When a governmental award is issued to a not-for-profit, it may contain a cost-sharing or matching provision. This represents that portion of the award that will not be reimbursed by the governmental agency but must be borne by the recipient organization in order to meet the project or program objectives.
This cost sharing component may be voluntarily committed cost sharing, for instance, a set dollar amount of funds that will be contributed toward the program from organizational funds, or mandatory cost sharing explicitly required by certain federal agencies, for instance, a 75/25 split of costs between the federal agency and the recipient organization, and is typically included in the project budget. The cost-sharing component may be in the form of cash – either recipient agency cash on hand or contributions – or in-kind contributions of materials, services, etc. and must meet the following criteria:
- Must be documented and verifiable in the recipient organization’s records
- Must be necessary and reasonable for the accomplishment of the project or program and included in the budget
- Must be allowable under the cost principles section of the Uniform Administrative Requirements
- Cannot be obtained from another Federal award unless that award specifically allows the costs charged to it to be used as matching for another award
- Cannot be used as matching for more than one project or program
The valuation of in-kind cost-sharing amounts follows the not-for-profit guidance applicable to in-kind items and generally must be at the lower of the recorded value in the contributor’s accounting records or fair value at the date of donation. For donated personnel costs that are necessary for the project or program, the amount used as matching may not conform to the requirements of Generally Accepted Accounting Principles (GAAP) and would not necessarily be reflected in the GAAP financial statements. In this situation, if the amounts are recorded in the books and records of the recipient organization for Federal award purposes, they would need to be eliminated for GAAP purposes. For allocated salaries of personnel as a cost-sharing component, the value would be the combination of the employees’ regular rate of pay, allocated fringe benefits and applied indirect costs based on the approved federally negotiated indirect cost rate. Unrecovered indirect costs which are amounts that are calculated as the difference between the applied indirect cost rate in the budget and the actual federally negotiated indirect cost rate may be used as matching with prior approval from the Federal awarding agency.
Since each Federal Agency has different requirements for the match component, in addition to reviewing the Uniform Administrative Requirements, the Compliance Supplement for the respective program CFDA number can be used as additional guidance.
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If you have any questions about this not-for-profit update, please contact your WithumSmith+Brown professional, a member of WS+B’s Not-for-Profit & Education Services Group or fill in the form below.
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