Under 2 CFR 200.1, cost sharing or matching means the portion of project costs not paid by federal funds or contributions (unless otherwise authorized by federal statute). While sponsors sometimes require matching to leverage federal investments, 2 CFR 200.306 places strict rules on when cost sharing may be considered in merit review, what expenses qualify, and how committed cost share must be documented and tracked.
The Three Regulatory Categories of Cost Sharing
| Category | How it arises | Tracked and auditable as a binding commitment? |
|---|---|---|
| Mandatory cost sharing | Required by statute or explicitly required in the Notice of Funding Opportunity (NOFO) as a condition of eligibility. | Yes. Must be quantified in the budget, tracked in institutional accounting records, and reported on the SF-425. |
| Voluntary committed cost sharing | Not required by the sponsor, but quantified and pledged by the applicant in the proposal budget or budget justification and incorporated into the award. | Yes. Once pledged and incorporated into the award, it becomes a binding, auditable commitment. |
| Voluntary uncommitted cost sharing | Faculty or senior researcher effort (or other institutional support) that is over and above what was committed and budgeted for in a sponsored agreement. | No. Under 2 CFR 200.306(k), voluntary uncommitted cost sharing is not tracked for sponsor reporting and must be excluded from F&A rate calculations. |
Note that under 2 CFR 200.306(a), voluntary committed cost sharing is not expected under federal research proposals. It cannot be used as a factor during the merit review of applications or proposals, but may be considered if it is both in accordance with federal awarding agency regulations and specified in a notice of funding opportunity (for example, NSF generally prohibits voluntary committed cost sharing in proposals and allows only mandatory cost sharing when explicitly required in a program solicitation).
Criteria for Allowable Cost Sharing (2 CFR 200.306(b))
For any cash or third-party in-kind contribution to be accepted as part of the recipient's cost sharing under a federal award, 2 CFR 200.306(b) requires that the contribution satisfies all seven criteria:
- Verifiable from the recipient's or subrecipient's records;
- Not included as contributions for any other Federal award;
- Necessary and reasonable for accomplishment of project or program objectives;
- Allowable under Subpart E (Cost Principles) of 2 CFR Part 200;
- Not paid by the Federal Government under another Federal award, except where the federal statute authorizing a program specifically provides that federal funds made available for such program can be applied to matching or cost sharing requirements of other federal programs;
- Provided for in the approved budget when required by the federal agency; and
- Conform to other applicable provisions of 2 CFR Part 200, as applicable.
Because of Criterion 4 (Allowable under Subpart E), salary above a statutory cap—such as salary exceeding the NIH Executive Level II salary cap—cannot be used to meet a mandatory or voluntary committed cost-sharing requirement. The portion of an investigator's institutional base salary above the statutory cap is an unallowable cost under the award; while the institution pays that difference from non-federal institutional funds, it cannot be counted toward a required cost-sharing obligation.
Unrecovered Indirect Costs (F&A) as Cost Sharing (2 CFR 200.306(c))
Under 2 CFR 200.306(c), unrecovered indirect costs—the difference between the amount charged to the federal award and the amount which could have been charged to the federal award under the recipient's potential negotiated indirect cost rate—may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency.
When calculating unrecovered F&A, apply the rate difference only to the eligible indirect cost base (such as MTDC) rather than total direct costs when exclusions like equipment or subaward amounts over $50,000 are present:
$$\text{Unrecovered F&A on Sponsor Directs} = \text{Eligible MTDC Base} \times (\text{Negotiated F&A Rate} - \text{Sponsor-Capped Rate})$$
Plus, if the institution also contributes allowable direct cost share that belongs to the MTDC base, the foregone F&A on those contributed direct costs may also qualify if approved by the sponsor.
Cost-Sharing Math: Sponsor Share vs. Total Project Costs
Always check whether a solicitation states the matching requirement as a percentage of the federal award amount or as a percentage of total project costs.
Case 1: Match stated as a percentage of the Federal share
If a sponsor awards $500,000 and requires a 25% match of the federal share (a 4:1 federal-to-non-federal ratio):
$$\text{Required Cost Share} = $500,000 \times 0.25 = $125,000$$
$$\text{Total Project Cost} = $500,000 + $125,000 = $625,000$$
Case 2: Match stated as a percentage of Total Project Costs
If a sponsor caps its federal share at $500,000 and requires that the recipient provide 20% of Total Project Costs, the $500,000 federal ceiling represents the remaining 80% ($1 - 0.20 = 0.80$) of total project costs:
$$\text{Total Project Cost} = \frac{$500,000}{1 - 0.20} = \frac{$500,000}{0.80} = $625,000$$
$$\text{Required Cost Share} = $625,000 - $500,000 = $125,000$$
You can verify both ways in the interactive Ceiling Back-Out, Cost Share & Burn Rate Calculator.
Valuation and Timing Rules to Remember
- Third-party in-kind contributions (2 CFR 200.306(d)–(j)): Services donated by third parties must be valued at rates consistent with those paid for similar work in the recipient's organization (or in the labor market if the recipient does not employ similar skills), and donated supplies or property must be valued at no more than fair market value at the time of the donation.
- Timing of cost-share expenditures: Cost-sharing expenditures must be incurred during the approved period of performance (or within an authorized pre-award cost window where allowable under the award) and verified in the institution's accounting system before reporting on SF-425 Line 10j.