Program Income

• The treatment of program income on federal grants is stipulated by the administrative requirements of the awarding agency. Similarly, non-federal sponsors may have terms and conditions that govern the treatment of program income.
• Treatment of program income earned under contracts is handled on a case by case basis under the terms and conditions of a particular contract.
• Program income earned during a project period shall be retained by the University and is usually treated using one of three methods, depending on policy, sponsor type, and/or terms and conditions of award:
  • Additive Method - Program income funds are added to the amount of the award. The additional funds are used to cover allowable expenses and are used by the department to further eligible project or program objectives and used for the purposed and under the conditions of the award.
    
  • Deductive Method - Program income funds are deducted from the amount of funding provided by the sponsor to complete the terms of the award. Program income mut be used for current costs unless the Federal awarding agency authorizes otherwise. Program income that the non-federal agency did not anticipate at the time of the federal award must be used to reduce the federal award and non-federal entity contribution rather than to increase the funds committed to the project.
    
  • Matching or Cost Share Method - With prior approval from the sponsor, program income funds are used to meet a cost shared commitment. Only expenses incurred to further project/program objectives qualify as cost share. Costs incurred to generate program income may not qualify. The amount of the federal award remains the same.
    
  • Additive/Deductive Combination - A portion of program income is added to the award as specified by the awarding agency; additional program income funds are deducted from the award amount. NSF and NIH so far are the only federal sponsors to employ this treatment. 
    
    
• Generally, for federal awards, the additive method is applied, unless otherwise stated in the terms and conditions of the award or sponsor regulations.
• Generally, for non-research projects and programs, the deductive method is applied to program income unless otherwise stated in the terms and conditions of the award.

Examples of how the National Institute of Health (NIH) and National Science Foundation (NSF) specifically treat program income are outlined below:

• National Institute of Health (NIH) - the additive alternative applies to all grantees unless there is a concern with the recipient activity, and NIH uses special terms and conditions, or the program requires a different program alternative.
• National Science Foundation (NSF) - unless otherwise specified in the grant, program income received or accruing to the grantee during the period of the grant is to be retained by the grantee, added to the funds committed to the project by NSF, and thus used to further project objectives. For additional information regarding NSF's treatment of program income, review the NSF Proposal & Award Policies & Procedures Guide (PAPPG).

Program income is administered through a separate project established under the award (ex. UNDP0XXXXXX) which is activated by your Grant's Officer.Typically, there are expenses associated with the generation of program income which should then be charged to the program income project. Expenditures that are posted against program income must be allowable and in compliance with terms and conditions of the designated sponsored award. Revenue generated by the activity is also posted by Grants & Contracts Accounting to the program income project. The department must contact Grants & Contracts Accounting to set up the project, and to request the income be added to the program income project as revenue.Because the program income is generated utilizing federal sponsor resources, the revenue generated is the property of the federal sponsor and not the department or University.

Treatment of Remaining Program Income

In the event program income remains at the end of the award, the additional income is considered part of the award funding. In accordance with sponsor policy; program income earned during the period of the award either remains with, or is returned to, the sponsor.

Program Income After the Project End Date

Unless otherwise specified in the terms and conditions of the award, UND is not required to report program income earned and accrued after the period of support has expired from the sponsor.

Reporting Program Income to Sponsors

Grants & Contracts Accounting reports program income earned and expended to the federal sponsor on the Federal Financial Report (SF-425), the Federal Cash Transaction Report and/or any report format required. Income resulting from royalties or licensing fees are generally exempt from reporting as program income.

Upon completion of the award, the program income account project will be closed out along with the parent award. There are no federal requirements governing the disposition of income earned after the end of the period of performance for a federal award unless the federal awarding agency regulations or the terms and conditions of the federal award provide otherwise.

• If the program income project has a deficit balance (expenses are greater than revenue), the deficit balance will be covered by any surplus remaining on the parent award. If the parent award is fully spent, the deficit balance must be transferred to a fund specified by the department.

• If the activity on the award can be continued in a self-sustaining manner (ex. revenue can cover expenses) at the end of the award the department should contact Tamara Barber to set up a re-charge center.

Program income expenses and revenue are subject to audit. Documentation must be maintained and readily available in the event of an audit or other review, this includes but is not limited to:

• Sponsor approval (if required)
• Description of the income-generating activities
• Method used to calculate the rates
• Sponsors stipulation of the rates
• Billing records identifying the budget numbers, customers and amounts charged or invoiced
• Revenue generated
• Any changes in rates

Principal Investigators

• Identifies sources of actual and potential program income at the proposal stage; complete required program income sections in the sponsored proposal, as necessary; develop plan for using program income;
• Discuss anticipated program income with the department administrator or business support center;
• Establish rates to use for the sale of goods or services;
• Verifies program income on reports; and
• Addresses account balance issues at final project termination.

Department Administrator/Business Support Center

• Assists Principal Investigator in calculating prices according to this policy; billing properly for products or services which produce program income;
• Reconciles revenue invoiced or submitted against financial reports;
• Monitors program income in account and any limits that are set by the sponsor;
• Deposits income received in accordance with the University's revenue policy; and verifies program income receipt on financial report.

Grants & Contracting Accounting

• Establishes a program income account in the Peoplesoft Grants Module;
• Ensures the proper treatment of program income and that it is properly recorded and accounted for;
• Determines whether program income is reportable or non-reportable;
• Reports program income to sponsor in financial reports; and 
• Advises Principal Investigators, department administrators and business support centers on the proper accounting and tracking of program income.

Example of Additive

Example of Deductive

Example of Matching

Example of Combination