What Cost Share Means Under Federal Regulations
Under the Uniform Guidance (2 CFR §200.29),
cost share or matching refers to the portion of project costs
not paid by federal funds, unless a statute explicitly authorizes federal dollars to be used as match. Cost share represents the grantee’s investment in the project - cash, personnel time, donated property, volunteer labor, equipment, or other non federal resources.
Cost share may be required by statute, the grant agreement, a Notice of Funding Opportunity, or it may be offered voluntarily. Once included in an approved award budget, any voluntary match becomes binding and must be documented and supported like federal expenditures. Cost share serves an important purpose: it expands the total resources supporting a project, leveraging non federal assets to strengthen outcomes and demonstrate commitment to the funded activities.
Examples of Cost Share
- Cash, labor, or property provided by the organization
- Donated supplies, equipment, land, or buildings from third parties
- Volunteer labor necessary and integral to project activities
- The difference between a negotiated indirect cost rate and a lower rate imposed by the award
- Non federal contributions that support approved project objectives
Federal funds generally cannot be used as match unless statute explicitly allows it.
Key Requirements Under 2 CFR §200.306
Cost share contributions must:
- Be verifiable through organizational records
- Not be counted as match for any other federal award
- Be necessary and reasonable
- Be allowable under Subpart E, Cost Principles Be included in the approved budget when required
- Come from non federal sources unless statute provides otherwise
- Conform to all other federal requirements
Cost share is historically prone to audit findings due to valuation issues, documentation gaps, double counting, and misinterpretation of program rules.
Cost Allocation: How Costs Are Distributed
Cost allocation determines how shared or joint costs are assigned to various activities and funding sources. While cost share increases the resources available to a project,
cost allocation ensures those costs are distributed fairly across benefiting programs.
A strong cost allocation plan helps organizations:
- Assign shared costs based on proportionate benefit
- Treat federal and non federal activities consistently
- Avoid charging 100% of shared costs to a single award when multiple programs benefit
Do not charge all shared costs - including contracted services, salaries, benefits, travel, training, and meals - to a single grant rather than allocating them properly. Because cost allocation shapes how both federal expenditures and cost share contributions are distributed, inaccurate allocation can inflate expenditures, misrepresent match contributions, and result in audit findings.
Internal controls, staff training, and documented allocation methods help maintain compliance across all cost categories.
Supplanting: A Separate but Related Compliance Rule
While cost share focuses on non federal contributions and cost allocation manages distribution of expenses,
supplanting addresses how federal funds interact with existing state or local funding. Supplanting occurs when federal funds replace (rather than supplement) existing state or local funds, something prohibited across many federal programs.
- Supplementing adds federal funds to existing resources.
- Supplanting replaces those resources, generally not allowed unless statute expressly permits it.
If an agency reduces its state/local funding because other grant dollars became available, that change may be considered supplanting. Violations can lead to repayment, suspension, termination, or future funding restrictions.
Maintaining clear accounting records and documenting reasons for funding changes helps prevent supplanting concerns and protect program integrity.
Why Cost Share Matters
Cost share expands a project’s total resources. Cost allocation ensures those resources, and all costs, are distributed fairly across activities. Supplanting rules ensure federal funds supplement rather than replace existing support.
Together, these compliance areas shape the financial integrity of federally funded projects. Strong internal controls, clear documentation, accurate cost allocation, and thorough understanding of program specific match requirements help organizations avoid audit findings and maintain full compliance.