Cost sharing is a financial commitment toward the total cost of a project from a source other than the granting organization. It can be one of two types, either mandatory or voluntary. Mandatory cost sharing is that which is required by statute, regulation, or written policy. Such cost sharing is set forth in the Program Announcement (PA) or the Request for Proposal (RFP) announcing the availability of the funding. Depending on the particular program or agency, this contribution may be satisfied by providing cash, services, or other contributions such as tuition waivers, or faculty or staff effort devoted to the project. In some instances, the program will mandate a percent of the total project costs as cost sharing, but in others, the requirement will be stated without a specified amount or percentage.

Voluntary cost sharing is a more complex issue. On an increasing basis, various funding programs and agencies are trying to further leverage their limited grant funds by encouraging applicants to show a commitment on the part of the submitting institution through voluntary cost sharing. In these instances, while it is not mandated by the regulations, cost sharing is nonetheless encouraged as an indication of support by the institution. Program officers at various agencies view this as a means to augment their program dollars and may stress the importance of an institutional financial commitment. While voluntary cost sharing is subjective, faculty may feel the pressure to meet these expectations.