Understanding Cost Share: A Comprehensive Guide for the Savvy Grant Seeker

Cost share, also known as matching, refers to the portion of a project or program’s costs that aren’t funded by the primary grant or funding source. In essence, it’s the contribution – financial or in-kind – that the recipient organization or its partners make towards the total project cost. This signifies commitment and shared responsibility, often strengthening the proposal’s competitiveness and demonstrating the organization’s dedication to the project’s success. It’s a critical element to understand in the world of grants and funded projects, demanding careful planning and accurate accounting.

Deeper Dive into Cost Share

Why is Cost Share Required?

Funders often require cost share for several key reasons:

• Demonstrated Commitment: It signals to the funding agency that the applicant is invested in the project’s success, beyond merely receiving funds. It proves a “skin in the game” scenario.
• Increased Leverage: Cost share allows the funding agency’s resources to be stretched further, enabling them to support more projects with the same budget.
• Enhanced Sustainability: A cost share commitment can help ensure the project’s long-term sustainability, as the organization has already allocated resources to its continuation.
• Collaboration and Partnership: It encourages partnerships and collaborative efforts, as organizations often pool resources to meet the cost share requirement.
• Alignment of Goals: Requiring cost share helps ensure that the project aligns with the recipient organization’s strategic priorities.

Types of Cost Share

Cost share isn’t always a matter of writing a check. It can take several forms:

• Cash Match: This is the most straightforward type, where the recipient contributes actual funds to the project. These funds must be from non-federal sources unless explicitly permitted by the granting agency.
• In-Kind Contributions: These are non-cash contributions that represent the fair market value of goods or services donated to the project. Examples include donated equipment, volunteer time, facilities usage, and supplies. Calculating the fair market value of in-kind contributions is crucial for accurate reporting.
• Third-Party Contributions: Resources provided by an entity other than the grant recipient. These can be cash or in-kind and must meet the same criteria as the recipient’s cost share.
• Waived Indirect Costs: In some instances, organizations can waive a portion of their indirect costs (overhead) and count that as cost share. This is a complex area and requires careful documentation and approval.

Documenting Cost Share

Proper documentation of cost share is absolutely crucial. It’s not enough to simply claim you’re contributing; you need to provide verifiable evidence. This documentation typically includes:

• Detailed Budget: A clear budget that outlines both the grant funds requested and the cost share contributions.
• Accounting Records: Maintain accurate records of all cash contributions, including bank statements and receipts.
• Time Sheets: For in-kind contributions of labor, detailed time sheets that track the hours worked and the hourly rate of the individuals involved.
• Valuation Documentation: For donated equipment or facilities, obtain appraisals or documentation to support the fair market value assigned.
• Letters of Support: From third-party contributors, outlining the nature and value of their contributions.
• Cost Share Tracking System: Establish a robust system to track and manage all cost share contributions throughout the project’s duration.

Negotiating Cost Share

While some funding opportunities have mandatory cost share requirements, others may be negotiable. Consider these factors when discussing cost share:

• Organization’s Financial Capacity: Be realistic about your organization’s ability to meet the cost share requirement without jeopardizing other programs or operations.
• Project’s Impact: If the project has the potential for significant impact, it may be possible to negotiate a lower cost share percentage.
• Availability of Other Funding: If you have secured other funding sources for the project, highlight this to demonstrate your commitment.
• In-Kind Contribution Opportunities: Explore opportunities to maximize in-kind contributions, which can be less financially burdensome than cash matches.
• Transparency and Communication: Maintain open and honest communication with the funding agency throughout the negotiation process.

Complications and Considerations

Cost share can be complex, with potential pitfalls for the unwary. Here are a few things to keep in mind:

• Allowable Costs: Cost share must adhere to the same allowability rules as the grant funds themselves. Costs that are not allowable under the grant cannot be used as cost share.
• Timing: Cost share contributions must be made within the grant’s project period. Costs incurred before or after the project period typically do not qualify.
• Source Restrictions: Some funding agencies may have restrictions on the types of funds that can be used for cost share. Federal funds cannot typically be used as cost share for other federal grants unless specifically authorized.
• Audit Requirements: Organizations may be subject to audit requirements related to their cost share contributions. It is essential to maintain thorough and accurate documentation to support all claims.
• Unrealistic Commitments: Avoid overpromising on cost share. It’s better to propose a realistic amount that you can confidently meet.

Frequently Asked Questions (FAQs) About Cost Share

1. What happens if we don’t meet our cost share commitment?

Failure to meet your cost share commitment can have serious consequences, including reduced grant funding, suspension of the grant, or even termination of the grant agreement. Funding agencies take cost share commitments very seriously and expect recipients to fulfill their obligations. Be proactive in communicating any potential challenges and explore options for adjusting the cost share plan if necessary.

2. Can we use volunteer time as cost share?

Yes, volunteer time can be used as cost share if it directly benefits the project and meets the requirements outlined in the funding agency’s guidelines. Document the volunteer’s hours worked, their hourly rate (based on similar positions in the organization or community), and the specific tasks they performed.

3. What are the differences between cost share and matching funds?

The terms cost share and matching funds are often used interchangeably. However, some may use “matching” to specifically mean a dollar-for-dollar match. It’s always best to clarify with the funding agency what they mean when using either term.

4. Can we count indirect costs as cost share?

Sometimes. Some funding agencies allow the waiver of indirect costs as a form of cost share. This usually involves agreeing to charge a lower indirect cost rate than your organization’s approved rate. You’ll need to review the specific guidelines of the funding opportunity to determine if this is permissible.

5. How do we determine the fair market value of in-kind contributions?

The fair market value of in-kind contributions should be based on what a willing buyer would pay to a willing seller in an arm’s-length transaction. For donated equipment, obtain an appraisal or research comparable sales. For donated services, use the hourly rate typically charged for similar services in the market.

6. Can we use funds raised through fundraising events as cost share?

Generally, yes, funds raised through fundraising events can be used as cost share as long as they are not from federal sources and are used for allowable project costs. Keep detailed records of the fundraising event, the amount raised, and how the funds were used.

7. What should we do if we anticipate difficulty meeting our cost share requirements?

If you anticipate difficulty meeting your cost share requirements, immediately contact the funding agency and explain the situation. Be transparent about the challenges you are facing and explore potential solutions, such as adjusting the project budget, seeking additional funding sources, or renegotiating the cost share requirement.

8. What are some examples of allowable in-kind contributions?

Allowable in-kind contributions can include:

• Donated office space
• Donated equipment and supplies
• Volunteer time
• Professional services (e.g., legal, accounting, consulting)
• Donated advertising or marketing services

9. What is considered an unallowable cost for cost share?

Generally, unallowable costs for cost share are the same as those unallowable for the grant funds themselves. Common examples include:

• Entertainment expenses
• Alcoholic beverages
• Lobbying activities
• Costs not directly related to the project

10. How do we report our cost share contributions to the funding agency?

The funding agency will typically provide specific instructions on how to report your cost share contributions. This often involves submitting a financial report that includes a summary of all cost share contributions, along with supporting documentation.

11. Can we include cost share from other federal grants?

Generally, you cannot use funds from other federal grants as cost share for a new federal grant, unless specifically authorized by the awarding agencies involved. This is known as “double dipping” and is generally prohibited.

12. What role do subrecipients play in cost share?

Subrecipients are responsible for meeting their share of any cost share commitments outlined in their subaward agreements. The prime recipient is ultimately responsible for ensuring that all cost share requirements are met, including those of its subrecipients. The responsibilities for cost share should be clearly defined and communicated in the subaward agreement.

Understanding cost share is a crucial element of successful grant management. By planning meticulously, documenting accurately, and communicating openly with funding agencies, organizations can navigate the complexities of cost share and maximize their chances of project success. Remember, cost share is not just about meeting a requirement; it’s about demonstrating your commitment to the project’s goals and ensuring its long-term sustainability.