Establishes procedures to meet government requirements to report cost sharing to sponsors. It also reflects the July 15, 1993 revisions to OMB Circular A-21 regarding the definition of University Research. Modified to provide clarification and streamline the process. Updated in December 1999 to incorporate revisions to policy on charging for administrative and technical expenses, and to reflect changes in the accounting treatment for cost sharing.

INTRODUCTION

The following document comprises Stanford University's policy on cost sharing and the procedure for monitoring project-by-project cost sharing and reporting such cost sharing to sponsoring agencies. This policy is effective for awards received on or after September 1, 1994. The policy was developed for the following purposes:
- To provide guidance regarding the circumstances in which cost sharing is permitted by the University, including what kind of services, expenditures, or assets may be cost shared.
- To provide information to the University community regarding the contractual, financial, and administrative implications that result from the commitment to cost share.
- To establish procedures which give the University the ability to provide information to sponsoring agencies which demonstrates that the University has fulfilled any cost sharing commitments it has made as a condition of obtaining external sponsorship.
- To establish procedures for recording cost-shared expenditures in the University's accounting system in order to segregate cost sharing for inclusion in the University Research portion of the Organized Research Modified Total Direct Cost (MTDC) base, in response to the July 15, 1993 revision to OMB Circular A-21 (A-21), Cost Principles for Higher Education, regarding the classification of University Research.
DEFINITION OF PROJECT-BY-PROJECT COST SHARING

Cost sharing represents that portion of the total project costs of a sponsored agreement borne by the University, rather than by the sponsor. Cost sharing of direct expenditures represents a redirection of departmental or school resources from teaching or other departmental and school activities to support sponsored agreements.

Mandatory cost sharing is required by the sponsor as a condition of obtaining an award. It must be included or a proposal will receive no consideration by the sponsor. Voluntary cost sharing represents resources offered by Stanford when not a specific sponsor requirement. In either case, when an award is received in which cost sharing (voluntary or mandatory) was proposed, the cost sharing becomes a binding commitment which the University must provide as part of the performance of the sponsored agreement.

Committed cost sharing included in Organized Research agreements becomes a component of University Research. Refer to the University policy entitled Classification of Sponsored, University, and Departmental Research, Research Policy Handbook Document 3.4.

Requirements for inclusion of cost sharing in grants and cooperative agreements are listed in OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals and Other Non-Profit Organizations (Attachment A contains a summary of federal requirements in OMB A-110).
DEFINITION OF INSTITUTIONAL COST SHARING

In contrast to project-by-project cost sharing, "institutional cost sharing," which is required by some sponsors (e.g., NSF), is not accounted for at a detailed level. Institutional cost sharing is a requirement of some unsolicited proposals whereby the University commits that it will use some of its own resources for related research. This commitment is made at the aggregate level between the sponsor and the University. This approach allows the University greater flexibility by being able to share a greater percentage on some projects and not share at all on others. In most cases departmental research meets this requirement and no special accounting or tracking is needed. It is important to note, therefore, that since departments have no responsibility to account for institutional cost sharing, the remainder of this policy does not apply if institutional cost sharing is the sole form of cost sharing on a project. Contact the Office of Sponsored Research with any questions related to institutional cost sharing.
THE COST SHARING COMMITMENT

When a Principal Investigator (PI) proposes and the University agrees to cost share University resources, the University is required to provide the stated resources in the performance of the sponsored agreement. Considering the administrative requirements and responsibilities inherent in the cost sharing commitment, the PI, departmental and school administrators should weigh the cost effectiveness and the expected benefits of each cost sharing commitment, prior to making such commitments.

Implicit in the Universityis commitment to cost share is the PI's agreement to ensure that:
1. funds are provided for cost-shared direct costs.
2. verification of the cost sharing commitment is provided at the time the proposal is submitted, via the SU-42. The SU-42 should indicate whether the cost sharing offer is mandatory or voluntary.
3. the Cost Sharing PTA Attribute Setup Request (see Attachment B, [ downloadable file]) with attached budget, indicating the source of cost sharing funds or a guarantee account, is completed upon receipt of the award and submitted to the Office of Sponsored Research (OSR).
4. cost-shared expenses for each project are accounted for in separate University accounts as discussed in Section 9.
5. allowable costs are timely and accurately charged to the appropriate cost sharing account.
6. expenditures on cost sharing accounts are certified (see Section 9).
7. records for cost sharing accounts are retained for the same period as the records for related sponsored agreement.
Note: The tracking, reporting, and certifying of cost sharing are subject to audit.
WHAT EXPENDITURES CAN BE COST SHARED?

To provide the most flexibility and to best support the project it is highly recommended that the cost sharing be proposed as a lump sum amount.

Cost sharing may consist of allowable direct or indirect cost resources.
1. Direct Costs
  1. FACULTY, STUDENT, OR STAFF EFFORT
    
    It may be appropriate to contribute faculty, student, or staff effort to the performance of a sponsored agreement. The commitment to provide such support, binds the University to contribute the effort and record the associated expenditures including fringe benefits in separate cost sharing accounts.
    
    Cost sharing effort is included in the calculation of total committed effort. Although proposals could be in circulation at any given time which exceed 100% of a faculty, student, or staff's effort, care must be taken at the time of each award to ensure that effort is not committed more than the appointment allows for concurrent periods of time.
    
    Note also that significant decreases (25% or more for grants or an amount specified by the sponsor for contracts) in the effort by key personnel to a project require coordination with and/or advance approval by a federal sponsor; non-federal sponsors may have similar requirements. This applies to changes in committed levels of effort to be cost shared on the project, as well as to that which will be charged directly to the project (refer to section 3 of Research Policy Handbook 3.1, Fiscal Responsibilities of Principal Investigators).
  2. EQUIPMENT
    
    Equipment cannot be offered as cost sharing unless the receipt of the award is contingent upon such cost-sharing.
    
    PIs should take care in preparing proposals for sponsored agreements not to commit the use of Stanford-owned or government-owned equipment as cost sharing, but rather to characterize the equipment as "available for the performance of the sponsored agreement at no direct cost to the project."
    
    Proposals which include the acquisition of special-purpose equipment as a direct cost may include an offer of University funds to pay for all or part of the cost of such equipment. These proposals may be for equipment or instrumentation grants, where the purpose of the grant is to buy equipment and we are required to share the cost with the sponsor, or research-oriented grants or contracts where the purchase of equipment required for the research is an allowable expense included in the proposal and award. Purchase and acquisition must occur during the period of performance. The portion of the purchase price paid by the University must be charged directly to a cost sharing account in support of the award.
  3. OTHER DIRECT COSTS
    
    Allowable direct costs other than salaries, fringe benefits, or equipment may be committed by the PI as cost sharing on the proposal budget. The following are examples of other direct costs that may be cost shared:
    - travel expenses
    - items that do not meet the capitalization threshold
    - laboratory supplies
  4. ADMINISTRATIVE EXPENSES
    Proposed administrative expenses that meet the criteria for direct charging in Stanfordis policy Charging for Administrative and Technical Expenses, Research Policy Handbook 3.6, and that are disapproved by the sponsor yet still incurred (scope of work is not reduced), must be accounted for as cost sharing. The portion of the expense that is directly utilized and benefits the project must be charged to a cost sharing account in support of the award. The amount cost shared may be less than the amount proposed.
    
    See Section 7 of this policy for expenses that may not be offered as cost sharing.
2. Facilities and Administrative Costs (Indirect Costs)
  
  Facilities and Administrative (F&A) costs are real costs of conducting instruction and research. These F&A costs do not disappear simply because a sponsor refuses to pay for them; the University must fund any F&A costs that have not been reimbursed. When direct costs are cost shared, the F&A costs associated with the direct costs are AUTOMATICALLY cost shared. PIs may take advantage of the automatic cost sharing of these costs, and include them on the proposal budget. PIs may also include any waived F&A costs as University cost sharing in proposals. (For the Stanford policy on waivers, see Research Policy Handbook 3.10, Indirect Cost Waivers.)
  
  For contracts sponsored by the US Department of Defense (DOD), pursuant to Public Law 103-160, section 841, issued on November 30, 1993, Universities are allowed to negotiate uncapped Facilities and Administrative cost rates for application to DOD contracts only. At the present time, Stanford has chosen to forego the opportunity to charge these agreements an uncapped F&A cost rate, thereby waiving some F&A costs. Since the University has chosen to waive the F&A costs above the 26% administrative cap for DOD contracts, PIs may also cost share the costs associated with the rate differential between the capped and uncapped F&A cost rates. Please contact the Cost and Management Analysis office for the rate differential between the current negotiated capped rate and the uncapped rate.
  
  The accounting system is not capable of tracking cost-shared F&A costs; they will not appear in the expenditure statements. The Office of Sponsored Research will calculate the cost-shared F&A costs based on information from the awarded budget and the accounting system for reporting purposes (see Section 11 of this policy).
SOURCE OF FUNDS FOR COST-SHARED EXPENDITURES

Identifying and providing resources for cost sharing of direct costs (including equipment) is always the responsibility of the PI. The PI may NOT utilize funds from another federal award as the source of cost sharing, except as authorized by statute. The PI may utilize funds from non-federal awards as the source of cost sharing, ONLY when specifically allowed by the non-federal sponsor. Funds for cost-shared expenditures are typically identified from among gift, endowment income, operating budget, or other department designated funds.
EXPENDITURES NOT ELIGIBLE FOR COST SHARING

The following expenses cannot be offered as cost sharing commitments in sponsored project proposals:
1. Facilities and Administrative costs in excess of the 26% administrative cap, except for DOD contracts.
2. unallowable costs as defined in A-21, section J.
3. salary dollars above a regulatory cap, e.g., NIH.
4. University facilities such as laboratory space. PIs should take care in preparing proposals for sponsored agreements not to commit use of facilities as cost sharing, but rather to characterize the facilities as "available for the performance of the sponsored agreement at no direct cost to the project."
5. depreciation on government-funded equipment.
OVERDRAFTS

After the end of the project performance period, when unanticipated project expenses result in more charges to a sponsored account than were funded, the amount of the overdraft is accounted for in the same manner as cost sharing. These costs represent project costs being borne by Stanford, and therefore, must be accounted for in the same manner as cost sharing. This treatment is required in Fiscal Responsibilities of Principal Investigators, document 3.1 in the Research Policy Handbook. However, these costs cannot be considered cost sharing for purposes of fulfilling a cost sharing commitment because overdrafts are considered unallowable under A-21.

When such overdrafts occur, the department is responsible for notifying the Office of Sponsored Research, who will open a cost sharing account and document the source of funds (as identified by the department) to cover the amount of the overdraft. The department then initiates the necessary expense transfer, including documentation of the nature of the expenses, appropriateness of the charge to the project, and other reasons for the transfer. This does not apply to temporary overdrafts that are the result of accounting errors, or mistakes in the coding of charges.

Note: Cost Sharing PTA Attribute Setup Requests are not necessary for overdrafts.
ACCOUNTING AND SPACE INVENTORY TREATMENT
NOTE: Information in this section refers to Stanford's legacy accounting system. This system was converted on September 1, 2003. For questions about accounting, contact your Research Accountant in the Office of Sponsored Research, or the appropriate individual in either Engineering Research Administration or the Medical School Research Management Group. Additional information is available on the Oracle Financials page (Fingate).

Cost sharing accounts are managed in the same manner as project accounts, as defined in section 2 of Research Policy Handbook 3.1, Fiscal Responsibilities of Principal Investigators. Review and certification requirements applicable to project accounts apply also to cost sharing accounts.
1. Cost Sharing on Organized Research Agreements
  1. ACCOUNTING TREATMENT
    1. Cost sharing expenditures are always recorded in cost sharing accounts, independent of funding source.
    2. Cost sharing accounts are in division fund class 127 (Continuing Projects) with budget and expense tied to project period and carried over the fiscal year end (corresponding to the primary sponsored agreement).
    3. All cost sharing expenses must be fully funded by the fiscal year end. It is preferable to fund the cost sharing account when it is established.
    4. Cost sharing activities/accounts should be budgeted so that the committed cost sharing appears in the Expense Control column of the Monthly Expenditure Statement. This is done using the SUFIN Expense Control application in PRISM (the "SU-39" entry form).
  2. SPACE INVENTORY CODING
    
    University space is coded to Organized Research in the University's Space Inventory System, consistent with the coding of expenditures in the accounting system.
2. Cost Sharing on Sponsored Instruction or Other Sponsored Activities
  1. ACCOUNTING TREATMENT
    1. The cost sharing account function should follow the sponsored project function in division fund class 127 (Continuing Projects) with budget and expense tied to the project period and carried over fiscal year end (corresponding to the primary sponsored agreement).
    2. All cost sharing expenses must be funded by the fiscal year end. It is preferable to fund the cost sharing account when it is established.
  2. SPACE INVENTORY CODING
    
    University Space is coded to Instruction or to Other Sponsored Activities, depending on the coding of the space associated with the primary sponsored agreement.
REDUCTION IN COST SHARING

The actual effort and other costs required to accomplish the goals of a sponsored project might differ from what was proposed and awarded. The total costs could decrease due to changes in programmatic needs. When there is cost sharing on such projects, the sponsor may need to be consulted to determine if the reduction can be applied to either the University's committed cost sharing or to both sponsor and University resource contributions on a pro rata basis. Otherwise, the sponsor's share is reduced and the Universityis entire cost sharing commitment must be met. The PI or the PI's departmental or research administrator must consult with the Office of Sponsored Research before the sponsor is contacted.
REPORTING COST SHARING

When required, Stanford University is responsible for providing information to sponsoring agencies that demonstrates the University has fulfilled the cost sharing commitments that it made as a condition of receiving external sponsorship. The Office of Sponsored Research is responsible for providing cost sharing reports to sponsors when required by the sponsor. In order to do so, departments must provide the necessary information on the Cost Sharing PTA Attribute Setup Request [ downloadable file] at the time of the award, and follow the accounting procedures described in the previous sections of this policy. In addition, during the financial close-out of a sponsored project, cost sharing commitments will be reviewed.