Overview of Procedure
This procedure gives the details necessary for documenting correctly Program Income.
Procedure steps
At Proposal for funding:
This procedure contains the appropriate steps to take in order to correctly identify and record program income in a proposal.
1. Identify revenue-generating activities
The Principal Investigator (PI) is responsible for identifying actual and potential program income at the proposal stage.
Even if the PI includes this income in the proposal budget calculations, it will be treated as program income and the Sponsored Programs Transmittal Form must be completed accordingly. For example, if conference fees are to be used to cover part of the cost of the project, this revenue is still program income. It may be appropriate to discuss first with the Office for Sponsored Programs (OSP) and, if necessary, the sponsor, whether funded activities might generate program income.
- Answer 'yes' to question on Sponsored Program Transmittal Form regarding program income
If the PI believes that program income will be generated during the project, he or she must answer ‘yes’ to the related question on the Sponsored Programs Transmittal Form.
- If required, complete program income statement to be included in proposal or include program income in the proposal budget
Some proposal applications provide a separate section for outlining anticipated program income. If this information is required, the PI must provide it. It may be appropriate to discuss first with Sponsored Programs personnel and, if necessary, OSP will contact the sponsor to determine whether funded activities might generate program income and whether it will be reportable.
- Ensure that program income in proposal is correctly identified on the Sponsored Programs Transmittal Form
A. When department heads and deans review proposals developed in their units, they must ensure that any activity that could generate program income is correctly identified on the Sponsored Programs Transmittal Form.
B. When grant administrators in OSP review the budget section of the proposal, they will verify that anticipated program income has been correctly identified on the Sponsored Programs Transmittal Form. They will also review the proposal for inclusion of any required program income statements.
During the Project:
This procedure contains the appropriate steps to take in order to correctly identify, record, report, and monitor program income during the project period.
- Identify potential program income and whether it is reportable to the sponsor
Any revenue that is associated with or generated by a sponsored project and does not come from the sponsor is potentially program income. The Principal Investigator (PI) is responsible for contacting the Office for Sponsored Programs (OSP) in order to discuss potential and actual income-generating opportunities and how the revenue will be used.
OSP will also determine whether the program income will be reportable to the sponsor. Non-reportable program income is handled according to the policy on Departmental Sales and Recharge Activities [see "exclusions" in policy].
- Plan for using program income
Once the PI has set a price for the product or service that will generate the program income, he or she must contact the Contracts and Grants Division (C&G) to discuss the appropriate method of handling the revenue.
C&G reviews sponsor policies to determine their requirements. It is important for PI’s to know how program income will be used because additional award funds could result in work scope changes.
Reportable program income revenue can be handled in one of four ways, depending on sponsor policy:
A. Matching - income is used to finance the nonsponsor or nonfederal share of the project.
B. Addition - income is added to the amount allowable for project costs.
C. Deduction - income is deducted from the amount reimbursed by the sponsor.
D. Add/Deduct - the addition method is used, up to an agency dollar limit. After that point, the deduction method is used.
How program income can be used:
Example: A sponsor awards $100,000 for a project. The project generates an income of $30,000.
? Matching: if the University were required to supply matching funds, e.g., $50,000, the University would now have to provide $20,000 because the $30,000 in program income is considered match.
? Addition: the total project cost would be $130,000.
? Deduction: the sponsor will now only fund $70,000 of the project's costs.
? Add/deduct: if the sponsor limit is $25,000, then $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 most cases, program income is spent before funds awarded by the sponsor.
Which handling method is used for a particular project?
All sponsors:
The sponsor may address anticipated program income revenue as part of the award. For example, conference fee revenue might be included as part of the awarded budget. Even if the sponsor does not label this revenue as “program income,” it is program income according to University and federal definitions of the term. If it is reportable, C&G deposits this revenue into a program income account.
When multiple sponsored awards generate program income, the income and expenses will be prorated among the accounts based on the individual awards. When non-sponsored funds are used in connection with sponsored funds, program income will be distributed following the same method used to prorate it.
Federal sponsors:
Individual agency policies determine how the income will be handled. However, most federal agencies specify that:
o Research awards will use the addition method.
o Non-research awards will use the deduction method.
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 and is handled as a departmental sale or recharge activity.
3. Discuss anticipated program income with the department administrator
The PI must ensure that the department administrator knows that program income is expected on the project and the nature of that revenue. The PI also informs the department administrator regarding how program income is to be handled in the project budget.
4. Invoice for the product or service
When the program income is generated, the department administrator documents the activity that generated the income (e.g., excess material is sold) and instructs the buyer where to send the payment. The department is responsible for invoicing, tracking, and collecting payments related to program income account activities.
5. Receive program income
Customers should refer to the departmental invoice when they send program income checks, money orders, or bank drafts.
All customer payments are to be sent to the servicing department, matched up with a copy of the department-generated invoice and forwarded to C&G with a completed deposit transmittal form for deposit. The deposit transmittal form must include the invoice number from the department’s invoice, as well as any other relevant information in the comment section of the form.
In accordance with University policy, all checks should be made payable to the University of Georgia and deposited within 5 working days of their receipt.
If program income arrives at C&G without reference to the invoice, C&G will contact the department to identify the nature of the program income and the sponsored account from which the program income was generated.
6. First program income receipt only:
C&G establishes the account as follows:
A. Set up restricted account, if necessary.
- activate the same summary object codes that are set up in the main account.
- deposit the program income received by the department.
- establish budget after receipt of funds in the amount received.
B. Monitor receipt of revenue.
The department administrator monitors monthly account status reports to verify that program income revenue has been received and recorded.
C. Redistribute budget among object codes.
C&G will budget program income following its receipt into the operating supply (71000) summary object. Departments must submit budget amendments to redistribute the funds among existing objects or request object code additions, as needed.
7. Use program income
In general, sponsors require program income revenue to be used before sponsor funds. Department administrators must monitor expenses in the program income account to ensure that it is spent first. Program income must be spent following the terms and conditions of the sponsored award.
Program income must be utilized in a manner that is allocable, allowable, and reasonable to the project. Expenses that are unallowable on the main project account are also unallowable on the program income account.
F&A cost and fringe benefit rates will be charged on program income at the same rate as the primary sponsored project.
8. Verify and monitor program income on reports
Program income must be processed and monitored in accordance with the terms and conditions of each award. The principal investigator and/or department administrator uses the University’s account status reports and accounting system to monitor receipt of program income.
The PI and the department are responsible for verifying program income on account status reports. If any discrepancies are discovered, contact C&G for assistance.
9. Report program income, if required
OSP determines whether the program income must be reported to the sponsor by verification of the program income information on the Sponsored Programs Transmittal Form. If required, C&G prepares these reports or includes the necessary information in the financial reports sent to the sponsor.
