45.13 -- Program Income
September 29, 2009


A. PURPOSE: This section explains program income and the proper use, accounting, and reporting of program income at the University of Idaho. The University requires principal investigators to identify and document program income on projects from both federal and non-federal sponsors. Sponsors provide funding to cover costs of conducting research, training, and public service related activities. Program income may be generated as a result of these activities and, in some cases, must be reported to the sponsor.

B. FEDERAL GUIDANCE: Program income from federally sponsored research must be managed in accordance with the Office of Management and Budget (OMB) Circular A-110 (Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations) and the applicable Code of Federal Regulations (45 CFR, Part 74), which together set out the processes to be used in the identification, use, recording, reporting, and monitoring of program income generated during the project period.

C. PROGRAM INCOME: DEFINITION, EXAMPLES, AND EXCLUSIONS:

C-1. Program Income. Program income is revenue resulting from sponsored project activities that is earned from a third party during the active phase of a sponsored project. The federal definition of program income according to OMB Circular A-110 and incorporated in 45 CFR, Part 74 [OMB A-110, Section 2(x) and 45 CFR 74.2 (2008)] is:

Gross income earned by the University that is directly generated by a sponsored activity or earned as a result of an award.

Unless Federal awarding agency regulations or the terms and conditions of the award provide otherwise, recipients shall have no obligation to the Federal Government regarding program income earned after the end of the project period [OMB A-110, Section 24(e)].

C-2. Examples of program income include:

• Fees for services performed, such as laboratory tests,
• Money from the use, sale, or rental of equipment purchased with project funds,
• Sale of supplies or fabricated with project funds,
• Sale of software, tapes or publications,
• Sale of research materials, such as animal models or reagents,
• Fees from participants at conferences or symposia, [ed. 9-09]
• Royalties and copyrights (Although this federal definition includes royalties and copyrights as program income, unless otherwise restricted by the terms and conditions of the award, the University has no obligation to the Federal Government with respect to income derived from license fees and royalties.) [OMB A-110, Section 24(h)].

C-3. Exclusions from program income are the following:  

• Patient care credits,
• Interest earned on advances of federal funds,
• Receipt of principal on loans, credits, discounts, etc. or interest earned on them,
• Taxes, special assessments, levies and fines raised by government recipients.

D. USES OF PROGRAM INCOME. Federal funding agencies may elect to use one of four methods to handle program income: additive; cost share/match; deductive; and additive/deductive. [OMB A-110, §24(b-d)]. In the event that the Federal awarding agency does not specify in its regulations or the terms and conditions of the award how program income is to be used, the deductive method shall apply automatically to all projects or programs except research. For awards that support research, the additive method shall apply automatically unless the awarding agency indicates in the terms and conditions another alternative on the award or the recipient is subject to special award conditions, as indicated in OMB Circular A-110, §14. The following examples define and illustrate the four method for handling program income: [rev. 9-09]

Example: A sponsor awards $100,000 for a project. The project generates an income of $30,000.

• Additive. Program income is added to the funds committed to the project by the Federal awarding agency and recipient and used to further eligible project or program objectives.

Example: The total project cost could be $130,000. The additional funds should be kept in a separate sponsored project (“K”) account fund and would need to be reported to the sponsor. [ed. 9-09] 

• Cost Share/Match. Program income is used to finance the non-Federal share of the project or program.

Example: If the University was required to match project funds in the amount of $50,000, the University would now only have to provide an additional $20,000, using the $30,000 in program income as part of the match. The sponsor would still pay $100,000.

• Deductive. Program income is deducted from the total project or program allowable cost in determining the net allowable costs on which the Federal share of cost is based.

Example: The sponsor will now only fund $70,000 of the total project costs. The sponsor will deduct the $30,000 in program income from the $100,000 original award.

• Additive/Deductive. When an agency authorizes the disposition of program income as either additive or match, program income in excess of any limits stipulated shall be used in accordance with the deductive method.

Example: If the sponsor limit is $25,000, then $25,000 can be added to the total project cost and $5,000 will be deducted from the total award to reduce the award to $95,000. The total amount available is $125,000.

E. PROCEDURES FOR IDENTIFYING, RECORDING, ACCOUNTING FOR, REPORTING AND MONITORING PROGRAM INCOME: While the University’s procedure is based upon the federal definition and treatment of program income, all sponsored funding is subject to the following procedures:

E-1. Identifying Program Income. It is the responsibility of the Principal Investigator (PI) to identify sources of actual or potential program income at the proposal stage. For all proposals that include program income, the PI must:

• Check “YES” to the program income question on the External Support Form (ESF) 
• Include how program income will be generated in the budget narrative. [rev. 9-09]

E-2. Recording Program Income.  

• If “YES” was checked on the ESF in answer to the program income query, the Sponsored Program Administrator (SPA) in OSP shall set up a separate program income “K” account fund beginning with "D4P" at the time of the award.  [rev. 9-09]
• If program income is not anticipated at the proposal stage of a project and the PI subsequently determines that he or she will begin to earn program income in the middle of an active project, it is the responsibility of the PI to identify the program income, notify the Office of Sponsored Programs (OSP), request review of the sponsor guidelines, and initiate a request for set up of a program income “K” account "D4P" fund. [rev. 9-09]   

E-3. Accounting for Program Income.  

• The department/college is responsible for invoicing and/or receiving the program income. All program income checks received must be forwarded to the OSP. Upon receipt of a program income check, OSP will deposit the check and credit the income to the program income fund and an appropriate budget entry will be done to reflect the income.
• As expenses related to the project are incurred, the department should, in general, charge the expenses against the program income fund before charging the main grant fund. NOTE: Expenses that are unallowable on the main grant fund are not allowable on the program income fund. [rev. 9-09] 
• Retention of program income records is identical to retention of records of sponsored program activities. Source documentation must be retained by the Department for a period of three (3) years following final payment by the award sponsor, unless award indicates a longer retention period or there is an audit/litigation still in progress.  

E-4. Monitoring and Reporting Program Income. (Reporting requirements are determined by sponsor terms or agency specific regulations.)

• OSP, with assistance from the Department, will ensure that all program income is identified and recorded properly in the correct fund. [rev. 9-09] 
• OSP will verify that only allowable costs are charged to the program income fund. [ed. 9-09]
• The OSP Financial Unit is responsible for reporting program income to the sponsor on any financial reports. [rev. 9-09] 
• Reporting and disposition of any residual program income funds will be in accordance with the requirements of the individual sponsor, but in general excess funds will reduce the amount of the sponsor obligation unless otherwise negotiated. [rev. 9-09]   

F. ROLES AND RESPONSIBILITIES FOR PROGRAM INCOME:

F-1. Principal Investigators/Departments.

• Understand and abide by the University of Idaho’s program income policies and procedures.
• Identify program income on the external support form (ESF) at the proposal stage or notify OSP if unanticipated program income is identified during the project.
• Follow the main grant award terms and conditions and charge only allowable expenses to the program income fund. [ed. 9-09] 
• Follow guidelines for disposition of program income.
• Submit close-out information for program income with the close-out information for the main grant fund.

F-2. Office of Sponsored Programs (OSP).

• Help Principal Investigator (PI) determine whether program income will be generated under a specific sponsored project. [rev. 9-09] 
• Identify and/or negotiate terms with the agency with respect to method of use regarding program income. [ed. 9-09]
• Establish the program income fund at award or upon request. [ed. 9-09]
• Ensure that all agency and award guidelines for main grant budget are also applied to program income fund. [ed. 9-09]
• Determine the program income reporting requirements and report program income to the sponsor.
• Confirm program income amounts with the department.
• Assist department in transferring program income balances, if appropriate.