When organizations think of matching funds, it’s a relatively simple calculation: multiply the amount of the grant by the required match percentage and, voila, you know the dollar amount needed. (e.g, a $200,000 grant with a 50% match requirement means $100,000 (cash or in-kind) is needed for match.)
Uncle Sam takes a different approach that often leaves new federal grant seekers scratching their heads.
Federal awarding agencies determine match amounts based on a project’s “total cost,” not the grant amount. The total cost is the sum of the federal grant amount plus the matching funds provided by the grant recipient. Therefore, if your total project cost is $400,000 and a grant has a 20% match requirement, the maximum federal award can be $320,000; and the applicant needs to provide $80,000 in matching funds.
Side note: It’s similar to home buyers working with lenders that have an 80/20 loan-to-value requirement. The lender puts up 80% and the home buyer covers the difference. Using the $400,000 example above, replace “total project cost” with “new home value,” “federal award” with “mortgage” and “matching funds” with “buyer’s equity.”
Several awarding agencies now provide match calculation examples in their funding opportunity notices. The example below is from a Department of Justice grant with a 25% match requirement.
- Step 1: Take the amount of grant funds you are requesting and divide it by 0.75. This will give you your total project cost. Example: $200,000 (grant amount) ÷ 0.75 (percentage for use of grant funds) = $266,667 (total project cost).
- Step 2: Subtract the amount of grant funds you are requesting from your total project cost. This will give you your matching funds requirement. Example: $266,667 (total project cost) − $200,000 (grant amount) = $66,667 (matching funds requirement).
- Step 3: A quick way to double check that you have the correct amount of matching funds is to take your total project cost and multiply it by 0.25. Example: $266,667 (total project cost) × 0.25 (maximum percentage of matching funds requirement) = $66,667 (matching funds requirement).
Another method is to build your budget based on your program’s objectives regardless of funding sources. That is, what would your program look like in an ideal world (e.g., staffing, supplies, equipment, consultants/vendors, etc.) to achieve your goals? If the amount is, for example, $300,000 per year and a federal grant has a 25% match requirement, your organization will need to cover $75,000 of the cost while the grant can fund the $225,000 difference.
Both calculations get you to the same place. I prefer the latter method. It requires organizations to look at their programs in terms of goals, objectives and outcomes—big picture stuff—rather than “how much (people or things) can we get for the maximum grant amount?” The fed’s formula is specific to each funding program (for obvious reasons) but it tends to put grant seekers in a chasing-the-dollars mindset. For long-term sustainability, organizations need to think strategically about the funding they pursue. Another topic for another time.
Shoot us a message if you have any questions about federal grants and matching funds. We’re here to help.