Cost Sharing Overview

1
Cost Sharing Overview

• What is Cost sharing?
• Why is it important?

2
What is cost sharing?

• The portion of sponsored program costs that are
  not borne by the sponsor.
• When effort or non-salary items such as supplies
  and equipment are funded by non-federal sources
  and contributed to a sponsored project.

3
Why is it important to report and monitor cost
sharing?

• To ensure compliance with the cost sharing level
  of effort and/or contribution UW has agreed to
  provide in the award document.
• Federal Office of Management and Budget (OMB)
  requires the reporting of mandatory and committed
  cost sharing.
• An award cant close until all mandatory pledges
  and committed cost sharing are met.

4
Why is it important to report and monitor cost
sharing? (Cont.)

• To withstand audit scrutiny.
• Federal, State, Internal.
• HHS requires UW to include cost sharing in the
  research base when the FA or indirect cost
  proposal is prepared.
• Cost sharing lowers the FA rate.

5
Types of cost sharing

• Mandatory
• Required by statute or program provision as a
  condition of the award.
• Committed (formerly known as budgeted voluntary
  and voluntary committed)
• Cost sharing quantified (often as a percentage of
  effort) in the sponsored proposal budget or
  budget justification without corresponding
  funding requested or awarded.

6
Types of cost sharing, cont.

• Salary Cap
• Required by NIH, SAMHSA, and AHRQ when total
  faculty salary exceeds the salary cap set by
  these sponsors.
• Aggregate
• Percentage of cost sharing required on all
  research projects for a given sponsor, such as
  NSF.

7
What can be used to satisfy cost sharing
commitment?

• Faculty effort
• of effort a faculty member pledges or commits
  to work on a sponsored project/budget, which is
  funded from non-Federal sources.
• Report on Faculty Effort Certification (FEC)
  form.
• Non-faculty effort
• amount of non-faculty effort spent on a
  sponsored project/budget.
• Report on BAR to GCA.

8
What can be used to satisfy cost sharing
commitment? (cont.)

• Other cost sharing
• Non-salary UW expenditures used for cost sharing,
  such as equipment, supplies, etc.
• Reported on BAR to GCA.
• Third-party cost sharing
• Cost sharing performed or donated by a
  non-University entity or personnel not paid by
  UW.

9
What can be used to satisfy cost sharing
commitment? (cont.)

• Cash Contributions, if permitted by the sponsor.
• Unrecovered FA or indirect costs
• The difference between the standard (negotiated)
  and actual FA or indirect cost rate.
• GCS approval is required to charge an FA rate
  less than those listed in GIM 13.

10
Highlights

• Cost sharing can only be quantified in the budget
  document or justification of the proposal.
• Do not quantify cost sharing in the body or
  narrative of the proposal.
• If cost sharing is quantified in the proposal
  budget, it is committed cost sharing. Committed
  cost sharing must be documented, reported, and
  tracked.
• Quantified of effort or amount shown.

11
Highlights, cont.

• If cost sharing effort is insignificant or
  incidental, do not quantify it in the proposal.
  Instead, explain what will be done or provided,
  and who will do it.
• Professor Jones will participate in the design
  of test methodologies.
• All mandatory and committed cost sharing must be
  met in order for the award to close.

12
Proposal Preparation Review

• Including Cost Sharing in the Proposal

13
Proposal Preparation and Review

• Answer question no. 11 of the GC-1
• If Mandatory provide explanation on GC-1 page 2
• The percentage of cost share required by sponsor.
• The sources of cost sharing.
• Letter of commitments from cost share providers
  (i.e. Chair, Deans, Provost, Third Party, etc.).
• Identify cost sharing info on Section B of the
  GC-1 Addendum.

14
Proposal Preparation and Review (cont.)

• If Committed Identify faculty effort by
  quarter in Section B of the GC-1 addendum.
• No Proceed without cost sharing pledge.

15
Proposal Preparation and Review (cont.)

• If a proposal is submitted to the National
  Science Foundation (NSF) with a specific cost
  sharing requirement, cost sharing must be shown
  on line M of the NSF budget Form 1030. Example
  NSF- MRI
• Cost sharing info must be provided in the GC-1
  addendum (see June 2002 revision)
• Letters of commitment must be obtained by
  providers

16
Proposal Preparation and Review (cont.)

• Use correct formula to calculate cost sharing,
  benefits, and FA (indirect) costs.
• http//www.washington.edu/research/maa/fec/cscalc.
  html
• Aggregate NSF requires 1 cost sharing in the
  aggregate by statute. Cost sharing is normally
  shown as faculty salary available from
  non-federal sources.
• Do not show cost sharing on line M of the NSF
  budget form 1030
• Cost sharing should be pledged at 1 of the
  project cost to meet the institution 1 in
  aggregate. Example 3K c/s should be pledged on
  a 300K total project cost.
• Check the aggregate box on GC-1 Addendum

17
Proposal Preparation and Review (cont.)

• Faculty time and effort should be listed in
  Section B of the GC-1 Addendum
• Include exact quarter dates when cost sharing
  will be performed for each faculty member.
• Exclude summer if no source funding is available.
• Include exact time for each faculty member.
• If faculty salary is not available, note and
  explain on the GC-1 form, and proceed without a
  cost sharing pledge.

18
Award Review

• Awards received in GCS are reviewed by the GCS
  Administrators to
• Confirm ensure cost sharing requirements
  commitments.
• On NEA (Notice to Establish Account), marked
  yes in the c/s boxes
• Provide detailed cost sharing info on NEA

19
Award Review

• Insert on NEA the faculty name, title,
  contributed effort, dollar value of salaries,
  benefits, and associated FA
• Provide Dept contact name and number on NEA to
  monitor and report c/s to GCA quarterly

20
Award Review

• GCS will issue a revised NEA for changes in
  mandatory cost sharing such as
• Change of cost sharing sources and pledges.
• Change of faculty name and change in percent of
  effort.

21
Post-Award Administration

• Award Receipt and Cost Sharing Documentation

22
Receipt of NEA

• New Accounts section receives Notice to Establish
  Account (NEA) from Grant and Contract Services
• Cost sharing Pledge documented by department on
  GC-1 Addendum
• Mandatory, committed, and aggregate

23
Award Receipt

• Coding cost share
• Mandatory - M
• Committed R
• Salary cap C
• Aggregate A

24
Cost Sharing Entered into Budget System

• Pledge Formats
• Contributed Effort (faculty and other) most
  common cost share
• Benefit and indirect cost calculations
• Time how quarters are entered

25
Cost Sharing Entered into Budget System (cont.)

• Pledge Formats
• Other cost share supplies, equipment,
  non-faculty employees
• Unrecovered indirect cost most common
  non-salary cost share
• Object code 25-99
• Calculated quarterly by GCA

26
Cost Sharing Entered into Budget System (cont.)

• Pledge Formats (continued)
• Third party cost share object code 03-99
• Documentation is very important

27
Cost Sharing Pledge On-line

• Cost share pledge on line
• Budget Driver Screen
• Departmental Responsibility
• Review for errors and ensure total agrees with
  NEA and award document
• Notify GCA if incorrect

28
Cost Sharing Documentation

• Faculty Effort Certification (FEC)
• Reviewed by MAA
• Other cost share
• Departmental Responsibility
• Submit highlighted budget activity reports (BARs)
  to New Accounts Section of GCA
• Third Party Cost Share Letter from outside
  organization
• Allowable/Unallowable

29
Cost Sharing Documentation

• GCA Responsibility
• Reviews documentation for allowability
• Notifies Department if not acceptable and
  explains why
• Reports cost sharing to departments
• Financial reports
• NSF over 500K
• Follow-up report for departments is being
  developed

30
Cost Sharing on Advances

• Attach GC-1 addendum, with cost share portion
  filled out, to advance request
• Applies to both mandatory and committed
• FECs will then be generated in a timely manner
• Send email only if changing quarter cost sharing
  will be performed or if cost sharing will occur
  during a no-cost extension
• Refer to GIM-9 for information on advance requests

31
Monitoring Cost Share

• GCA/MAA Responsibility
• Notify departments by e-mail expired budgets
• Follow up after 30 days, 60 days
• Closing procedures
• Departments Responsibility
• Submit cost share documentation on a quarterly
  basis (minimum)
• Follow up on budgets with unmet cost sharing
• Ensure that departments obligations are met

32
Consequences of Not Meeting Cost Share
Requirements

• Delay in reporting to sponsors
• Unplanned commitment of resources by
  school/college
• Potential award reduction, termination,
  suspension, disbarment

33
Sources of Information on Cost Sharing

• Grant and Contract Accounting
  www.washington.edu/research/gca/uwin/spending.html
  
• Management Accounting and Analysis
  www.washington.edu/research/maa/fec/index.html
• Grant and Contract Services www.depts.washington
  .edu/gcs/gim/gim21.html
• A-110
• www.whitehouse.gov/omb/circulars/a110/a110

34
Faculty Effort Certification

• Cost Sharing

35
Faculty Cost Sharing

• FECs are the only place where actual faculty cost
  sharing effort on grants and contracts is
  reported.

36
Award Receipt

• Codes pre-print on the FEC for Mandatory,
  Committed and Aggregate cost sharing
• Budget followed by letter code and time
• Salary cap cost sharing will not pre-print on the
  FEC
• A salary cap addendum will be attached to the FEC

37
Award Receipt

• Using the Budget Driver
• Go to Administrative Applications
• Open BGT (budget driver)
• Choose option 6 (Faculty Effort Certification)
• Choose option 3 (Cost Share Inquiry Screen)

38
Award Receipt

• View pledge for faculty
• Place 9s in the date box.
• Insert the faculty members EID number.
• Enter the budget number.
• View pledge for budget
• Place 9s in the date box.
• Leave the ID section blank.
• Insert the budget number.
• Non-faculty cost share will have 9s in the ID
  section.

39
Reporting

• Complete section 6, Cost Sharing on quarterly
  FEC
• Return to MAA by date printed on the top of the
  FEC.

40
Tracking/Department

• Make sure that a cost share source is budgeted
  from non-federal funding
• effort printed on FEC may differ from actual
  effort. Total must be met at end of
  grant/contract.
• If the PI enters zero, you will be notified to
  verify effort.
• Track each quarter to make sure the cost sharing
  is being completed

41
Tracking/MAA

• Overdue FEC reports (8 times a year)
• NIH compliance report (once a year)
• Unmet cost share report (quarterly)

42
Revisions to Cost Share

• Revisions to cost share require change in the
  online pledge in the Budget Driver
• Ensure pledge is correct on BGT before submitting
  FEC

43
Revisions to Cost Share

• Contact GCS for a revised NEA for changes in
  MANDATORY cost sharing such as
• Change of cost sharing sources and pledges
• Change of faculty name and percent of effort
• Contact New Accounts, GCA
• Change in quarter dates if within dates of the
  grant
• Change in faculty name and percent for COMMITTED
  cost sharing
• No change necessary
• Shifting cost share to another quarter where
  pledge is already entered in the BGT

44
Other Voluntary

• Other Voluntary cost sharing has been written
  in on FECs and coded O in the BGT.
• Why and how to reduce
• Extra effort above what is required by grant
• 1/5/01 OMB memoranda explains voluntary
  uncommitted cost sharing no longer needs to be
  documented or reported.
• http//www.whitehouse.gov/omb/memoranda/m01-06.htm
  l
• Do not record cost sharing after original pledge
  is met
• Place this effort in section 7, All Other
  Activities

45
Other Voluntary, cont.

• Cost sharing performed in quarter where no cost
  sharing has been entered
• If within the grant period, send email to New
  Accounts, GCA to have the quarter dates changed
• gcanew_at_u.washington.edu

46
Other Voluntary, cont.

• Change in time stated in proposal.
• With salary increases
• Faculty should increase dollars paid on budget to
  keep paid constant
• Department can re-budget
• Significant re-budgeting requires permission from
  sponsor

47
Other Voluntary, cont.

• Main PIs who are not paid on grant but want to
  record effort
• Offer description of effort without quantifying
  in proposal.
• Doesnt need to be reported on FEC.
• Report on FEC, line 7, and circle Voluntary
  Uncommitted Cost Sharing.
• Offer a Committed cost sharing.
• Requires the effort to be reported on FEC,
  tracked, and completed before award closes.

48
Other Voluntary, cont.

• Use UWP/CUMG salaries when applying for grants
• Keeps the time equal to what is offered in the
  proposal.
• Reflects SOM policy adopted in 1994.

49
When its OK to write in Budget

• If award is set up after the start date of the
  grant, pledge does not appear on the FEC
• If pledge is on BGT, write Budget on FEC
• Attach GC1 to advances so cost share can be set
  up before FEC prints
• Date verified with New Accounts, budget xx-xxxx
  has M, R or A cost share.
• Previously submitted FECs without the cost share
  information documented will need to be revised.
• If pledge is set up late on the BGT for any other
  reason, cost sharing can be entered even though
  it did not print on the FEC

50
When its OK, cont.

• Special requirements of the award (e.g. K awards)
  should be documented as Committed on FEC.
• Write budget number and R on FEC, section 6
• Attach documentation to support effort required
  by grant, e.g. FIN/screen 1/action 4.
• Future budget number, followed by R with no
  will print on FEC

51
Salary Cap Cost Sharing

• NIH, SAMHSA, AHRQ restrict amount of direct
  salary an individual can earn on their grants and
  contracts.
• effort required to be in compliance does not
  appear on FEC or BGT
• time not put into proposal or GC1 Addendum
• Plan ahead to provide a cost share source
• Salary cap addenda are attached to the FEC of
  each faculty who owes cap cost sharing

52
Salary Cap

• Salary cap cost sharing
• Effort owed to the grant as awarded, is
  calculated as a percent of the capped salary.
• Actual percent effort on the grant is calculated
  as a percent of the actual total salary.
• Example (with cap at 100,000)
• Proposed 10,000/100,000 10
• Actual 10,000/130,000 7.7
• Cost Share Owed 2.3

53
Salary Cap

• Cap cost sharing is calculated at a rate of 100
  effort
• Part-time faculty need to provide cost share
  source or keep their salary under the cap
• UWP/CUMG salary
• include when calculating cost sharing dollars.
• For NIH/SAMHSA/AHRQ awards
• If total salary (at a rate of 100) will be over
  the salary cap, provide a non-federal budget as a
  cost share source.

54
Audit

• Audit Guidelines

55
Audit Objective

• Determine whether internal controls are
  sufficient to ensure compliance with
• Federal regulations
• Sponsor policies
• University policies and procedures

56
Overall Conclusions - Departments

• Lacked understanding of cost sharing concepts and
  requirements
• Didnt meet and report cost sharing in a timely
  manner
• Contributes to late submission of final reports
  to sponsors

57
How Did We Do the Audit?(What Did We Look For)

• Internal Control Systems Evaluation
• Audit Testing
• Same Audit Methodology Used by SAO and possibly
  by NSF

58
Systems Evaluation

• Do pertinent dept. personnel have knowledge and
  understanding of regulations, policies and
  procedures (federal, sponsor, UW)?
• Did the dept. approve and plan for the commitment
  of UW resources?
• Is committed cost sharing allowed only for
  competitive reasons?

59
Systems Evaluation (cont.)

• Are proposals properly reviewed?
• Department met program requirements
• Cost sharing placed in the budget section of
  proposal
• GC-1 addendum properly completed
• Obtained documentation for third party cost
  sharing

60
Systems Evaluation (cont.)

• Is there a designated person responsible for
  ensuring
• Cost sharing requirements are being met and
  reported in a timely manner (faculty and
  non-faculty salaries and other cost sharing)?
• FECs are accurate and submitted promptly?
• Is department familiar with the Budget System and
  does it have access?
• Does the department check the accuracy of the
  cost sharing pledges in the system?

61
Systems Evaluation (cont.)

• Does the department monitor cost sharing?
• How?
• How often?
• How soon does department check that requirements
  were met and reported after award ends?
• How does department know all contributed costs
  are allowable?
• Does the department know what information to
  obtain to satisfy requirements for third party
  cost sharing?

62
Systems Evaluation (cont.)

• What assurance does department have that
  sub-recipients are monitoring cost sharing?
• What is the departments policy on NSF cost
  sharing (mandatory 1 for institution)?

63
Audit Test

• Obtained from GCA list of budgets with cost
  sharing. For those with budgets that were about
  to expire or have expired, inquired why cost
  sharing requirements have not been met.
• Obtained list of departments with late FECS and
  determined reason for delinquency.
• Reviewed supporting documentation for non-salary
  contributions for adequacy and proper valuation.

64
Audit Test (cont.)

• Determined if cost sharing was overlooked
• Not properly reflected in the GC-1 addendum?
• Not entered correctly in the budget driver?
• Compared NSF cost sharing with program
  solicitations.

65
Common Findings

• Not familiar with sponsor requirements and
  University policy (third party, NSF, etc.)
• Cost sharing in the project narrative of proposal
• Committed cost sharing continues to be included
  in proposals
• GC-1 addendums not complete or unclear
• Pledges not reviewed

66
Common Findings (cont.)

• Lack of periodic monitoring
• Wait for GCA follow-up
• Non-faculty cost sharing not submitted quarterly
  to GCA
• FECs not submitted promptly

67
Recommendations Highlights

• Be familiar with requirements and policies
• Approve and plan for cost sharing commitments
• Properly review proposals
• Verify accuracy of pledges
• Submit FECs promptly
• Monitor
• Ensure pledges are met and reported within 45
  days of expiration

68
Departments

• Departmental Responsibilities

69
Department Proposal Review

• Is cost sharing described in proposals budget
  section?
• Does cost sharing meet program requirements?

70
Department Proposal Review (cont.)

• What resources (costs not paid by proposal) are
  committed to this project?
• Faculty Effort
• Department/College/University
• Third Party
• Sub-contractor

71
Faculty Effort

• Does faculty member have effort to pledge?

72
Departmental Resources

• What is PI requesting?
• If funded, can department fulfill obligation?
• Department Chair approval required.

73
College/University Resources

• Negotiated by Chair or PI
• Approved in writing by Dean, Provost or designee

74
Third Party

• Is third party a viable partner?
• Submit letter from business office/authorized
  institutional representative confirming cost
  sharing commitment.

75
Proposal Review by Department

• Is cost sharing properly recorded on the GC-1 and
  addendum?
• Concurrences for non-faculty effort contributions.

76
Departmental Internal Controls

• Log of Cost Sharing Commitments

77
Confirm Cost Sharing

• Review Award Documents
• Review Budget Driver
• Coordinate with other units (Deans Office) if
  extra department resources required.

78
Reporting FEC

• Timely submission
• Review for accuracy
• Confirm completing cost share requirements
• If cost sharing will be completed in quarters
  other than those on budget driver, send email to
  GCANew_at_u

79
Reporting - Other

• Non Faculty salaries, equipment, services
  reported to GCA on quarterly basis
• Ensure claimed expenses are allowable
• Benefit the project
• Allocable to project

80
Reporting Third Party

• Letter signed by third-party representative
  confirming completion of cost sharing obligation

81
Budget Close

• Confirm cost share reporting is complete.

82
Cost Sharing and the FA Proposal

• How cost sharing affects the FA rate

83
How does cost sharing affect the FA or indirect
cost rate?

• UW must place cost sharing in the research base
  (denominator) when calculating the FA or
  indirect rate.
• The FA rate is calculated
• Facilities and administrative costs of org.
  research
• Direct costs of organized research (research
  base)
• Cost sharing decreases the FA rate.
• FA reimbursement is an important source of
  revenue to the University.

84
Conclusion

• Do not cost share unless required.
• If cost sharing is quantified in the proposal, it
  must be documented, reported, and tracked.
• Mandatory and committed cost sharing must be met,
  or the award will be reduced.