Some sponsored activities generate income as a by-product of the work performed. Federal regulations refer to this as program income. Examples of program income include:
- Income from fees, such as registration fees for conferences and workshops
- Fees charged for laboratory tests and analysis
- License fees and royalties on patents and copyrights
- Fees garnered from the use or rental of property acquired using award funds
- Proceeds from the sale of items fabricated using award funds, such as software, CDs, tapes, or publications
Cost sharing occurs when the implementer proposes, and the funder accepts, that a portion of award activities will be funded by the implementer. Once a cost sharing commitment is accepted, the implementer is obligated to expend those funds during the award period. Federal regulations require cost sharing transactions also be identified and tracked as such.
Types of Program Income
Additive
Program income funds are added to award funds, thus increasing the amount available to accomplish the objectives of the sponsored project.
Example
The award amount is $100,000. Then $20,000 in net program income is added to the $100,000 award amount, increasing the PI’s authority to spend to $120,000. Typically, program income generated by research awards follow the additive method.
Deductive
Total funds available to the project remain the same and the funds generated through program income are deducted from the financial commitment of the sponsor.
Example
The award amount is $100,000. Here, when $20,000 of net program income is earned, it is deducted from the sponsor’s commitment. The total award amount remains the same, but the sponsor’s liability is reduced from $100,000 to $80,000. Typically, program income generated by non-research awards follow the deductive method.
Matching
Program income funds are used to finance the non-sponsor share of the award (mandatory or committed cost sharing).
Matching program income is fairly rare, and applies funds to cost sharing rather than award funds. The total cost sharing commitment does not change, but income earned through award activities can be used to meet that commitment.
Example
$20,000 of net program income is applied to the cost sharing commitment of $30,000, thereby reducing the university’s liability to $10,000 of funding.
Add/Deduct
A portion of program income is added to the award funds (up to a limit specified by the sponsor) increasing the amount available to spend. The remaining program income is deducted from the sponsor’s financial commitment.
Some National Institute of Health (NIH) awards require a method that splits program income and applies it according to sponsor requirements. A portion of the income – up to a sponsor-defined limit – is additive and increases the total amount available to spend. Any remaining income is deductive and reduces the sponsor’s financial liability without decreasing the award amount.
Example
The sponsor allows 50% of net income to be additive. When $20,000 of net program income is earned, $10,000 is additive, which increases the total authority to spend to $110,000. The remaining $10,000 of net program income is deductive, which reduced the sponsor’s liability to $90,000, but keeps the total award amount at $100,000.
Reporting Program Income
At award close, program income on federal awards is reported to the sponsoring agency on Federal Financial Report Standard Form 425 (SF-425). CGA will base the report on the information provided by the administering unit and the General Ledger. Any remaining (unexpended) program income will be remitted to the sponsor. The university’s use of program income is subject to audit and may be reviewed for compliance with the award terms and conditions, including allowability of costs.