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Section 4 Fiscal Policies
Subject 4.5 Cost Accounting
Policy 4.5.7 Cost Sharing Policy
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01/25/06 -Originated
-Reviewed w/o changes
Cost Accounting -Author
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Cost Sharing Policy
Audience
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The information in this document is for use by all employees
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Definitions
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Cost Sharing: The portion of the total project costs of a Sponsored Project that is borne by the UTMB rather than the sponsor. (Cost Sharing is sometimes referred to as “Cost Matching”.)
Mandatory Cost Sharing: Cost Sharing required by a sponsor as a condition of obtaining an award. Mandatory Cost Sharing is a binding commitment on the UTMB. Any employee’s Effort that is expended in satisfaction of this binding commitment must be accounted for in accordance with this policy.
Voluntary Committed Cost Sharing (VCCS): Institutional Base Salary that is associated with Committed Effort in excess of effort for which salary reimbursement is requested. VCCS can occur in one of two ways: (a) through a proposal in which Committed Effort is greater than the Effort for which salary support is requested (for example, where a UTMB proposal promises Committed Effort of 30% for an employee, but requests only 10% salary support); or (b) by actually charging the sponsor for less than all of the Committed Effort actually expended (for example, where the proposal contains Committed Effort
of 30% and requests full salary support of 30%, and the Actual Effort is 30%, but the grant is only charged for 10% of IBS). VCCS does not include voluntary Effort that is in excess of Committed Effort, and for which no salary support is requested or claimed. For example, if a UTMB proposal contains Committed Effort of 30% and requests full salary support of 30%, but 40% Effort is actually provided and the sponsor is not charged for the additional 10% Effort, the 10% does not represent VCCS.
Voluntary uncommitted cost sharing: Cost sharing in kind (effort, materials or services) which is provided to a sponsored activity above that agreed to as part of the award.
Unrecovered facilities and administrative cost: The difference between the amount awarded and the amount which could have been awarded under the recipient's approved negotiated facilities and administrative cost rate.
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Policy
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This policy provides information and guidance on how to report cost sharing by UTMB employees to ensure that UTMB is in compliance with all applicable federal laws and regulations.
It is the Policy of UTMB to discourage the sharing of costs on sponsored awards unless it is a requirement for application (see “mandatory cost sharing: in the definitions below). Under extraordinary circumstances, cost sharing may be offered to the sponsor, but any such proposal and subsequent agreement will be governed by the specifics of this document in the following sections.
The following document comprises UTMB's policy on cost sharing and the procedure for monitoring cost sharing and reporting such cost sharing to sponsoring agencies. The policy is developed for the following purposes:
• To provide guidance regarding the circumstances in which cost sharing is permitted by UTMB, including what kind of services, expenditures, or assets may be cost shared.
• To provide information to the UTMB community regarding the contractual, financial, and administrative implications that result from the commitment to cost share.
• To establish procedures that give UTMB the ability to provide information to sponsoring agencies and demonstrate that UTMB has fulfilled any cost sharing commitments it has made as a condition of obtaining external sponsorship.
• To establish procedures for recording cost-shared expenditures in UTMB’s accounting system in order to segregate cost sharing for inclusion in UTMB Research portion of the Organized Research Modified Total Direct Cost (MTDC) base, as required by OMB Circular A-21 (A-21).
Disciplinary action for instances of breach of policy including, but not limited to, failure to file or knowingly filing an erroneous Effort Report Form, will be administered according to the UTMB Institutional Handbook of Operating Procedures IHOP Policy in accordance with the Regent’s Rules and Regulations..
In case of a violation of civil or criminal law, violators may be subject to civil or criminal penalties. If UTMB becomes aware of alleged criminal violation(s), UTMB may report such conduct to the appropriate oversight agencies.
Note: The tracking, reporting, and certifying of cost sharing are subject to audit under OMB Circular A-133, sponsor guidelines or terms of the sponsored agreement.
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Requirements for Documenting Cost Sharing
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To meet the administrative requirements for cost sharing under OMB Circular A-110, UTMB must meet 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 Circular A-110, as applicable.
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The Cost Sharing Commitment
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When a Principal Investigator (PI) proposes and UTMB agrees to cost share university resources, UTMB is required to provide the stated resources in the performance of the sponsored agreement. Considering the administrative requirements and responsibilities inherent in the cost sharing commitment, the PI and the appropriate administrators within the Department, the Institute, the Center and UTMB should weigh the cost effectiveness and the expected benefits of each cost sharing commitment, prior to making such commitments. As such, cost sharing commitments must be specifically requested by the Principal Investigator and approved by the appropriate UTMB departmental and school officials.
Implicit in UTMB’s commitment to cost share is the PI’s agreement to ensure that:
1. Cost sharing commitment is approved at the time the proposal is submitted and indication of whether the cost sharing offer is mandatory or voluntary.
2. Funds are provided for cost-shared direct costs at time of award.
3. Cost-shared expenses for each project are documented.
4. Allowable costs are timely and accurately charged to the appropriate cost sharing account.
5. Records for cost sharing accounts are retained for the same period as the records for related sponsored agreement.
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Types of Cost Sharing
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FACULTY, STUDENT, OR STAFF EFFORT
It may be appropriate to contribute faculty, student, or staff effort to the performance of a sponsored agreement. The commitment to provide such support binds UTMB to contribute the effort and record the associated expenditures including fringe benefits with the appropriate cost sharing funds.
Cost sharing effort should be limited where the program requirements allow effort as a direct cost to the project.
Cost sharing effort must be documented within the Effort Reporting System. On the Effort Report Form, individuals must complete the effort report by identifying the level of cost shared effort contributed with the associated project.
Cost sharing effort is included in the calculation of total committed effort. Although proposals could be in circulation at any given time which in the aggregate exceeds 100% of a faculty, student, or staff's effort, care must be taken at the time of each award to ensure that effort is not committed more than the appointment allows for concurrent periods of time.
Note also that significant decreases in the effort by key personnel to a project may require coordination with and/or advance approval by a federal sponsor --non-federal sponsors may also have similar requirements. This applies to changes in committed levels of effort to be cost shared on the project, as well as to that which will be charged directly to the project.
EQUIPMENT
Equipment should not be offered as cost sharing unless the receipt of the award is contingent upon such cost sharing.
PI's should take care in preparing proposals for sponsored agreements not to commit the use of UTMB-owned equipment as cost sharing, but rather to characterize the equipment as "available for the performance of the sponsored agreement at no direct cost to the project".
Proposals which include the acquisition of special-purpose equipment as a direct cost may include an offer of UTMB funds to pay for all or part of the cost of such equipment. These proposals may be for equipment or instrumentation grants, where the purpose of the grant is to buy equipment and we are required to share the cost with the sponsor, or research-oriented grants or contracts where
the purchase of equipment required for the research is an allowable expense included in the proposal and award. Purchase and acquisition must occur during the period of performance. The portion of the purchase price paid by UTMB must be charged directly to funds identified for cost sharing in support of the research award.
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Types of Cost Sharing
(cont’d)
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OTHER DIRECT COSTS
Allowable direct costs other than salaries, fringe benefits, or equipment may be committed by the PI as cost sharing on the proposal budget. The following are examples of other direct costs that may be cost shared:
FACILITIES AND ADMINISTRATIVE COSTS (Indirect Costs)
Facilities and Administrative (F&A) costs are real costs of conducting sponsored projects and instruction. When the project does not recover the F&A costs (in part or in whole) associated with the research project, UTMB forgoes associated funds that it would have received. This in turn impacts the total funds UTMB has available.
Unrecovered F&A costs may be used to satisfy a Mandatory Cost Sharing obligation ONLY with the prior approval of the Federal awarding agency.
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Sources of Funds for Cost-Shared Expenditures
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Identifying and providing resources for cost sharing of direct costs (including equipment) is always the responsibility of the PI. The PI may NOT utilize funds from another federal award as the source of cost sharing, except as authorized by statute. The PI may utilize funds from non-federal awards as the source of cost sharing, ONLY when specifically allowed by the non-federal sponsor. Funds for cost-shared expenditures are typically identified from among gift, endowment income, operating budget, or other department designated funds.
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Expenditures NOT Eligible for Cost Sharing
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The following expenses cannot be offered as cost sharing commitments in sponsored project proposals:
1. Unallowable costs as defined in A-21, section J.
2. Salary dollars above a regulatory cap, e.g., NIH.
3. University facilities such as laboratory space. PI’s should take care in preparing proposals for sponsored agreements not to commit use of facilities as cost sharing, but rather to characterize the facilities as "available for the performance of the sponsored agreement at no direct cost to the project"
4. Depreciation on federally funded equipment
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Overdrafts
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After the end of the project performance period, when unanticipated project expenses result in more charges to a sponsored project than were funded, the amount of the overdraft is accounted for in the same manner as cost sharing. These costs represent project costs being borne by UTMB, and therefore, must be accounted for in the same manner as cost sharing.
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Accounting Treatment
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Information on tracking cost sharing expenditures within Peoplesoft
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Level of Cost Sharing
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When sponsored projects are awarded at the level outlined in the proposal, the committed cost sharing must be provided at the requested amount.
The actual effort and other costs required to accomplish the goals of a sponsored project might differ from what was proposed and awarded. The total costs could decrease due to changes in programmatic needs. When there is cost sharing on such projects, the sponsor may need to be consulted to determine if the reduction can be applied to either UTMB’s committed cost sharing or to both sponsor and University resource contributions on a pro rata basis and to approve such reduction. Otherwise, the sponsor’s share is reduced and UTMB’s entire cost sharing commitment must be met. The PI or the PI’s departmental or research administrator should consult with the Office of Sponsored Projects before the sponsor is contacted.
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Reporting Cost Sharing
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When required, UTMB is responsible for providing information to sponsoring agencies that demonstrates UTMB has fulfilled the cost sharing commitments that it made as a condition of receiving external sponsorship. This responsibility includes providing cost sharing reports and reviewing cost sharing commitments during the financial closeout of a sponsored project. The Principal Investigator and Departmental administration will need to provide to Sponsored Programs a full accounting of such cost sharing for incorporation into the institutional report to the sponsor.
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References
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OMB Circular A-21, C-4b; Section J;
OMB Circular A-133
OMB Circular A-110
PHS Grants Policy Statement
45 CFR 74.53
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