Dear Business and Grant Administrators,

 

Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), Section 2 CFR 200.307 defines program income as "gross income earned by a recipient that is directly generated by a sponsored activity or earned as a result of the award.”  Program income must be identified, appropriately documented, and the resulting revenue and expenses properly recorded and accounted for.  Non-federal sponsored awards generally require similar diligence to identify, document, and account for program income.  At the same time, in some cases when we are dealing with a non-federal sponsor or a firm-fixed price award silent on the issue of program income, this income may not reportable and therefore not considered program income.

 

Examples of program income when the source of funding is a sponsored award or the revenue is directly generated by a sponsored activity:

(note: royalties from patents, copyrights, etc. are generally not reportable as program income) 

 

ü  Fees earned from services performed under the project, such as laboratory tests.

ü  Income generated from sales of commodities and research materials, such as tissue cultures, cell lines, and research animals.

ü  Registration fees from participants attending conference or workshop.

ü  Income from sales of educational materials.

ü  Sale, rental, or usage fees, such as fees charged for the use of computing or laboratory equipment.

ü  Income generated from the sale of software, digital media, or publications.

Accounting for program income

As a non-profit institution, the University’s mission is not to seek profit from its research activities; therefore, not properly accounting for program income on sponsored awards may potentially affect the University’s tax-exempt status. Unless specified otherwise in the award, federal regulations require the University to expend program income funds before spending award funds.  Any funds remaining in the program income project after the project has terminated will be returned to the sponsor.  Program income revenue may be accounted for in one of the methods described below, depending on sponsored award terms and conditions.  Regardless of the accounting method used, program income may be used only for allowable costs in accordance with the applicable cost principles and the terms and conditions of the sponsored award.

 

Additive Method: Program income funds are added to the sponsored award commitment and used to further eligible project or program objectives.  Funds may be retained and used during the term of the award.  Generally, if the award is silent on the treatment of program income, the additive method is the default approach used for applying program income to sponsored awards.

o   Example: The sponsored award amount was $100,000.  $10,000 of program income is generated.  The total allowed project costs are now $110,000 ($100,000 of the original award amount and $10,000 of the program income earned).

 

Deductive Method: Program income funds are deducted from the total award’s allowable costs to determine the net allowable costs on which the sponsor's share of costs is based. 

o   Example: The sponsored award amount was $100,000.  $10,000 of program income is earned.  The program income must be used to offset the award amount from the sponsor and reduces the total award amount to $90,000.  Total available funds for the project remain at $100,000 ($90,000 from the sponsored award and $10,000 from the program income earned).

Matching Method: With prior approval of the sponsor, program income funds are used towards fulfillment of a committed cost sharing requirement for the sponsored award.

o   Example: The sponsored award amount was $100,000 with a cost sharing commitment of $20,000. $10,000 of program income is generated.  The expenditure of the program income may be used to account for $10,000 of the cost sharing commitment.

For institutions of higher education and nonprofit research institutions, the additive method is the most commonly used method by federal sponsors for utilizing the program income generated from federal grants.  The additive method shall automatically apply to all awards made to the University, unless otherwise specified in the terms and conditions of the award.

 

If you have any questions or concerns with this note, please reach out to your assigned SPA Financial Analyst.

 

Thank you.

 

Linda Serrantonio, CRA | Team Lead

Research Finance | Reporting

University of Vermont

Sponsored Project Administration

217 Waterman | 85 South Prospect Street

Burlington, VT 05405-0160

P: 802-656-4194 | [log in to unmask] | www.uvm.edu/spa/