2. Appendix A_B.docx.pdf

PIA-FOA-21-AFRL-0001

Appendix A – Cost Share Information

I. Cost Sharing or Cost Matching

The terms “cost sharing” and “cost matching” are often used synonymously. In accordance with 2 CFR 200.306 both of the terms in the titles specific to regulations applicable to cost sharing. The Government almost always uses the term “cost sharing,” as it conveys the concept that non-federal share is calculated as a percentage of the Total Project Cost.

II. What Qualifies For Cost Sharing

While it is not possible to explain what specifically qualifies for cost sharing in one or even a couple of sentences, in general, if a cost is allowable under the cost principles applicable to the organization incurring the cost and is eligible for reimbursement under an Government grant or cooperative agreement, then it is allowable as cost share. Conversely, if the cost is not allowable under the cost principles and not eligible for reimbursement, then it is not allowable as cost share. In addition, costs may not be counted as cost share if they are paid by the federal government under another award unless authorized by federal statute to be used for cost sharing.

The rules associated with what is allowable as cost share are specific to the type of organization that is receiving funds under the grant or cooperative agreement, though are generally the same for all types of entities. The specific rules applicable to:

CFR Part 200 Subpart E - Cost Principles for all other non-federal entities https://www.ecfr.gov/

DOD R&D General Terms and Conditions, (March 2021) https://www.onr.navy.mil/work-with-us/manage-your-award/manage-grant-award/grants-terms-conditions ; and

FAR Part 31 for For-Profit entities (48 CFR Part 31) https://www.acquisition.gov/far/part-31

In addition to the regulations referenced above, other factors may also come into play such as timing of donations and length of the project period. For example, the value of ten years of donated maintenance on a project that has a project period of five years would not be fully allowable as cost share. Only the value for the five years of donated maintenance that corresponds to the project period is allowable and may be counted as cost share.

Additionally, Government generally does not allow pre-award costs for either cost share or reimbursement when these costs precede the signing of the appropriation bill that funds the award.

III. General Cost Sharing Rules on a Government Award

1. Cash Cost Share – encompasses all contributions to the project made by the recipient or sub-recipient(s), for costs incurred and paid for during the project. This includes when an organization pays for personnel, supplies, equipment for their own company with organizational resources. If the item or service is reimbursed for, it is cash cost share. All cost share items must be necessary to the performance of the project.

https://www.ecfr.gov/cgi-bin/text-idx?node=2:1.1.2.2.1.5&rgn=div6 https://www.onr.navy.mil/work-with-us/manage-your-award/manage-grant-award/grants-terms-conditions https://www.onr.navy.mil/work-with-us/manage-your-award/manage-grant-award/grants-terms-conditions https://www.acquisition.gov/far/part-31

• Cash contributions include, but are not limited to: personnel costs, fringe costs, supply and equipment costs, indirect costs, and other direct costs.

2. In-Kind Cost Share – encompasses all contributions to the project made by the recipient or sub-recipient(s) that do not involve a payment or reimbursement and represent donated items or services. In-Kind cost share items include volunteer personnel hours, donated existing equipment, donated existing supplies. The cash value and calculations thereof for all In-Kind cost share items must be justified and explained in the Cost Share section of the project Budget Justification. All cost share items must be necessary to the performance of the project. If questions exist, consult your government contact before filling out the In-Kind cost share section of the Budget Justification.

• In-kind contributions are those where a value of the contribution can be readily determined, verified and justified but where no actual cash is transacted in securing the good or service comprising the contribution. Allowable in-kind contributions include, but are not limited to: the donation of volunteer time or the donation of space or use of equipment.

3. Funds from other federal sources MAY NOT be counted as cost share. This prohibition includes Government sub-recipients. Non-federal sources include any source not originally derived from federal funds. Cost sharing commitment letters from sub-recipients must be provided with the original application.

4. Fee or profit, including foregone fee or profit, are not allowable as project costs (including cost share) under any resulting award. The project may only incur those costs that are allowable and allocable to the project (including cost share) as determined in accordance with the applicable cost principles prescribed in 2 CFR Part 200 Subpart E - Cost Principles for all other non-federal entities, DOD R&D General Terms and Conditions (2021), and FAR Part 31 for For-Profit entities.

IV. Government Financial Assistance Rules

As stated above, the rules associated with what is allowable cost share are generally the same for all types of organizations. Following are the rules found to be common, but again, the specifics are contained in the regulations and cost principles specific to the type of entity:

(A) Acceptable contributions. All contributions, including cash contributions and third party in-kind contributions, must be accepted as part of the prime recipient's cost sharing if such contributions meet all of the following criteria:

(1) They are verifiable from the recipient's records.

(2) They are not included as contributions for any other federally-assisted project or program.

(3) They are necessary and reasonable for the proper and efficient accomplishment of project or program objectives.

(4) They are allowable under the cost principles applicable to the type of entity incurring the cost as follows:

a. For-profit organizations. Allowability of costs incurred by for-profit organizations and those nonprofit organizations listed in Attachment C to OMB Circular A–122 is determined in accordance with the for-profit cost principles in 48 CFR Part 31 in the FAR, except that patent prosecution costs are not allowable unless specifically authorized in the award document. (v) Commercial Organizations.

FAR Subpart 31.2—Contracts with Commercial Organizations; and

b. Other types of organizations. For all other non-federal entities, allowability of costs is determined in accordance with 2 CFR Part 200 Subpart E, and DOD R&D General Terms and Conditions (2021).

(5) They are not paid by the federal government under another award unless authorized by federal statute to be used for cost sharing or matching.

(6) They are provided for in the approved budget.

(B) Valuing and documenting contributions

(1) Valuing recipient's property or services of recipient's employees. Values are established in accordance with the applicable cost principles, which mean that amounts chargeable to the project are determined on the basis of costs incurred.

For real property or equipment used on the project, the cost principles authorize depreciation or use charges. The full value of the item may be applied when the item will be consumed in the performance of the award or fully depreciated by the end of the award. In cases where the full value of a donated capital asset is to be applied as cost sharing or matching, that full value must be the lesser or the following:

a. The certified value of the remaining life of the property recorded in the recipient's accounting records at the time of donation; or

b. The current fair market value. If there is sufficient justification, the Contracting Officer may approve the use of the current fair market value of the donated property, even if it exceeds the certified value at the time of donation to the project. The Contracting Officer may accept the use of any reasonable basis for determining the fair market value of the property.

(2) Valuing services of others' employees. If an employer other than the recipient furnishes the services of an employee, those services are valued at the employee's regular rate of pay, provided these services are for the same skill level for which the employee is normally paid.

(3) Valuing volunteer services. Volunteer services furnished by professional and technical personnel, consultants, and other skilled and unskilled labor may be counted as cost sharing or matching if the service is an integral and necessary part of an approved project or program. Rates for volunteer services must be consistent with those paid for similar work in the recipient's organization. In those markets in which the required skills are not found in the recipient organization, rates must be consistent with those paid for similar work in the labor market in which the recipient competes for the kind of services involved. In either case, paid fringe benefits that are reasonable, allowable, and allocable may be included in the valuation.

(4) Valuing property donated by third parties.

a. Donated supplies may include such items as office supplies or laboratory supplies.

Value assessed to donated supplies included in the cost sharing or matching share must be reasonable and must not exceed the fair market value of the property at the time of the donation.

b. Normally only depreciation or use charges for equipment and buildings may be applied. However, the fair rental charges for land and the full value of equipment or other capital assets may be allowed, when they will be consumed in the performance of the award or fully depreciated by the end of the award, provided that the Contracting Officer has approved the charges. When use charges are applied, values must be determined in accordance with the usual accounting policies of the recipient, with the following qualifications:

i. The value of donated space must not exceed the fair rental value of comparable space as established by an independent appraisal of comparable space and facilities in a privately-owned building in the same locality.

ii. The value of loaned equipment must not exceed its fair rental value.

(5) Documentation. The following requirements pertain to the recipient's supporting records for in-kind contributions from third parties:

a. Volunteer services must be documented and, to the extent feasible, supported by the same methods used by the recipient for its own employees.

b. The basis for determining the valuation for personal services and property must be documented.

V. Responsibility

The prime Recipient is solely responsible for managing cost share contributions and enforcing cost share obligation assumed by sub-recipients, sub-awards and/or other related agreements.

(A) Cost Share Allocation

The Prime Recipient is free to determine how best to allocate the cost share requirement. Cost share may be provided by the prime recipient, sub-recipients, or third parties (entities that do not have a role in performing the scope of work). The amount contributed by individual contributors may vary, as long as the cost share requirement for the project as a whole is met.

(B) Cost Share Types and Allowability

Cost share may be provided by the prime recipient, sub-recipients, or third parties (entities that do not have a role in performing the scope of work). Vendors/contractors may not provide cost share. Any partial donation of goods or services is considered a discount and is not allowable.

The prime recipient may not use the following sources to meet its cost share obligations including, but not limited to:

Revenues or royalties from the prospective operation of an activity beyond the project period;

Proceeds from the prospective sale of an asset of an activity;

Federal funding or property (e.g., federal grants, equipment owned by the federal government);

or

Expenditures that were reimbursed under a separate federal program.

The Recipient may not use the same cash or in-kind contributions to meet cost share requirements for more than one project or program.

Cost share contributions must be specified in the project budget, verifiable from the prime recipient’s records, and necessary and reasonable for proper and efficient accomplishment of the project. As all sources of cost share are considered part of total project cost, the cost share dollars will be scrutinized under the same federal regulations as federal dollars to the project. Every cost share contribution must be reviewed and approved in advance by the Contracting Officer and incorporated into the project budget before the expenditures are incurred.

(C) Cost Share Verification

Recipients are required to provide written assurance of their proposed cost share contributions in their

Full Applications. Upon selection for award negotiations, applicants are required to provide additional information and documentation regarding their cost share contributions.

(D) Cost Share Contributions by FFRDCs

Because FFRDCs are funded by the federal government, costs incurred by FFRDCs generally may not be used to meet the cost share requirement. FFRDCs may contribute cost share only if the contributions are paid directly from a non-federal source.

Applicants are encouraged to refer to 2 CFR Part 200 Subpart E - Cost Principles for all other non-federal entities, DOD R&D General Terms and Conditions, and FAR Part 31 for For-Profit entities for additional cost sharing information.

Appendix B – Sample Cost Share Calculation For Blended

Cost Share Percentage

The following example shows the math for calculating required cost share for a project with $2,000,000 in federal funds with four tasks requiring different non-federal cost share percentages:

Task Proposed Federal

Share

Federal Share % Recipient Share %

Task 1 (R&D) $1,000,000 80% 20%

Task 2 (R&D) $500,000 80% 20%

Task 3 (Demonstration) $400,000 50% 50%

Task 4 (Outreach) $100,000 100% 0%

Federal share ($) divided by federal share (%) = Task Cost

Each task must be calculated individually as follows:

Task 1 $1,000,000 divided by 80% = $1,250,000 (Task1 Cost) Task 1 Cost minus federal share = non-federal share

$1,250,000 - $1,000,000 = $250,000 (non-federal share)

Task 2 $500,000 divided 80% = $625,000 (Task 2 Cost) Task 2 Cost minus federal share = non-federal share

$625,000 - $500,000 = $125,000 (non-federal share)

Task 3 $400,000 / 50% = $800,000 (Task 3 Cost) Task 3 Cost minus federal share = non-federal share $800,000 - $400,000 = $400,000 (non-federal share)

Task 4 Federal share = $100,000 Non-federal cost share is not mandated for outreach = $0 (non-federal share)

The calculation may then be completed as follows:

Tasks $ Federal

Share

% Federal

Share

$ Non-Federal

Share

% Non-Federal

Share

Total Project

Cost

Task 1 $1,000,000 80% $250,000 20% $1,250,000

Task 2 $500,000 80% $125,000 20% $625,000

Task 3 $400,000 50% $400,000 50% $800,000

Task 4 $100,000 100% $0 0% $100,000

Totals $2,000,000 $775,000 $2,775,000

Blended Cost Share % Non-federal share ($775,000) divided by Total Project Cost ($2,775,000) = 27.9% (non-federal) Federal share ($2,000,000) divided by Total Project Cost ($2,775,000) = 72.1% (federal)