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Understanding Non-Federal Match Requirements

Are local funds required for projects that receive DOT funding?

Two hands match up two puzzle pieces that, together, make up a $100 bill.Most DOT grant programs involve sharing project costs. Matching or “cost sharing” means that a portion of the project’s cost is not paid by Federal funds. Matching funds are typically stated as a percentage of the total project cost. 

The required local match percentage, sources of match, and other requirements vary from program to program, so check the Notice of Funding Opportunity (NOFO) for your program when applying. 

Formula highway and transit grant funds also have matching requirements that vary based upon the Federal-aid or formula program from which the project receives funding. In some cases, the Federal share is also adjusted based on related statutory provisions. (To understand the difference in formula versus grant funds, see What money is available?)

In some instances, Federal funding can be “braided” for local match. Federal fund braiding is when funds from one Federal program are used to meet the match requirements of another. The Federal funding “strands” never lose their identity and grantees report to both participating agencies regarding how specific funds are spent. 

It is important to determine whether Federal funds can be used as match, as this requires specific Congressional authorization. For example, the Department of Housing and Urban Development’s Community Development Block Grant (CDBG) program includes a specific regulation to allow CDBG funds to be used to meet cost share requirements on other Federal grants (24 CFR 570.201[g]).

Determining the Match Amount

Step 1: Determine Total Project Cost (e.g., $125,000)

Step 2: Total Project Cost Amount multiplied by Program Federal Share Percentage = ($125,000 * 80% = $100,000) = Federal Grant Amount

Step 3: Total Project Cost Amount multiplied by Required Local Share Percentage ($125,000 * 20% = $25,000) = Local Cost Share

What Programs Allow a Reduced Match?

Numerous DOT funding opportunities provide flexibility in cost sharing requirements for rural, Tribal, and disadvantaged communities. Some highway safety and expedited project delivery projects offer a 100 percent Federal match not related to the type of project sponsor or community served. Check your specific program NOFO to see the exact requirements and flexibility, if provided.

The DOT Discretionary Grants Dashboard is a database of all transportation discretionary grant programs at DOT and other Federal agencies. It includes a filter to search for grants that offer a Match Waiver. Select “yes” on the Match Waiver drop-down menu to see the grant programs that include some kind of match flexibility. Match information is provided for every grant program included in the Dashboard.

Many, but not, all formula and grant programs with “rural” or “Tribal” in their title may offer some match flexibility. Note that not all Federal programs use the same definition of rural. View the Rural Eligibility page to determine whether your community may be eligible, and for which programs. More information on Tribal programs can be found at: FHWA Transportation Funding Opportunities for Tribal Nations.

Some of the larger DOT programs that offer match flexibilities include: 

Justice40 Match Flexibility

The Justice40 Initiative aims to ensure that 40 percent of the benefits of certain Federal investments flow to disadvantaged communities that are marginalized, underserved, and overburdened by pollution. As part of the Justice40 whole-of-government initiative, some USDOT grant programs offer non-Federal match flexibility. 

View a list of Justice40-covered programs with non-Federal match flexibility.

There are Federal tools available to help you determine if your community meets the disadvantaged community threshold

How Can I Meet My Match Requirement?

There are two kinds of local matching: cash and third-party in-kind.

To determine acceptable sources of local match, refer to information in the specific Program Circulars, or Notices of Apportionments, or Notices of Funding Opportunity—all of which are published in the Federal Register and posted on the Operating Administration websites.

Cash Match

Cash or “hard” matching includes cash spent for project-related costs. The allowable cash match must include costs that are necessary, reasonable, and allowable under the federal program. 

Tips to Meet Cash Match Requirement 

  • Identify project partners that can potentially provide matching funds including from state or local transportation funds, toll revenues, parking fees or other resources managed by the state department of transportation, metropolitan planning organization, toll authority, transit agency, Tribal governments, or local governments. 
  • Outside of government, universities, nonprofit partners, or philanthropic organizations can also be sources to fund local match for projects that they may also be investing resources to support.
  • Consider whether other Federal funds can be “braided” to provide match, and if this is permitted in the grant program.
  • Matching funds should be adequately documented for verification, treated consistently, and adequate accounting controls should be in place and meet Federal grant administration and financial management requirements. 

Third-Party In-Kind Match

Third-party in-kind or “soft” matching includes, but is not limited to, the valuation of non-cash contributions provided by a third party. This could be a non-profit or private-sector partner, other units of government, educational partner, or others who may be providing in-kind match in the form of services, supplies, real property, and equipment. The value of the service may be used for the matching requirements, if the services are necessary, reasonable, and allowable under that Federal program. Grantees are allowed to use unrecovered indirect costs for matching or cost sharing requirements; however, this requires prior approval of the Federal awarding agency. 

Valuation of In-Kind Match

For third-party in-kind matching—such as supplies, equipment, real property, services, materials, or space—the value must not exceed the fair market value at the time of the donation. For volunteer services, the rates must be consistent with the rates normally paid for similar work in the organization. If an employee from another organization conducts services free of charge, the services should be valued at that employee’s regular rate of pay, in addition to their fringe benefits and allowable indirect costs. 

Tips to Meet In-Kind Match Requirement 

  • Include donated office or meeting space using the fair market value of that space. 
  • Calculate the time devoted by volunteers contributing their professional expertise to a project using a published range for that position within that person’s organization, or rates consistent with those ordinarily paid by other employees for similar work in the same labor market.  
  • Document fringe benefits and other costs associated with the time devoted by match staff or volunteer time. 

Restrictions on Use of Funds 

Matching and cost share funds have the same restrictions as Federal funds. These funds must follow the same allowable and unallowable guidelines in their Federal award. If, for example, a conference is unallowable under the grant award that has matching requirements, then grantees would not be able to use the matching funds instead. The expense has to be allowable with Federal funds in order for it to be allowable with matching or cost share funds. 

How This Applies to Your Grant  

Grantees that have a matching requirement must follow the guidelines in their USDOT grant award in order to remain in compliance with Federal regulations. Grantees will have to provide the correct amount of match funds, use the funds only on allowable expenses, and maintain records in case of an audit or site visit.

Work with your USDOT grant manager or government representative to discuss questions or get clarification needed to better understand the specific matching requirements and program guidelines applicable to your award. 

Additional Resources

The following resources provide more information about cost share flexibilities: