Federal Assistance Manual Chapter 1-400

CHAPTER 1-400 MATCHING AND COST SHARING

• 1-400-00 Purpose
  
• 1-400-10 Applicability
  
• 1-400-20 Basic Principles
  
• 1-400-30 Special Provisions for the AML Program
  
• 1-400-40 Third Party In-Kind Contributions
  
• 1-400-50 Direct vs. Indirect Charges

1-400-00 PURPOSE

This chapter sets forth OSM policies on the allowability of contributions for satisfying matching or cost sharing requirements of OSM grants. The requirements for matching and cost sharing are outlined in the Grants Management Common Rule (43 CFR 12, Subpart C).

1-400-10 APPLICABILITY

This chapter applies to all OSM grants and cooperative agreements which require matching funds or cost sharing by the recipient.

1-400-20 BASIC PRINCIPLES

1. Matching and cost sharing requirements may be satisfied by project or program related allowable costs incurred and financed by the recipient and/or project or program related in-kind contributions made by third parties.

2. Allowable costs incurred by the recipient to satisfy matching or cost sharing requirements may be financed from any non-Federal source.

3. Except as noted in 1-400-30, costs borne directly or indirectly by OSM under any Federal grant or contract (including any Federal grant or contract awarded to a third party) are not allowable for satisfying matching or cost sharing requirements of other Federal programs.

4. Funds obtained under other Federal grant programs may not be used to fulfill the matching requirement of any OSM grant, unless the funds are considered revenue sharing or come from block grants.

5. No contribution may be counted more than once as matching or cost sharing. However, when a contribution is related to two or more grants, it may be prorated among the grants or cooperative agreements involved.

6. Costs and third party contributions to satisfy matching or cost sharing requirements must be verifiable from the records of the recipient.

7. Costs financed by program income shall count towards satisfying the matching requirement of Administration and Enforcement grants.

1-400-30 SPECIAL PROVISION FOR THE AML PROGRAM

1. AML set-aside funds and interest earned onthose funds may be used as the non-Federal match for other Federal grant programs, as long as the purposes of the other grant programs are consistent with the purposes of the set-aside funds.

2. AML grant funds may be used for any required non-Federal share of the cost of projects funded by other Federal agencies for the purpose of environmental restoration related to treatment or abatement of acid mine drainage from abandoned mines, provided the projects are consistent with the purposes and priorities of SMCRA. (This provision first was included in the FY 1996 Appropriations Act. P.L. 104-134, and has continued to be included in the subsequent Appropriations Acts.)

1-400-40 THIRD PARTY IN-KIND CONTRIBUTIONS

1. A third party in-kind contribution counts toward satisfying a cost sharing or matching requirement only if the contribution was necessary to accomplish program activities and would be allowable if the grantee were required to pay for them.

2. Some third party in-kind contributions are goods and services that, if the grantee had to pay for them, the payments would have been an indirect cost. Cost sharing or matching credit for such contributions shall be given only if the grantee has established, along with its regular indirect cost rate, a special rate for allocating to individual projects or programs the value of the contributions.

3. A third party in-kind contribution to a fixed-price contract may count towards satisfying a cost sharing or matching requirement only if it results in:
   1. An increase in the services or property provided under the contract (without additional cost to the grantee) or

   2. A cost savings to the grantee.

4. The value placed on third-party in-kind contributions for cost sharing or matching purposes shall conform to the requirements below.
   1. Volunteer services. Services provided to a grantee by volunteers are valued at rates consistent with those paid by the grantee to its employees performing similar work. If the grantee does not have employees performing similar work, the applicable rates are those paid by other employers for similar work, in the labor market in which the grantee competes for services. In either case, a reasonable amount of fringe benefits may be included in the valuation. Further, the quantity and allocability of volunteer services must be supported, to the extent feasible, by the same methods that the grantee uses for its own employees performing similar services. If, for instance, a grantee's employees use a time clock, volunteers performing similar work must do the same.

   2. Employees of other organizations. When an employer other than the grantee furnishes at no cost the services of an employee, these services are valued at the employee's regular rate of pay (exclusive of the employer's fringe benefits and overhead costs), provided they are in the same line of work for which the employee normally is paid. If these services are in a different line of work, then the rules for volunteer services apply. Therefore, if an engineer volunteers to conduct park tours on the weekends for a grant-supported program, his time wold be valued at the rate of a tour guide, not an engineer. If on the other hand, he donates necessary engineering services to the project, his time would be valued at the rate of an engineer.

   3. Donated supplies and loaned equipment or space. If a third party donates supplies, the contribution is valued at the market value of the supplies at the time of donation. If a third party donates the use of equipment or space in a building but retains title, the contribution is valued at the fair market rental value of the equipment or space.

   4. Donated equipment, buildings and land. If a third party donates equipment, building or land, and the title passes to the grantee, the amount that is allowable for purposes of cost sharing or matching depends on whether the grant is for capital or operating expenditures.
      1. If the purpose of the grant is to assist the grantee is acquiring equipment, buildings or land, the total market value of the property at the time of donation may be claimed.

      2. If the purpose of the grant is to support activities that require the use of equipment:
         1. Depreciation or use allowances based on the market value of the donations are allowable costs incurred by the grantee. Such depreciation or use allowance is determined and allocated according to the applicable cost principles in the same manner as depreciation or use allowances for property purchased by the grantee, and therefore is uaully treated as indirect costs; or

         2. If OSM approves, the fair rental rate of the donated land and the full market value of the equipment or buildings at the time it is donated may be considered cost-sharing or matching. Approval shall be given only if purchase of the equipment or building or actual rental of the land would have been approved as an allowable direct cost. If any part of the donated property was acquired with Federal funds, only the non-Federal share of the property may be counted as matching or cost-sharing.

   5. Donated real property for construction/acquisition. If a grantee donates real property for a construction or facilities acquisition project, the current market value of that property may be counted as cost sharing or matching. If any part of the donated property was acquired with Federal funds, only the non-Federal share of the property may be counted as matching or cost-sharing.

   6. Appraisal of real property. In some cases, the market value of land or a building or the fair rental rate of land or space in a building must be determined. As a precondition to allowability for cost-sharing or matching purposes, OSM may require that the market value or fair rental rate be determined by a certified real property appraiser, and that the value or rate be certified by the responsible official of the grantee.

1-400-50 DIRECT VS. INDIRECT CHARGES

1. The classification of a contributed cost as either direct or indirect must be consistent with the classification of similar items which the recipient charges to grant or cooperative agreement accounts. Thus, if items such as rent, utilities, accounting, executive salaries, etc., are treated as indirect in developing the recipient's indirect cost rate, then contributions in these categories may not be regarded as direct cost contributions to the grant-supported activity. Similarly, the use of facilities and equipment already owned by the recipient may not be counted as a direct cost contribution where the cost or value of such use is reflected in the applicable indirect cost rate as depreciation or use charges.

2. If the recipient has established special or multiple indirect cost rates, the requirement for consistent classification of costs applies separately to the activities covered by each rate. For example, if "onsite" and "offsite" rates have been established, the costs of renting offsite facilities may be charged directly to offsite activities, even though analogous types of cost (e.g., depreciation and operation and maintenance expenses of onsite activities) are treated as indirect costs of onsite activities. OSM indirect cost rate negotiators will negotiate "offsite" or other special indirect cost rates with recipients only where justified in accordance with the applicable cost principles. Special indirect cost rates will not be established if the sole reason for the rate would be to reflect cost sharing or matching arrangements.

3. When a recipient wishes to provide matching or cost sharing in the indirect cost category, he should merely reduce his charge to the grant or cooperative agreement account for the indirect costs to which he would otherwise be entitled. The amount of the reduction will count as matching or cost sharing. Where such reductions of indirect costs might appear to be inadvertent in financial reports submitted under the grant or cooperative agreement, OSM may request the recipient to include an explanation in the "Remarks" section of the report, showing that the claim for less than full allowable indirect costs is intentional.

FEDERAL ASSISTANCE MANUAL
Jan 2, 1998