Cost-sharing and matching on grants, contracts, and cooperative agreements
Budgets for research projects consist of several categories of expenditures required to perform the planned research. These categories typically include personnel costs, employee benefit costs, equipment purchases or leases, travel expenses, computing costs, supplies, and publication costs. These costs are direct costs — direct in the sense that their need is directly attributable to doing the outlined research. There are also indirect costs -- indirect in the sense that they are real costs associated with performing research, but their total cost cannot be directly associated with an individual project. Indirect costs include expenses such as library services, maintenance, departmental and administrative services, etc. These are often called "overhead costs" or F&A (Finance and Administration) costs. The real cost of doing a proposed project is the total of the direct and indirect costs.

Who is going to pay for the costs of doing the research? Often, the expenses are shared between the University and the grantor. Cost-sharing, or matching, represents the agreement whereby the University and the grantor "divy-up" the total cost of the project. From the University’s standpoint, it represents our financial commitment to the project. Cost-sharing principles for federal grants are controlled by the Federal Office of Management and Budget.

Understand this about cost-sharing for a research project — Cost-sharing funds are not funny money. The funds shown as cost-sharing or matching are ones that we must actually spend on the project and we must account for those expenditures to the grantor just as we would any other project expenses. This accountability requires an actual cost-sharing account for the project in addition to the regular project account. If the project budget says that we are going to spend $5,000 of state-appropriated salary funds for your time on the project, then there must be a budget for that amount and state funds must be encumbered for that purpose.

Some granting organizations will require, as a condition of the grant, that we share, or match, a certain portion of the total cost of the project. In that case, the required portion is shown in the budget as the amount of the category/categroies (salaries, equipment, etc.) that we will pay from non-grant funds.

If we are required to cost-share a certain portion of a project, and the agency will not pay F&A costs to the University, we can use the non-allowed overhead costs to meet the matching requirement as long as the granting agency approves.

In other cases, an organization or agency may not require any cost-sharing whatsoever. Do not include cost-sharing commitments in your budget if they are not required. Making a financial cost-sharing agreement in that instance does not improve your project. But it does cost real money that will have to come from other sources in your Division’s operating budget.

Federal rules prohibit using federal funds to match or cost-share other federal funds. We cannot, therefore, use salaries that are paid from Hatch or McIntire-Stennis appropriations to match a USDA Cooperative Agreement, or a NSF project, or any other federally-funded project.

We have a large, standing, annual matching requirement for the West Virginia Agricultural and Forestry Experiment Station. It is the annual match of our Hatch and McIntire-Stennis programs. Law requires a one-to-one match. We must, therefore, budget at least $3,000 million of state-appropriations each year as matching for those programs. The degree to which each state exceeds the match requirement is one of the components used in the formula by which Hatch and McIntire-Stennis are distributed. It is, therefore, in our financial interest to show as much as we can of state appropriations being committed to these programs.

Which brings us back to the earlier admonition, "don’t cost-share if you don’t have to." Because once funds are cost-shared, they cannot be used for matching again. That means if we cost-share, say, $100,000 of state-appropriated faculty and staff salaries on various grants and projects, those funds cannot be used to meet the McIntire-Stennis and Hatch match.

There are additional nuances to cost-sharing. For example, a third party could help us with cost-sharing by contributing time, or materials, or in-kind services to the project. Likewise, certain volunteer services can be used to cost-share. There are guidelines for how to value such methods and our Office of Sponsored Programs needs to be consulted in the early stages of budget preparation.

To sum up with the two basic cost-sharing principles:

1. Do not cost-share on research projects unless it is required by the grantor as a condition of obtaining the grant.