Cost Sharing

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Fiscal policy 210• UT has a fiscal policy for cost

sharing• Other universities also have this• Cost sharing requirements are very

common in sponsored projects– F&A cost sharing– Direct cost sharing

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Reasons for fiscal policy• To ensure compliance with federal

costing & cost sharing requirements as set forth in Uniform Guidance.

• To establish consistent procedures for recording cost share expenditures in the university’s accounting and effort certification systems for sponsored projects

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Definitions• Cost sharing is the portion of total

project costs of a sponsored agreement that is not paid by the sponsoring agency

• Matching is another common term used to describe cost sharing

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Types of cost sharing• Mandatory Cost Sharing• Voluntary Committed Cost Sharing• Voluntary Uncommitted Cost

Sharing

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Mandatory cost sharing• Mandatory Cost Sharing

– This is cost sharing that is required either by statute or by administrative regulation

– The requirement for such cost participation is explicitly set forth in project announcements or guidelines issued by the sponsor, and is a requirement for eligibility to participate in the project and will be specifically identified within the university’s proposal

• For example, State of TN agencies normally cap F&A at 15%of total direct costs

– Whenever it is possible or permissible to do so, grant and contract proposals should reflect mandatory cost sharing as a percentage of total costs rather than as an allocation of specific direct costs

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Voluntary committedcost sharing

• Voluntary Committed Cost Sharing– This is cost sharing that is not required by the

sponsor, but which is included voluntarily in the university’s proposal to the sponsor

– Once the sponsor has accepted the proposed cost share, the university is then obligated to meet the cost sharing amount

• For example, voluntary committed cost sharing would be when a principal investigator commits to spend 15% effort on the project but does not expect the sponsor to provide funding to cover these costs

• In this case, the 15% effort on the project was not a requirement for proposal submission in the RFP, but was included at the discretion of the PI (or other project personnel) in an attempt to leverage the proposal

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Voluntary committedcost sharing

• Uniform Guidance Change

– As of December 26, 2014, with the implementation of the OMB Uniform Guidance, Voluntary committed cost sharing is not expected nor considered on proposals.

– Section 200.306 Cost Sharing or Matching

– Voluntary Committed Cost Sharing is only solicited for research proposals when required by regulation and transparent in the notice of funding opportunity

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Voluntary uncommittedcost sharing

• Voluntary Uncommitted Cost Sharing– This is cost sharing that is neither mandatory nor

voluntary committed– It represents contributions by the university to a

sponsored project that were not required by the awarding sponsor and were not volunteered in the university’s proposal to the sponsor

• Normally occurs during the progress of the work– Voluntary uncommitted cost sharing is not reported

back to the sponsor• For example, voluntary uncommitted cost sharing

occurs when the principal investigator’s effort is greater than what was committed to the sponsored project

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Criteria• Cost sharing must be identifiable and verifiable in the

university’s official accounting records• Expenditures must be necessary and reasonable for

proper and efficient accomplishments of project or program objectives

• Expenditures must be allowable and allocable under the applicable cost principles

• Expenditures must not be included as cost sharing for any other project or program

• Cost sharing expenditures may not be from funds supported by the federal government under another award, except where authorized by federal statute to be used for cost sharing

• Costs are described in the approved budget and/or terms of the sponsored agreement when required by the awarding sponsor

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Examples of costsharing expenditures

• Any potential direct cost that may be used as cost sharing must also qualify as a direct expense on the project and not be an expense that would normally be included in the F&A costs– Examples of normally allowable cost sharing

• Faculty, staff, or student salaries & related staff benefits• Laboratory supplies• F&A costs

– F&A associated with the direct cost share expenditures– Unrecovered F&A– Caution: Not all F&A is allowable as cost sharing. Prior

approval from the sponsor is required.• Third party contributions

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Unallowable costsharing expenditures

• Cost sharing sources that come from other federally sponsored projects that have not obtained prior approval from both federal sponsors involved

• Expenditures that are normally included in the University’s F&A rate

• Expenditures that were incurred outside the award period

• Expenditures that are considered to be outside the scope of the project

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Pre-award considerations• When a proposal is submitted for review with

the campus / unit research office, all cost share will be included in the budget narrative as well as the budget

– The proposal is signed by the Principal Investigator and Department Head to commit the cost sharing resources

• The campus / unit research office will review the budget to ensure compliance with Uniform Guidance.

• When a project is awarded with an amount different from the proposed budget, adjustments must be made to the budget and cost share amount

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Post-award accounting• All UT contributed cost sharing

expenditures must be recorded on a WBS element under the Project Definition for the sponsored project

• Upon receipt of either a fully executed award or Advance WBS Element Request Form, the campus / unit business office will establish the project and WBS element(s) in IRIS depending on the cost sharing requirements

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Two methods• Single WBS element

– This is the simplest method• Companion WBS element

– More complicated method, but more precise

– Sometimes called “sister” account

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Single WBS Element• All project expenditures (including cost sharing

expenditures) are posted to one WBS element• Cost sharing will be recorded via a settlement

rule or manually to the appropriate cost center or in rare cases, a gift fund– GL code 544400 for automated direct cost sharing– GL code 444400 for manual direct cost sharing– GL code 501990 for F&A cost sharing

• Typically, this method will be used to record unrecovered F&A costs or used to record cost share that is a set percentage of the total project costs

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Companion WBS Element• More than one WBS element will be

created for the project• One WBS element will be used to record

sponsor related expenditures while another WBS element will be used to capture cost sharing expenditures

• At the end of each period, the costs on the cost sharing WBSE element will be settled to an appropriate cost center or gift fund

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Companion method

Project DefinitionR011024009

WBS ElementR011024009

(sponsor costs)

WBS ElementR011024010

(UT costs)

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Complications• Departments must split charges

correctly between 2 WBS Elements• Obligated amount on CJ20N = zero• Depending upon the way the WBS

Element is set up, the settlement entry at the end of the month may use secondary cost elements (544400 and 501990) or the original cost elements.– Can make it difficult to determine the actual

amount of cost sharing that was done (line items net to zero)

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CJ20N• The

attributes on CJ20N indicate that the WBS Element is a companion or cost sharing WBS Element

Wrong? This is a cost sharing WBSE!

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Settlement rule

• The settlement rule on CJ20N controls what will be settled, how much, how, and where

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Allocation structure• The allocation

structure attribute determines how the settlement will be recorded– 544400 or original

cost elements

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How to report• Use CJI3 to

get expenditures but exclude settlement– Document

type does not equal blank

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Effort certification• Any salaries that are claimed as

cost sharing must be supported by the effort certification system– For example, if 25% of Dr. Brown’s

time is voluntary, committed cost sharing, then the effort certification should show 25% effort expended on the WBS element(s) for the sponsored project.

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Responsibilities• The PI has primary

responsibility for ensuring that cost sharing expenditures are recorded on the project WBSE in a timely manner in accordance with Uniform Guidance.– Department bookkeeper,

Department head, campus / unit research & business offices should assist the PI

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Third-party contributions• Any cost sharing from a third party source must

be included in the proposal • Third-party contributions offered as cost sharing

require a commitment letter on company letterhead signed by an individual who is in a position to commit the in-kind contribution– The cost sharing criteria is the same for the third party

as for UT – Unmet cost sharing by third party will then become

the responsibility of the Principal Investigator and his/her department

– For contributions other than cash, see slide #27 for valuation methods

– After-the-fact reporting to the university will be necessary

• See next slide

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Documentation requirements

• After-the-fact reporting to the university will be necessary– Because these expenditures will never appear in the

University’s accounting system, it is the Principal Investigator’s responsibility to obtain an after the fact documentation of the cost sharing

– The cost share documentation should include the expense categories and amounts to date of the cost share expenditures and signature from the third party contributor

– This documentation must be forwarded to the appropriate Campus Business Office to file in the University’s official record

– It should be noted that this is subject to an audit.

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Valuation of contributions• These guidelines

should be used whenever a third party donates goods or services other than cash that will be used as cost sharing

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Training classes• 1 Overview of Accounting for Sponsored Projects• 2 OMB Circulars & Cost Accounting Standards• 3 Understanding F&A Costs• 4 Direct Costing• 5 Cost Transfers & Closeout• 6 Cost Sharing• 7 Subcontract Monitoring• 8 Advanced Topics• 9 Invoicing, Reporting & Cash Receipts• 10 Sponsored Projects Reports in IRIS• 11 Business Ethics for Sponsored Projects• 12 Schedule of Final Charges (SFC)

Sponsored Projects Accounting “Certification”

• The Modules listed as Training Classes related to Sponsored Projects can also be taken as a Certification.

• In order to gain a Certification in Sponsored Projects Accounting, you must take the training class and pass a quiz associated with the training module.

• Trainings toward the Certification can be obtained through HR training courses, Blackboard, or In-House training (upon departmental request)

• If taking the training through HR for the Certification you will need to take the quiz. Quiz’s are located in the Sponsored Projects Accounting project section in Blackboard.

• You must be registered as a participant within this project in Blackboard to gain access.

• To be setup in Blackboard contact Jay Taylor, Financial Compliance Officer, SPA @vtaylor@utk.edu or 974-0952.

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RAOR Meetings• ROAR meetings are held on the 3rd Wed. of each month

between 10-11am.

• Please consider attending these meetings. Each meeting has a specific topic and the meetings are open forum discussion. That means you should bring all your questions based on the topic being presented or just come to provide feedback about your experiences with others based on their questions.

• Also, the topics are chosen by topics/concerns supplied by attendees. The ROAR Committee would love to hear your topic requests.

• These meetings will give valuable information for you to take back to

your department!

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