Policies & Procedures


Section: C&G
Part: POL
Statement No.: 4.8
Date: 12/12/01
University of North Carolina - General Administration
Administrative Policies and Procedures Manual
Title: Cost Sharing

1. Definitions

    a) Cost Sharing is the portion of total project costs not borne by the sponsor agency. Other terms used include matching, third party, and in-kind contributions.

    b) Mandatory Cost Sharing is cost sharing that is mandated by the sponsoring agency. This can be in the form of a specified dollar amount or a certain percentage of total costs (i.e. EPA requires 5%).

    c) Required or Committed Cost Sharing is cost sharing that has been included in the proposal and accepted by the sponsor regardless of whether it was mandatory or voluntary. The amount included in the proposal becomes part of the legal requirements of the contract or grant.

2. Post-Award Cost Sharing Issues

    a) The UNC Time and Effort Reporting System (TERS) is the only federally approved method of documenting effort on a project for monthly employees. Cost sharing should be documented when the Project Director and other UNC employees spend a significant amount of time on sponsored projects that is not reimbursed by the sponsor. This is true even if their time was not included in the proposal or award agreement as cost sharing (voluntary). Significant effort should be determined based on a review of the individual facts and circumstances of each sponsored project. This judgment would normally be based on the percentage of time an individual will spend on the project and the resulting contribution made to the project.

    b) Since the definition of significant is determined by individual project review, it is difficult to establish a set percentage to use as a guideline when determining whether effort is significant or not. Historically, 5% or greater has been considered significant. however, the project review could prove that a percentage less than 5% is significant for that particular project. For example, some federal projects require prior approval when the Principal Investigator has not been working on the project consecutively for three months or more. In this case, 1% would be considered significant and the effort would need to be documented in TERS unless prior approval is obtained from the agency.

    c) What is considered significant is ultimately left up to the judgment of the Project Director. However, there are certain circumstances when effort must be documented in TERS. If there will be any direct charges associated with an individual (for example travel), effort for this individual should be documented either as a direct charge to the project or cost shared. If the salary dollars are needed to meet cost sharing commitments or if it is necessary to document levels of effort as committed in the proposal, the cost sharing must be documented in TERS regardless of the percentage of time spent on the project. In these special circumstances, effort cannot be considered "insignificant" and thus omitted from TERS.

    d) The only exception is situations where travel for a large skilled labor pool is needed for isolated instances of work. The labor pool would need to be individuals with specific and specialized skills. The nature of the work and skills required are such that it would be cost prohibitive to hire outside UNC. The work should be infrequent, should be of short duration and should not take time away from the employees normal work assignments. An example would be a project that required a group of student volunteers to host some activity at a remote site. The students are not paid from salary or wages from grant funds, but are provided with travel support from grant funds. Travel can be paid to the student volunteers in these circumstances even though the effort is insignificant and not documented in TERS. In these situations labor should be documented on a log, which lists the employee name, social security number, dates worked, hours worked, project number and a brief description of the work. This documentation should be kept in the account file maintained by the work unit and available upon request under an audit situation.

    e) Federal regulations require that significant cost sharing, regardless of whether it was required by the sponsored agreement, be documented to ensure accurate financial reporting and regulatory compliance in the development of UNC's F & A cost rates. Cost sharing is a significant factor in the calculation of the F & A cost rates. Failure to document and report cost sharing could result in inaccurate F & A cost rates and the refund of F & A cost revenues.

    f) Cost sharing may become a requirement through reductions in award amounts (as compared to what was requested in a proposal) unless comparable reductions are made in the scope or objective of the work. The reasons for reductions in award amounts should be clearly documented during negotiations with sponsors to avoid unplanned or unnecessary cost sharing. Examples of reasons for a reduction in award amount include original cost estimate was too high, the scope or objective of the proposal was reduced, or the sponsor wants UNC to bear more of the project cost. Sponsored Programs will work with units to minimize cost sharing as a requirement through reductions in award amounts.

    g) Cost sharing may also be required to maintain the committed level of effort on sponsored projects when rebudgeting results in significant decreases in salaries of the Project Director or other personnel funded from the project that could impact the outcome of the work.

3. Applicable Regulations

UNC cost sharing must meet the following criteria in order to be allowable:

    a) Cost sharing must be verifiable from UNC records.

    b) Expenditures documented as cost sharing must be necessary and reasonable for the proper and efficient accomplishment of project objectives.

    c) Expenditures documented as cost sharing must be the types of charges that are allowable according to federal cost principles (See Statement No. 4.4).

    d) Cost sharing cannot be used or reported more than one time. If cost sharing benefits more than one project, it should be prorated in an equitable manner among the projects (e.g., based on % of each project's cost to total combined project costs).

    e) Unless otherwise authorized, expenditures by the federal government under other agreements may not be used as cost sharing for federal projects.

    f) Mandatory cost sharing must be disclosed in approved budgets when required by the agency.

    g) Cost Sharing must be incurred during the award period.

For documentation and reporting purposes, UNC has classified cost sharing into the following categories.


The effort of UNC employees for whom UNC will fund salaries and related fringe benefits for the time that they work on a sponsored project. The work unit should obtain a certified Time and Effort Plan/Certification Form for each employee who will be working on but not paid from a project, within 60 days of receipt of a new award or continuation/ renewal. The employee and Project Director will review and certify the cost sharing established by the TERS Form.

The Time and Effort Plan/Certification Form must be used to establish cost sharing percentages (regardless of the level of involvement) in the effort reporting system for:

    a. Significant amounts of time spent on projects beyond the award requirements.

    b. Cost sharing performed in order to maintain committed levels of effort on sponsored projects.

    c. Cost sharing performed in order to meet committed dollar amounts or % of award amounts.

    d. Any award where there will be direct charges associated with an individual (travel, tuition, etc.), unless the exception discussed under "Post-Award Cost Sharing Issues" above can be met.

Non-Salary Modified Total Direct Costs (MTDC)

This includes supplies, travel, subcontracts and other MTDC costs, which UNC will fund. Documentation such as purchase orders, use logs, vendor invoices, journal vouchers, payment authorizations, travel authorizations and travel reimbursements should be maintained by the work unit.

Other Contracts and Grants

In some cases, cost sharing requirements may be met through expenditures on other contract and grant accounts. When this type of cost sharing is used, the accounts must be identified by the work unit. If less than total expenditures of the other contract or grant will be used to meet cost sharing requirements, object codes must also be provided. Based on account numbers and object codes provided by the work unit, actual charges documented in FRS will be used to support this category of cost sharing.

For other contracts and grants to qualify as allowable cost sharing, the technical relationship between the projects must be established. The technical relationship to the project requiring cost sharing can be established by information cited in the other contract/grant proposal linking the work of the projects or by a certification from the Unit Director stating they have reviewed the other contract/grant and determined it to be technically related to the project requiring cost sharing. This memo should be provided to Sponsored Programs.

Special Note: In general you cannot cost share one federal contract or grant against another federal contract or grant. In order to cost share federal dollars against other federal dollars you must receive approval from both federal sponsors. This may be done by clearly disclosing the nature of the cost sharing in the proposals. If it has not been disclosed in the proposal, written approval must be obtained from the sponsor (follow the normal prior approval process as outlined in Statement 4.6).


Subcontractors who have agreed, as part of their contract with UNC, to participate in our cost sharing requirements make up this category of cost sharing. A standard clause should be included in subcontract agreements citing the subcontractor's cost sharing and reporting responsibilities. Because subcontractors' cost sharing will never appear in UNC's accounting system, it is important to obtain this information from them periodically. Their documentation of actual cost sharing to-date should be reported by expenditure category (salaries, fringes, equipment, their F & A costs, etc.). Copies of cost sharing documentation obtained from subcontractors must be provided to the Division of Finance.

Third Party/Other

Cost sharing by a third party is not identifiable in UNC's financial system. This type of cost sharing must be reviewed to ensure that it is allowable according to UNC's agreement with the sponsor and that prior approval for this type of cost sharing has been obtained from the sponsor when necessary. In some cases, federal regulations will govern the valuation of third party contributions. Contact Sponsored Programs to discuss allowability. Documentation provided by third parties should identify cost sharing by category (salaries, fringes, equipment, etc.) and the value of each. Copies of cost sharing documentation obtained from third-party and other sources must be provided to the work unit.

Facilities and Administrative Costs

F & A costs may be calculated and claimed as cost sharing, if not prohibited by the sponsor, on overhead-bearing direct costs that are allowable and documented as cost sharing. No documentation by the work unit, other than that required for direct cost sharing, is required.

Unallowable Cost Sharing

Cost sharing must meet the same criteria as direct costs. Cost sharing must be:

  • Reasonable

  • Allocable

  • Timely

  • Allowable

  • Necessary

In addition to specific costs which are unallowable according to Federal OMB Circular A-87 and are highlighted in UNC Administrative Procedures Manual, Statement 4.4, the following types of cost sharing are unallowable:

Federal to federal

Federal appropriations and contracts and grants funded directly or indirectly through non-federal sponsors by the federal government are not allowable as cost sharing for another federal project unless the source of cost sharing was explicitly disclosed in both proposals and accepted as cost sharing by the federal agencies or written approval was obtained from both federal sponsors. Federal contracts and grants may be used as cost sharing on any non-federal contract or grant unless prohibited by either sponsor.

Expenditures included in F & A rate

Costs that are recovered through UNC's federally approved F & A cost rates, such as costs associated with the administration of Sponsored Programs and the Division of Finance are not allowable as cost sharing. Questions regarding expenditures that are recovered through F & A cost rates should be directed to Sponsored Programs or the Division of Finance.

Double counting

Cost sharing can only be committed and reported as cost sharing once. If cost sharing expenditures relate to two or more projects, the expenditures should be prorated in an equitable manner among the projects so that, in total, it is only used and reported once.

Expenditures incurred prior to award

Expenditure transactions that have already taken place in a period prior to a project's begin date are not normally eligible as cost sharing. For example, "cost sharing" the PI's effort during the previous summer for an award with a project begin date of October 1 would not be eligible as cost sharing. If equipment purchases or space renovations included as part of a proposal have already been completed, these may not qualify as cost sharing. Depending on the agency, the terminology used and the particular situation, each of these cases would require a review by the Division of Finance to determine if the expenditures would be allowable by the sponsor.

Non-Compliance with Cost Sharing Requirements

Failure to meet cost sharing obligations or to adequately document cost sharing can result in cost disallowances by sponsors. It is the responsibility of the Project Director and the work unit administrative officers to ensure UNC compliance with cost sharing regulations and procedures.