Flowchart 1A: In-Kind Approval Process
Local funds, as well as cash from any non-federal source, may be used to satisfy the non-federal match requirements for a project under the Federal Aid Highway Program. In-kind contributions represent eligible project costs provided by a third party to your project to satisfy the non-federal share (also known as "match") requirements of a federal-aid project. Examples of in-kind contributions include donated services, materials or goods, and equipment. Federal aid guidance regarding non-federal matching requirements can be found at Federal-Aid Guidance for Non-Federal Matching Requirements.
The FHWA Colorado Division defines third party as "an entity (other than the grantee/recipient, subgrantee/subrecipient, or project sponsor) that is not party to this federal-aid project agreement, but who may have an interest in the project." Third party in-kind contributions are described by FHWA Colorado Division as "goods or services which are necessary, allowable, eligible and reasonable to carry out the scope of the federally assisted project or program. While these goods or services are without charge to the project sponsor, they must be pre-approved and supported (documented) by the same methods used by the project sponsor to support all direct cost reimbursements."
You should spend time reviewing the guidance concerning in-kind contributions and should allow ample time in your schedule if you anticipate that your project will have this source of funds. If in doubt about whether or not a contribution qualifies as in-kind, ask your CDOT project manager.
Eligible in-kind contributions are contributions from an entity meeting the definition of third party (defined in 2 CFR 200.306(b)(2) and (b)(5)). Additionally, an in-kind contribution cannot be funded by other federal monies, nor can in-kind contributions be counted towards other federal cost-sharing requirements or matching requirements of another federal grant agreement, federal procurement contract, or any other award of federal funds. In other words, your in-kind match can only be used to match one project and cannot include federal funds.
The use of in-kind contributions to satisfy non-federal match requirements must be pre-approved by CDOT and the FHWA Colorado Division prior to the execution of an intergovernmental agreement or contract.
For in-kind contributions to be used to satisfy non-federal match requirements, the contribution must be "necessary and reasonable" for accomplishment of the project. In other words, the contribution must be directly related to the project and a necessary component of the project's successful completion.
A simple test of this principle is to ask, "If I had to pay for these goods or services, when they are incorporated into the project, would they be eligible expenses towards this project?" If the answer is no, then the in-kind contribution is not likely to be eligible. In-kind contributions must also meet the cost allowability principles of the applicable Federal Cost Principles.
You're probably asking what's the difference between "eligible" and "allowable"? These are two requirements that must be met for every in-kind contribution:
- Eligible refers to requirements of the specific program and are governed by 23 CFR 420.113. As an example, the Congestion Mitigation Air Quality (CMAQ) program includes items that can be used for match that are not eligible under other programs. Just because a contribution is eligible in one program, does not mean it's eligible in another. Be sure to check your program's eligibility requirements.
- Allowable refers to requirements that reach across all programs and are governed by 2 CFR 200 Subpart E-Cost Principles. Regardless of the program, federal rules define allowable expenses. Be sure to check the allowable requirements as well.
An in-kind checklist to assist you in resolving questions pertaining to in-kind contributions can be found in the checklist section of this website on the right rail of the home page.
The use of in-kind contributions to meet match requirements must be documented first in the pre-approval process, and secondly in the reporting documentation throughout the duration of the project. In-kind contributions must be verifiable from the records provided.
Once you have determined that the in-kind contribution will likely be acceptable, you must complete the FHWA Checklist for Pre-Approval of In-kind Match Form and submit it to the CDOT project manager. The form should be submitted prior to authorization of any phase by FHWA.
An important aspect of the form is the requirement to provide a valuation for each contribution. Valuations for goods or services need to be fair and reasonable.
Once the form is submitted, CDOT will work with FHWA to obtain pre-approval for the contribution. Allow approximately 5 to 10 weeks for this pre-approval process.
For each pre-approved contribution, a signed letter or document from the third-party donor is required which:
- states they agree to the contribution;
- identifies the goods or services being contributed and their valuations;
- states the contribution is not being used for any other program match; and
- state that the contribution was procured with non-federal funds.
In-kind contributions must be clearly identified in the scope of work attachment to an intergovernmental agreement. While the project costs to which an in-kind contribution is to be applied cannot be incurred prior to the approval of in-kind by CDOT and FHWA, it is possible to modify in-kind contributions to an agreement after its initial execution via an in-kind amendment.
The intergovernmental agreement can be executed once the scope of work has been modified to include the pre-approved in-kind contribution.
In-kind match requires specific documentation throughout the life of the project and after completion of the project. It is your responsibility to attain and submit all pertinent documentation.
Once the project begins, you must confirm in-kind contributions with the first reimbursement request to CDOT. As in-kind contributions are incorporated or used on the project, the documentation for the in-kind contribution must accompany the request for reimbursement of other direct costs. If in-kind contributions don't materialize, cash must be used to make the match. It is the responsibility of your agency to ensure the required match of a project is met.
You are required to keep track of all in-kind contributions and how much of it is used throughout the life of the project. You must provide in-kind usage with each reimbursement request and provide a detailed summary at the end of the project. The summary must show that all in-kind match was successfully met.
You are required to keep in-kind documentation and have it available for inspection purposes for a period of no less than three and one half years after the completion of the project.
