Cost Sharing: Yours, Mine, Ours Randi Wasik University of Washington Urmila Bajaj California Institute of Technology

2 Cost Sharing Compliance – Definitions, Regulations, and Types (pre and post ) Roles and Responsibilities -PI, Pre-Award and Post-Award Group Case Studies Discussion Outline

Definition per Federal Guidelines OMB Circular A-110 defines cost sharing as – Project costs not borne by the sponsors but supported by contributions from the recipient and third parties, both cash and in- kind. 2CFR 200 (Uniform Guidance) defines cost sharing or matching as – Portion of project costs not paid by Federal funds (unless otherwise authorized by Federal statute) References: OMB Circular A-110OMB Circular A-110, Subpart C.23. Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations 2CFR Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards 3

Definition in General Terms Portion of research costs that are not covered by the sponsor – Primarily required by federal sponsors – Pledge can be a % of total project costs or a fixed amount – Obligation must come from non federal funds Careful about: – federal flow through awards – non-federal sponsors may require prior approval 4

Federal Requirements Applicable to Cost Sharing Cost shared expenditures are: included in the approved budget verifiable from the recipient’s records not included as contributions for other federal projects necessary and reasonable for project objectives (allocable) allowable under applicable cost principles not paid by the Federal Government under another award unless approved approved by federal agency when unrecovered F&A is used 5

Cost Sharing Funding Source-Cash Cash General Budget Gift Non-federal Grant Other Institutional Funds NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC 6

Cost Sharing Funding Source-Non Cash Unfunded effort of key personnel –from collaborators Donated property, certification for the value of donation Sub- awardee cost sharing NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC 7

In-kind Contributions Unrecovered indirect costs-requires prior approval from the agency Donated property-requires prior approval, valuation for cost sharing has to follow federal guidelines (value of remaining life or current fair market value, whichever is lesser unless approved by the agency) Volunteer services by third party professionals-rates must be consistent with those paid for similar work, may be able to include paid fringe benefits Services of an employee of a third party-valued at employee’s regular rate of pay, fringe benefits and indirect costs at the third party organization Equipment, research supplies, etc. donated by a third party-valued at fair market price at the time of donation Finally, for third-party in-kind contributions, the fair market value of goods and services must be documented and to the extent feasible supported by the same methods used internally by the non-Federal entity. (2CFR )

Common Traits Observed with Cost Sharing Generally federal sponsors require cost sharing-more common in grants than contracts Not common with industrial sponsors Non-profits typically do not pay for certain costs States typically decline to pay full overhead NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC 9

Types of Cost Sharing Mandatory Award eligibility criteria Sponsor imposed cap on salary Voluntary Committed PI offered in proposal (pre ) and in proposal budget (post ) Uncommitted PI did not quantify in proposal References: OMB, M-01-06, Memorandum for The Heads of Executive Departments And Establishments, Clarification of OMB A-21 Treatment of Voluntary Uncommitted Cost Sharing and Tuition Remission Costs NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC 10

Clarifications in 2CFR 200 (Uniform Guidance) 2CFR (to be implemented) – voluntary committed cost sharing is not expected in federal proposals – Federal agencies cannot use voluntary committed cost sharing as a factor during the merit review of proposals – Cost sharing requirement needs to be included in FOAs – Only mandatory or cost sharing specifically committed in the project budget must be included in the or base for computing F&A rate 11

Office of Sponsored Research & PI/Department – Proposal phase Review sponsor guidelines for proposal format Prepare budgets and justifications including cost sharing budgets Identify cost share funding sources Obtain approval from department chair or dean Obtain letter of commitment from sub-awardees, third parties Roles and Responsibilities

Office of Sponsored Research & PI/Department – Award phase Review awarded budgets Set up companion accounts – Provide OSP with cost share funding source information Record PI and key personnel %s of committed effort Confirm cost share requirements are flown down to the sub-awardees or collaborators Roles and Responsibilities

Sponsored Projects Accounting Office – Award phase Review award budget, terms and conditions Ensure companion account linked to main award Monitor cost shared expenditures throughout the life of the award Document cost sharing Collect certifications from third party contributions

15 If effort is in the proposal = formal commitment If original effort commitment is met and charged to the grant = no cost sharing If original effort commitment is met, but not charged to the grant= voluntary committed cost sharing (NSF disallows voluntary committed cost sharing) If higher effort is spent than committed, but not charged to the grant=voluntary uncommitted cost sharing Relationship Between Proposed Budget, PI Effort and Cost Sharing

Effect of Increased Cost Sharing on F&A Rate Cost shared expenditures are supported by general budget or non sponsored accounts, but are considered research costs and included in the University’s Organized Research (OR) base When OR base increases, the F&A rate decreases Voluntary committed cost sharing increases the OR base used for determining the F&A rate Institutions discourage PIs to offer voluntary cost sharing 16

Proposal Submission, a Collaborative Effort 17

Program solicitation requires cost sharing Cost sharing funding source is identified Appropriate approval from Dean, Division Chair, Provost, etc. is obtained Third party contributions are documented via letters of intent Principal Investigator Confirms that….

19 Program solicitation/sponsor guidance is reviewed carefully to interpret cost sharing requirements Appropriate approvals from division heads, collaborators have been obtained Letters of intent are acceptable by the University No voluntary commitments are made inadvertently in the proposal – Under the new Uniform Guidance 2CFR 200, the proposal may not be peer reviewed if voluntary cost sharing is included Pre-Award Group Confirms that….

Voluntary Commitments in Proposals Commitments included in the proposal budget that are not charged to the sponsor “Unfunded” collaborators named as key personnel Maintenance of equipment in instrumentation grants Supplies and materials Travel Waiving or charging a lower indirect cost rate 20

Avoiding Voluntary Commitments PI’s 1 calendar month effort, salary requested $0.00 PI will be available to provide advice Purchase of Laser Interferometer-justified in the budget at $500K but not included in “Equipment” line item PI has access to laser interferometer 21 Include under other support and rewrite as

Award Acceptance & Monitoring Cost Sharing 22

Post-Award Group Confirms that….. Award is issued at the proposed budget If award is issued at a reduced budget, cost sharing or other commitments are modified Award notification includes cost sharing commitment When appropriate, cost sharing companion account is set up

Post Award Office Responsibilities Continue….. Sponsored Projects Accounting confirms Commitment (labor and non- labor) is entered in the Award Management system For cash contributions, companion account is linked to the main award For Non-Cash contributions, cost sharing certification requirement is notified to the PI Other Central Offices (Purchasing, Property Services, etc.) are notified of cost sharing obligations NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC 24

PI and Department’s Responsibilities PI’s Department Administrators confirm Salaries, purchase orders and internal requisitions are set up in the system for the sponsored award as well as the cost sharing account For cash contributions, companion account is linked to the main award For Non-Cash contributions, the sources of cost sharing are documented PI understands the University’s responsibility to track and report cost sharing to the sponsor Sub-Awardee/s are aware of their cost sharing commitments NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC 25

Important To Remember That…… Cost shared expenditures on sponsored projects are: subject to audit subject to federal cost principles easily identifiable for F&A rate proposal part of the official record (record retention) NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC 26

Monitoring Cost Sharing Cost sharing companion account is incurring expenditures at the same rate as the sponsored award Expenditures are allowable, allocable and consistent PI effort commitment is being met by charging PI salary directly or via cost sharing account to the project Cost sharing certifications are received from third parties Sponsored Projects Accounting and PI’s Department monitor that NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC 27

Examples of Cost Shared Expenditures The test is-could the cost be directly charged to the sponsored project? Faculty salaries/benefits Non faculty salaries/benefits GRA assistantships and tuition Equipment and M&S Other direct costs Program Income (with agency approval) Unrecovered F&A (with federal agency approval) 28

Examples of Expenditures that Cannot Be Cost Shared F&A costs (without agency approval) Costs unallowable under OMB Circular A-21 section JCosts not allocable (benefitting the research project)Costs not allowed on an award 29

At Close Out Final reconciliation – Expenditures are matching commitment – Cost sharing by sub-awardees are met – Companion account is funded and closed Reporting to sponsors – SPA Office reports to sponsors SF425, SF1034 (for subawards) NSF via research.gov – PI reports to sponsors Progress Reports NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC 30

What Do The Auditors Look For Was cost sharing commitment met? What account was used to fund the cost sharing? Was agency approval received for budget deviations? Did the collaborators (sub-awardees) meet their cost sharing obligations? What kind of documentation are maintained for in-kind cost sharing? 31

Conclusion Any questions???? NCURA 55th Annual Meeting * August 4-7, 2013 * Washington, DC

Case Study #1 Department of Interior issued a solicitation that requires cost sharing, with no limit on indirect costs. In fact DOI, being a federal agency, will honor the university’s negotiated indirect cost rate. Fresca University’s PI is responding to the proposal with the following budget: Direct cost $100,000 + IDC $15,000 (Fresca’s IDC rate is 65% of MTDC, IDC is waived in the DOI portion)= $115,000 Fresca’s cost sharing budget is: $50K from the “waived” IDC Can the PI include waived IDC as part of the matching requirement? Who needs to approve this proposed cost sharing commitment? 33

Case Study #2 Dr. Brenan submitted a research proposal to NSF for grant. He was happy that he could save $s by not charging any portion of his salary directly to the award, and managed to add a graduate research assistant in his proposal. Dr. Brenan made sure that he included 1 calendar month of his effort in the budget but did not request for salary support. What type of cost sharing is this? Would NSF consider awarding this proposal?

Case Study #3 Dr. Smith, from Presidency College, is the main PI of a cooperative agreement from NASA (award total is $4M) that requires a significant amount ($1M) of cost sharing. The collaborators are sub-awardees, PIs from three other universities, Eastern College, Northern University and Western University, committed to cost share a total of $800,000 toward the cooperative agreement. Dr. Smith’s university was going to cost share the balance, $200,000. Breakdown of collaborator cost sharing: Eastern College: $400,000; Northern University: $200,000 and Western University: $200,000 Western University, unfortunately, could not meet their commitment of $200,000 and cost shared only $100,000. Total cost sharing from collaborators came to $700,000, instead of $800,000. I.Who is responsible to oversee that the total cost sharing commitment has been met? II.What action can Dr. Smith take to make up the shortfall? III.Can Dr. Smith take any actions against the university that did not meet the commitment?