sends formal
requests for cost
share support to
involved Chairs
and/or Deans,
depending on
school model
• Once all school
approvals are
gathered, OR
makes a decision
on their portion
4. Generation
of Official Cost
Share Letter
of Support
• All cost sharing
commitments,
including draft
letter, are given to
VPR for review and
endorsement
• Cost Share Officer
scans letter to PI
and sends original
via intercampus
mail
Improvements to Process
• Central guidance and assistance with cost share
budget throughout proposal development
• Cost Share Officer advises home department so each
school’s expectations and processes are considered
• Cost share form (OSR-EZ) provides a complete
snapshot of request
• All involved units receive consistent requests from
one central person
• Central review of complicated process is provided
from start to finish ensuring seamless
transition to unit’s cognizant Grant Officer
Post Award Project Establishment
• For awards involving institutional cost share support
• Three Steps for Establishment
1. Notification and Evaluation of Award
2. Confirmation of Commitments
3. Establishment of 191 and 192 Chart Strings
Current Philosophy: Fund 191 & 192
• 191
– Used to manage mandatory cost sharing and voluntary
committed non-salary cost sharing
– Expense budget (spending plan) established
– Budget journals are run to establish revenue budgets
(invoices) for all contributing units
• 192
– Used to manage voluntary committed salary cost sharing
and over-the-cap cost sharing
– No expense budget in the financial system; no budget
journals are run to establish revenue budgets (invoices)
– Funded after-the-fact via transfer journals
Problems
• Current function does not allow clear distinction
between mandatory and voluntary committed cost
sharing, as the 191 captures both
• No clear way to capture over-the-cap cost sharing, as 192
includes both over-the-cap and voluntary committed
salary cost sharing
• In many voluntary committed cost sharing situations,
units are required to manage both a 191 and 192 for
their salary and non-salary items – due to this
management issue, units have often requested only one
fund (usually, 191) be opened instead of 192
192 Issues
• No expense budget (spending plan) established
– Home unit must manually track on the total amount
of cost sharing they must meet on an annual basis
• No budget journals run for individual contributions
under the contributing units’ department IDs
– Home unit must separately track on which units have
outstanding commitments and must communicate
with those units directly to have them initiate transfer
journals
192 Issues
• Without the budget journal to establish the revenue
budget (invoice), contributing units:
– Have no formal way of approving their cost share
commitments in the financial system
– No way to easily view any outstanding commitments
and fund them
Recommended Changes
• Clearly illustrate mandatory cost sharing, voluntary
committed cost sharing, and over-the-cap cost
sharing
• Allow departments to more effectively manage the
cash commitments associated with voluntary
committed cost sharing
• Change to the function of the fund 191 and 192, and
creation of an additional cost share fund – the 193.
• 191 and 193 would function the same way
Recommended Changes
191
192
193
Current Model
Mandatory (Salary &
Non-Salary)
Voluntary Committed
(Non-Salary)
Voluntary Committed
(Salary)
Over-the-Cap
N/A
Proposed Model
Mandatory (Salary &
Non-Salary)
Over-the-Cap
Voluntary Committed
(Salary & Non-Salary)
Future of Cost Sharing
• Proposed OMB Uniform Guidance
– If cost sharing will be considered, solicitation must
specifically address how it will be considered
– If cost sharing will not be considered, it should not be
“encouraged” to eliminate ambiguity for applicants
– Effectively – voluntary committed cost sharing is not
expected and will not be used as a factor in review
Future of Cost Sharing
• National Science Foundation (NSF) has already taken
the approach of prohibiting voluntary committed
cost sharing
– Still see requests for “institutional support” that are
then captured in the Facilities & Other Resources
section with no quantification
• Shrinking federal budgets
– Sequestration
Questions?
Kelly Morrison
Grant and Cost Share Officer
Office for Sponsored
Research
kellym@northwestern.edu
Elizabeth Adams
Executive Director, Evanston
Office for Sponsored
Research
eadams@northwestern.edu