Policy for Cost Sharing on Sponsored Projects
This policy has been developed to ensure that "cost sharing" on sponsored projects is proposed, accounted for and reported in a manner consistent with the requirements set forth in federal regulations (Office of Management and Budget (OMB) Circulars A-110 and A-21), requirements of sponsoring agencies and the policies of Vanderbilt University.
DEFINITION OF ORGANIZED RESEARCH
Organized research includes all research and development activities of an institution that are separately budgeted and accounted for that requires a formal application and approval process and includes:
The Organized research base is used by Vanderbilt University for development of its Facilities and Administration (F&A, also known as indirect costs) rate. The formula for development of this rate is:
DEFINITION OF COST SHARING
Cost sharing represents that portion of the total project costs (direct or indirect) of a sponsored agreement borne by the University, rather than by the sponsor. There are three types of cost sharing that are described below.
TYPES OF COST SHARING
MANDATORY COST SHARING
Mandatory cost sharing is that portion of the University contribution to a sponsored project, which is required by the terms of the project. It must be included or a proposal will receive no consideration by the sponsor.
VOLUNTARY COST SHARING
Voluntary cost sharing represents resources offered by Vanderbilt in sponsored project proposals when not a specific sponsor requirement.
Voluntary committed cost sharing is defined as those resources that are committed and budgeted for in a sponsored agreement.
Voluntary uncommitted cost sharing is defined as university faculty effort that is over and above that which is committed and budgeted for but not charged to the sponsored agreement. Voluntary uncommitted cost sharing should not be recorded as organized research.
In a recent OMB clarification to OMB Circular A-21 there is an indication that most Federally funded research programs should have some level of committed faculty (or senior researchers) effort, either in the form of a direct charge or committed voluntary cost sharing. If this effort is in the form of cost sharing, it cannot be considered voluntary uncommitted cost sharing. This effort can be provided at any time within the fiscal year (summer months, academic year, or both). Some types of research programs such as programs for equipment and instrumentation, doctoral dissertations, and student augmentation do not require committed cost sharing. . For more information on the governments clarification on cost sharing see: http://www.vanderbilt.edu/ocga/federalr/OMB21_01.pdf.
In both mandatory and voluntary cost sharing when an award is received in which cost sharing was proposed, the cost sharing becomes a binding commitment that the University must provide as part of the performance of the sponsored project. Failure to properly record cost sharing may result in audit findings that could result in audit disallowances that have to be refunded to the appropriate sponsor and/or reduce Vanderbilt's indirect cost rate during future negotiations.
INSTITUTIONAL COST SHARING
Institutional cost sharing is a requirement of some unsolicited proposals whereby the University commits that it will use some its own resources for related research. This commitment is made at the aggregate level between the sponsor and the University. This approach allows the University greater flexibility by being able to share a greater percentage on some projects and not share at all on others. The National Science Foundation requires institutional cost sharing.
ALLOWABLE COSTS FOR COST SHARING
The obligation for cost sharing is predominately associated with Federal grants and cooperative agreements. In accordance with OMB Circular A-110, cost-sharing costs must be reasonable, allowable, allocable and meet the consistency requirements under federal cost principles (OMB circulars A-21 and A-110). In addition, the costs should be:
The cost must not include any of the following:
WHAT EXPENDITURES CAN BE COST SHARED?
Cost sharing may consist of allowable direct or indirect cost resources, subject to approval by the appropriate Dean, Director or Department Chair.
EXPENDITURES NOT ELIGIBLE FOR COST SHARING
The following expenses cannot be offered as cost sharing commitments in sponsored project proposals:
After the end of the project performance period, when unanticipated project expenses result in more allowable charges to a sponsored project than were funded, the amount of the overrun is cost sharing and should be accounted for appropriately.
When such overruns occur, the department/research unit is responsible
for notifying OCGA (University Central) or Department of Finance, Academic
& Research Enterprise (Medical Center) as to the source of funding
for the overrun.
Salary amounts in excess of the NIH salary cap (contact the appropriate sponsored program office for current amount) are considered voluntary committed cost sharing. The associated fringe benefits and indirect costs are also considered cost sharing.
CONSEQUENCES OF COST SHARING
Mandatory and voluntary committed cost sharing on sponsored research
projects is included in the Organized Research direct cost base that is
included in the calculation of the Facilities and Administration (F&A,
also known as Indirect costs) rate. An increase in the Organized Research
direct cost base results in a decrease in Vanderbilt University's F&A
rate and consequently a reduction of indirect cost revenue from sponsored
projects that is credited to the various schools and other units of the
For specific instructions on accounting treatment for cost sharing, please refer to the following web site at: http://www.vanderbilt.edu/ocga/vupolices/cost_sharing_accounting_treament.ppt.
SPACE INVENTORY CODING
University space used for mandatory and voluntary committed cost sharing for research projects is coded to Sponsored Research in the University's Space Inventory System, which should be consistent with the coding of expenditures in the accounting system.
ROLES AND RESPONSIBILITIES
DEAN'S OFFICE, ACADEMIC DEPARTMENT AND RESEARCH UNIT RESPONSIBILITY
DIVISION OF SPONSORED RESEARCH/OFFICE OF RESEARCH
COMMONLY ASKED QUESTIONS
Question: What is the relationship between the space inventory and cost sharing?
Answer: The coding of space in the University's Space Inventory System must be consistent with the coding of expenditures in the accounting system. Auditors confirm this consistent treatment during the review of the University's indirect cost proposal.
Question: If a proposal voluntarily offers cost sharing does that represent a binding commitment if the proposal is awarded?
Answer: Yes, cost sharing that is identified in the proposal represents a binding commitment if awarded, regardless of whether it is mandatory or voluntary.
Question: Can cost sharing expenses consist of expenses that are unallowable on a Federal grant/contract?
Answer: No, one of the criteria to determine if a cost sharing expenditure is appropriate is that it meets all of the allowability criteria in OMB Circular A-21. See Allowable Cost for Cost Sharing section in this policy.
Question: Should cost overruns be treated as cost sharing?
Answer: If the cost overrun consists of allowable costs and occurred because there were not sufficient funds awarded then the overrun should be treated as cost sharing.
Question: Do amounts in excess of the NIH salary cap represent cost sharing?
Answer: Yes, the NIH salary cap is a legislated cap on salary reimbursement rates and amounts in excess of the cap represent cost sharing.
Question: If a faculty member cost shares effort that occurs after working 40 hours does this need to be recorded as cost sharing?
Answer: Yes, this would be considered cost sharing; however, full time equivalent (FTE) for faculty effort is not defined in terms of a 40-hour workweek. A faculty FTE is defined as100% effort that is defined as the total of all effort performed during a defined work period regardless of the number of hours worked.