Definition

Cost sharing is that portion of total project costs that are paid from sources other than the sponsor.  Typically, cost sharing is a concept that is used by some federal agencies to demonstrate to Congress and others, a recipient's willingness to share in the project's expenses.  Some agencies make a distinction between "cost sharing," "in-kind" and "matching."   Generally, all these terms refer to the share of costs not charged to the sponsor.  In some cases these terms can refer to cash contributions, donated services or facilities.   

Federal regulations regarding cost sharing are found in OMB Circular A-110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations" (A-110).  Subpart C, Section .23 of A-110 states in part;   

(a) All contributions, including cash and third party in-kind, shall be accepted as part of the recipient's cost sharing or matching when such contributions meet all of the following criteria.

  (1) Are verifiable from the recipient's records.
  (2) Are not included as contributions for any other federally assisted project or program.
  (3) Are necessary and reasonable for proper and efficient accomplishment of project or program    objectives.
  (4) Are allowable under the applicable cost principles.

(5) Are not paid by the Federal Government under another award, except where authorized by Federal statute to be used for cost sharing or matching.
(6) Are provided for in the approved budget when required by the Federal awarding agency.
(7) Conform to other provisions of this Circular, as applicable.

(b) Unrecovered indirect costs may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency... 

Subpart C, Section .23 also delineates specific rules for valuation and documentation for volunteer services, donated supplies, property, buildings, and equipment. 

 Mandatory vs. Voluntary Cost Sharing

 Mandatory cost sharing represents expenses that are paid from non-federal funds that were required by the sponsor in the project announcement, or costs that were clearly shown in the approved budget as UWO's share.  For example, a program description may indicate that sponsor funds must be matched at x% in order to be eligible for the award.

 Voluntary cost sharing includes expenses that have been contributed by UWO to the project in excess of the sponsor's requirements or those listed in the approved budget.  For example, if Professor Jones actually spent 50% of his time working on the project instead of the 20% that he pledged in the proposed budget, the excess, 30% (50% - 20%) is considered voluntary cost sharing.