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[Major revision–posted 4/11/18 (replaces 7/21/15 edition)]
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Operating Policy and Procedure

OP 65.07: Cost Sharing on Sponsored Projects

DATE: April 11, 2018

PURPOSE: The purpose of this Operating Policy/Procedure (OP) is to set forth Texas Tech University's policy for cost sharing committed on sponsored projects.

REVIEW: This OP will be reviewed in February of even-numbered years by the Managing Director of Accounting Services and the Managing Director of the Office of Research Services with substantive revisions forwarded to the Senior Associate Vice President for Research, the Vice President for Research, and the Vice President for Administration & Finance and Chief Financial Officer.

POLICY/PROCEDURE

1.  Policy Statement

Cost sharing will be proposed, approved, administered, and accounted for in accordance with federal regulations. Unless otherwise noted, federal regulations are imposed for state and privately funded sponsored projects. The policies herein apply to all committed cost share, whether mandatory or voluntarily committed. The university discourages cost sharing commitments when they are not required by the sponsor.

While particular sponsors may use other terms such as matching and in-kind, they are considered cost sharing for purposes of this policy.

2.  Definitions

a.    Cost Sharing — The portion of the total cost of an externally funded sponsored project that is not funded by the sponsor. Cost sharing is considered either committed or uncommitted.

b.    Committed Cost Sharing — A contribution to the total cost of a sponsored project that is specifically identified and described in the proposal budget and made a condition of the award. Committed cost sharing, whether mandatory or voluntary, is a binding commitment and must be accounted for in accordance with this policy.

(1)    Mandatory Cost Sharing — A contribution to the total cost of a sponsored project that is required by statute or sponsor policy as a condition of obtaining the award. Mandatory cost sharing requires documentation and is reported to the sponsor.

(2)    Voluntary Committed Cost Sharing — A contribution to the total cost of a sponsored project that is not required by the sponsor but is reflected in the proposal narrative, budget, and/or budget justification. Voluntary committed cost sharing requires documentation and is reported to the sponsor.

When a proposal with quantifiable PI effort in the narrative, budget, or budget justification is awarded, federal regulations consider such effort to be a binding commitment. If there are no corresponding salary charges to the resulting award, the committed effort is deemed to be voluntary committed cost sharing and, therefore, must be included in a cost share plan in the proposal, accounted for in a cost share fund in Banner, and certified.

c.    Voluntary Uncommitted Cost Sharing — Contributions to the project above the amount committed and budgeted for in a sponsored agreement. Uncommitted cost sharing does not require documentation or reporting and will not be accounted for.

d.    Third Party Contribution — A contribution to a sponsored project that is provided by a party other than the university or the primary sponsoring agency. Third-party contributions may be in the form of cash or non-cash (i.e., "in-kind" contributions) such as real property, equipment, supplies, and other expendable property, or goods and services directly benefitting the project.

e.    Unrecovered Facilities and Administrative (F&A) Costs — The difference between the university's full negotiated F&A rate (calculated at MTDC) and that which is reimbursed under the sponsored project. Reduced F&A may be a result of sponsor limitations or institutional waivers. Refer to OP 65.01, Facilities and Administrative Cost Recovery for additional information.

f.    Cost Share F&A – The associated indirect costs for institutional direct expensed calculated at the university's full negotiated F&A rate of MTDC, unless limited by the sponsor.

3.  Allowable Costs for Cost Sharing

Cost sharing may consist of direct and/or F&A costs and can be provided in the form of cash (institutional funds/gifts), third party contributions (cash or in-kind), program income (with prior agency/sponsor approval), and/or sponsored project funding from another non-federal sponsored agency.

a.    Charges must be allowable and allocable under federal cost principles (2 CFR Part 200 Subpart E) and the terms and conditions of the sponsored agreement. Refer to OP 65.08, Direct Charging to Sponsored Projects and Cost Share Funds, for additional guidance.

b.    Unrecovered F&A (whether limited by the sponsor or waived by the institution) and cost share F&A should be included as part of cost sharing. Federal projects require prior approval in accordance with 2 CFR 200.306(c).

c.    The use of departmental administrative expenses (2 CFR Part 200 Appendix III.B.6) for meeting cost sharing commitments must be specifically identified in the proposal narrative, budget, and/or budget justification and accepted (or not specifically disapproved) by the sponsor.

d.    All contributions, including cash and third party in-kind, must meet each of the following criteria in accordance with 2 CFR Part 200.306:

(1)    Verifiable from the recipient's records

(2)    Not included as contributions for any other federally-assisted project (i.e., the same expenditures cannot be used as cost sharing for multiple federal awards)

(3)    Necessary and reasonable for proper and efficient accomplishment of project objectives

(4)    Not paid by the federal government under another award, except where authorized by federal statute to be used for cost sharing (i.e., the source of cost sharing on a federal award cannot be another federal award)

(5)    Provided in the approved budget when required by the federal awarding agency

e.    Cost share must be incurred during the performance period of the award. Some agencies expect and/or require cost sharing to occur at the same pace as award spending.

f.    The Department of Health and Human Services (DHHS) has instituted maximum compensation levels for individuals working on their projects (i.e., salary cap). Salaries exceeding the maximum rates of pay are considered mandatory cost sharing.

4.  Source of Funds

Where there is a cost sharing commitment (mandatory or voluntary committed), the Office of Research Services (ORS) will work with the principal investigator (PI) at the proposal stage to develop the cost share budget and to identify source of funds for cost sharing. This includes sources of funding for rates of pay exceeding the DHHS maximum levels. ORS will work with Accounting Services (AS) to ensure appropriate sources are identified. Service centers and other certain funds are not allowable sources.

5.  Accounting and Reporting

a.    When projects are awarded with institutional commitments, AS will establish designated cost share FOPs and associated budgets in accordance with the proposal and award. When required by the sponsor, cost sharing reports will be prepared, submitted, and/or certified by AS.

b.    Expenditures must be recorded in the established accounts to be counted toward the cost share commitment. AS will calculate and maintain sufficient documentation of charges not recorded in the accounting system, which include:

(1)    Fringe benefits and tuition remission on state-appropriated funds

(2)    Unrecovered F&A and cost share F&A costs

(3)    Third party contributions

(4)    Other In-Kind contributions

6.  Documentation and Record Retention

a.    Documentation for non-salaried expenditures must follow the requirements outlined in OP 65.08, Direct Charging to Sponsored Projects and Cost Share Funds.

b.    Salaried cost share commitments are captured in eCRT for effort certification.

c.    Because third party contributions are not accounted for in the university's financial systems, external entities are required to submit documentation to AS.

(1)    Cash and in-kind contributions from subrecipients should be reported and documented in accordance with the subrecipient risk assessment and subaward.

(2)    For non-subrecipients, AS will establish third party cost share monitoring plans.

(3)    Cost sharing information must be certified by the third party and approved by the PI.

d.    Records will be retained for the same period as the related sponsored agreements.

7.  Monitoring

The PI has primary responsibility for ensuring charges to cost share funds are in accordance with federal regulations and the terms and conditions of the award. AS will provide additional oversight and accountability for the funds throughout the award life cycle.

If the cost share budget or source of funds deviate from the cost share plan at the proposal stage, the PI should work with AS to make necessary revisions and update accounting system accordingly.

If it becomes apparent that cost sharing commitments cannot be met, ORS may renegotiate cost sharing requirements with sponsoring agencies as necessary.

Operating Policies & Procedures