Non-Federal Share: How to determine your match and value your donations?
Knowing the extent of your participation will give you a clear path towards your objectives and allow you to focus on getting all the contributions needed to accomplish them.
However, keep in mind that getting the contributions needed is only half of the process. It is also fundamental that you have clarity about how to value each donation and all the requirements that must be met so they can be included in your Non-Federal Share.
To help you achieve your goals, we have developed the Non-Federal Share Guide, filled with the requirements, steps and considerations needed to avoid mistakes in the process of determining your Non-Federal Share and valuing the donations you receive so they can be included in it.
Cost Sharing or Matching
When the Office of Head Start awards a grant, each agency is committed to participate to some extent in the cost of the project by matching the Federal funds awarded with Non-Federal funds. This is known as the Non-Federal Share, and it is a contribution of 20 percent of the total project cost.
It is essential that every grantee succeeds in providing the Non-Federal Share by the end of the school year to avoid any disallowance of the allowable federal cost or the loss of the award.
Therefore, it is necessary that you know how to calculate your Non-Federal Share, what contributions count to meet this share, how to value them and document them.
To calculate the Non-Federal share, you must divide the total Federal funds by 80%
to determine total project costs.
Afterwards, the Federal Portion has to be subtracted from the total project cost and the remainder will be the Non-Federal Match that you will have to provide throughout the year.
For example, if Federal Funds equal $500.000:
$500,000 ÷ 0.80 (80%) = $625,000 (Total Project Cost)
$625,000 – $500,000 = $125,000 (Non-Federal Match).
In reality, the Non-Federal match equates to 25 percent of the federal funds expended, and it can be provided using any combination of cash match, or in-kind contributions.
However, the funds acquired to meet the Non-Federal Share will not count until they are spent on allowable program costs (Cash Match) or used (Donated Goods).
According to 45 CFR § 75.306 of the Head Start Act, for all the cash and third party’s in-kind contributions to be accepted as Non-Federal Match, they must comply with the following criteria:
(1) Are verifiable from the non-Federal entity’s records;
(2) Are not included as contributions for any other Federal award;
(3) Are necessary and reasonable for accomplishment of project or program objectives;
(4) Are allowable under subpart E of this part;
(5) Are not paid by the Federal Government under another Federal award, except where the Federal statute authorizing a program specifically provides that Federal funds made available for such program can be applied to matching or cost sharing requirements of other Federal programs;
(6) Are provided for in the approved budget when required by the HHS awarding agency; and
(7) Conform to other provisions of this part, as applicable.
From these requirements, there are three key concepts that should be kept in mind at all times.
- First of all, your Non-Federal Share cannot be completed with any other Federal funds or awards. This means that your efforts should be focused on getting contributions from State or local governments, the private sector, and your community through volunteer work.
- Next, you must ensure that all the contributions you receive are allowable, which means that the use and spend of all contributions are under the same rules of use of federal funds.
- Always check with your region specialist or the Head Start Act if you are not sure if a cost is allowable.
- Finally, ensure that allowable cash donations are used and spent reasonably. A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.
If you have any doubts about how reasonable is the cost in which you are about to incur, ask yourself the following two questions:
- Is this cost of a type generally recognized as ordinary and necessary for the operation of the governmental unit or the performance of the Federal award?
- Does this cost comply with the requirements imposed by such factors as: sound business practices; arms-length bargaining; Federal, State and other laws and regulations; and, terms and conditions of the Federal award?
If you find yourself answering these questions affirmatively, congratulations! You have an allowable and reasonable donation that can be included in your Non-Federal Share!
Value of In-Kind and Donated Services
As goods and services are donated, your agency must determine the value of those contributions. Depending on the type of contribution, it can be valued according to different criteria, but in general, it should be based upon the cost of similar services in the program and the local community or their fair market value.
Overall, the most common contributions you will receive are volunteer services. Head Start Parents, professional and technical personnel, consultants and other individuals are allowed to provide their volunteer services, and any amount of time they provide can be included in your Non-Federal Match as the service provided is an integral and necessary part of the program.
According to the Office of Head Start, for a volunteer’s time to be counted as in-kind it must adhere to the following criteria.
The services provided by the volunteer would have to otherwise be allowable costs that would be purchased from a consultant or other individual or provided by salaried personnel.
The duties of the individual must be controlled by the agency.
The value of the service provided by the individual must be measurable and material.
The value must be based upon the service provided by the individual. For example, a dentist who volunteers time to provide dental services to Head Start children should have time valued according to normal compensation for the service provided. If the dentist chooses to volunteer in a different capacity, such as working in the classroom, his service should be valued according to the agency’s current wage scale.
Besides these requirements, it is also important for you to keep in mind that no federal funds can be used to complete your Non-Federal Share, therefore, if the volunteer’s time is being paid under another federal grant, it may not be used for match. However, if the volunteer’s time is being partially or fully paid by State or Local sources, that cost may be used as match if the state or local funding is not already used as a match for the federal funds.
Let’s look at some examples of allowable volunteer contributions and how to value them:
- If a Fire Department staff member assists an agency with the development of its emergency preparedness program, his/her contribution has to be valued based on the Fire Department’s rate of pay plus fringe benefits. This is appropriate as the skills required for this service could not be found within the organization, and it is capturing the actual cost of the service provided for which the agency would have paid otherwise.
- If a parent volunteers in a classroom, the service provided is similar to the one provided by an assistant teacher from the organization, therefore, the service should be valued based on the agency’s rate of pay for that position.
Although volunteer contributions may be the most common ones, you should also look at other types of donations. Donated goods are also a way to match your Non-Federal Share, and the main criteria to value them is their fair market value. Depending on the goods that are donated, that fair market value can be determined in different ways.
For example, if your agency receives supplies as a contribution,the fair market value should be determined using sources such as the guide issued by the IRS. You should also consider that supplies donated to be used as gifts, prizes and awards are not allowable, and can only be counted as match if the program would otherwise have had to purchase the items to implement the program objectives.
For donated equipment to be allowable it must have a fair market value greater than $5000 and should provide at least one year of useful life. If the equipment is used, its fair market value should not exceed the value for equipment of the same age and condition at the time of donation. Additionally, the organization has to provide documentation that includes the description of the equipment and should reference its proposed use in the program and condition at time of receipt
If the nature of the donation requires that the equipment’s title will pass to your organization you will need to get prior approval from the Administration of Family & Children (AFC, before its fair market value can be counted as in-kind, otherwise, only its depreciation can be counted as match.
Finally, another type of contribution your agency can receive and include in your Non-Federal Match, are buildings, land or space. The main difference between these is that, when you receive building or land as a donation, its title passes to your agency; if you receive space as a donation, what you are getting is the right to use the space as if you were renting it, but the facilities will not be owned by your organization.
Valuing these donations is a simple process. In case of receiving a building or land, your agency must get an independent appraiser to determine its fair market value at the time of the donation and it has to be certified by the responsible official of the organization.
For donated space, your agency must get an independent appraisal as well, but in this case, the fair market value will be based on the fair rental value of comparable space and facilities in a privately owned building in the same locality.
What should never be forgotten
You have a clearer understanding about how to determine your Non-Federal Share and how to value all the donations so they can be used to calculate the match. Following these practices will make your process much more efficient and easy, however, there are five things you should never forget.
- Your Non-Federal Share must be allowable.
- The funds used in your Non-Federal Share cannot be used as a match for other grants and must not come from other Federal Funds or awards.
- Volunteer services are valued based on the cost of similar services within your organization or your local community.
- Donated goods are valued based on their fair market value.
- All donations have to be properly documented to be counted as Non-federal matching funds.