Fiscal Management

Non-federal Match Narrative

Non-federal matching information and explanations of fiscal issues such as contributions, disallowances, documentation, in-kind, and volunteer services can be found below. Head Start administrators and non-federal entities may find this information helpful.

Overview of Requirements

The Head Start Act stipulates that the federal share of the total costs of the Head Start program will not exceed 80 percent of the total grantee budget unless a waiver has been requested and granted (Head Start Act Section 640(b)). If the grantee agency fails to obtain and document the required 20 percent, or other approved match, a disallowance of federal funds may be taken. Non-federal match must meet the same criteria for allowability as other costs incurred and paid with federal funds.

Clarifying Definitions

Allowable Cost: Third party in-kind contributions shall count toward satisfying a cost-sharing or matching requirement only where, if the party receiving the contribution were to pay for them, they would be an allowable cost. Allowable costs are determined by the tests of reasonableness, necessity and allocability as defined in 45 CFR § Part 75 Subpart E-Cost Principles.

Cash Contributions: The grantee's cash outlay, which is generated by the non-federal entity or donated by a third party, and is expended to fund allowable program costs. Cash match counts toward the non-federal match requirement when expended, not when donated to or generated by the grantee.

Disallowance: A cost determined during an audit, or other review conducted by the funding agency, to be unallowable under the OMB Cost Principles and/or the Terms and Conditions of the grant award that may require subsequent repayment to the Office of Head Start. A cost can be disallowed whether paid for by federal or non-federal sources.

Documentation: Written proof that a service has been provided or a donation has been received. Examples include receipts, timecards and invoices or proof of payment.

In-Kind: Property or services that benefit a grant-supported project or program and are contributed by non-federal third parties without charge to the grantee. In-kind contributions may consist of the value of real property and equipment and the value of goods and services directly benefiting the grant program and specifically identifiable to it. In-kind match is counted for the period when the services are provided or when the donated goods are received and used.

Non-Federal Match: That portion of the total costs of the program provided by the non-federal entity in the form of in-kind donations or cash match received from third parties or contributed by the agency. In-kind contributions must be provided and cash expended during the project period along with federal funds to satisfy the matching requirements.

Total Costs: All allowable costs of a program incurred by a grantee including the federal and non-federal match. Total costs do not include those paid by other sources that are not part of the approved budget such as the U.S. Department of Agriculture (USDA). Total costs are net of applicable credits such as refunds and rebates.

Volunteer: An individual providing a service that is necessary to the operation of the Head Start program at no cost to a grantee agency.

Waiver: A reduction in the required amount of grantee non-federal match that is authorized by a federal official in writing. A waiver is justified if it meets one of five criteria defined in the Head Start Act Section 640(b)(1)-(5), and outlined below.


Non-federal match is a statutory requirement of the Head Start Act Section 640(b)). Administrative requirements are codified in 45 CFR § 75.306. As stated in the Act, the grantee agency must provide 20 percent of the total costs of the Head Start program unless a waiver has been granted.


There are five criteria for receiving a waiver:

  1. Lack of community resources may prevent the Head Start agency from providing all or a portion of the non-federal contribution that may be required
  2. Impact of cost the Head Start agency may incur in initial years it carries out such a program
  3. Impact of an unanticipated increase in cost the Head Start Agency may incur to carry out such a program
  4. Whether the Head Start agency is located in a community adversely affected by a major disaster
  5. Impact on the community that would result if the Head Start agency ceased to carry out such a program

To receive a waiver or a reduction in the required non-federal match, the grantee agency must provide the Administration for Children and Families (ACF) Regional Office written documentation of need. This request may be submitted with the grant application or during the budget period if a situation arises that creates a concern that the 20 percent match requirement cannot be met. Approval of the waiver request cannot be assumed by the grantee agency without written notice from the ACF Regional Office. Waivers apply only to one budget period and, if needed, the non-federal entity must apply for a new waiver for any subsequent budget period.


The grant application must include proposed budgets for the federal and non-federal funds. The Notice of Award (NOA) constitutes approval of both the federal and non-federal budgets as described in the approved applications. The budget should reflect proposed sources of match. For example, the budget may be based upon historical data inclusive of volunteer hours, cash match and other donations.


The required 20 percent of the total grantee budget (federal funds plus non-federal match) is the same as 25 percent of the federal funds. An alternative method of calculation is: Federal funds divided by 0.8 (0.8 = 1.0 - 0.2) minus the federal match, which equals the non-federal match.

For example, if the match is 20 percent:

Federal funds: $1,000,000
Non-federal match = $1,000,000 / 0.8 = $1,250,000 minus the federal match of $1,000,000 = $250,000, which is the non-federal match.

This could be verified as:
Federal match = $1,000,000
Non-federal match = $ 250,000
Total cost = $1,250,000 X 20% = $250,000

The required non-federal match for a budget period is calculated at the close of the period based upon the federal funds expended.


Factors affecting allowability of matching expenditures (whether cash or in-kind) are the same as for federal expenditures in that the costs must be reasonable, allocable, and necessary for the accomplishment of the project objectives and are allowable under the applicable cost principles. (45 CFR § 75 Subpart E).

The Administration for Children and Families (ACF) enforces matching requirements on a budget period basis for the Head Start programs. Head Start grantees are required to meet matching requirements on a budget year basis. Match cannot be saved or "banked" for a future period. However, if a cash contribution is not expended in the year received, it can be used to meet the matching requirement in future periods when expended on allowable costs.

Match received from federal sources is not allowable unless there is specific statutory language allowing this use of federal funds. There are very few sources which have been determined to be allowable.

The Bureau of Indian Affairs, Indian Self Determination Act (PL 93-638) authorizes the use of funds for matching purposes so long as the identified use is specifically related to the approved grant. An example of this match might include the provision of medical and/or dental services by a tribally-operated health center, if it is operated under the authority of the Self Determination Act. Funds received under the Indian Child Welfare Act can be used to match other federal funds.

Grantee agencies may propose an overmatch (e.g., greater than the required 20 percent required), but must be aware that once proposed and approved, they are required to provide the approved amount of match. Acceptance of proposed overmatch can be determined by a review of the NOA document.

Cash Match

Cash match can consist of state or local funds, or private or corporate donations. It cannot include funds received from any federal source except as defined in specific statutory language. The match is counted when expended, not when received. A grantee may provide matching in the indirect cost category by reducing the allowable charges to the grant per the indirect cost rate as approved in the indirect cost agreement. Grantees must be aware that this allowability is subject to the 15 percent administrative cost limitation.


All matching contributions must be verifiable from the grantee's records. This includes the source and application of cash match, services received and donations of supplies and equipment.

The use of volunteer time as match must include the establishment of a wage scale based upon the grantee agency's internal scale or prevailing wages in the area. Salaries and wages used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner as salaries and wages claimed for reimbursement from Federal awards. Supporting documentation should include:

  • Volunteer's name
  • The dates, including year, the volunteer provided services
  • The duration of time of services the volunteer provided to the program
  • The volunteer's supervisor's signature
  • The volunteer's signature
  • The volunteer activity
  • The rate applied to this activity
  • Total valuation for the time period

Documentation should be maintained on a regular basis. Programs may choose to use a monthly time sheets for regular volunteers or daily time sheets for occasional volunteers.

Documentation for receipt of supplies and/or equipment should include a copy of a receipt issued to the donor. Information on the receipt should include a description of the item, an estimate of the current fair-market value of the item, the date received and signatures of the donor and the recipient.

Accounting practices vary regarding the summarization and entry of the match into the agency general ledger or books of entry. To ensure internal control, cash match must follow the same cash controls as other agency revenue. For example, cash match might be maintained in the general ledger as a separate subaccount within the Head Start fund. This would provide a means of tracking the cash match and related expenditures. Third party in-kind service or other donations might be tracked on a spreadsheet at the Head Start office and the information given to the fiscal department monthly for entry to the general ledger if required by agency accounting policies and procedures. This could be accomplished by having general ledger accounts for non-federal match revenue and non-federal match expense.

Volunteer Services

Volunteer services are an integral part of the Head Start program. Professional and technical personnel, consultants, and other individuals, such as Head Start parents, may furnish volunteer services. Each hour of volunteered service may be counted if the service is an integral and necessary part of the program. To count the time of a volunteer as match, the volunteer must be providing a service to and not receiving a service from the program. The procedures for valuing volunteer services are found in 45 CFR § 75.306.

If a volunteer's time is being paid under another federal grant, it may not be used for match. However, if a volunteer is paid from a grant that is funded by state and/or local and federal sources, (e.g., 60 percent state/local and 40 percent federal), part of the volunteer's time may be used as match. In this example, 60 percent of the costs may be used as match if the state/local funding is not already used as a match for the federal funds. It may be necessary for the agency to contact the volunteer's funding agency to verify the funding status. A volunteer's time may not be counted as match for more than one grant.

Volunteer time valuation should include fringe benefits. For example, if the agency has an estimated 30 percent fringe rate, then 30 percent should be allocated to volunteer time. In this case if a volunteer provides $100 of volunteer services (e.g., 10 hours at $10/hour), the total valuation would be $130 or $100 X 1.3.

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.

Consultants and other individuals may provide their services to a program at a reduced rate. The difference between this reduced rate and the amount normally charged by the individual may be used as in-kind. The grantee should have a written agreement with the individual that documents the reduction, and documentation should be maintained of the services provided. This may be in the form of an invoice or other grantee developed form.

Time spent by governing bodies such as the Board of Directors, Tribal Councils, and the Policy Council may be used as in-kind for time spent in their decision-making capacity related to the Head Start program. A reasonable valuation should be developed by the program, and applied based upon documentation from the meeting minutes and sign-in sheets. In determining the valuation, the agency or program should bear in mind the nature of the contribution rendered by these individuals. Policy Council time would be considered to be programmatic, however Board or Tribal Council time could be considered an administrative match that is subject to the 15 percent limitation.

The value of donated employee time can be used only in specific circumstances and only when the employee's time is given freely. Donated employee time can be used as in-kind only if the employee is not being compensated through salary, overtime or compensatory time, and if the service and time donated are not in the scope of the employee's paid employment. Consideration should be given to Fair Labor Standards Act requirements as well as agency personnel policies.

Allowability of parent volunteer time is based upon whether the parent is giving a service to the grantee or receiving a service from the grantee. For example, time spent by parents in special programs such as literacy is unallowable because the parent is not providing a service to the program. Time spent by a parent working in the classroom is allowable because a service is being provided to the program.

The time spent by parents on fundraising activities is unallowable as match because fundraising is specifically unallowable under the Office of Management and Budget (OMB) Cost Principles. However, expenditure of the proceeds is allowable when expended for allowable program costs.

Donations of Supplies

As defined in 45 CFR § 75.306, the agency should value third-party donations of supplies at the current fair market value of the supplies as determined by the agency using sources such as the guide issued by the IRS. Generally, donations of supplies to be used as gifts, prizes and awards are not allowable. Value of such items can be counted as match only if the program would otherwise have had to purchase the items to implement the program objectives. The Head Start Program Performance Standards (HSPPS) provide the guidance to acceptable program objectives.

Donated Equipment

45 CFR § 75.306 Equipment, donated for use in a Head Start program, is defined as having a fair-market value greater than $5,000 and a useful life longer than a year. Equipment donated for use in the program must not exceed the fair market value of equipment of the same age and condition at the time of donation. Documentation for the receipt of the equipment must include the description of the equipment and should reference the proposed use in the program and the condition at time of receipt. Donated equipment used as match is subject to equipment regulations found at 45 CFR § 75.439.

Donated Equipment (45 CFR § 75.306) Title Passes to the Grantee

Equipment, donated for use in a Head Start program, is defined as having a fair-market value greater than $5,000 and a useful life that is longer than one year. Fair-market value at the time of the donation can be counted as in-kind if prior approval is received from ACF. If approval is not received, only depreciation can be counted as match. Donated equipment used as match is subject to equipment regulations found at 45 CFR § 75.306.

Donated Land and Buildings (45 CFR § 75.306) Title Passes to the Grantee

The value of donated land and buildings shall not exceed its fair market value at the time of donation to the grantee as established by an independent appraiser and certified by a responsible official of the grantee.

Depreciation may be computed following any generally accepted method and is to be based on the acquisition cost of the building. The computation will exclude the cost of the land.

Donated Space

Donated space must not exceed the fair rental value of comparable space as established by an independent appraisal of comparable space and facilities in a privately owned building in the same locality.

Valuation and Matching

Whenever current fair market value of real property is established, the determination of value must be made by an independent real property appraiser certified or licensed in the state in which the property is located (45 CFR § 75.306(i)(1), Grants Policy Statement page II-67). The appraiser must be licensed for the type of property appraised, generally commercial real estate. An appraisal more than three years old cannot be used to establish current fair market value of real property.

Fair market rental value is the amount that a grantee would have to pay to rent comparable space in the community. The claimed value of donated space must not exceed the fair market rental value of comparable space as established by an independent appraisal of comparable space in a privately-owned building in the same locality (45 CFR § 75.306(i)(3)). For purposes of establishing fair market rental value of donated space from an unrelated party, the required fair market rental value may be established by an appraiser as described above, or by a licensed and independent real estate broker or real estate agent familiar with the rental market in the local community. An appraisal more than three years old cannot be used to establish current fair market rental value of donated space.

If space is donated by a related party, the amount of match the grantee may claim is limited to the amount that could have been claimed had the grantee been the titleholder of the property, generally those amounts described in 45 CFR § 75.436.

Potential Disallowances

Failure to meet the non-federal match requirement without an approved waiver can have a severe impact on the grantee agency.

An example of the impact of a disallowance of non-federal match follows:



Federal match:

$ 800,000

Federal share expended:

$ 800,000

Required non-federal match:


Allowable non-federal match:


Total grant award:

$ 1,000,000

Actual grant amount:

$ 980,000

Recalculated maximum federal share: $980,000 x 80% = $784,000 (80% of Actual grant amount)

Amount of disallowance: $800,000 - $784,000 = $16,000

The amount of disallowance must be repaid by the grantee agency from agency funds. Federal funds may not be used to repay the disallowance. The shortfall may be the result of a failure to accumulate the match, lack of documentation or incorrect valuation that results in a subsequent disallowance.

Audit Requirements

Under the Single Audit Act, and 45 CFR § Part 75 Subpart F-Audit Requirements, auditors are required to assess internal control and compliance. In the area of non-federal match, this includes assessing whether the non-federal entity provided the minimum amount of match required, that match allocated was allowable, and whether the grantee appropriately valued and documented match sources.

To accomplish this, the auditor must:

  • Verify that the required matching contributions were met
  • Ascertain the sources of matching contributions and perform tests to verify they were from an allowable source
  • Test records to verify that the values placed on in-kind contributions (including third-party contributions) are in accordance with 45 CFR § Part 75, program regulations and the terms of the award
  • Test transactions used to match for compliance with the allowable costs/cost principles requirement

Related Links

45 CFR § 1303.4

Federal financial assistance, non-federal match, and waiver requirements

45 CFR § 75.306

Cost sharing or matching

45 CFR § 75.307 (e)(3)

Program income used to finance non-federal share

Related DABs