Contracts and Grants Accounting

PROGRAM INCOME

Contracts and Grants Accounting home Award Setup Managing Award Finances Award Closeout Deficit Clearing Process Effort Reporting Training

Some sponsored activities generate income as a by-product of the work performed. Federal regulations refer to this as "program income.”  Examples of program income include:

  • Income from fees, such as registration fees for conferences and workshops
  • Fees charged for laboratory tests and analysis
  • License fees and royalties on patents and copyrights
  • Fees garnered from the use or rental of property acquired using award funds
  • Proceeds from the sale of items fabricated using award funds, such as software, CDs, tapes, or publications

When income is directly generated by a supported activity or earned as a result of an award, that income is considered part of the award and must be spent on award activities (i.e., funds generated by one award cannot be used for a different award or other activity). Program income is subject to the award terms and conditions and must be treated according to the sponsor’s requirements. See Program Income Procedures (PDF).

Program income on federal awards does not include income earned after the expiration of the award, the receipt of principal on loans, rebates, credits, discounts, etc., or interest earned on any of these, unless otherwise stipulated by federal awarding agency regulations or terms and conditions of the award. Income generated through non-federal awards is handled according to the sponsor's terms and conditions. If the sponsor is silent on the issue of award funds generating income, then the income is handled according to the Accounting for Departmental Revenues policy and procedures.


Types of Program Income

Additive:

Program Income funds are added to award funds, thus increasing the amount available to accomplish the objectives of the sponsored project

In this example, the award amount is $100,000. Then $20,000 in net program income is added to the $100,000 award amount, increasing the PI's authority to spend to $120,000. Typically, program income generated by research awards follow the additive method. (Click illustration for full-size image)

Deductive:

Total funds available to the project remain the same and the funds generated through Program Income are deducted from the financial commitment of the sponsor

In this example, the award amount is $100,000. Here, when $20,000 of net program income is earned, it is deducted from the sponsor's commitment. The total award amount remains the same, but the sponsor's liability is reduced from $100,000 to $80,000. Typically, program income generated by non-research awards follow the deductive method. (Click illustration for full-size image)

Matching:

Program Income funds are used to finance the non-sponsor share of the award (mandatory or committed cost sharing)

Matching Program Income is fairly rare, and applies funds to cost sharing rather than award funds. The total cost sharing commitment does not change, but income earned through award activities can be used to meet that commitment. In this example, $20,000 of net program income is applied to the cost sharing commitment of $30,000, thereby reducing the University's liability to $10,000 of funding. (Click illustration for full-size image)

Add/Deduct:

A portion of Program Income is added to the award funds (up to a limit specified by the sponsor) increasing the amount available to spend. The remaining Program Income is deducted from the sponsor’s financial commitment.

Some National Institute of Health (NIH) awards require a method that splits program income and applies it according to sponsor requirements. A portion of the income -- up to a sponsor-defined limit -- is Additive and increases the total amount available to spend. Any remaining income is Deductive and reduces the sponsor's financial liability without decreasing the award amount.

In this example the sponsor allows 50% of net income to be additive. When $20,000 of net program income is earned, $10,000 is additive, which increases the total authority to spend to $110,000. The remaining $10,000 of net program income is deductive, which reduced the sponsor's liability to $90,000, but keeps the total award amount at $100,000. (Click illustration for full-size image)

Accounting for Program Income

Program Income is “net” – the income generated covers the costs incurred to generate that income. F&A will be assessed on Program Income expenses at the award funded rate. Some NSF awards specify Program Income funds be spent first, i.e., before the sponsor is invoiced for expenses.

Occasionally program income is anticipated in the award proposal and noted in the Phoebe Award Summary. In these cases, CGA will set up an award-specific CF1 value to track program income during award set-up. It is more likely that the potential to generate income is determined during the execution of award activities.  As soon as you have identified an award activity that will generate income:

  1. Check your award documentation to determine the sponsor's requirement  (additive, deductive, etc.) for tracking and using program income.
  2. Notify CGA about the income, and let them know the ChartFields -- the award Fund# and the DeptID, Program Code, and CF2 if aplicable -- you will be using.
  3. CGA will then create a specific CF1 value -- attributed "program income" with the SPO award number as the attribute value – to use in expense and revenue chartstrings to track activity related to Program Income.
    3a. For Matching Program Income, the CF1 value assigned will represent both Program Income and Cost Sharing for the award (value begins with 2, has two attributes)
    3b. Some National Science Foundation (NSF) awards may have special provisions that require the Federal share of program income be kept in a separate account, reported on and/or remitted under special circumstances.
  4. CGA will update the PC ChartField mapping table so the new CF1 will function appropriately in BearBuy and other systems.

CGA will notify the department when the award's Program Income CF1 is activated. From this point on, this CF1 must be used to identify and track all Program Income revenues and expenses.

Recording Expenses

When making purchases and recording expenses related to generating Program Income, use the specific Program Income CF1 and the award's Fund# in the ChartString.

 

Recording Program Income Revenue

When recording Program Income, use Revenue Account 45050 (only used to for Program Income revenue), the award's fund# and Program Income CF1 in the ChartString.

If you will bill customers for program income, work with BPS and the BFS BI/AR team to generate those invoices within PeopleSoft.

  • BPS will create charge codes associated with a Program Income ChartString
  • When the invoice is generated, Program Income revenue will be recorded
  • Payments will be routed to and applied by BPS

If you will collect the revenue (rather than creating customer invoices) for Program Income, create a CDS entry using the Program Income ChartFields listed above. (click image to enlarge example)

Reporting Program Income

At award close, Program Income on federal awards is reported the sponsoring agency on Federal Financial Report Standard Form 425 (SF-425). CGA will base the report on the information provided by the administering unit and the General Ledger. Any remaining (unexpended) program income will be remitted to the sponsor. The University’s use of program income is subject to audit and may be reviewed for compliance with the award terms and conditions, including allowability of costs.