Nonprofit Accounting Basics

Matching, Level of Effort, and Earmarking


John Meriscko

National Association of County and City Health Officials

Matching, level of effort, and earmarking are the:

  • amount (or percentage) of grantee contributions or matching funds provided
  • specified service or expenditure levels maintained
  • minimum or maximum limits for specified purposes

Matching, level of effort, and earmarking applicable to grants and contracts will be specified in the agreement.

Matching, or cost sharing, includes requirements to provide contributions (usually non-federal) of a specified amount or percentage to match federal awards. Matching may be in the form of allowable costs incurred or in-kind contributions (including third-party in-kind contributions); also, if permitted by the grant, it may be possible to use in-kind contributions, such as donated services of volunteers, that are not recorded in the GAAP financial statements because they do not meet the criteria in SFAS 116 - e.g., volunteers who are not required to use specialized skills. Matching requires that the recipient pays for some of the program costs either with their own money or with funds from another entity.

Level of effort includes requirements for (a) a specified level of service to be provided from period to period, (b) a specified level of expenditures from non-federal or federal sources for specified activities to be maintained from period to period, and (c) federal funds to supplement and not supplant non-federal funding of services.

Earmarking includes requirements that specify the minimum and/or maximum amount of percentage of the program’s funding that must/may be used for the specified activities, including funds provided to subrecipients. Earmarking may also be specified in relation to the types of participants covered.