Federal grant cost-share requirements explained (2 CFR Part 200)

How it’s calculated

Federal amount   = total project cost × federal share %
Required match   = total project cost − federal amount
                   (the non-federal portion you must cover)

Match provided   = cash match + in-kind match
Match gap        = required match − match provided
                   (if > 0, the budget is short on match)

Match ratio      federal : non-federal
                 e.g. $75,000 federal : $25,000 match = 3 : 1

Worked example (total project = $100,000, 75% federal):
  federal amount   = 100,000 × 0.75      = $75,000
  required match   = 100,000 − 75,000    = $25,000
  ratio            = 75,000 : 25,000     = 3 : 1

Assumptions:the federal share % and the basis (total project cost vs. federal award) are taken from the program’s NOFO and are program-specific— the same headline percentage produces a different dollar match depending on the basis, so confirm it before budgeting. Allowable in-kind valuation (fair market rate for labor, fair rental value for space, fair market value for equipment) is program-specific per the NOFO / 2 CFR Part 200. The negotiated indirect cost rate (and whether indirect costs count toward match) is handled separately under your federally negotiated rate agreement and is not modeled in the formula above. This is an estimate, not legal advice — verify every figure with the grant program. The Federal Grant Cost-Share Calculator runs this math for your specific deal terms, and the methodology page documents the sourcing standards and correction policy behind it.

What cost-share is and why it matters

Cost-share (also called matching funds or matching contribution) is the recipient’s non-federal contribution to the total project cost. Federal grant programs require cost-share to ensure the recipient has ‘skin in the game’ and to leverage federal dollars.

Per 2 CFR § 200.306 (Uniform Guidance): ‘Cost sharing or matching means the portion of project costs not paid by Federal funds.’ Cost-share must be: verifiable from the recipient’s records; not included as cost-share on other federally funded projects; necessary and reasonable; allowable under federal cost principles (2 CFR Part 200, Subpart E); not paid by Federal funds (with narrow exceptions).

The formula depends on how the requirement is expressed: a percentage of total project cost gives cost-share = total project × required % − federal award amount; a percentage of the federal award gives cost-share = federal award × [required % ÷ (1 − required %)], which is the matching ratio. Always confirm the percentage basis (total project vs. federal award) in the Notice of Funding Opportunity — these formulas produce different results. Match requirements are program-specific (see the NOFO / 2 CFR Part 200); verify with the grant program; not legal advice.

What counts as allowable cost-share

Per 2 CFR § 200.306, allowable cost-share sources fall into two buckets:

Cash contributions (easiest to document): organizational funds, state or local government funds, private foundation grants, revenue earned on the project. Must be expended during the grant period of performance.

In-kind contributions (allowable but require more documentation): third-party volunteer labor — valued at the fair market rate for the service, not the volunteer’s wage rate for unrelated work. Donated equipment — valued at fair market value or depreciation, not original cost. Donated space — valued at fair rental value (what comparable space would rent for). Donated professional services — valued at the going rate for the service if provided by a private contractor.

Not allowable: other federal grant funds (unless specifically authorized by statute). Costs not allowable under federal cost principles (entertainment, lobbying, unallowable salaries per OMB guidelines). Commitments made before the award’s start date (pre-award costs require prior approval). What counts and how it’s valued is program-specific (see the NOFO / 2 CFR Part 200); verify with the grant program; not legal advice.

Documentation requirements that survive audit

Cost-share is a frequent audit finding because documentation requirements are strict and records-keeping is often an afterthought:

For employee time: contemporaneous timesheets or effort reports signed by the employee and supervisor, showing hours on the grant project. After-the-fact effort reporting is a major audit red flag. The uniform guidance (2 CFR § 200.430) requires that effort be based on records that accurately reflect the work performed.

For volunteer labor: signed time logs from the volunteer with description of activities; documentation of the fair market rate for the service (job postings, salary surveys, comparable contractor invoices).

For donated equipment: acquisition records showing original cost; appraisal or valuation documentation for fair market value if different from book value.

For third-party cash contributions: letters of commitment from donors before the award; bank records or cancelled checks showing actual receipt.

Retention: 2 CFR § 200.334 requires retention of all records for 3 years after the final financial report is submitted to the awarding agency (longer if litigation or audit is pending).

The federal funds prohibition and its exceptions

The prohibition on using federal funds as cost-share (2 CFR § 200.306(b)(5)) is a hard rule with narrow exceptions. The exceptions require explicit statutory authorization — it must appear in the program’s authorizing legislation or Notice of Funding Opportunity.

Common legitimate exceptions: USDA Rural Development programs (some allow state CDBG funds as match). Department of Transportation programs (some allow state transportation funds). HHS programs (some allow Medicaid as a match source under specific conditions).

Common mistakes: using NIH Phase I award funds as cost-share for an NSF grant (not allowed). Using SBA Paycheck Protection Program (PPP) funds as cost-share (not allowed — PPP was a federal program). Using CDBG funds as cost-share for another CDBG project (not allowed — same federal program).

The Federal Grant Cost-Share Calculator tracks your cost-share sources and flags any that may contain federal funds so you can get compliance confirmation before including them in your budget. Whether an exception applies is program-specific (see the NOFO / 2 CFR Part 200); verify with the grant program; not legal advice.

A worked example, and what I watch for

Worked example: a $100,000 project funded at a 75% federal share. The federal amount is $100,000 × 0.75 = $75,000, which leaves a $25,000 required match— a 3:1 federal-to-non-federal ratio. Say you line up $15,000 in organizational cash plus $10,000 of allowable in-kind (a project manager donating hours valued at the fair market rate for that role, plus donated office space at fair rental value). Cash $15,000 + in-kind $10,000 = $25,000 provided, so the match gap is zero and the budget balances on paper. The risk isn’t the arithmetic — it’s whether each in-kind dollar is documented well enough to survive audit.

In my experience pricing project budgets out for operators, the match number itself is rarely where applications fall down — it’s the documentation behind the in-kind half. I’ve found that the two questions that catch people are “what basis is the percentage on?” (total project cost vs. federal award change the dollar match materially) and “can you prove the fair market value contemporaneously?” I’ve seen otherwise-clean budgets flagged at closeout because volunteer labor was valued at the volunteer’s unrelated salary instead of the going rate for the service actually performed. There is no blanket rule here: read the NOFO, map it back to 2 CFR Part 200, value in-kind at fair market with records made at the time, and confirm the basis before you commit a number. This is an estimate of how the rules generally work — match requirements are program-specific (see the NOFO / 2 CFR Part 200); verify with the grant program; not legal advice.

Primary sources cited

Sources: formulas and rules on this page are cited to primary federal regulatory sources, and the cost-share math is open source. Read our full methodology for sourcing standards and our correction policy. This is an estimate — match requirements are program-specific (see the NOFO / 2 CFR Part 200); verify with the grant program; not legal advice.

• 2 CFR § 200.306 — Cost Sharing or Matching
• 2 CFR Part 200 — Uniform Administrative Requirements (Uniform Guidance)
• 2 CFR § 200.430 — Compensation, Personal Services (effort reporting)
• Grants.gov — Federal Grant Opportunities
• View the cost-share math source on GitHub → (packages/calc/src/grant-cost-share.ts)