Let’s Talk Cost Sharing Deborah Moon, AVP of Finance and Controller Derek Sommer Manager, Post Award Accounting.

Let’s Talk Cost Sharing

Deborah Moon, AVP of Finance and Controller

Derek Sommer Manager, Post Award Accounting

Agenda

• What is Cost Sharing?/Committed vs. Uncommitted• Why Cost Share?/Decision to Cost Share• What is Allowable?• Cost Sharing & Allowability A-21/Administrative

Requirements A-110• Do’s and Don'ts• What is the cost to the institution?• How is the F&A Rate Impacted?• Are Some Costs Better Than Others?• How to Account for Cost Share?• Examples of Best Practices

What is Cost Sharing?

• Defined as “all contributions, including cash and third party in-kind which meet seven criteria: – Verifiable– not included as contributions for any other federally-assisted project or

program– necessary and reasonable for accomplishment of objectives– allowable– not paid by the Federal Government under another award (except

where authorized by statute)– provided for in the aproved budget when required by the /federal

awarding agency– conform to other Circular provisions.”

What is Cost Sharing?

• Cash – recipient’s cash outlay

• In-Kind – non-cash contributions provided by non-federal third parties

i.e. • Volunteer services – at rates, inclusive of respective

benefits, exclusive of F&A, paid for similar work

• Donated supplies & equipment – current FMV

What is Cost Sharing?

• Mandatory vs. Voluntary– Mandatory cost sharing is required by the sponsor

as a condition of the award, either due to laws passed by Congress or agency program guidelines - cost sharing specifically pledged in the proposal’s budget or award

– Voluntary cost sharing may be offered by a University to make a proposal more competitive - university X or faculty effort that is over and above that which is committed and budgeted for in a sponsored agreement

Committed vs. Uncommitted

• Committed Cost Sharing:– Whether mandatory or voluntary, commitments are a condition of the award.– Must be properly documented for cost accounting purposes (i.e., F&A rate

calculation)

• Voluntary Uncommitted Cost Sharing:– Treated differently from committed cost sharing– Not included in organized research base for F&A rate purposes– Not reflected in any allocation of F&A Costs– Voluntary Uncommitted effort (Faculty-donated) is excluded from the effort

reporting requirements of A-21 Section J.8.

Why Cost Share?

Sponsors issue RFPs requiring cost sharing

Scope of work requires resources greater than commitment by sponsors

Competition for awards – PI’s feel that cost sharing will enhance their ability to win awards

NSF Clarification on cost sharing

Decision to Cost Share

• Cost/Benefit Analysis• A-110 and A-21• Institutional Policies / Approvals• Ability to account and report• “Value” to institution• Don’t budget/propose if you’re not willing to

cover the cost• Institutional resources

NSF Cost Sharing: January 2003• NSF cost sharing beyond the statutory requirement will be

clearly stated in program solicitations• NSF statutory 1% cost sharing requirement for unsolicited

research projects – this is an institutional aggregate commitment

• In budget negotiations any reduction of 10% or more should have corresponding reduction in scope

• Voluntary cost sharing should not be included on line M of the proposal budget – do not include cost sharing beyond the amounts specified in the solicitations

• Fastlane revised to mask Line M from reviewers• Cost Sharing on Line M > $500K must be certified by

Authorized Organizational Representative w/in 90 days of end of each budget period and within 90 days following expiration of award

Cautions

• All sponsored projects should have some degree of faculty effort - otherwise institutions run the risk of extrapolations for F&A bases

• Beware of expressions of support in budget narratives and workscope that are not included in the budget figures

• Remember that all direct cost sharing has a respective F&A component

What is Allowable?

• Equipment – YES, if newly purchased, specifically for project

– previously owned equipment is already covered through IDC and may not be offered as matching

• Space and Facilities

– NO, space and facilities typically serve joint objectives and their cost is factored into the F&A rate

– YES, leased space, although the lease costs must be excluded from the facility component when calculating the F&A rate

What is Allowable?

• Level of Effort– YES, if the service is integral to the approved

project or program. – OMB Circular A-110: “Rates for volunteer

services shall be consistent with those paid for similar work in the recipient's organization….paid fringe benefits that are reasonable, allowable, and allocable may be included in the valuation.”

What is Allowable?

• Unrecovered Indirect Costs

– YES, the difference between the amount awarded and the amount which could have been awarded under the University's approved negotiated indirect cost rate.

– OMB Circular A-110: “Unrecovered indirect costs may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency.”

• Other Indirect Costs– YES, those indirect costs associated with the direct costs being cost-

shared are allowable

What is Allowable?

• Cost Overruns– YES, overruns may meet the cost sharing requirements

on the project for which they were incurred. – However, it is unallowable for the cost overruns on one

project to be used as cost sharing on another.• OMB Circular A-21: “Any excess of costs over

income under any other sponsored agreement or contract of any nature is unallowable. This includes, but is not limited to, the institution's contributed portion by reason of cost-sharing agreements or any under-recoveries through negotiation of flat amounts for F&A costs.

Cost Sharing & AllowabilityOMB Circular A-21

Factors affecting allowability of costs:(a) Reasonable – necessary, prudent, consistent with

institutional policies and practices(b) Allocable – incurred solely to advance the work under

sponsored agreement, benefits is measurable, necessary(c) Consistent treatment through application of GAAP(d) Conform to limitations/exclusions set forth in A-21 or in

sponsored agreement as to types or amounts of cost items

Administrative Requirements:OMB Circular A-110

• OMB Circular A-110, Section 23All contributions, including cash and third party in-kind, shall be accepted as part of the recipients cost sharing or matching when such contributions meet all of the following criteria:(1) Are verifiable from the recipient’s records(2) Are not included as contributions for any other federally-assisted project or program(3) Are necessary and reasonable for proper and efficient accomplishment of project or program objectives(4) Are allowable under the applicable cost principles(5) Are not paid by the Federal Government under another award, except where authorized by Federal statute to be used for cost sharing or matching(6) Are provided for in the approved budget when required by the Federal awarding agency(7) Conform to other provisions of the circular

Do’s and Don'tsFollow the regulations outlined in OMB Circular A-110

Do…• Track/document all cost-

shared items for an award

• Include only those items necessary and reasonable for the project

• Include mandatory items noted in the proposed budget when required by the Federal sponsoring agency

Don’t…• Include items already noted as

a contribution on another award

• Include items unallowable per the applicable cost principles

• Include items paid by the Federal government under another award, unless authorized

What is the Cost to the Institution?

• Committed salaries/wages, ODC

• Loss of fringe benefit and indirect cost recovery

• Increase in Research Base for F&A calculations

• Time value of accounting/reporting

How is the F&A Rate Impacted?

• Tracking unrecovered indirect costs helps establish the true cost of F&A expenses to the University.

• An accurate depiction of the indirect cost calculation will help with future rate negotiations.

Calculation of the Indirect Cost Rate

Indirect CostsOverhead costs incurred inSupport of Research Activities: Depreciation of Bldg.. & Equip. Operation & Maintenance of

labs e.g.. utilities Cost of Research Space Administrative Services

Indirect Costs Direct Costs

Indirect Cost Rate

$59,000 $100,000

$59,000/$100,000 = 59.0%

Direct CostsCosts incurred in Performing Research Activity: Salaries and fringes of

laboratory personnel

Research lab supplies and materials

Effect of Cost Sharing on the Indirect Cost Rate School Faculty Volunteers $10K of

Time Project

Direct CostsCosts incurred in Performing

Research Activity: Salaries and fringes of

laboratory personnel

Research lab supplies and materials

Indirect Costs Direct Costs

Indirect Cost Rate

$59,000/$110,000 = 53.64%

$59,000$100,000

+$10,000

Indirect CostsOverhead costs incurred in

Support of Research Activities: Depreciation of Bldg. & Equip. Operation & Maintenance of labs e.g. utilities Cost of Research Space Administrative Services

Are Some Costs Better Than Others?

• Cost Sharing from non-federal sources which would already be included in the research base- and hopefully generating F&A revenue

• Graduate students support if graduate students are partially excluded from MTDC- smaller affect on base

• Equipment – excluded from MTDC for research base; but removes that equipment from depreciable pool

Accounting for Cost Sharing

• Companion Centers

• Contra GL Accounts

• Shadow Systems – departmental funds

• Gamble and Ignore

Companion Centers

Benefits• Costs are separately

accountable and reportable by natural account classifications

• Ease of institutional tracking and reporting – PAR’s (effort reporting)

Cost• Maintenance of

additional cost centers in general ledger system, payroll system, paperwork

Contra GL Accounts

Benefits• Costs are identifiable

and reportable from accounting system records

Costs• Need to reconcile from

GL detail to determine natural accounts

• Confusing for research personnel to decipher

Shadow Systems

Benefits• Costs are tracked and

identifiable

Costs• Effort of maintaining

and reconciling shadow system

• Potential to overcommit• Accountability

Gamble and Ignore

Benefits• No additional work now

Costs• A-133 Audit Findings• Project Audits• Extrapolation

techniques for F&A Base additions

• Effort Reporting

QUESTIONS

BREAK

CMU Cost Sharing

Cost Sharing Account Set-up Identifying Cost Sharing Factors Affecting Cost Sharing Necessary Information from Department Accounting for Cost Sharing

Coverage of Cost Sharing Costs in GL

CMU Cost Sharing Set-Up

Identifying Cost Sharing– When reviewing the executed award documentation

all cost sharing specifically pledged in the proposal’s budget or award must be accounted for within an Oracle cost sharing award or matching non-federal award

• Cost sharing awards in Oracle begin with a 2xxxxxx• Each department on campus should have at least three (3)

different cost sharing award numbers (one for each sponsored award purpose) mapped to their organizations

CMU Cost Sharing Set-Up

Factors Affecting Cost Sharing– Type of Cost Sharing (matching, departmental,

etc.)– Cost Sharing award purpose

• Sponsored Research

• Other Sponsored Projects

• Sponsored Instruction– Example: A sponsored award that’s main purpose is

Sponsored Research should have a cost sharing award that matches this purpose

CMU Cost Sharing Set-Up

Factors Affecting Cost Sharing (con’t)– Cost Sharing Requirement (% of project expenses

or actual $ figure)– Cost Sharing information will be input into the

sponsored award DFF– The award will be marked as having cost sharing

– Cost Sharing or Non-Federal matching number should be provided to your SPA Representative (if a cost sharing number is needed for your organization, please contact your SPA Representative)

– The $ value of the cost sharing will be input into this field

CMU Cost Sharing Set-Up

Necessary Information from Department– Cost Sharing Award Number– Amount of Funding– Project and Task to Fund

• Keep in mind the task controls the organization expenses post against in grants AND GL.

– Cost Sharing Budget

CMU Cost Sharing in GL

Moving Funds within GL– All Cost Sharing expenses must post in the Grants Module

• All expenses posting in the Grants Module flow-through to the General Ledger

– Funding transfer should be completed via journal entry in the General Ledger once the CS award has been linked to a project/task in the GM

• Example: A charge of $5,000 in cost sharing expenses post in GM. At this point, your Cost Sharing GL Funding Source (063000) will be in deficit by $5,000. A journal entry must be completed to balance your GL string. The entry should be posted against:

72100.063000.0.0.Dept Org.01– Funding Transfers should be completed as soon as expenses hit the

cost sharing accounts

CMU Cost Sharing in GL

Moving Funds within GL– Sample Journal Entry

• 72100.000001.001.000.Dept Org.01 DEBITDEBIT

• 72100.063000.000.000.Dept Org.01 CREDITCREDIT

INTERNAL TRANSFER GENERAL UNRESTRICTED

ORGANIZATION WHERE EXPENSES POST

INTERNAL TRANSFER COST SHARING FS ORGANIZATION WHERE EXPENSES POST

CMU Cost Sharing in GL

Moving Funds within GL– Amount of Funding to Move

• TUBS– Organizations recognized as TUBS complete funding transfers

to account for Direct AND AND Indirect Cost Sharing expenses

• Non-TUBS– Organizations recognized as Non-TUBS complete funding

transfers to account for Direct Cost Sharing expenses ONLYONLY

CMU Cost Sharing

Accounting for Cost SharingDirect Charging – to a Cost Sharing PTA

– Pros: Does not require a manual entry by SPA

More control over what expenses are cost shared

Ability to keep your GL CS account in balance– Cons: More difficult to cost share accurately

Splitting charges between sponsored and CS award

Manual Cost Sharing Entries – batch posted by SPA– Pros: Ability to charge on only one account (sponsored)

More accurate cost sharing calculation– Cons: Time constraints on SPA in completing the entry

CMU Cost Sharing Set-Up

Accounting for Cost Sharing– % of Project Expenses% of Project Expenses

• Regular cost sharing entries may be needed to properly account for cost sharing when based on a % of project costs

– Example: CS Requirement is 20% of Total Project Costs

Sponsor Funding Obligation = $85,000

Total Project Expenses = $100,000

$100,000 X 20% = $20,000

Sponsor Pays $80,000

CMU Pays $20,000

CMU Cost Sharing Set-Up

Accounting for Cost Sharing (con’t)– Mandatory Cost Sharing AmountMandatory Cost Sharing Amount

• Cost Sharing may be based on an actual $ figure that must be paid by CMU to meet the cost sharing requirement – example would be commitment to purchase a piece of equipment costing $10K

– Example: CS Requirement = $10,000Sponsor Funding Obligation = $50,000Total Project Expenses = $45,000

$45,000 – $10,000 = $35,000Sponsor Pays $35,000CMU Pays $10,000

CMU Cost Sharing Set-Up

Accounting for Cost Sharing (con’t)– Matching Cost Sharing

• Non-Federal awards used to meet cost sharing requirements on a Federal award must be set-up within their own sponsored award, with the funding source listed as the Non-Federal sponsor, to properly account for the expenses

– Note: Once a Non-Federal award is matched against any Federal award, that Non-Federal award can not be used to match any further Federal awards

CMU Cost Sharing Set-Up

Cost Sharing Overspent Awards– Sponsor awards that become overspent must have

the overspent amounts moved to cost sharing accounts when the awards are closed

• Accomplished via Pre-Approved Batches entered by SPA

– Able to be covered in two ways

» Faculty Discretionary Accounts accomplished via a Transfer to Close Entry

» Funded by a GL Funding Transfer

QUESTIONS

Cost Sharing Millionaire

• Rules:5 prize levels“Phone an audience member”“Ask the audience”If contestant misses question – prize goes to audience member who answers – finish round with the audience answering

• Volunteers………

Cost Sharing MillionaireRound 1Level 1: Today’s session is:A – informational about cost sharingB - a good way to avoid workingC – time to nap after lunchD – about earning prizes

Level 2: Cost sharing expenditures must be in compliance with:

A –RFP/Solicitation RequirementsB – OMB A-21 / OMB A-122C – OMB A-110D – All of the above

Cost Sharing MillionaireRound 1Level 3: Cost Sharing can be in all of the forms,

EXCEPT:A –Cash contributionsB – third party in-kind contributionsC – funding from another sponsoring agencyD – educational discounts

Level 4: Which of the following would cost the University the most if used as cost sharing?

A – capital equipmentB - PI effort funded by a non-federal awardC – PI effort funded by internal fundsD – graduate student stipends

Cost Sharing MillionaireRound 1Level 5: If an institution’s:• F&A costs = $20,000• Research Base before CS= $100,000• Cost Sharing = $100,000What is the F&A rate before and after CS?A – 10% before; 20% afterB – 20% before; 30% afterC – 20% before; 10% afterD – 20% before; 25% after

Cost Sharing MillionaireRound 1$20,000 F&A costs

------------ = 20% Before

$100,000 Research Base

$20,000

----------------------- = 10% After Cost Share

$100,000 + $100,000

Cost Sharing MillionaireRound 2Level 1: Cost Sharing Award numbers begin with a:A –8xxxxxxB – 5xxxxxxC – 1xxxxxxD – 2xxxxxx

Level 2: Which of the following is NOT required by SPA when setting-up cost sharing?

A – Cost Sharing BudgetB - Project and TaskC – Funding AmountD – PI Name

Cost Sharing MillionaireRound 2

Level 3: Which of the following would be appropriate to utilize as cost sharing?

A – include items already reported as costs sharing on another federal awardB - include expenditures for administrative supportC – include expenditures for office suppliesD – include items utilized for the project which were funded by contributions

Level 4: Which of the following is an appropriate cost sharing expenditure?

A – 20% Educational discount on equipment purchase orderB – utilization of existing space in the chemistry labC – Volunteer services valued at rates consistent with those paid in recipients

organizationD – related PI effort which was funded by another federal award

Cost Sharing MillionaireRound 2Level 5: Which of the following is not

required to be included in the research base for F&A calculations:

A – Voluntary Committed Cost Sharing

B – Voluntary Uncommitted Cost Sharing

C – Mandatory Cost Sharing

D – All of the above are required to be included

Cost Sharing MillionaireRound 3Level 1: All CS expenses should post in the:A –Grants ModuleB – General LedgerC – Accounts Payable ModuleD – Purchasing Module

Level 2: Funding transfers should be completed:A – Fiscal Year EndB - When Cost Sharing occursC – Once every two yearsD – Never

Cost Sharing MillionaireRound 3Level 3: Which of the following would NOT be

allowable as cost sharing?A – Equipment required for the projectB - Office Supplies to be used on the projectC – PI Effort D – Lab supplies to be used on the project

Level 4: Mandatory cost sharing is NOT:A – required to be documented and reportedB – a condition of the awardC – cost sharing specifically pledged in the award documentsD – costs over and above that which is committed and budgeted

Cost Sharing MillionaireRound 3Level 5: If a sponsored award which is

obligated at $125,000 has:• CS Requirement = $25,000• Total Project Expenses = $130,000Which of the following is true?A – Sponsor Pays $125,000; CMU Pays $5,000B – Sponsor Pays $100,000; CMU Pays $30,000C – Sponsor Pays $105,000; CMU Pays $25,000D – Sponsor Pays $0; CMU Pays $130,000

Cost Sharing MillionaireRound 4Level 1: Institutions cost share for all of the following

reasons EXCEPT:A – it’s required by the RFP or programB - Scope of work requires resources in excess of sponsor commitment C – PI’s believe they need to offer cost share to be competitiveD – They have way too many resources and need to blow some money

Level 2: Which of the following is NOT required for institutions to be in compliance with OMB A-110 for their cost sharing:

A – costs must be verifiable from recipient’s recordsB – costs must be reasonableC – costs must be allowable under costs principlesD – costs must be funded from non-sponsored activities

Cost Sharing MillionaireRound 4Level 3:The Oracle award purpose on a sponsored

and a cost sharing award with a Sponsored Instruction purpose would be:

A –Sponsored Instruction = Sponsored ResearchB – Other Sponsored Project = Sponsored InstructionC – Sponsored Instruction = Sponsored InstructionD – Sponsored Research = Other Sponsored Project

Level 4: What is the minimum # of CS award numbers each organization should have?

A – 8B - 3C – 5D – 1

Cost Sharing MillionaireRound 4Level 5:All awards linked to a specific

project can be found by going to which screen in Oracle?

A –Project Funding

B – Project Budget

C – Funding Inquiry

D – Funding Summary

Cost Sharing MillionaireRound 5Level 1: Which is NOT a recommended method to

account for Cost Sharing?A –Companion CentersB – Contra GL CentersC – Shadow SystemsD – Gamble and Ignore

Level 2: All of the following are allowable as Cost Sharing except:

A – EquipmentB – PI EffortC – Unrecovered indirect costs D – cost overruns on unrelated sponsored projects

Cost Sharing MillionaireRound 5Level 3:The cost sharing funding source

is:A –072100

B – 000001

C – 063000

D – 071000

Cost Sharing MillionaireRound 5Level 4: If a Non-TUB department has:

• Direct CS Expenses = $50,000

• F&A Rate = 50%

How much should the department transfer to their cost sharing funding source in the GL?

A – $33,333

B – $50,000

C – $25,000

D – $75,000

Cost Sharing MillionaireRound 5Level 5: Which is NOT true of Voluntary

Uncommitted Cost Sharing:A –Not included in organized research base for F&A purposes

B – Not required to be included in effort reporting

C – Not reflected in allocation of F&A costs

D – Treated the same as committed cost sharing for A-133 program cost sharing testing

THANK YOU