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.

  1. The principal investigator (PI) identifies potential program income and notifies the department administrator and the Sponsored Projects Administration (SPA) grants administrator (GA).

    Any revenue that is associated with or generated by a sponsored project and does not come from the sponsor is potentially program income. The PI is responsible for notifying the department administrator and the SPA GA that program income is expected on the project, the nature of that revenue, and how the revenue will be used.  It is important for PIs to know how program income will be used because additional award funds could result in workscope changes.

    The SPA GA will determine whether the program income is reportable to the sponsor and if sponsor approval is needed for a change in workscope. 

    Reportable program income revenue will be applied to the sponsored project in one of four ways, depending on the sponsor's policies:

    1. Matching - income is used to finance the non-sponsored or nonfederal share of the project.
    2. Addition - income is added to the amount allowable for project costs.
    3. Deduction - income is deducted from the amount reimbursed by the sponsor.
    4. 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.

    1. Matching: if the University were required to supply matching funds, e.g., $50,000, the University would now have to provide $20,000.
    2. Addition: the total project cost could be $130,000.
    3. Deduction: the sponsor will now only fund $70,000 of the project's costs.
    4. 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 method is used?

    Federal sponsors:

    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.

    Note: 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.

    Nonfederal sponsors:

    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.

    Not reportable program income is handled according to Administrative Policy: Selling Goods and Services to External Customers [see "exclusions" in policy].

  2. The PI or department administrator contacts External Sales for advice on proper pricing of program income, sales tax compliance, and award 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 award is closed, subsequent income is considered an external sale rather than program income and pricing, tax, and award terms must be addressed at the beginning of the sales process.

  3. The PI generates the program income.
  4. The department administrator receives and deposits the point of sale program income or invoices for the program income.

    The department administrator should collect point of sale program income and may issue sequentially numbered receipts. (Note: For conference fee revenue, the registration receipt serves as documentation.)  After the program income is collected, the department administrator should deposit the program income into the Sponsored Unapplied Program Income Account in accordance with Administrative Policy: Accepting and Depositing University Revenue.

    When program income is 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 how to send the payment to the University and payments will be applied by Accounts Receivable Services. (Procedures for creating program income invoices can be found on the Creating a Bill job aid.)

    Note: If selling capital equipment, refer to Administrative Procedures: Capital Euipment 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.

  5. The Sponsored Financial Reporting (SFR) Accounts Receivable Accountant moves the program income to the appropriate sponsored project.

    The SFR accounts receivable accountant monitors the Sponsored Unapplied Program Income Account and when there is program income  it is applied according to the award’s terms and conditions.

    Reportable: the program income is moved to the sponsored project (addition, deduction, or add/deduct method) or to a non-sponsored account string (matching method)

    Not reportable: the program income is moved to a non-sponsored account string

  6. The department administrator verifies program income has been applied according to the award’s terms and conditions.

    The department administrator monitors for the receipt of program income and contacts the SFR accounts receivable accountant if it does not appear as expected.

  7. The PI and SPA GA monitor program income levels.

    The PI monitors the level of program income as part of the financial oversight of the sponsored project.

    The SPA GA monitors the level of program income to determine if  a limit set by the sponsor has been or is close to being reached or 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 the sponsor’s limit or this significant level has been reached, the SPA GA consults with the PI and appropriate institutional officials to determine disposition of the new program income.

  8. The SFR accountant reports program income to the sponsor.

    If program income is required to be reported to the sponsor, the SFR accountant prepares and sends the necessary information to the sponsor.

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