What is the difference between cost sharing and matching?

The terms are used almost interchangeably. Both mean the portion of project costs not paid by the federal award. 'Matching' usually refers to a required ratio (for example, 25% non-federal funds), while 'cost sharing' is the broader umbrella term that includes both mandatory matching and voluntary contributions. Under 2 CFR 200.306, the same documentation and allowability rules apply to both.

What counts as in-kind match on a federal grant?

In-kind contributions are non-cash third-party donations of goods or services — donated volunteer time, donated equipment use, donated space, or donated supplies. They count toward match if they are necessary and reasonable for the project, allowable under the cost principles, not paid by another federal award, verifiable from your records, and valued under the rules in 2 CFR 200.306(d)-(j). Volunteer time is valued at rates consistent with what you'd pay for similar work.

Can you use other federal funds to meet a federal match requirement?

No, not unless a specific federal statute expressly authorizes it. The general rule under 2 CFR 200.306(b)(5) is that costs used to meet cost sharing or matching cannot be paid by the federal government under another federal award. Using one federal grant to match another is one of the most common and most serious match findings. Always confirm any exception is grounded in statute, not assumption.

What happens if you don't meet the match requirement on a federal grant?

If a match is mandatory and you fall short, the agency can disallow a proportional amount of federal funds — effectively requiring you to repay the federal share tied to the unmatched portion. A 25% match shortfall doesn't just mean you owe the missing match; it can reduce your allowable federal expenditures by the corresponding ratio. Document match contemporaneously and track it every reporting period to avoid a closeout surprise.

Cost Sharing & Matching on Federal Grants: The Complete Guide

Key Facts

Governed by 2 CFR 200.306. The same allowability, documentation, and valuation rules apply whether the match is cash or in-kind.
Mandatory vs. voluntary. Mandatory match is required by statute or the award. Voluntary committed cost sharing — once you put it in your application budget — becomes a binding obligation too.
No double-dipping. Costs counted as match cannot be paid by another federal award (200.306(b)(5)) unless a statute expressly allows it.
Match must be documented like federal costs. Verifiable from your records, necessary, reasonable, and allowable. "We had volunteers" without timesheets won't survive an audit.
Falling short can cost federal dollars. A shortfall in a required match can trigger a proportional disallowance of federal funds, not just the missing match amount.

Summary

Cost sharing is the part of the project budget you cover with non-federal money — or non-federal value. Some programs require it (mandatory match). Some don't, but you offered it anyway in your application (voluntary committed cost sharing), which makes it just as binding. The rules for both live in 2 CFR 200.306, and they're stricter than most first-time grantees expect.

The single biggest mistake people make is treating match as an afterthought. They focus on spending the federal money correctly, then scramble at closeout to document the match they swore they'd provide. By then the volunteer hours weren't logged, the donated space was never valued, and the in-kind contributions can't be verified. And a match you can't document is a match you didn't make — at least as far as an auditor is concerned.

Mandatory Match vs. Voluntary Cost Sharing

Mandatory cost sharing is required either by the authorizing statute or by the terms of the award. If a program says it requires a 25% non-federal match, that means for every $3 of federal funds you spend, you must put up $1 of your own. The ratio is usually expressed against either total project cost or federal share, and that distinction matters enormously — a "25% of total project cost" requirement is a bigger number than "25% of the federal share." Read the notice of funding opportunity carefully and confirm the base.

Voluntary committed cost sharing is the trap. The program didn't require a match, but you put one in your budget to make your application more competitive. Here's the thing nobody tells you up front: once it's in your approved budget, it's no longer voluntary. It's committed. You're now obligated to deliver it and document it just like a mandatory match. So the practical advice is blunt — don't volunteer cost sharing you can't reliably document. Reviewers, by regulation (200.306(a)), generally aren't supposed to factor voluntary cost sharing into the merit review anyway, so you're often taking on a binding obligation for little competitive benefit.

Cash Match vs. In-Kind Contributions

Cash match is the easy kind. It's your own organizational funds, or non-federal grant funds, spent on allowable project costs. You document it the same way you document federal expenditures — invoices, payroll records, the general ledger. The only real trick is making sure the source isn't federal money in disguise.

In-kind is where people get into trouble. In-kind contributions are non-cash donations from third parties: volunteer time, donated supplies, free use of equipment or facilities. They count toward match under 200.306, but only if you can value and verify them. Volunteer services are valued at rates consistent with those paid for similar work in your organization, or in the local labor market if you don't employ that role (200.306(e)). Donated supplies are valued at fair market value at the time of donation. Donated space or equipment use is valued at fair rental rates.

And every bit of it has to be documented contemporaneously. A volunteer who gives 200 hours of professional bookkeeping needs a signed timesheet showing dates, hours, and the nature of the work — created at the time, not reconstructed at closeout. Donated goods need a record of who donated them, what they were, when, and how you arrived at the value. If a third party donates something, you generally need their certification of the value too. Auditors test in-kind match aggressively because it's the easiest place to inflate numbers.

GrantMetric Analysis

Track match every reporting period, not at closeout. The grantees who get burned are the ones who report federal spending quarterly but only tally their match at the end. By then it's too late to fix a shortfall. Build match into your financial reporting cycle. If you're supposed to provide $50,000 in match over a year and you're only at $8,000 by month six, you have a problem you can still solve — at month twelve, you don't.
A match shortfall can cost you federal money, not just the gap. This is the part that surprises people. If your award required a 1:3 match and you came up $20,000 short on the match, the agency doesn't just note the missing $20K. It can disallow the proportional federal share tied to that unmatched amount. The cost of under-matching is often larger than the shortfall itself, because it pulls federal dollars back with it. Read your award's specific match enforcement language — it's usually worse than you'd guess.
The "no other federal funds" rule has almost no exceptions. People constantly try to match one federal grant with another. Don't. Under 200.306(b)(5) it's prohibited unless a specific statute authorizes it, and "I think it's allowed" is not a defense. The handful of real exceptions (certain block grants, some HUD programs) are written into statute. If you can't point to the statutory authority in writing, treat it as prohibited.

The Seven Tests Every Match Contribution Must Pass

Under 2 CFR 200.306(b), to count toward cost sharing or matching, a contribution must meet all of the following. Miss any one and the contribution doesn't count:

It must be verifiable from the grantee's own records. It must not be included as a contribution for any other federal award. It must be necessary and reasonable for accomplishing the project objectives. It must be allowable under the cost principles in Subpart E (so an unallowable cost can't become an allowable match). It must not be paid by another federal award unless a statute says otherwise. It must be in the approved budget when the awarding agency requires prior approval. And it must conform to the other provisions of 2 CFR 200.

That last test about allowability catches people. Alcohol isn't allowable as a federal cost, so a donated reception doesn't become matchable just because someone else paid for it. The character of the cost matters, not who paid.

Reporting Match on the SF-425

Cost sharing gets reported on the Federal Financial Report — the SF-425 — in the recipient share lines (lines 10i through 10k). You report the required recipient share, what you've actually provided, and the remaining obligation. The final SF-425 has to show the full required match was met across the project period. If those lines don't add up at closeout, you'll get a question from grants management before they'll close the award, and possibly a disallowance after.

Keep your match documentation in the same file as your federal expenditure documentation, organized so that the SF-425 recipient-share numbers tie directly back to source records. When the auditor asks to see how you arrived at the match figure on line 10j, you want to hand them a clean trail, not start a treasure hunt.

Match Documentation Checklist

Confirm the requirement and the base. Is the match a percentage of total project cost or of federal share? It changes the dollar amount substantially.
Log volunteer time contemporaneously. Signed timesheets with dates, hours, work performed, and the valuation rate.
Get donor certifications for in-kind goods. What was donated, when, and the fair market value basis.
Confirm no source is federal. Trace every match dollar and in-kind item back to a non-federal source.
Reconcile match to the SF-425 each period. Don't wait for closeout to discover a gap.
Retain match records for 3 years after the final SF-425, same as federal cost records (200.334).

Frequently Asked Questions

What's the difference between cost sharing and matching?

They overlap. 'Cost sharing' is the umbrella term for any non-federal portion of project cost — mandatory or voluntary. 'Matching' usually means a required ratio. Under 2 CFR 200.306 the documentation and allowability rules are the same either way.

What counts as in-kind match?

Non-cash third-party donations — volunteer time, donated supplies, free use of space or equipment. They count only if verifiable, necessary, reasonable, allowable, not paid by another federal award, and valued under 200.306. Volunteer hours are valued at rates consistent with similar paid work.

Can I use other federal funds as match?

No, unless a specific statute expressly authorizes it. 200.306(b)(5) prohibits counting costs paid by another federal award toward your match. This is one of the most common serious findings — never assume an exception without statutory authority in writing.

What happens if I miss the match?

For a mandatory match, the agency can disallow a proportional share of federal funds tied to the unmatched amount — meaning you may repay more than the gap itself. Track match every reporting period so you catch a shortfall while you can still fix it.

Sources & Disclaimer Sourced from 2 CFR 200.306 (cost sharing or matching), Subpart E cost principles, and the SF-425 instructions. Match requirements and enforcement vary by program statute and award terms. Your Notice of Award and Grants Management Specialist are authoritative for your specific award. GrantMetric is an independent platform not affiliated with any federal agency.