International collaborative research grants rarely come from a single funder writing a single check. Instead, national funding agencies coordinate around a shared call, and each contributes its own share of the total budget under rules that go by several overlapping names: co-funding, matching funds, and cost sharing. These terms are often used loosely and interchangeably in proposal guidance, but for a research administrator structuring a multi-country budget, the distinctions determine who has to find the money, in what currency, on whose fiscal calendar, and under whose audit rules.
This guide covers how co-funding and matching-funds requirements actually work across the major international collaborative-funding models, how they differ from the single-funder cost-sharing rules US institutions already know from federal awards, and what a pre-award office needs to check before committing an institution to a cross-border funding structure.
Co-funding, matching funds, and cost sharing are not the same thing
In US federal grants administration, cost sharing has a specific regulatory meaning under 2 CFR 200.306: it is the portion of a single award’s total project cost that the recipient institution funds from non-federal sources, either as a mandatory condition written into the funding opportunity or as voluntary committed cost sharing the applicant offers. One funder, one award, one set of Uniform Guidance rules.
International collaborative grants introduce a second, structurally different arrangement: co-funding, where two or more national or multinational funders jointly finance one collaborative project, each covering a different slice of the work (typically its own country’s researchers) under its own domestic rules. “Matching funds” in this context usually refers to a specific ratio one funder requires — either from a partner funder, from the applicant institution, or from a third-party source — as a condition of its own contribution. The practical effect is that a single international collaborative proposal can be subject to two, three, or more overlapping cost-sharing and reporting regimes at once, none of which is CASRAI’s or any single body’s to define, because no global standards body governs grants administration the way, for instance, the IASB governs accounting.
Three common co-funding models
1. Parallel funding / lead-agency model
Under this model, no money crosses a border. Each national funding agency reviews and pays only its own country’s researchers on the collaborative project, under a shared or coordinated review process. The US National Science Foundation runs bilateral and multilateral “lead agency” and parallel-funding arrangements on this model — for example with the German Research Foundation (DFG), the French Agence Nationale de la Recherche (ANR), and other partner agencies — where a single joint proposal is reviewed once (often by the “lead” agency) but each country’s funder makes and pays its own award to its own nationals. There is no pooled budget and, strictly speaking, no cross-border “matching funds” obligation in the 2 CFR 200.306 sense — each side is simply expected to secure funding from its own national funder as a condition of the collaboration going forward. See CASRAI’s guide to NSF’s separately-submitted collaborative proposal mechanism for how this plays out on the US domestic side of a joint submission.
The Belmont Forum, a consortium of national funding agencies that jointly issues environmental-change research calls, uses the same principle: each participating country’s agency funds its own researchers on a joint international project rather than contributing to a shared pot.
2. Pooled co-funded partnership
Under this model, a supranational body and a group of national funders jointly capitalize a shared fund, and a single grant agreement covers the whole consortium. The clearest current example is Horizon Europe’s Co-funded European Partnerships, in which the European Commission co-funds a joint programme of research calls at either 30% or 50% of the programme’s eligible costs, with the participating national and regional funding agencies required to match that EU contribution with at least an equivalent amount of their own investment. The Commission signs a single Horizon Europe grant agreement with the partnership consortium (generally the participating funding agencies and public bodies), while the EU contribution flows through Horizon Europe work-programme calls and each partner’s matching contribution is implemented and accounted for under that partner’s own national rules. Individual researcher-level projects selected under a joint transnational call are then typically funded and administered by each researcher’s own national agency, so a pooled top-level partnership can still resolve into parallel national payments at the project level.
3. Matching-funds condition attached to a single award
A funder may also require matching funds as a straightforward eligibility or budget condition on its own award, without a second funder being formally party to the agreement — for example, a national funding council that requires an applicant institution or an in-country industry partner to contribute a specified ratio of cash or in-kind resources before it will release its own funds for an international collaboration. This is conceptually closer to domestic cost sharing (one funder, one condition) but is applied specifically because the project is international, often to demonstrate host-institution commitment, satisfy a reciprocity expectation with a partner country’s funder, or meet a programme-specific policy goal.
How this differs from — and interacts with — indirect costs
Matching-funds and co-funding arrangements are budget-structure questions: who pays which direct costs, and under what ratio. They sit alongside, but are analytically separate from, indirect cost (F&A/overhead) rate questions, which determine what percentage a given funder reimburses on top of direct costs. The two interact in practice, though: Horizon Europe applies a flat 25% indirect-cost rate to eligible direct costs, UKRI funds at 80% of full economic cost (fEC) under the Transparent Approach to Costing (TRAC) methodology with the institution expected to find the remaining 20%, and Canada’s Tri-Agency programs operate under the Tri-Agency Guide on Financial Administration (TAGFA). None of these indirect-cost conventions are interchangeable, and a co-funded international project can end up with different indirect-cost treatment on each country’s slice of the budget even where the direct-cost matching ratio is identical. See CASRAI’s guide to calculating indirect costs and comparison of foundation vs. federal indirect cost rates for the mechanics on the US side.
Cash vs. in-kind matching funds
Where a genuine matching-funds ratio is required (as opposed to parallel national funding with no formal ratio), the contribution can typically be met two ways:
- Cash match — a direct financial contribution from the institution, a third-party partner, or another funder, budgeted and tracked like any other direct cost.
- In-kind match — non-cash contributions such as donated faculty effort, equipment use, or facilities, valued according to the specific funder’s valuation rules and, in a US federal context, subject to the same documentation standard as any other cost claimed against the award (it must be verifiable from the recipient’s records, not included as a match on any other federal award, and necessary and reasonable for the project).
International funders do not uniformly recognize in-kind contributions the same way US federal cost-sharing rules do, and valuation conventions (currency, overhead loading, whether volunteer time is includable at all) vary by agency. A pre-award office should confirm, per funder, per award, whether in-kind match is accepted at all and how it must be valued and documented before building it into a budget as if the rules were universal.
Compliance risks specific to cross-border co-funding
- Currency exchange risk. A matching-funds commitment denominated in one currency and tracked against direct costs in another creates exposure over a multi-year project; institutions should confirm which side bears exchange-rate risk and whether the funder allows rebudgeting if rates move materially.
- Misaligned fiscal years and appropriation cycles. National funders operate on different fiscal calendars and, for government funders, different appropriations processes. A partner country’s funding decision can lag or fail independently of the lead institution’s own award, which is a real risk in parallel-funding models where each side’s award is legally separate.
- Non-supplantation and double-counting. Just as under 2 CFR 200.306, funds already committed as match on one award generally cannot also be counted as match on a second award from a different funder — this is a real risk when an institution is stacking a domestic federal match requirement on top of an international co-funding commitment for the same project.
- Divergent audit and reporting regimes. Each national funder’s share is typically audited under its own country’s rules (in the US, potentially subject to the Single Audit Act if federal match dollars are involved), meaning a single collaborative project can carry two or more independent audit exposures with different documentation standards and retention periods.
- Indirect-cost mismatch. As above, differing F&A/overhead treatment across funders means the “same” nominal matching ratio can represent a different real cost burden depending on which country’s indirect-cost convention applies to which slice of the budget.
A pre-award checklist for structuring an international co-funded proposal
- Identify which model applies — parallel/lead-agency, pooled co-funded partnership, or a straightforward matching-funds condition on a single award — since the compliance obligations differ by model, not just by funder.
- Confirm, for each participating funder, whether a formal matching ratio exists, and whether it is expressed against direct costs, total costs, or a specific budget category.
- Confirm whether in-kind contributions are accepted as match by each funder, and get each funder’s valuation methodology in writing before budgeting them.
- Check for non-supplantation conflicts — is any portion of the proposed match already committed as cost sharing on another active award?
- Map each participating institution’s fiscal year and award-decision timeline; flag any dependency where one country’s award is contingent on another’s decision.
- Confirm indirect-cost treatment separately for each funder’s contribution rather than assuming a single blended rate applies across the whole consortium budget.
- Identify audit exposure for each funding stream and confirm document-retention requirements, which can differ by funder and jurisdiction.
- Document the agreed cost-sharing/matching terms in the consortium or subaward agreement itself, not only in the funding-opportunity announcement, so the obligation survives staff turnover on either side.
Frequently asked questions
Is a matching-funds requirement the same as cost sharing?
Not always. In a US federal single-funder context, “cost sharing” is the regulatory term under 2 CFR 200.306. In an international collaborative context, “matching funds” more often describes a ratio one funder requires from a partner funder, institution, or third party as a condition of its own award — the underlying documentation and allowability logic is similar, but the funder relationships and applicable rulebook are different.
Does money actually move between countries under these arrangements?
Usually not, in the most common model. Under parallel/lead-agency funding (used by NSF’s bilateral and multilateral arrangements and by the Belmont Forum), each national funder pays only its own country’s researchers directly; there is no cross-border transfer of the award itself, even though the projects are reviewed and executed jointly.
What happens if one partner country’s funder can’t meet its committed share?
This depends entirely on the specific programme’s terms, which is why confirming contingency language before award is essential — some models treat each national award as fully independent (so a shortfall on one side does not automatically affect the others’ awards), while pooled co-funded partnerships may have consortium-level consequences if a required match is not met. This is a negotiated term, not a universal rule, so it needs to be checked per programme rather than assumed.
Are in-kind contributions treated the same as cash matching funds?
Not necessarily. Whether in-kind contributions count toward a matching-funds requirement, and how they are valued, is set by each individual funder. US federal in-kind cost sharing has specific documentation and valuation standards; international funders vary in whether they accept in-kind match at all.
How does the Horizon Europe co-funding rate work?
Under Horizon Europe’s Co-funded European Partnerships, the European Commission contributes a fixed share — either 30% or 50% of the joint programme’s eligible costs, depending on the partnership — and the participating national and regional funding agencies are required to match that EU contribution with at least an equivalent amount from their own resources. The EU contribution is administered through Horizon Europe work-programme calls; each partner’s matching share is implemented under that partner’s own national rules.
For the US federal cost-sharing rules that apply on the domestic side of a collaborative award, see CASRAI’s guide to mandatory vs. voluntary cost sharing under 2 CFR 200.306. For the broader landscape of national and multinational funders that structure these arrangements, see the grants management pillar page and CASRAI’s guide to Canada’s Tri-Agency research funding system.
