Research Policy Handbook

Cost Sharing Policy (RPH 3.5)

Current version: February 1, 2012

Summary:

Establishes procedures to meet government requirements to report cost sharing to sponsors. Reflects the:

• January 2011 National Science Foundation update to its cost sharing policy
• Clarification of OMB Circular A-21
• Memoranda January 2001 Treatment of Voluntary Uncommitted Cost Sharing 
• December 1999 revisions to A-21 on charging for administrative and technical expenses, and to reflect changes in the accounting treatment for cost sharing.
• July 15, 1993 revisions to A-21 regarding the definition of University Research.

Modified to provide clarification and streamline the process.

1. INTRODUCTION
   

   This document comprises Stanford University's policy on cost sharing and the procedure for monitoring and reporting cost sharing. This policy is effective for awards received on or after September 1, 1994. The policy was developed for the following purposes:

   • To provide guidance regarding the circumstances in which cost sharing is permitted by the University, including what kind of services, expenditures, or assets may be cost shared.
   • To provide information to the University community regarding the contractual, financial, and administrative implications that result from the commitment to cost share.
   • To establish procedures which give the University the ability to provide information to sponsoring agencies which demonstrates that the University 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 the University's accounting system in order to segregate cost sharing for inclusion in the University Research portion of the Organized Research Modified Total Direct Cost (MTDC) base, in response to the July 15, 1993 revision to OMB Circular A-21 regarding the classification of University Research.
2. DEFINITION OF COST SHARING COMMITMENT
   

   Cost sharing represents that portion of the total project costs not borne by the Sponsor.  Cost sharing is typically in the form of an actual cash expenditure of funds.

   Matching is where the sponsor requires the University to match grant funds in some proportion with funds from another party, either from the University or more typically another sponsor (with both sponsors’ approval). Matching requirements may be in the form of actual cash expenditure of funds or may be an “in-kind” match, which is the value of non-cash contributions to the project. An in-kind or matching contribution made by a party other than Stanford requires documentation from the third party supporting the use of the funds as in-kind/matching and may require a certification of fair market value.

   Types of Cost Sharing:

   • Mandatory cost sharing is required by the sponsor as a condition of obtaining an award. The cost sharing commitment must be included in the proposal to be considered by the sponsor.
   • Voluntary cost sharing is not required by the sponsor as a condition of obtaining an award.  It must be included in the proposal, but the sponsor does not require cost sharing as a condition of the award.

   When an award is received in which there was a commitment by Stanford in the proposal to share in project cost, (voluntary or mandatory cost sharing or, matching) the activity becomes a binding commitment which the University must provide as part of the performance of the sponsored agreement. This commitment must be tracked in the accounting system as cost sharing.

   Voluntary Uncommitted Cost Sharing is faculty-donated effort or other direct costs above that agreed to as part of the award.  Since it was not proposed and constitutes “additional” time or materials it is not considered a binding agreement and shall not be accounted for as cost sharing.

3. THE COST SHARING COMMITMENT
   

   When a Principal Investigator (PI) proposes, and the University agrees to cost share University resources, the University is required to provide the stated resources in the performance of the awarded project. Considering the administrative requirements and responsibilities inherent in the cost sharing commitment, the PI (or other person responsible for the identified fund) should carefully weigh the cost effectiveness versus the expected benefits of each potential cost sharing commitment. Cost sharing of direct expenditures represents a redirection of departmental or school resources from teaching or other departmental and school activities to support sponsored agreements.   This commitment must be indicated on the Proposal Development Routing Form (PDRF). By signing the PDRF, the department chair or designee approves the cost sharing commitment.

   Implicit in the University’s commitment to cost share is the PI's agreement to ensure that:

   1. voluntary cost sharing is permitted by the particular sponsor and project for which it is being proposed
   2. funds are available for cost-shared direct costs
   3. once awarded, cost sharing is managed in the same manner as project PTA. Cost-shared expenses will be appropriately charged, tracked and accounted for in compliance with University and sponsor requirements
   4. University space is coded in the University's Space Inventory System, consistent with the coding of expenditures in the accounting system
   5. the PI will certify these expenditures in the same manner as all sponsored project spending.

   Note: The tracking, reporting, and certifying of cost sharing are subject to audit.

4. WHAT EXPENDITURES CAN BE COST SHARED?
   

   Cost sharing may consist of allowable direct and/or indirect cost resources.

   1. Direct Costs
      1. 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 the University to contribute the effort and record the associated expenditures including fringe benefits in separate cost sharing PTAs.

         A faculty member with an appointment less than 12 months may be paid from federal and/or sponsored projects for no more than 90% (95% for Research Faculty) during any of the summer months. (Refer to section 1.C. of Research Policy Handbook 3.1, Fiscal Responsibilities of Principal Investigators). The remaining summer effort cannot be cost shared.  This effort is reserved for University obligations of time associated with the key person's role in a tenured/tenured track position (which would include teaching, committee and departmental responsibilities as well as preparing proposals for sponsored funding and leave from campus).

      2. EQUIPMENT
         

         Equipment cannot be offered as cost sharing unless the receipt of the award is contingent upon such cost-sharing.

         PIs should take care in preparing proposals for sponsored agreements not to commit the use of Stanford-owned or government-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 University 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 the University must be charged directly to a cost sharing account in support of the award.

      3. 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:

         • travel expenses
         • items that do not meet the capitalization threshold
         • laboratory supplies
         • the University contribution to graduate student tuition.
      4. ADMINISTRATIVE EXPENSES

         Proposed administrative expenses must meet the criteria for direct charging, defined in Stanford’s policy Charging for Administrative and Technical Expenses, Research Policy Handbook 3.6. If those proposed expenses are disapproved by the sponsor yet still incurred (i.e., scope of work is not reduced), they must be accounted for as cost sharing. The portion of the expense that is directly utilized and benefits the project must be charged to a cost sharing account in support of the award. The amount cost shared may be less than the amount proposed.

   2. Facilities and Administrative Costs (Indirect Costs)
      

      Facilities and Administrative (F&A) costs are real costs of conducting instruction and research. These F&A costs do not disappear simply because a sponsor refuses to pay for them; the University must fund any F&A costs that have not been reimbursed. When direct costs are cost shared, the F&A costs associated with the direct costs are automatically cost shared. PIs may take advantage of the automatic cost sharing of these costs, and include them on the proposal budget. PIs may also include any waived F&A costs as University cost sharing in proposals. (For the Stanford policy on waivers, see Research Policy Handbook 3.10, Indirect Cost Waivers.)

      For contracts sponsored by the US Department of Defense (DOD), PIs may cost share the costs associated with the rate differential between the capped and uncapped F&A cost rates. Please contact the Cost and Management Analysis office for the rate differential between the current negotiated capped rate and the uncapped rate.

      The accounting system is not capable of tracking cost-shared F&A costs; they will not appear in the expenditure statements. The Office of Sponsored Research will calculate the cost-shared F&A costs based on information from the awarded budget and the accounting system for reporting purposes.

5. EXPENDITURES NOT ELIGIBLE FOR COST SHARING
   

   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. costs designated as unallowable for a particular sponsored project
   3. salary dollars above a regulatory cap, e.g., NIH
   4. salary dollars for effort above 90%  (95% for Research Faculty) for those faculty with an appointment of less than 12 months
   5. University facilities such as laboratory space. PIs 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."
   6. University utilities
   7. depreciation on government-funded equipment
   8. Facilities and Administrative costs in excess of the 26% administrative cap, except for DOD contract.

   In addition, cost sharing may not be proposed where the sponsor has explicitly prohibited it (e.g., National Science Foundation).

6. SOURCE OF FUNDS FOR COST-SHARED EXPENDITURES
   

   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 both parties. Funds for cost-shared expenditures are typically identified from among gift, endowment income, operating budget (except in the School of Medicine), or other department designated funds.

7. OVERDRAFTS
   

   After the end of the project performance period, when unanticipated project expenses result in more charges to a sponsored account than were funded, the amount of the overdraft must be included in the University’s modified total direct cost base for calculation of the F&A rate.  An overdraft does not represent cost sharing but is accounted for in the same manner.

8. REDUCTION IN COST SHARING
   

   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 the University's committed cost sharing or to both sponsor and University resource contributions on a pro rata basis. Otherwise, the sponsor's share is reduced and the University’s entire cost sharing commitment must be met. The PI or the PI's departmental or research administrator must consult with the Office of Sponsored Research before the sponsor is contacted.

9. REPORTING COST SHARING
   

   The Office of Sponsored Research is responsible for providing information to sponsoring agencies that demonstrate the University has fulfilled the cost sharing commitments that it made as a condition of receiving external sponsorship.  An overdraft in not considered cost sharing and is not reported to a sponsor.