Questions and Answers - Policy on Cost-Sharing for Grant and Non-Repayable Contribution Agreements
Updated: July 13, 2023
Why are there two dates in the Policy on 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).
When did the Policy on Cost-Sharing come 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 or after 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.
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.
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%.
Will recipients be held accountable if they committed to a higher cost-share rate or only for the minimum 5% stipulated in the Policy on 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%.
How does the Policy on Cost-Sharing apply 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.
Does the Policy on Cost-Sharing apply 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.
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.
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.
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.
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.
Where the organization requires volunteer services, what would be considered eligible cash or in-kind contributions?
The volunteer time contributed toward the project will be accounted for as an in-kind contribution to the project, whereas the travel, accommodation and food expenses can be considered eligible cash contributions to the project, if paid by the organization.
Is there a threshold for the number of volunteers who can participate in a project?
No. However, the number of volunteers must be appropriate to the scope and size of the project and the results being achieved.
Are other types of contributions acceptable as in-kind besides the three categories (volunteers, facilities and assets, and loyalty points) outlined in Appendix 1?
Yes. While the three categories represent the majority of in-kind contributions, other types of in-kind contributions may be accepted on a case-by-case basis. These should be signaled at the time of application.
Why are contributions from the beneficiaries of a project not acceptable as cost-share?
The time that beneficiaries or intermediaries spend participating in capacity-building activities will not be counted as cost-share. The rationale is that these individuals or entities are within the immediate reach of the project.
What is meant by equivalent services?
Upon establishing the rate for volunteer services to be provided, the applicant must solely consider the tasks that will be performed. For example, if an individual with an accounting designation is volunteering to build a school, his or her professional designation adds no value and should therefore not be considered.
What is meant by similar working conditions?
It implies a comparable working environment, taking into account any circumstances affecting labour in the workplace, such as hardship, working hours, physical aspects, legal rights and responsibilities. This notion is included in the policy given that, in some cases, the value of an in-kind contribution may vary from one country or region to another due to a specific local context.
When suppliers provide a discount, would the difference between the market rate and the rate paid be eligible as an in-kind contribution?
No, the difference between the market rate and the rate actually paid is not an eligible in-kind contribution. For example, if multiple training sessions are organized in a given venue and the supplier provides a reduced rate for the room, only the actual cost paid will be eligible. This amount will constitute a monetary contribution.
How does the Policy on Cost-Sharing apply when there is more than one signatory to the agreement (accountability)?
In the case of more than one signatory, accountability for the cost-share contribution is jointly and severally shared among the signatories of the agreement.
Can the cost-share contribution come from a project not funded by GAC? New
To clarify the current Policy, the source of the cost-share contribution must be provided specifically for the GAC-funded project. As such, project activities/expenditures that are carried out/incurred, in part or whole, as part of a project that is not funded by GAC are ineligible and do not count towards the required cost-share contribution.
For example, project activities/expenditures funded by a multilateral organization and implemented by a Canadian organization are not eligible, in part or whole, as a cost-share contribution by the Canadian organization under GAC’s non-repayable grant and contribution agreements.
- Date Modified: