Program Income Guidelines
GCA webpage update
1.1 Examples of program income include: 1.2 Accounting for Program Income 1.2.1 Additive Method 1.2.2 Deductive Method 1.2.3 Matching Method 1.2.4 Add/Deduct Method 2 Accounting for Program Income generated during the award period:
2.1.1 Research Awards 2.1.2 Non-Research Awards 2.2 Non-Federal Awards: 2.3 Fixed Price Contracts: 3 Accounting for Program Income generated AFTER the award period:
4 PROGRAM INCOME PROCEDURES
4.1 Establishing a Program Income Budget 4.2 Administering Program Income Budgets 4.2.1 INCOME 4.2.2 EXPENSES 4.3 PI/Departmental Responsibilities 4.4 MAA Staff Responsibilities 4.5 GCA Staff Responsibilities 5 Regulations and Supporting Documents
Program Income is earned income that is directly generated by a supported activity or earned as a result of an award. The University requires principal investigators to identify and document program income on projects from both federal and non-federal sponsors. The nature of this income must be appropriately documented and the resulting revenue and expenses properly recorded and accounted for. This income must be administered through a program income account established by Grant and Contract Accounting (GCA). The guidelines and procedures that follow are intended to ensure compliance with federal regulations and sponsor terms and conditions.
Program Income is the property of the sponsor and is to be accounted for in accordance with the terms and conditions of the award.
Federal regulations in OMB Circular A-110 define 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."
• Fees earned from services performed under the project, such as laboratory tests
• Funds generated from sales of commodities and research materials, such as tissue cultures, cell lines and research animals
• Conference fees charged when a grant funds the conference
• Income from registration fees, consulting, and sales of educational materials
• Sale, rental, or usage fees, such as fees charged for the use of computing or laboratory equipment purchased with grant funds
• Funds generated from the sale of software, tapes, or publications
(This is not an exhaustive list but is representative of what is considered program income. Contact OSP or GCA for specific questions.)
Note: Royalties from Patents & Copyrights, etc. are generally not reportable as program income.
Program income revenue may be accounted for in one of four ways [OMB Circular A-110, C.24], depending on sponsor policies. 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 award.
Program income funds are added to the funds committed to the project by the sponsoring agency and used to further eligible project or program objectives.
EXAMPLE: the initial project budget was $100,000. $10,000 of program income is generated. The total project costs may now be $110,000. ($100,000 expensed on the parent budget and $10,000 expensed on the program income sub-budget.)
Program income funds are deducted from the total project or program allowable costs to determine the net allowable costs on which the sponsor's share of costs is based.
EXAMPLE: The initial project budget was $100,000. $10,000 of program income is earned. The adjusted project budget amount from the sponsor is reduced to $90,000 after gross program income is taken into account. Total project costs remain at $100,000. ($90,000 on the parent budget and $10,000 on the program income sub-budget.)
Program income funds are used to finance the non-sponsor share of the project or program (mandatory or committed cost sharing).
EXAMPLE: The initial project budget was $100,000 with cost sharing committed at $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 committed cost sharing.
A portion of program income is added to the funds committed to the project as specified by the awarding agency; any remaining program income funds are deducted from the total funds available for the project.
EXAMPLE: The initial award was $100,000. $35,000 of program income is earned and the sponsor allows the first $25,000 to be added to the award bringing the award to $125,000. The amount in excess of $25,000 [$10,000] is deducted from the new award amount. Thus, the award amount is: $100,000 + $35,000 - $10,000 = $125,000 ($90,000 agency funds plus $35,000 program income).
NOTE: When an NIH Notice of Grant Award (NGA) specifies the Add/Deduct method, their regulations specify the first $25,000 to be added and any excess over $25,000 deducted from total project costs.
The principal investigator (PI) is responsible for contacting GCA to discuss the activity that will generate program income and its relationship to the grant or contract. Unless specified otherwise in the award, federal regulations (OMB Circular A-110, C.24) require the University to expend program income funds before spending sponsor funds. Funds remaining in the project or program income account after the project has terminated will be returned to the sponsor. If the PI wishes to use these funds to further project or program objectives, a budget extension of the award should be requested. http://www.washington.edu/research/main.php?page=budgetExtension. This form is sent to OSP for concurrence; OSP forwards to the sponsor for approval (if applicable) prior to the grant termination date.
In the event that the agency does not specify in its regulations or the terms and conditions of the NGA how program income is to be used, the following procedures apply.
If the award is silent on the treatment of program income, the Additive method (1.2.1) generally applies to research awards and is the default method for applying program income. Funds may be retained and used to further eligible project or program objectives during the term of the award.
If the award is silent on the treatment of program income, the Deductive method (1.2.2) generally applies to non-research awards and is the default method for applying program income. An amount equal to the program income is deducted from the award amount.
Income generated through non-federal awards is handled according to specific sponsor rules as referenced in the award document. If the sponsor is silent on this issue of program income, the income is not reportable and therefore not considered program income. The revenue is handled according to the University policy for non-grant related income found in the Administrative Policy statement, "Accounting for Revenues from Sales of Goods and Services". http://www.washington.edu/admin/rules/APS/32.01.html
Program income generated through fixed price contracts is handled according to specific sponsor rules as referenced in the contract agreement or other sponsor terms and conditions. If the sponsor is silent on this issue, the income is not reportable and therefore not considered program income. The revenue is handled according to the University policy concerning, "Accounting for Revenues from Sales of Goods and Services". http://www.washington.edu/admin/rules/APS/32.01.html
Unless agency regulations or award terms and conditions specify otherwise, there is no obligation to the sponsor for program income earned after the end of the award period. Income thus earned is subject to the university policy concerning, "Accounting for Revenues from Sales of Goods and Services". http://www.washington.edu/admin/rules/APS/32.01.html. (See also ASP 59.5 Policy on Sales of Goods and Services. http://www.washington.edu/admin/rules/APS/59.05.html)
NOTE: income earned during the award period but received up to 60 days after the end of the award period must be considered program income and treated in accordance with the program income guidelines above (1.2).
External sales of goods and services to non-University entities after award termination must be accounted for in an appropriate departmental revenue account (e.g., budget type 14-XXXX). The department should request a revenue or recharge/cost center budget from either the UW Office of the Vice Provost for Planning and Budgeting (OPB) http://www.washington.edu/admin/pb/home/pdf/bgtnumberbrief.pdf or Management Accounting and Analysis (MAA) depending on the projected source of the revenue. (http://www.washington.edu/research/maa/recharge/index.html)
- Contact OPB if sales are anticipated only to external non-UW entities.
- if sales are anticipated from internal and external sources, contact MAA to establish a recharge or cost center. See the University's Recharge and Cost Center Policy for additional details.
Sales to external customers outside the University may be subject to Unrelated Business Income Tax (UBIT). In addition, the department must also invoice for and collect applicable Washington State Sales or Use Tax. (See section 188.8.131.52 below)
Federal, state and University policies and procedures for grants and contracts and the sponsoring agency's policies apply to program income budgets. http://www.washington.edu/research/main.php?page=programIncome, http://www.whitehouse.gov/omb/circulars/a110/a110.aspx
Requests to establish a program income budget are processed when the PI submits a request to GCA. The following information should be included in the request: (See Appendix B)
• Description of the activity and relationship to the grant or contract
• Approximate annual level of income
• A proposed fee schedule for the services to be performed, or cost of commodities to be sold, together with a breakdown of the major fee or cost components (See "rate setting" 184.108.40.206.)
• Assurance that the service or commodity is not being provided to non-UW customers at a price that is less than outside vendors charge for the same goods or services.
• Purpose or proposed use of the income
• Provision made in the rate charged on outside sales for Facilities & Administrative (F&A) costs at 8% TDC.
• The proposed beginning and end dates of the program income account.
GCA will review the request to determine if the activity is generating "program income." If the activity is considered program income and the activity meets the definition of a Recharge or Cost center, (http://www.washington.edu/research/maa/recharge/index.html) GCA will contact MAA to coordinate a review of the proposed rate/rates.
The program income budget will be established as a sub-budget of the parent grant.
The budget period for the program income account should coincide with the budget period of the parent award. Typically, a single program income budget will be used over the entire period of the project, including those projects that are reported on new budget numbers for each renewal period. Upon receipt of a competing renewal, or other form of formal extension of the parent award by the sponsor, the department must send a request to GCA to extend the end date of the program income budget.
Only services that are defined in the Request for a Program Income Account, eFA or ePAC may be processed through a given program income budget. If other services are anticipated, a revised request must be submitted to GCA that identifies the new source of income.
220.127.116.11 Rate Setting:
Rates that are determined for selling services and commodities are to be based upon the actual costs, in accordance with federal guidelines [OMB Circular A-21, J 47, b, 2] and The Administrative Policy Statement, 59.5 http://www.washington.edu/admin/rules/APS/59.05.html
• Internal customers:
If 50% or more of revenue is anticipated from internal UW customers, rate setting should follow the University policy for Recharge and Cost centers. http://f2.washington.edu/fm/maa/node/3 MAA will review the proposed rates and inform GCA if they are allowable.
• External customers:
Rates for external customers (Non-UW departments/units) should be set so as to not create an unfair price advantage over private enterprise. Follow University policy for Sales of Goods and Services. (See http://www.washington.edu/admin/rules/APS/59.05.html)
The Facilities & Administrative (F&A) cost applied to program income budgets is 8% TDC (total direct cost) and is included in the rate charged to external customers.
• Documentation supporting rates charged must be maintained by the charging department and reviewed annually according to sale of goods and services policy. http://www.washington.edu/admin/rules/APS/59.05.html)
• If a department anticipates revenue from the activity will continue to be generated after expiration of the parent grant or contract, a new separate reimbursable budget must be set up by the UW Office of Planning and Budget or Management Accounting and Analysis. See: http://www.washington.edu/admin/pb/home/pdf/revenue-budgets.pdf
18.104.22.168 Sales Tax:
Sales tax is normally collected on all sales to non-University entities. Sales tax should be computed and added as a separate amount on all sales of materials, supplies and services, with only a few exceptions. Those exceptions include:
• Tuition, fees and fines charged for the University's instructional activities
• Sales for resale if the purchaser provides a resale certificate prior to the sale
• In some cases sales of informational services, computer services or data processing services
• There is also an exemption for personal/professional services
An explanation and complete list of exceptions and a more detailed policy statement is available in the Administrative Policy Statement 31.6. http://www.washington.edu/admin/rules/APS/31.06.html
Please refer questions regarding sales and use tax to the UW Tax Office at 206-616-3003.
22.214.171.124 Invoicing for Goods and Services:
See Student Fiscal Services, Invoice Receivables for information on invoicing and deposit procedures.
Recharges to other UW budgets require use of the Cost Transfer Invoice (CTI).
Instructions for use of the CTIs are found in the CTI web page: http://www.washington.edu/admin/finacct/office/ctiisd/ctiguide.htm
(Use of the CTI process will ensure that the 8% Facilities & Administrative (F&A) costs are not charged on internal UW transactions.)
Charges to other UW budgets require authorization from the departments being charged. Retain the authorization on file in accordance with the University's Record Retention Schedule (http://www.washington.edu/admin/recmgt/index.php).
Expenditures and revenues recorded in program income budgets are subject to audit. The responsibility for administering all sponsored projects is defined in the Grants Information Memorandum (GIM 2). http://www.washington.edu/research/osp/gim/gim2.html
In general, program income funds should be expended prior to expensing sponsor funds.
Federal regulations define program income as gross income. (OMB Circular A-110 C.24) The NIH, NASA, US Dept of Education, and some other federal agency general terms and conditions allow costs incident to the generation of program income to be offset against gross income to arrive at "program Income". Such costs may include supplies, materials, services and labor related to the production, marketing and distribution of the goods or services being sold.
PIs and departments should carefully review the sponsor terms and conditions to determine the allowability of these costs. Expenses charged to the program income budget must meet the same requirements of allowability as expenses charged to the parent sponsored budget.
If required by the sponsor, the PI must obtain sponsor approval to establish a program income budget. Once approval is obtained from the sponsor, notify GCA to set up a program income budget.
1. To initiate the establishment of a program income budget, see section 4.1 above.
2. If 50% or more of revenue is anticipated from internal UW customers, complete a recharge proposal and submit it to MAA for review and approval of rate(s) prior to recharging. http://www.washington.edu/research/maa/recharge/policy1.html
3. If more than 50% of revenue is anticipated from external sales, prepare a simple rate/costing methodology and submit to your Dean's office for review and approval of the rate(s) prior to charging.
4. Sales tax charged must be appropriate and in accordance with sponsor and UW policy. http://www.washington.edu/admin/payables/salestax.html
5. When sales to non-UW entities are anticipated, departments should work with Invoice Receivables (206-543-7560) to obtain invoice formats and to use central billing and collection services.
6. Sales to internal UW customers require use of CTIs: http://www.washington.edu/admin/finacct/office/ctiisd/ctiguide.htm
7. Any expenditure charged to a program income budget must be allowable in accordance with sponsor and UW guidelines.
8. Only program income revenues related to activities previously defined in the program income budget request should be recorded in program income budgets.
9. If revenue is generated after the award has ended, the department will establish a separate budget. http://opb.washington.edu/sites/default/files/opb/Budget/revenue-budgets.pdf
1. Review recharge methodologies and rates as submitted by the department and communicate approval to GCA and to the department.
1. GCA will establish a program income budget in the accounting system.
2. A program income budget is established as a sub-budget of the grant or contract associated with the production of the program income.
3. For federally sponsored activities, GCA will include an analysis of the program income account in determining the amount to request for reimbursement from the sponsor.
4. When the parent budget expires, GCA will review the status of all budgets associated with the parent budget. If the parent budget has a continuation budget, the program income sub-budget will become the program income sub-budget of the new parent account. Based on the availability of funds over-expenditures on the parent budget may be transferred to the program income budget and vice-versa.
5. When required and upon termination of the parent budget, GCA will report program income earned and expended to the sponsoring agency on the financial status report and/or the federal cash transaction report.
6. At the end of the award, GCA will return the unexpended balance on the program income budget to the sponsor by transferring expenditures from the parent budget to the program income budget to bring the program income budget to a zero balance. The result may be an unexpended balance in the parent budget that will be returned to the sponsor.
7. GCA will then close the program income budget.
Administrative Policy Statement 31.6 – Applying and Accounting for State Sales Tax - http://www.washington.edu/admin/rules/APS/31.06.html
Administrative Policy Statement 32.1 – Accounting for Revenues from Sales of Goods and Services - http://www.washington.edu/admin/rules/APS/32.01.html
Administrative Policy Statement 33.1 User Fee Approval
Administrative Policy 33.2 – Institutional Overhead Policy - http://www.washington.edu/admin/rules/APS/33.02.html
Administrative Policy 59.5 - Policy on Sales of Goods and Services http://www.washington.edu/admin/rules/APS/59.05.html
Cost Transfer Invoice (CTI) – Definition and Procedure
Internal Sales Document (ISD) – Definitions and Procedures –
General Records Retention Schedule – http://www.washington.edu/admin/recmgt/retention.schedule.html
GIM 2 – Fiscal Responsibilities on Grant and Contract Accounts - http://www.washington.edu/research/osp/gim/gim2.html
Recharge and Cost Center Rate Policy –
MAA webpage - http://www.washington.edu/research/maa/
OSP webpage - http://www.washington.edu/research/osp/moving.html
GCA webpage - http://www.washington.edu/research/gca/office/