Questions and Answers - Policy on Cost-Sharing for Grant and Non-Repayable Contribution Agreements

1. Why are there two dates in the Policyon Cost-Sharing? There are two dates in order to provide a transition period between the date of publication (October 1, 2018) of the Policy on Cost-Sharing for Grant and Non-Repayable Contribution Agreements and its actual enforcement (April 1, 2019).
2. When did the Policyon Cost-Sharingcome into force and how? The Policy on Cost-Sharing became effective on April 1, 2019. This policy does not apply retroactively to existing signed agreements, to projects that are already approved or operational at the time of its enforcement date. More precisely:
   • Unsolicited: Any application received on orafter the enforcement date must adhere to the Policy on Cost-Sharing. It does not apply to applications received before the enforcement date; these applications were grandfathered.
   • Calls: Calls launched on or after the publication date must adhere to the Policy on Cost-Sharing. It does not apply to proposals received from calls launched before the publication date, October 1, 2018.
   • Department-initiated (civil society): Invitation letters sent on or after the publication date must adhere to the Policy on Cost-Sharing. The Policy on Cost-Sharing does not apply to invitation letters sent prior to the publication date.
3. Does the cost-share contribution (either cash or in-kind) need to be discussed at the time of negotiation and specified in the contribution agreement’s budget? In order to be applied against a specific budget line item of the contribution agreement, the budget must clearly specify the amounts to be contributed by the organization, both in-kind and in cash.
4. How is cost-share calculated? The cost-share is calculated based on total eligible direct costs. A maximum of 95% should be funded by the Department and a minimum of 5% by the recipient. The recipient’s contribution is calculated as follows: Recipient’s contribution = Total eligible project’s costs (excluding the compensation for overhead) x 5%.
5. Will recipients be held accountable if they committed to a higher cost-share rate or only for the minimum 5% stipulated in the Policyon Cost-Sharing? Grant and contribution agreements are binding documents. Therefore, recipients will be held accountable for the amount they committed to in the agreement, even in the event where the committed cost-share exceeds the minimum of 5%.
6. How does the Policyon Cost-Sharingapply to the different selection mechanisms of the departmental programming process? To ensure simplicity, the Policy on Cost-Sharing does not specify a different cost-share rate based on the type of selection mechanism used. The Policy on Cost-Sharing applies to all selection mechanisms.
   • Unsolicited: Applicants submitting unsolicited proposals should specify a minimum 5% cost-share in their proposal. If they do not, the proposal could be rejected.
   • Calls: The call page should specify the exact cost-share requirement; the minimum cost-share requirement will be 5% for recipients.
   • Department initiated (civil society): Programs should ensure that the applicant is aware of the Policy on Cost-Sharing, including the minimum 5% cost-share rate.
7. Does the Policyon Cost-Sharingapply to blended finance projects that fall under the Terms and Conditions for International Development Assistance Program? The Policy on Cost-Sharing does not apply to repayable contributions under blended finance. If the project has a non-repayable component, however, the cost share applies on that portion.
8. Can a recipient’s funding towards an innovative finance component of a project be counted as part of its cost-share contribution? Subject to GAC’s confirmation, a recipient can count up to one-third (1/3) of its funding towards an innovative financing component of a project (i.e. which may generate revenues/reflows and/or to support financing activities) as part of its cost-share contribution, up to a maximum of 1.67%. For greater clarity, the maximum that can be counted as cost-share is one-third of the 5% minimal cost-share requirement of the total project value (or 1/3 x 5% = 1.67%). This approach takes into account the fact that cost-share generally covers direct project implementation expenses (“sunk costs”); in contrast, funding towards an innovative finance component can potentially be recuperated by the recipient, in part or whole, by way of reflows at the end of the project. For this reason, only a portion of innovative financing components counts towards the required cost-share. Once the 5% cost-share requirement has been reached, any further funding towards an innovative finance component will be considered as resources mobilization.
9. Are all expenditures incurred for the purpose of the project eligible for cost-share? No, only costs deemed eligible by the Department are acceptable as cost-share. It is a good practice to pre-define project costs deemed eligible and acceptable as cost-share prior to signing the agreement. For more information, please refer to the Guidance on Eligible Costs for Development Initiatives.
10. If overhead (indirect) project costs are greater than the costs for which the recipient is compensated for, can the recipient claim the foregone overhead? No, the recipient cannot claim the foregone overhead. Additional overhead costs incurred by the recipient that are greater than the allowable rate stipulated in the agreement will not be accepted as cost-share.
11. Is there a minimum IN CASH cost-share? No, there is nothing preventing recipients from providing a significant proportion or the entirety of their cost-share in-kind, where this can be effectively valued and justified.
12. Where the organization requires volunteer services, what would be considered eligible cash or in-kind contributions?

Date Modified: 2023-07-14