IMPORTANT NOTE: This guide is a general reference and is not meant to be a substitute for our University policies & regulations. Be sure to consult the University’s policies and/or contact us.
The Connection: Cost Sharing and Effort Reporting
Why are we combining these two areas in one section of the SPA Guide under the broad title of Cost Sharing and Salary Management? Both Cost Sharing and Effort Reporting have specific purposes, regulations, and procedures, but both are part of many projects that we manage here at the university. Because of this dual presence in numerous projects, many of the procedures become intertwined, so it is best to review the concepts and required actions together.
Review the following brief introductory definitions before delving deeper into each topic:
- Effort Reporting: As part of federal requirements related to employees working on sponsored projects, our faculty must estimate, periodically review, and certify the percentage of effort they accrue on each project, whether their salaries are being paid by the sponsor or cost-shared by the university. Effort Reporting is covered in greater detail in the second half of this section.
- Cost Sharing: Cost sharing is the portion of project costs not reimbursed by the sponsor and may be in the form of cash or in-kind contributions. Cost sharing is most commonly required under federal grants and becomes a binding commitment once an award is made. The college/department is responsible for tracking and documenting the cost-share amounts throughout the life of the project. Cost Sharing is covered in greater detail in the first half of this section.
The Consequences: Common Mistakes in Cost Sharing and Effort Reporting
Pay particular attention to this list of common mistakes made at some universities and their potential consequences before you review the rest of this section.
Auditors in the House!
To put the Effort Reporting rules and procedures that you’ll be reviewing in this section into perspective, it may also help to know what to expect from an audit.
Here are a few important facts to keep in mind as you review the legal pad list on the right:
- State Auditors review effort report certification annually.
- Auditors from specific sponsoring agencies may review effort report certifications during audits.
- DHHS Auditors may review effort report certifications during any audit.
Audit reviews may include tests such as:
- Was certification completed by the deadline?
- Does certified effort match actual work?
- Do payroll charges support effort certified?
- Were payroll adjustments processed timely?
- Are there projects not listed on the effort report that should be?
Be sure to keep these facts in mind as you review the information in this important section of the guide.
Cost sharing is defined as the portion of project costs not reimbursed by the sponsor. In most cases, the cost sharing source will be university funding, but other sources are also used to meet the university’s cost share obligation.
A typical example of university cost sharing (illustrated below) might be:
- Total cost of a project is $150,000
- Sponsor requires that the university contributes 25% of the total project cost ($37,500)
- Sponsor provides the balance ($112,500)
- The $37,500 contribution to the project is the cost sharing obligation of the university
Continuing with this example, the $37,500 cost-share contribution can come from a number of sources, including actual cash funds from the university or other contributors as well as in-kind contributions.
Sources of Cost Sharing
The following are some examples of cost-sharing sources other than direct university funds that might be used to meet our cost share obligation:
- Facilities or equipment use
- Personnel assigned from any private or non-sponsored source
- Goods and services directly benefiting and specifically identifiable with the project
- Portion of work performed by employees on sponsored projects not paid by the sponsor, i.e., salary that is funded by the University or by some other funding source
Show Me the Money!
The pie-chart below illustrates another type of cost sharing arrangement including a second university and a private company.
Remember the following important points to understand the true nature of Cost Sharing:
- Cost Sharing is real money charged to and paid from other funding sources.
- Cost sharing commitments are not met until someone from each area spends or donates!
And watch out for the following non-compliance problems and potential consequences:
- Failure to meet cost sharing obligations
- Failure to adequately document cost sharing
which can lead to…
- Project sponsors withholding funds
- Audit Findings
- Risk for future funding opportunities
How Cost Sharing Originates
Cost Sharing can emerge in a number of ways. The following are typical scenarios that result in a cost sharing obligation for the university:
- Mandatory/Involuntary (Sponsor Driven Requirement) – required by the sponsor, generally stated in the Solicitation or program announcement, and the cost share component must then be included in the university’s proposal and budget
- University acceptance of an award that does not include salary payments for PI or key personnel – may not include any effort payment or no payment beyond a 3-month time frame (Summer Effort)
- University acceptance of an award for a lesser amount without a revised scope of work or budget – university then becomes obligated to cost-share the remaining balance
- Voluntary Uncommitted (Recipient) – commitments not offered by the university in the proposal narrative/budget but occur during the life of the award (example: sponsor not paying for some equipment that was unanticipated but needed after the project is under way)
- Voluntary Committed – not required by the sponsor, but a cost share amount is included in the university’s proposal, budget, or budget narrative and then becomes mandatory when the award is granted
The university strongly discourages voluntary cost sharing at the proposal stage. Some researchers mistakenly believe that sponsors are more likely to make an award if the institution commits some cost sharing up-front, but this is not true. It is best not to include any voluntary cost sharing at the proposal stage, knowing that the sponsor can respond with a lesser award amount if necessary and cost-sharing can then be arranged.
Specifically, the university’s principal of limiting cost share commitments contains the following recommendations:
- Cost share only when specifically mandated or required by the sponsor in the RFP.
- The Department/College should scrutinize cost sharing included in excess of the minimum required by the Sponsor.
- If obligations are not mandated, do not list on budget pages or note in budget narratives.
Before reading the specifics that follow, review the chart below. The chart illustrates the types of Cost Sharing and gives you some specific notes on each type.
Following the Rules
We must make sure that all of our cost sharing dollars meet certain requirements from OMB A-110 Requirements/Regulations: (SubPart C-.23).
The chart below summarizes the main points. Click the link above to review the federal language. (To print or bookmark the chart below, click on the chart to open in a new tab.)
Remember the following key points regarding Cost Sharing. (A number of these points are also contained in the Cost Sharing Top 10 Reminders Quick Reference Guide (PDF) linked below this bulleted list.)
- Incurring Costs:
We do not incur/recognize cost sharing until actual funds are expended.
- Claiming Cost Sharing:
We cannot claim cost sharing for CAS covered awards unless we could have charged the same costs under OMB A-110 criteria, including the allowability test and meeting the definition of a direct charge.
- Accounting System:
Cost Sharing amounts are not tracked/recorded by the University’s financial accounting systems.
It is the College’s/Unit’s responsibility to document, track, and meet cost sharing requirements.
- Updating TEARS:
Cost shared effort is defined as work performed by employees on sponsored projects that are not paid by the sponsor (i.e., the salary is funded by the University or by some other funding source). Cost shared effort must be included on the effort report since it is a component of the total effort that an employee works. It is the College’s/Unit’s responsibility to update the effort reporting system (TEARS) to capture/certify cost sharing in the effort cost category.
- Leading Collaborative Effort:
If your College is the lead on a collaborative effort, ensure that the other Colleges/Units involved in the cost sharing commitment understand their responsibilities and roles in capturing this information.
- Affecting F&A Rate:
Cost Sharing affects the University’s research cost base in the development of the Facilities and Administrative Cost Rate.
- Submitting Revisions:
Revised budgets and statements of work should be submitted and accepted by the agency for any differences between the original proposal and the actual award amount if not to be considered as committed cost sharing.
- Not Meeting Cost Share Commitments:
If you learn that Cost Sharing commitments may not be met, contact the Fiscal Manager in C&G for assistance PRIOR to the end of the agreement. Rarely, some Sponsors may, with written and adequate justification, release/reduce the recipient’s cost sharing commitment.
- Claiming F&A Costs:
F&A Costs may be claimed/used (if not prohibited by the Sponsor) as added cost sharing on any F&A-bearing direct costs used as cost sharing (normally all costs except equipment, tuition/fees, & Subcontractors).
- Claiming Under-recovered/Waived F&A costs:
Under-recovered/waived F&A costs, if approved in advance by the sponsor and specifically noted in the proposal/budget, can be calculated on the modified total direct costs and claimed as additional cost sharing. Contracts and Grants will calculate the amount of any under-recovered/waived F&A to be claimed/reported at project closeout based upon submission of final cost sharing figures by the College.
Cost Sharing Top 10 Reminders for Colleges
The following Quick Reference Guide summarizes some of the points listed above as well as other tips for handling Cost Sharing and TEARS procedures. Click on the link below to open a PDF copy to adjust the print size, print or bookmark for future reference.
You are probably aware of your college’s procedures and “who handles what” related to TEARS cost-sharing set-ups, monitoring, changes, and effort certification. If not, be sure to check with other administrative staff in your college or department for the specifics. You may also want to check the TEARS Coordinator list if you are not aware of who handles the role of coordinator in your college or department.
Regardless of your role, review the checklist below or click the link to open the checklist as a PDF document to adjust the print size, print or bookmark for future reference.
Notice the three-column format that allows you to use the same checklist for any project – through set-up, ongoing, and close-out reviews.
Review the following chart on the confirmation process. If you are not familiar with the Cost Share Confirmation Memo referenced in the chart, follow the instructions in the Cost Share Confirmation memo segment below the chart to view the form.
View the sample below of the Cost Share Confirmation memo that the colleges receive from the Office of Contracts and Grants.
After the Fact Cost Sharing
The After the Fact Cost Sharing Memo is the method that should be used to document cost sharing situations that cannot be documented within the University’s official effort reporting system (TEARS). The college/department/business unit is responsible for identifying the circumstance in which cost shared effort must be documented on the After the Fact Cost Sharing Memo and is responsible for completing the memo. Completed memos should then be sent to the Office of Contracts and Grants(C&G).
The Office of Contracts and Grants has two After The Fact Cost Sharing Memos:
- The Regular Monthly After the Fact Cost Sharing Documentation memo (PDF) allows for reporting of cost shared effort for an employee after TEARS for a FY has been archived. If for any reason you come across cost shared effort that has not been entered on an employee with an existing effort report, you can still enter that cost shared effort up until the point in time that we archive the effort reports for that fiscal year – typically done the following January. If the effort report has already been certified, it will need to be re-certified after adding the Cost Sharing.
- If you discover cost shared effort for the fiscal year and an effort report was not generated for that employee, please contact the University TEARS Coordinator immediately to have an effort report created for that employee. An effort report can only be created if the survey period has not been closed.This will record the cost sharing in our system rather than leaving a paper trail within our file. While the deadline for certification may have passed, it is still important that we make every effort to get these effort reports certified. If the survey period is closed and an employee needs to certify their report a hard copy should be printed, signed, kept in the college and a copy sent to C&G. In addition, if the effort reporting period is closed and a effort report needs to be corrected, print a hard copy, manually make the corrections, have the employee (or someone who has first hand knowledge of the employee’s effort) resign the hard copy, keep the hard copy in your file and send a copy to C&G. We believe this shows due diligence on our part and would be looked upon favorably in an audit situation.
- The Non-TEARS After the Fact Cost Sharing Documentation memo (PDF) should be used for reporting:
- Bi-Weekly Employees
- Summer Effort
- Supplemental Pay
- Cost sharing from one Ledger 5 to another Ledger 5
As always, if you have any questions or concerns, your first point of contact is your College TEARS Coordinator. The College TEARS Coordinator will contact the University TEARS Coordinator as needed.