Cost Sharing

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Policy Number:
UW-4012
Responsible Office:
Research and Sponsored Programs

University Policy

Rationale/​Purpose:

This policy was created to:

  • Comply with the university’s obligations under the federal Office of Management and Budget’s regulations for cost-sharing and other relevant sponsor requirements.
  • Provide clear direction to faculty and staff for determining cost sharing in proposals.
  • Promote the best possible alignment between faculty and staff activity and funding sources so as to enhance research efforts at UW–Madison.
  • Establish expectations for tracking, monitoring, and recording cost-sharing by the university.

As one of the nation’s leading research institutions, UW–Madison recognizes the importance of providing good stewardship of institutional and extramural funds. The university’s stewardship includes the responsibility for complying with federal requirements for proposing, managing, and documenting sponsored activities.

Support for the faculty’s research goals is critical to the success of the university. The purpose of this policy is to foster excellence in research by promoting successful support for research activities through institutional investments in sponsored projects. Cost-sharing activities are important at many stages in a research program:

  • Proposing the research goals and the funding to support them
  • Establishing the obligations of the university in regard to the project budget and expenditures
  • Charging salary and other items of expense for the project
  • Managing the sources of funds in keeping with federal requirements
  • Monitoring the university’s commitments to the project
  • Documenting project expenditures and the funding for project expenses
Definitions:
Cost sharing
The portion of the total costs of a sponsored project that is borne by UW rather than the sponsor.
Cost sharing commitment
An obligation by the university to contribute to the total costs of a sponsored project by providing goods or services at no cost to the sponsor or a cash contribution toward a project expense (such as for the purchase of equipment).

Types of Cost Sharing

Committed cost sharing
Includes mandatory cost sharing and voluntary committed cost sharing, as established on a project-by-project basis for sponsored awards.
Institutional cost sharing
Cost sharing that is required by federal statute and satisfied in the aggregate across a number of awards, rather than with project-by-project commitments. In the past, awards from both the National Institutes of Health (NIH) and the National Science Foundation (NSF) were subject to institutional cost sharing. Currently, NIH and NSF are not issuing new awards with institutional cost sharing requirements.
Mandatory cost sharing
Cost sharing that is required by the sponsor as a condition for proposal submission and award acceptance.
Matching
For the purpose of this policy, this term is synonymous with cost-sharing.
Voluntary committed cost sharing

Cost sharing that is offered in a proposal’s budget but not required by the sponsor as a condition of proposal submission. Once offered by the institution and agreed to by the sponsor, it becomes an obligation the university must fulfill.

Voluntary committed cost sharing also can occur when there are changes to the sources that pay for committed effort. For example, an investigator commits 30% effort to an award and intends to charge 30% of their salary to that award. Subsequently, the investigator decides to charge only 20% of their salary to the award. This can occur for a variety of reasons. The result is 10% voluntary committed cost sharing, even though neither the proposal nor the award document indicated an explicit cost-sharing commitment.

Voluntary uncommitted cost sharing
Cost sharing that is over and above what is committed and budgeted for in a sponsored research agreement. It is neither pledged explicitly in the proposal nor stated in the award documents, but it occurs in the course of executing a project, primarily when an individual expends more effort on the project than their commitment requires. This type of cost sharing, or "extra effort," is above the level agreed to as part of the award and is not required to be documented, tracked, or reported. It is not included in the organized research base for the university's facilities and administrative rate, nor is it subject to effort reporting requirements.

Types of Expenses that Can Be Cost Shared

Third-party costs
Expenses borne by a party external to the university, usually to meet a mandatory sponsor requirement. The third party may be a subrecipient. The expenses can include:
  • Volunteer services
  • Employee salaries and fringe benefits for non-UW personnel
  • Donated supplies
  • Donated space, buildings, or land
  • Donated or loaned equipment
UW non-payroll costs
Allowable sponsored project expenses as defined by 2 CFR 200, Subpart E and paid by the university, other than salaries and the associated fringe benefits. These can include:
  • The purchase price of equipment acquired by the UW
  • Supplies
  • Travel  
  • Tuition or tuition remission
  • F&A not earned on cost-shared direct expenses
  • Unrecovered F&A expenses due to a waived or lowered F&A rate for the sponsored agreement
UW payroll costs
Salaries paid by the university, and the associated fringe benefits, for UW faculty and staff who devote effort to sponsored projects.
UW zero-dollar appointee effort
Effort expended on a sponsored project by an individual who has a UW appointment but receives no compensation from the university. In the absence of a mandatory sponsor requirement, this is voluntary committed cost sharing. From a UW accounting standpoint, this is a third-party cost. Types of personnel for whom this can occur include:
  • Emeritus professors who receive no UW compensation.
  • Howard Hughes Medical Institute investigators.
  • UW faculty members whose compensation is paid directly by the U.S. Department of Agriculture.

Methods of Cost Sharing

Direct costs funded through institutional support

In-kind or cash contributions toward a sponsored project's direct costs, supported by University of Wisconsin–Madison funds.

An In-kind contribution is an item of cost for which institutional support is already in place, such as investigator effort; no new cash outlay is required. The most common form of in-kind contribution occurs when salary and fringe benefits paid by the university are committed to a specific sponsored project. By contrast, a cash contribution is a new, incremental cost such as for equipment, travel, or additional staff necessary to conduct the sponsored project, and for which a new funding source must be identified.

Direct costs funded with third-party cash contributions

Cash contributions from third parties external to the university. Funds from the UW Foundation, the Wisconsin Alumni Research Foundation (WARF), and other state and private organizations may be used to pay the direct costs for a sponsored project.

With this method of cost sharing, the external organization provides a cash contribution to the university, and the cash is deposited into a UW account. This account becomes the funding source for project expenses. All of the associated financial transactions are well represented in the university's accounting systems, making this a relatively easy method to track.

Third-party in-kind contributions
Non-cash contributions from third parties external to the university. Instead of cash, the third party provides goods or services. This can include donated space, donated buildings or land, donated supplies, donated or loaned equipment, volunteer effort, or the paid effort of employees from an outside organization. The goods or services must directly benefit and be specifically identifiable to the project or program to which they are contributed.
Indirect costs

Facilities and administrative costs that are offered to meet a cost-sharing requirement. This can occur in two types of circumstances. First, every direct cost has its associated facilities and administrative cost. When a direct cost is cost shared, the associated indirect cost can (and typically should) be considered part of the university's cost-sharing commitment.

Second, some sponsored project proposals use a facilities and administrative rate that is lower than the university's standard rate. The difference between the diminished facilities and administrative recovery under the proposal's lowered rate and the recovery that would occur with the standard rate may be offered to meet a cost-sharing requirement with the permission of the sponsor.

Scope:

All faculty and staff who engage in or propose to engage in sponsored projects; all federal and nonfederal sponsored projects.

Policy:

It is the policy of the UW–Madison that all researchers who engage in sponsored projects will comply with university policies and sponsoring agency regulations regarding the proposing, charging, and reporting of cost-sharing funds on those projects. The university’s policy on cost sharing is applicable to both federal and non-federal sponsored projects.

Generally, the university’s policy is to minimize institutional and third-party cost sharing on sponsored projects. Cost sharing may be allowed when it is mandated by the sponsoring agency or when it is necessary to reflect accurately the resources that must be expended to accomplish the project objectives. It must be noted as well that most cost-sharing resources are supplied by the department, school, or college. In some instances, a school or college may create requirements in addition to this policy regarding cost sharing. Approval of voluntary committed cost sharing rests with the dean's and director's office.

Cost sharing occurs when the institution redirects its resources to support a specific sponsored project beyond the funding level provided by the sponsor. In some cases cost sharing allows the institution to stretch scarce resources. For example, by using cost sharing to match sponsor funds, UW may be able to purchase large, complex pieces of equipment or construct new research facilities. In those examples, UW leverages institutional funds by bringing in sponsored funds to pay part of the costs of the purchase or construction. In other instances, however, the reallocation of funds from institutional activities to a sponsored project can have a detrimental effect on the programmatic, administrative and financial capabilities of the researcher and the University. The consequences of cost-sharing commitments include:

  • Reducing the flexibility of researchers to conduct other research by obligating their effort to specific projects.
  • Increasing the requirements for capturing, monitoring, and documenting for audit all commitments and expenditures of cost-shared funds.
  • Decreasing the university’s recovery of indirect costs (facilities and administrative costs) by the addition of cost sharing to the research base.
Procedure:

Complete information about the University’s procedures for cost sharing can be found in the document titled Guidelines for Cost Sharing. This document is available on the RSP web site at: RSP Cost Sharing

Related UW-Madison Policies:
Related UW–Madison Documents, Web Pages, or Other Resources:
External References:

Policy Administration

Approval Authority:
Associate Vice Chancellor for Research Administration, Director Research and Sponsored Programs
Policy Manager:
Associate Director, Research Financial Services
Contact:
Policy & Planning Analyst -- Jennifer Rodis, RODIS@RSP.WISC.EDU, (608) 890-2538
Associate Vice Chancellor for Research Administration -- Mark Sweet, MASWEET@RSP.WISC.EDU, (608) 265-9252
RSP -- Cost Share Team, costshare@rsp.wisc.edu
Associate Director, Research Financial Services -- Angie Johnson, angie.johnson@rsp.wisc.edu, (608) 890-3147
Effective Date:
10-21-2010
Date Issued:
10-21-2010
Revised Dates:

Not Applicable

Reviewed Dates:

12/1/2016

Retrieved:
01-17-2025 23:07:56