Program Income

  1. Federal Definition and Requirements
  2. Examples of Program Income
  3. Accounting for Program Income
  4. Reporting Program Income
     

a. Federal Definition and Requirements

Definition

Per OMB Circular A-110, program income means awardee gross income that is directly generated by a supported activity or earned as a result of the award. Program income includes, but is not limited to, fees received for services performed; the use or rental of real or personal property acquired under a federally funded project; the sale of commodities or items fabricated under an award; license fees and royalties on patents and copyrights; and interest on loans made with award funds. The interest earned on advances of federal funds is not considered program income. Unless otherwise provided in the specific awarding-agency regulations or the terms and conditions of award, program income does not include the receipt of principal on loans, rebates, credits, discounts, etc., or interest earned on any of them.

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Requirements

Federal awarding agencies apply the following standards in requiring recipient organizations to account for program income related to projects financed in whole or in part with federal funds.

Program income earned during the project period will generally be retained by the awardee and, in accordance with federal awarding-agency regulations or the terms and conditions of the award, must be used in one or more of the following ways:

  1. Added to Funds Committed to the Project by the Federal Awarding Agency and Recipient and Used to Further Eligible Project or Program Objectives -- This option applies automatically to awards supporting research, unless the funding agency's award terms and conditions indicate another alternative or the recipient is subject to special award conditions. When the funding agency authorizes the disposition of program income as described here, any program income in excess of the stipulated limits must be used in accordance with paragraph 3 below.
  2. Used to Finance the Non-Federal Share of the Project or Program Costs -- This option may be available to non-research projects/programs if and when authorized by the funding agency. When the funding agency authorizes the disposition of program income as described here, any program income in excess of the stipulated limits must be used in accordance with paragraph 3 below.
  3. Deducted from the Project or Program's Total Net Allowable Costs on which the Federal Share of Costs is Based -- In the event the federal funding agency's regulations or award terms and conditions do not specific how program income is to be used, paragraph 3 shall automatically apply to all projects or programs except research.

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Earnings f​rom Copyrights, Patents

Unless the federal funding agency regulations or award terms and conditions provide otherwise, awardees will have no obligation to the federal government with respect to program income earned from license fees and royalties for copyrighted material, patents, patent applications, trademarks, and inventions produced under an award. However, Patent and Trademark Amendments (35 U.S.C. 18) apply to inventions made under an experimental, developmental, or research award.

Sale of Prope​rty

Proceeds from the sale of property shall be handled in accordance with the requirements of the Property Standards.

Earnings Post-Project

Unless the funding agency regulations or award terms and conditions provide otherwise, awardees shall have no obligation to the federal government regarding program income earned after the end of the project period

Note

If authorized by the funding agency regulations or the award terms and conditions, costs incident to the generation of program income may be deducted from gross income to determine program income, provided these costs have not been charged to the award.

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b. Exam​ples of Program Income

  • Revenue from the sales of biological materials developed under a research grant.
  • Sales of educational materials, such as manuals, developed from a grant-supported curriculum development project.
  • Sales of videos produced for educational purposes under a federal grant.
  • Revenues generated from admission fees to artistic events supported by grants.
  • Income from services, license fees, and royalties.

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c. Accounting for ​Program Income

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

  1. If the deduction alternative is to be followed or if the income is used to cover the costs incurred to produce the revenue under the sponsored agreement, the income should be directly credited to the sponsored account (MFK).
  2. If the additional funds or cost-sharing alternative is followed, a separate 240 Fund MFK must be established to account for and report the revenues.
  3. If the income results from transactions processed through the UI Research Foundation (UIRF), the UIRF will determine the distribution to include reimbursement to the grant for costs incurred, royalties or license fees to other third parties, and the remainder being split 10% to the UIRF, 10% to the UI department, 80% to the principal investigator. A Fund 240 MFK will be established for the department and the PI to access the amounts distributed for their use, which is restricted to further the objectives of the grant program that supported the original research.

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d. Repo​rting Program Income

Project directors/departments should contact the Grant Accounting Office, 335-3801, for guidance on proper reporting/accounting procedures for program income prior to the generation of any revenues derived from sponsored agreements.

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