Cost Sharing: Accounting and Budgeting

Cost sharing requires three separate accounts: the award master account, the cost sharing associate account, and the cost sharing funding account. No single account can perform more than one of these functions concurrently.

The cost sharing associate account is the account connected to the award in which the University will demonstrate its financial contribution. The funding account is the University funded account from which the cost sharing expenses will be ultimately paid. A cost sharing account can be linked to only one funding account.

When a cost shared expense is incurred it is initially charged to the cost sharing account, but it will be automatically transferred to the funding account through subaccount 9740. Therefore, no expenses should remain in the cost sharing account. If the cost shared expenses are faculty salaries in the same department, then the department's instruction account would suffice as the funding account. If the cost sharing funding to support the project is coming from more than one source, then a 2-ledger account should be created for the funding account. When created, funds should be transferred to the 2-ledger account from the participating departments in order to cover all of the cost shared expenses. This is preferable to creating multiple cost sharing accounts for the same award

The budget and the balance in a cost sharing account should always equal $0. For example, if you need to cost share $10,000 of faculty salary:

  1. Create an associate account to the master account for the award
  2. Put "cost share" or "(CS)" in the long account name
  3. Enter the cost sharing funding account number (where the money will be ultimately charged) NOT to be confused with the guarantee account and select the correct type of cost sharing (mandatory/voluntary)
  4. Unless the award specifically allows indirect costs (IDC) as an element in the cost sharing formula, set the account's IDC rate to 0%
  5. Start a $0 budget for the associate account (do not change the master account budget)
  6. Enter a debit for $10,000 in subaccount 1000
  7. Enter a debit for the appropriate amount of benefits
  8. Enter a credit in subaccount 9740 for the total of the amount debited (this is the subaccount for the transfer out to the funding account)
  9. Enter the reason for the budget entry and you are done.

Some things to keep in mind...

  • a CS account should always be an associate account for an award
  • a CS funding account is usually a specially created ledger 2 or ledger 4 account, but is NEVER EVER NEVER another award account
  • you should not budget IDC unless the award explicitly allows IDC in the cost sharing formula. Therefore the IDC rate of most cost sharing accounts should be set at 0% during the account creation process.