Handling Program Income During the Project Period
This procedure contains the appropriate steps to take in order to correctly identify, record, report, and monitor program income during the project period.
- Identify potential program income and whether it is reportable to the sponsor.
Any revenue that is associated with or generated by a sponsored project and does not come from the sponsor is potentially program income. The principal investigator (PI) is responsible for contacting Sponsored Projects Administration (SPA) in order to discuss potential and actual income-generating opportunities and how the revenue will be used.
SPA will also determine whether the program income will be reportable to the sponsor. Non-reportable program income is handled according to Administrative Policy: Selling Goods and Services to External Customers [see "exclusions" in policy].
- Contact External Sales for advice on proper pricing of program income, sales tax compliance, and contract terms.
When the opportunity to generate program income is identified, the PI or department administrator should contact External Sales before any program income is invoiced. After the grant/contract is closed, subsequent income is considered an external sale rather than program income and pricing, tax, and contract terms must be addressed at the beginning of the sales process.
- Plan for using program income.
Once the PI has set a price for the product or service that will generate the program income, they must contact SPA to discuss the appropriate method of handling the revenue.
SPA reviews sponsor policies to determine their requirements. It is important for PIs to know how program income will be used because additional award funds could result in workscope changes.
How program income can be used:
Reportable program income revenue can be handled in one of four ways, depending on the sponsor's policies:
- Matching - income is used to finance the non-sponsored or nonfederal share of the project.
- Addition - income is added to the amount allowable for project costs.
- Deduction - income is deducted from the amount reimbursed by the sponsor.
- Add/Deduct - the addition method is used up to an agency dollar limit. After that point, the deduction method is used.
Examples: A sponsor awards $100,000 for a project. The project generates an income of $30,000.
- Matching: if the University were required to supply matching funds, e.g., $50,000, the University would now have to provide $20,000.
- Addition: the total project cost could be $130,000.
- Deduction: the sponsor will now only fund $70,000 of the project's costs.
- Add/deduct: if the sponsor limit is $25,000, then $25,000 will be added to the total project cost, but $5,000 will be deducted from the sponsor's payment to reduce it to $95,000. The total amount available is $125,000.
Note: in all cases, program income is spent before the sponsor's award is used.
Which handling method is used for a particular project?
The sponsor may address anticipated program income revenue as part of the award. Even if the sponsor does not label this revenue "program income," it is program income according to University and federal definitions of the term.
Where program income is generated by multiple sponsored awards, the income and expenses will be prorated among the accounts based on the awards. When non-sponsored funds are used in connection with sponsored funds, program income will be distributed following the same method to prorate it.
Individual agency policies determine how the income will be handled. However, most federal agencies specify that:
- Research awards: the addition method will be used.
- Non-research awards: the deduction method will be used.
In certain situations the sale of capital equipment purchased with federal sponsored funds must be treated like Program Income unless otherwise dictated in the award documents. Refer to refer to Administrative Procedures: Capital Equipment Disposals: Selling Capital Equipment Purchased with Sponsored Funds from NSF Grants, NIH Grants or Non-Federal Grants and Capital Equipment Disposals: Selling Capital Equipment Purchased with Sponsored Funds (does not include NSF Grants, NIH Grants and Non-Federal Grants) for specific criteria.
In many cases, the sponsor does not have an established program income policy. If the sponsor is silent on this issue, the income is not reportable and is handled according to Administrative Policy: Selling Goods and Services to External Customers.
- Discuss anticipated program income with the department administrator.
The PI must ensure that the department administrator knows that program income is expected on the project and the nature of that revenue. The PI also informs the department administrator regarding how program income is to be handled in the project budget.
- Generate the program income.
- Invoice for program income.
When program income is generated and the revenue in not collected at the time of the sale, an invoice should be created in the Enterprise Financial System (EFS) by the department administrator. The invoice will instruct the buyer to send the payment to the University’s lockbox and payments will be applied by Accounts Receivable Services. Procedures for creating program income invoices can be found on the Controller's Website.
- Receive and deposit point of sale program income.
For point of sale program income sequentially numbered receipts can be used, they must include the same information. For conference fee revenue, the registration receipt serves as documentation.
Department Administrators deposit the program income into the Sponsored Unapplied Program Income Account in accordance with Administrative Policy: Accepting and Depositing University Revenue.
- If selling capital equipment, refer to Administrative Procedures: Capital Equipment Disposals: Selling Capital Equipment Purchased with Sponsored Funds from NSF Grants, NIH Grants or Non-Federal Grants and Capital Equipment Disposals: Selling Capital Equipment Purchased with Sponsored Funds (does not include NSF Grants, NIH Grants and Non-Federal Grants) for specific deposit requirements.
- Move the program income to the appropriate account.
SFR accountants monitor the Sponsored Unapplied Program Income Account via oversight reports. When program income appears on the report, they review the award's terms and conditions to determine whether the program income is reportable or not.
- Reportable: the SFR accountant moves the income to the project account (add or deduct alternative) or to a non-sponsored account (match alternative).
- Non-reportable: the SFR accountant moves the income to a non-sponsored account.
- Verify program income on reports.
The department administrator and PI monitor receipt of program income. If they believe that program income has been generated but is not appearing in the financial system, they must contact SFR.
- Monitor program income levels.
Sponsored Projects Administration:
SPA monitors program income to evaluate whether a significant level of income has been reached. A significant level is considered to be 25% or more of the total cumulative award amount. If this level has been reached, SPA consults with the PI and appropriate institutional officials to determine disposition of the new program income.
SPA also determines whether the program income is to be used according to the "additional" method and whether any limit set by the sponsor has been or is close to being reached. If so, SPA contacts the PI to discuss handling options.
PIs monitor the level of program income as part of the financial oversight of the project.
- Report program income, if required.
SPA determines whether the program income must be reported to the sponsor. If required, SFR prepares and sends these reports or includes the necessary information in the sponsor financial reports.