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Cost Sharing Policy
Effective Date: March 1, 2011
Revision Date: none
PDF Version: Cost Sharing Policy
Cost sharing refers to the expenditure of University or third-party resources beyond the amount funded by the sponsor to support the scope of work defined by a sponsored (federal or non-federal) award. Harvard strongly discourages cost sharing unless such a commitment is required by the sponsor. When there is documented evidence that the commitment is necessary to ensure the competitiveness of the Harvard proposal, however, school officials may allow these commitments by approving them in writing and managing the committed resources.
In cases where commitments of University resources are made on sponsored programs, the Office for Sponsored Programs (OSP) and the committing schools will ensure that the allocation of costs of these resources is consistent with University costing policies governing sponsored program expenditures and indirect cost calculations. In addition, cost-shared expenses will be verifiable from Harvard's records, as required by OMB Circular A-110 Section C23a(1), regardless of the reporting requirements of the sponsor..
Harvard discourages cost-sharing commitments because such commitments burden Harvard with financial and administrative responsibilities, while limiting the academic and programmatic flexibility that University resources are intended to provide. Cost sharing requires the maintenance of detailed records that are subject to audit, and cost sharing has the potential to affect negotiated indirect cost rates adversely.
Who Must Comply
All Harvard University schools, local units, and University-wide initiatives whose federal sponsored programs are included in the three Harvard University indirect cost rate agreements.
Expenses incurred to meet cost-sharing commitments bring the same accounting, financial, legal, and regulatory burdens as costs on Harvard sponsored programs. Cost-shared expenses must be in compliance with the following:
- University sponsored programs expenditure policies
- Any additional terms specified by the sponsor
- Costing policies disclosed and approved by the federal government in Harvard's Disclosure Statements (DS-2s)
- U.S. Federal agency guidelines or non-federal program guidelines, as appropriate.
- U.S. Office of Management and Budget (OMB) Circular A-21, Cost Principles for Educational Institutions.
- U.S. Office of Management and Budget Circular (OMB) A-110, Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations, especially Section C.23, which requires that cost sharing funds be a) verifiable from the University's records, b) not used to cost-share on more than one project, c) necessary and reasonable for the sponsored program, d) not obtained from another federal sponsored project, and e) included in the budget for the sponsored project.
SOURCES OF COST-SHARING CONTRIBUTIONS
University Cost Sharing
Occurs when project costs are not borne by the sponsor, but are paid from University funds using gift, endowment, or other non-sponsored sources, as represented by the 000001- 054999 and 300000-699999 fund ranges.
Sponsored Cost Sharing
Occurs when cost-sharing commitments are met using existing (usually non-federal) sponsored grants and contracts at Harvard, as represented by the fund range 200000-299999. These types of commitments must be tracked manually by the department managing the award. Note that expenditures on a federal sponsored project may not be used to meet cost sharing requirements on other federally funded projects.
Note: In certain cases, sponsored cost-sharing commitments are presented in proposals to sponsors before those cost-sharing funds are secured from the sponsors. In these cases, the principal investigator has anticipated that funding for project costs will be awarded to Harvard by a different sponsored program to share in supporting the proposed scope of work. Proposers should be aware that, in the event that the anticipated cost-sharing funds are not available, the school, department, or center will be responsible for arranging an alternate source of the required cost sharing. If no alternative cost sharing can be identified and the sponsor is unwilling to renegotiate the terms of the cost share, Harvard will be forced to refuse the award.
TYPES OF EXPENDITURES THAT CAN BE COST-SHARED
Cost-sharing commitments can be met using direct or indirect costs that are allowable, allocable, reasonable, and consistently accounted for by the University. Since all cost-shared expenditures must be verifiable from University records, the use of companion accounts (see Definitions section) is required for all cost-shared direct expenses that can be coded using a sponsored activity value with a non-sponsored fund value. If tracking via companion accounts is not possible, the school must track the cost sharing manually. For cases in which the determination of costs is not apparent (such as cases of donated services, buildings, or land), A-110 Section C. 23 provides guidance.
- This policy describes two broad categories of cost sharing: Section A discusses direct costs (effort, equipment, and other direct expenses) and Section B discusses indirect costs (unrecovered overhead on sponsored expenditures, overhead on cost-shared University resources, and costs normally considered indirect).
A. Direct Costs
1. Faculty Effort or Research Staff Salary
PIs can commit to expend faculty or research staff effort on a sponsored program without charging commensurate salary to the sponsored fund. Such a commitment of effort binds the University to contribute research staff or faculty time to the project and to record salary expenditures, including fringe benefits, in a manner that makes the expenditure verifiable from University records. Like all committed effort, cost-shared faculty effort must be effort-reported.
Equipment purchased with Harvard resources CANNOT ordinarily be offered as cost sharing, since the depreciation of Harvard-owned equipment is included in the University's indirect cost rates and the equipment was not purchased for use on the project. Rather than committing the use of Harvard-owned equipment as cost sharing, proposals should characterize the equipment as "available for the performance of the sponsored agreement at no direct cost to the project." If, however, the purchase of equipment is necessary for the project or the sponsor mandates the purchase of equipment, then the acquisition cost of specific equipment may be offered as cost sharing. Purchase and acquisition must occur during the period of performance of the project, and procedures must be in place to ensure that the depreciation on such equipment is not included in the indirect cost rate calculation.
3. Other direct costs
Most other costs that could be charged (allowable, allocable, reasonable, and consistently treated) to a sponsored project can be cost-shared. The following are examples of other direct costs that may be cost-shared:
- travel expenses
- laboratory supplies
- equipment items that do not meet the capitalization threshold (currently $5000)
B. Indirect Costs (Facilities and Administrative Costs)
Indirect costs may be offered in a proposal to meet cost sharing requirements imposed by the sponsor, but they are not considered to be cost sharing in any other situations. There are three ways to cost-share indirect costs. Note that none of these cost-shared indirect costs are recorded in Harvard's General Ledger - they will be calculated and reported manually by OSP.
1. Unrecovered overhead on sponsored expenditures
The amount of F&A not collected from the sponsor that could have been allocated to the direct costs paid by the sponsor of an award. Unrecovered overhead typically results from awards made by sponsors that do not pay the full negotiated F&A rate. For federal sponsors, A-110 section C.23b indicates that "Unrecovered indirect costs may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency."
2. Overhead on cost-shared University resources
The amount of F&A, calculated at the full negotiated F&A rate, that would normally have been allocated to cost-shared direct costs funded by University resources.
3. Items normally considered indirect
Costs of items that Harvard normally considers indirect (such as depreciation, administrative support, rent, etc.). For cost sharing on federal awards, costs typically deemed indirect represent a cost accounting standards (CAS) inconsistency and are therefore not allowed. For non-federal awards, however, the sponsor may allow items typically considered indirect to be offered as cost sharing.
TYPES OF EXPENDITURES THAT CANNOT BE COST-SHARED
- For cost sharing on federal awards, any costs that would not be allowed on federal sponsored awards cannot be cost-shared. Like federal direct expenditures, cost-shared costs must be allowable, allocable, reasonable, and consistently accounted for by the University. Note that there is often more flexibility with cost sharing on non-federal awards.
- Costs that are paid by the federal government cannot be used to meet cost-sharing requirements on other federal awards unless authorized by federal statute.
- Costs representing salaries over regulatory caps, such as the National Institutes of Health salary cap, cannot be used to meet a cost sharing commitment.
Principal investigators (PIs)
Responsible for representing cost sharing correctly in the budget and the scope of work for each sponsored program in accordance with University policies, and for identifying University or third-party resources to be used to meet cost-sharing commitments. Upon award, PIs are responsible for ensuring that cost-shared commitments are fulfilled and that cost-shared expenses are posted to the correct accounts.
Responsible for minimizing cost-sharing by ensuring that commitments are not made in proposals unless required by the sponsor. Departments should provide their cognizant central office (OSP for the "University Area," FOA for HMS, OFS for HSPH) with details of the account codings for cost-sharing accounts, should ensure that shared costs are incurred in the companion accounts provided to their cognizant central office, and should ensure that the same resources are not offered as cost sharing on more than one project. Since non-sponsored companion accounts are not visible to OSP financial teams, department officials should assist OSP by providing appropriate reports, as necessary. In cases of cost sharing involving F&A recovery, such as unrecovered overhead or overhead on cost-shared University resources, the department and OSP must work together since the Harvard General Ledger will not allocate F&A to non-sponsored funds. Departments should also work with their cognizant central office when costs normally considered indirect, such as rent or telephone costs, are calculated and considered as cost sharing. In the case of donated services used for cost sharing, the department is responsible for determining and documenting the value of those services for review by their cognizant central office. ["Department officials" are administrators who work closely with PIs and other administrators to manage sponsored awards. In schools without departments, these responsibilities will be fulfilled by School officials.]
Responsible for reviewing proposal narratives for cost-sharing commitments, for minimizing cost-sharing commitments, and for providing dean's approval, as required by school policy. School officials are responsible for managing the effort reporting process for committed cost sharing and for ensuring that unallowable costs, such as salaries over regulatory caps, are not counted toward cost-sharing commitments.
Cognizant central office (OSP (University Area), SPA/FOA (HMS), and OFS (HSPH))
Responsible for reviewing proposals to minimize commitments of University resources and for reviewing the appropriateness of accounts from which cost sharing has been pledged. The pre-award offices are responsible for ensuring that cost-sharing commitments are approved by responsible officials in the schools. OSP is responsible for initiating cost-sharing reporting, obtaining documentation of costs incurred to meet cost-sharing commitments, and for including cost-sharing expenses in indirect cost calculations, as appropriate.
OMB Circular A-21
OMB Circular A-110
OMB Circular A-21 January 5, 2001 "Clarification of OMB A-21 Treatment of Voluntary Uncommitted Cost Sharing and Tuition Remission Costs"
University Cost Sharing Identification, Tub/Org Approval and Reporting Form is available at ABLE.
CONTACTS AND SUBJECT MATTER EXPERTS
School financial administrators
Cost Sharing -- Project costs that are not borne by the sponsor [A-110 Subpart A Section 2(i)].
Committed Effort -- Percentage of a researcher's time that has been pledged to a project, regardless of whether the effort is funded by the sponsor or through cost sharing.
Companion Accounts -- Accounts that record cost-sharing amounts, often coded using the sponsored activity value with a non-sponsored fund value in the Harvard chart of accounts.
In-kind Cost Sharing -- Non-cash contributions of time, talent, or resources from Harvard or donated by third parties for which Harvard is responsible. Third-party in-kind contributions may be in the form of real property, equipment, supplies and other expendable property, or goods and services directly benefiting and specifically designated for the project or program.
Mandatory Cost Sharing -- Project costs that are not borne by the sponsor, but are required as a condition of the award. "Sponsor-encouraged" cost sharing not required as a condition of receiving an award does not constitute mandatory cost sharing.
Matching -- For the purposes of this Policy, "matching" is a synonym for "cost sharing".
Over-the-cap Cost Sharing -- Portion of a faculty or staff member's salary that exceeds a regulatory maximum imposed by the sponsor. Over-the-cap cost sharing must be included in the direct cost base for indirect cost calculations, and it cannot be used to meet cost-sharing commitments on sponsored programs.
Overrun Cost Sharing -- Costs incurred to complete a sponsored project that exceed the amount awarded by the sponsor. These costs must be included in the direct cost base for indirect cost calculations.
Sponsored Cost Sharing -- Costs expended from non-federal sponsored accounts, identified in the Harvard General Ledger by the fund range 200000-299999, in support of a sponsored program.
University Cost Sharing -- Costs expended from gift, endowment, or other non-sponsored accounts identified in the Harvard General Ledger by the fund ranges 000001-054999 and 300000-699999 in support of a sponsored program.
University Resources -- For the purposes of this Policy, refers to all Harvard sources that fund project costs not paid by the sponsor. University cost sharing and sponsored cost sharing (see definitions above) are two types of University resources.
Unrecovered Overhead -- F&A not collected by the University when a sponsor does not pay the full negotiated F&A rate. In some cases, unrecovered overhead may be used to fulfill a sponsor's cost-sharing requirement.
Voluntary Committed Cost Sharing -- Project costs that are not borne by the sponsor and are not required as a condition of the award, but are offered in the proposal by the PI, ordinarily in the form of contributed effort. Voluntary committed cost sharing becomes mandatory once the award is made and must be added to the direct cost research base for indirect cost calculations.
Voluntary Uncommitted Cost Sharing (also referred to as VUCS) -- Defined in OMB's January 2001 Clarification (http://www.whitehouse.gov/omb/memoranda/m01-06.html ) as university faculty (including senior researchers') expended effort that is over and above that which is committed and budgeted for in a sponsored agreement. VUCS does not include costs other than salary and fringe and is not considered to be cost sharing, either for reporting or indirect cost calculation purposes.