Cost Share and Matching Funds: What Counts, How to Document It
GrantCopilot Team
September 12, 2026
9 min read
TL;DR
Mandatory cost share is required by the funding announcement. Voluntary committed cost share is offered in the proposal and becomes just as binding once awarded. Both must be allowable, verifiable in your records, necessary to the project, and not paid for by another federal award. Cash match is money you spend; in-kind match is donated time, goods, or space valued at fair market value. NIH and NSF research grants rarely require match, and NSF prohibits offering voluntary committed cost share, so do not volunteer it there. Document match the same way you document grant spending: timesheets, invoices, donation letters, and a ledger that ties to the award.
Cost share is the portion of a project's cost that the funder does not pay. Sometimes a funder requires it: a one-to-one match, a 25 percent local contribution, a demonstration that the community has skin in the game. Sometimes an applicant offers it voluntarily to look more competitive. Either way, the moment cost share is written into a funded proposal it becomes a binding, auditable obligation, and it is one of the most common findings in nonprofit single audits. This guide covers what cost share is, what actually counts, how to value volunteer time and donated goods, when you should not offer match at all, and how to document it so the numbers hold up two years later when an auditor asks.
Three Kinds of Cost Share, and Why the Distinction Matters
The federal rules at 2 CFR 200.306 recognize three categories, and the difference determines what you owe the funder.
- Mandatory cost share is required by statute or by the funding opportunity. A program might require a 25 percent non-federal match, or a dollar-for-dollar match. You cannot be funded without it, and you must document it.
- Voluntary committed cost share is match you were not required to provide but wrote into the proposal budget anyway. Once the award is made, it is treated exactly like mandatory cost share: it must be delivered, documented, and reported. This is the category that surprises organizations at audit time.
- Voluntary uncommitted cost share is effort or resources you contribute during the project without ever having promised them in the proposal. It is not tracked, not reported, and carries no compliance obligation. Extra staff time you absorb quietly falls here.
Cash Match vs In-Kind Match
Cash match is money your organization or a third party actually spends on project costs: salaries paid from unrestricted funds, supplies bought with a foundation grant, a partner's cash contribution to the program. It is the easiest form of match to document because it already lives in your accounting system.
In-kind match is a contribution of value rather than money: volunteer hours, donated equipment or supplies, donated space, or services a partner provides at no charge. In-kind match is where most documentation problems arise, because the value has to be established and defended rather than simply read off an invoice.
Both forms count toward a match requirement unless the funding announcement says otherwise. Some programs cap the share of match that can be in-kind, or require a minimum cash component, so read the notice of funding opportunity carefully.
What Counts: The Four Tests in 2 CFR 200.306
For a cost to count as match on a federal award, it must pass every one of these tests. Foundations that require match generally apply the same logic even if they do not cite the regulation.
- Allowable. The cost would be allowable as a direct charge to the grant if the funder were paying for it. Alcohol, lobbying, and entertainment cannot be match any more than they can be charged.
- Not paid by the federal government under another award. You cannot use one federal grant to match another unless the statute for the first program specifically allows it. This is the most common disqualifier for nonprofits that stack federal funding.
- Verifiable from your records. If you cannot produce a timesheet, invoice, donation acknowledgment, or ledger entry, it did not happen as far as an auditor is concerned.
- Necessary and reasonable for the project. The contribution has to support the funded work. Donated office furniture for a program that never uses it is not match.
- Not already counted. The same contribution cannot be used as match on two different awards.
- In the approved budget. Match must appear in the approved budget or be approved by the funding agency after the fact.
Valuing Volunteer Time and Donated Goods
In-kind contributions must be valued at fair market value, and the regulation is specific about how.
Volunteer time. Value volunteer hours at the rate you would pay an employee for the same work, or at the market rate for that skill in your labor market if you have no comparable employee. A retired accountant volunteering to keep the project's books can be valued at an accountant's rate. The same person handing out flyers is valued at the rate for outreach work, not at an accountant's rate. Fringe benefits can be included in the valuation if they are reasonable and consistent with what you pay employees. Volunteers should sign timesheets showing dates, hours, and the activity performed, and a supervisor should approve them.
Donated goods and supplies. Value at fair market value at the time of donation. Keep the donor's written acknowledgment stating what was donated and when, and document how you established the value, for example a retail price for identical items or a vendor quote.
Donated equipment or space. For donated equipment, the match value is generally the fair market value if title passes to you, or the depreciation or use allowance if you only get to use it. For donated space, the value is the fair rental rate for comparable space in your area, supported by a written estimate from a realtor or property manager, and prorated for the share of time and square footage the project actually uses.
Third-party services. When a partner provides staff time at no charge, value it at that employee's actual salary and fringe, documented by the partner with the same kind of timesheet you would keep for your own staff.
When Not to Offer Cost Share
Volunteering match feels generous, but in federal research funding it is often a mistake. Under 2 CFR 200.306(a), voluntary committed cost share is not expected on federal research proposals and cannot be used as a factor in merit review unless the funding announcement specifically says so. Offering it does not help you win, and it does create an audit obligation.
NSF goes further. The Proposal and Award Policies and Procedures Guide prohibits voluntary committed cost sharing on most proposals; you may include it only when a specific solicitation requires it. Writing "the university will contribute an additional 10 percent" into an NSF standard grant budget can get the proposal returned without review.
NIH does not generally require cost share on research grants, and reviewers do not score it. Any institutional commitment described in an NIH application should be stated as available resources rather than as a budgeted match; see our NIH modular versus detailed budget guide for what the budget justification does need.
Where match is expected is in community, workforce, infrastructure, and many state and local programs, and in some foundation and corporate grants. Programs like Walmart Spark Good do not require match, but many community foundations and United Way funders do ask what other resources you are bringing. In those settings, match is part of how you demonstrate sustainability, and the rest of this guide applies.
A Worked Example: 1:1 Match on a $50,000 Community Grant
A county health department offers up to $50,000 for a youth mentoring program and requires a dollar-for-dollar non-federal match. The applicant, a nonprofit with a 26 percent fringe rate, assembles $50,000 in match as follows, each line with the documentation it will keep.
- Cash: program director time paid from unrestricted funds. 0.20 FTE x $70,000 salary = $14,000 plus 26 percent fringe = $3,640. Total $17,640. Documented by payroll records and effort certifications showing the 20 percent allocation to this program.
- Cash: partner contribution. The local school district contributes $10,000 in cash toward mentor background checks and training. Documented by a signed letter of commitment and, at award, by the district's check and your deposit record.
- In-kind: volunteer mentors. 40 mentors x 3 hours per week x 30 weeks = 3,600 hours. Valued at $16.50 per hour, the rate the organization pays part-time youth program aides for comparable work. Total $59,400 available; $18,000 claimed as match, with the remainder held as voluntary uncommitted contribution. Documented by signed volunteer timesheets approved by the program coordinator.
- In-kind: donated meeting space. The community center provides a room two evenings per week for 30 weeks, 60 uses x $60 per use based on the center's published rental rate. Total $3,600. Documented by a letter from the center stating the donation and its standard rate.
- In-kind: donated laptops. A local business donates 5 refurbished laptops for mentee homework support, valued at $152 each based on the vendor's current refurbished price list. Total $760. Documented by the donor's acknowledgment letter and the price list.
- Total match: $50,000. Cash $27,640, in-kind $22,360.
Documenting Match Through the Life of the Award
Match is not documented once at the proposal stage. It is tracked throughout the award, reported alongside grant spending, and reconciled at closeout. Auditors test it exactly as they test federal expenditures, and the most frequent single audit finding for cost share is not fraud but missing paper: volunteer hours with no signed timesheets, donated space with no valuation, a partner's promised cash that never showed up in the ledger.
Set up the match tracking on the day you receive the award, not the month before the final report.
- Create a match ledger in your accounting system, coded to the award, with a line for every match source in the approved budget.
- Collect volunteer timesheets on the same schedule as staff timesheets, signed by the volunteer and approved by a supervisor, with the activity described.
- File donation acknowledgments that state the item, date, donor, and how the value was established, at the time of the donation.
- Reconcile quarterly. Compare match delivered to match promised. If you are falling short, tell your program officer early; most agencies will approve a budget revision or an alternative source. A shortfall discovered at closeout can result in a proportional reduction of the federal award.
- Keep everything for the retention period, typically three years after the final financial report, and longer if an audit is open.
Using Letters of Commitment to Evidence Match
Third-party match promised at the proposal stage should be backed by a letter of commitment, not a letter of support. The difference matters: a letter of support says a partner thinks your project is a good idea; a letter of commitment says what the partner will contribute, in what quantity, over what period, and who has the authority to promise it. Reviewers, and later auditors, treat only the second as evidence.
A match commitment letter should state the contribution in the same units the budget uses (dollars, hours, square feet, units of equipment), the period it covers, the valuation basis, and a signature from someone authorized to bind the organization. Our guide to letters of support versus letters of commitment covers the structure in detail, including a section on match documentation.
Once the award is active, the letter is the starting point, not the proof. Actual delivery still has to be documented with the partner's records.
Frequently Asked Questions
Yes, on most awards that allow in-kind match. Value the hours at the rate you would pay an employee for the same work, or at the local market rate for that skill, and document them with signed and approved volunteer timesheets that show dates, hours, and activities. Some programs cap the in-kind share or require a cash minimum, so check the funding announcement.
You can use non-federal grants, such as foundation or corporate funding, as match on a federal award if the other funder allows it and the cost passes the allowability tests. You generally cannot use one federal award to match another unless the authorizing statute for the first program specifically permits it.
Tell your program officer as soon as you see the gap. Agencies can often approve a substitute match source or a budget revision. If a shortfall is discovered at closeout or in an audit, the funder may reduce the award proportionally and require repayment of the difference, and the finding can affect future applications.
On federal awards they can, with prior approval from the awarding agency. If a funder caps indirect costs below your negotiated rate, the difference between what you could have charged and what the cap allows is unrecovered indirect cost, and 2 CFR 200.306(c) permits it as cost share when approved. Show the calculation in the budget justification.
Rarely. NIH research grants do not generally require cost share and reviewers do not score it. NSF prohibits voluntary committed cost sharing on most proposals and only allows match when a specific solicitation requires it. Describe institutional resources as available support rather than as a budgeted match on these applications.
Cost share is a promise about resources you will bring to the project, and funders and auditors hold you to it. Know which kind of match you are dealing with, apply the four tests before you count anything, value in-kind contributions at fair market value with a written basis, and keep the paper from day one. And in federal research settings, resist the urge to offer match that nobody asked for; it will not help you win and it will follow you to closeout. For the rest of the budget, see our guides on how to build a grant budget and budget justification examples, and for what belongs in your indirect base, direct versus indirect costs.
Topics
cost sharing grants
matching funds
in-kind match
cost share
grant budget
nonprofit funding
grant compliance
community grants