Guidelines on Program Income for Federal Grants

Version: March 2020

Purpose
Program Income describes any revenue generated from a sponsored project or external grant. Principal Investigators and Project Directors must identify program income on sponsored awards so that it can be properly documented and managed by Lewis & Clark. The following guidance is intended to ensure program income is treated consistently and in compliance with regulations on federally funded projects.

Overview
The Uniform Guidance 2 CFR §200.307 defines Program Income as “gross income earned by the institution that is directly generated by a sponsored activity or earned as a result of an award” during the period of performance.

Program income includes, but is not limited to the following:

• fees received for services performed
• income generated from sales of commodities or research materials
• registration fees from participants attending a conference or workshop
• rental or usage fees, such as fees charged for the use of computing or lab equipment
• income generated from the sale of software, digital media, or publications

Depending on the funding agency requirements and award terms and conditions, program income may be handled in one of the following four ways.

1. Additive: Program income funds are added to the sponsored award commitment and used for eligible project objectives during the term of the award. This is the most commonly used method by federal sponsors for utilizing the program income generated from federal grants.
2. Deductive: Program income funds are deducted, or offset, from the total award’s allowable costs to determine the net allowable costs on which the sponsor’s share of costs is based.
3. Matching: With prior approval of the sponsor, program income funds are used towards fulfillment of a committed cost-sharing requirement for the sponsored award.
4. Add/Deduct: A portion of program income is added to the funds committed to the project as specified by the awarding agency; any remaining program income funds are deducted from the total funds available for the project.

Program income generated that is the result of activities not directly related to the sponsored award must be prorated to identify the proportion attributable to the sponsored award.

Program income committed as cost sharing becomes part of the required institutional commitment to a project. In the event of a shortfall in the expected program income, an alternative means of meeting that cost share obligation is required. Program income earned may only be used for allowable expenses.

Procedures

Proposal Stage:

• PI: Discuss potential program income with SPARC.
• PI: If program income will fund a portion of the project as committed cost sharing, an alternative funding source must be identified in the event of any program income shortfall.
• SPARC: Review potential program income and determine whether and how it should be included in the proposal budget.
• SPARC: All program income information must be included on the Grant Proposal Clearance Form and approved internally prior to proposal submission.

Award Initiation:

• PI: Confirm program income and source has not changed since proposal submission.
• PI: Work with SPARC and the Business Office as needed to develop a process for invoicing for and receiving payments and depositing funds to the correct grant-related account using the program income object code.
• SPARC: Negotiate program income terms in sponsored awards.
• SPARC: Ask Business Office (BO) to establish program income object code (4625) with award set up.

During the Award:

• PI: Identify any new sources of program income.
• PI: Generate invoices as necessary, and deposit all program income to the correct account and object code. Income must be reconciled to the invoices, and complete documentation retained in case of audit. The PI or project director is responsible for maintaining all program income records and receipts in case of audit.
• PI: Ensure project expenses are allowable in accordance with sponsored award and federal regulations whether using grant funds or the program income generated under the award.
• PI and SPARC: Understand and comply with sponsor approved program income accounting method, and verify total program income earned and amount expended to be included in financial reports.
• SPARC: Prepare financial reports for PI review and submission to sponsor.
• BO: Report earned program income to sponsor as required by agency (e.g. Federal Financial Report).

Award Closeout:

• SPARC: Reconcile program income for award closeout.
• BO, unless otherwise specified by sponsor: Submit financial report, including program income, to sponsor.

BO: Return unspent program income balance to the sponsor according to the award terms and conditions. Unless otherwise specified in the award agreement, funds remaining in the program income account after the project has terminated will be returned to sponsor. Further, any program income generated within 60 days of award expiration is still considered program income; it must be treated in accordance with these guidelines and be reported to the sponsor