1308 Program Income Associated with Sponsored Projects

Policy Sections

1308.1 Overview

1308.2 Treatment of Sponsored Projects Program Income

1308.3 Program Income and Proposal Preparation

1308.4 Recording Program Income

1308.5 Expenses Posted Against Program Income

1308.6 Treatment of Remaining Program Income

1308.7 Program Income After the Project End Date

1308.8 Costs Incident to Program Income Generation

1308.9 Reporting Program Income to Sponsors

This document sets forth requirements for identifying, treating, recording, and reporting program income associated with sponsored projects.  The policy applies to all University departments and offices that are involved in the administration of sponsored projects.

Yale University is responsible for the programmatic and financial monitoring of program income.  The terms governing program income are generally documented in the awarding document.

This policy informs the community of the requirements associated with program income generated as a result of the activities performed under a sponsored award.

Program Income

The gross income earned by a recipient/grantee that is directly generated by a supported activity or earned as a result of the award during the period of performance.

Personal Property

Property of any kind except real property. Personal property may be tangible, having physical existence, or intangible, having no physical existence, such as copyrights, patents, or securities.

Real Property

Land, including land improvements, structures and appurtenances thereto, but excludes movable machinery and equipment.

Recipient/Grantee

An organization receiving an award directly from awarding agencies/sponsors to carry out a project or program.

Program income includes but is not limited to:

• income from fees for services performed such as laboratory tests;
• money generated from the use or rental of real or personal property purchased with project funds;
• proceeds from the sale of commodities or items fabricated with project funds;
• proceeds from the sale of software, tapes, or publications;
• income from the sale of research materials such as animal models;
• fees from participants attending conferences or symposia;
• sales of products with an accompanying material transfer agreement; and
• principal and interest on loans made with Federal award funds.

Program income does not include:

• patient care credits;
• interest earned on advances of federal funds;
• rebates, receipt of principal on loans, credits, discounts, etc. or interest earned on them; or
• taxes, special assessments, levies, and fines raised by government recipients; or
• license fees and royalties on research funded by a federal award

Unless the sponsor/awarding agency regulations or the terms and conditions of the award document provide otherwise, program income earned from license fees and royalties for copyrighted material, patents, patent applications, trademarks and inventions is exempt from reporting requirements.

The treatment of program income on federal grants is stipulated by the administrative requirements of the awarding agency.  Similarly, non-federal sponsors may have terms and conditions that govern the treatment of program income.

Treatment of program income earned under contracts is handled on a case by case basis under the terms and conditions of a particular contract.

Program income earned during a project period shall be retained by the University and is usually treated using one of three methods, depending on policy, sponsor type, and/or terms and conditions of the award:

• Additive: Program income funds are added to committed funds of the project by the awarding agency and recipient, thus increasing the amount available to accomplish program objectives (increase in available budget).
• Matching: Program income is used to finance the non-federal share of the project (offset to cost sharing or matching). Program income is used for costs during the project period unless the sponsor authorizes deferral to a later period.
• 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 (offset to sponsor’s funding).
• Combination (may be required, for example, by the Department of Health and Human Services agencies): Program income up to, and including, $25,000 are treated as specified under the additive alternative and any amount of program income exceeding $25,000 are treated under the deductive alternative.

Generally, for federal awards, the additive method is applied, unless otherwise stated in the terms and conditions of the award or sponsor regulations.

Generally, for non-research projects and programs, the deductive method is applied to program income unless otherwise stated in the terms and conditions of the award.

Although these default treatments usually apply, Yale may request permission from the sponsor to treat program income by applying an alternative. 

Examples of how the National Institutes of Health (NIH) and National Science Foundation (NSF) specifically treat program income are outlined below:

Consider whether any program income will be generated during the project period and complete the proposal based on funding agency guidelines.

For each sponsored project that generates program income, the departmental business office must record the revenue as a credit in the program income Spend Category SC539 at the time of deposit.  The deposit is to be prepared and handled in accordance with the University Policy and Procedure on Depositing and Recording University Funds

F&A costs and fringe benefits will be charged on expenses related to program income at the same rate and basis as the prime sponsored award.  When program income is credited to the Spend Category SC539, it does not automatically provide a Facilities and Administrative Cost (F&A) credit as is the case for other credits.  Typical credits are the result of an expense being removed; whereas, a program income credit is the result of adding additional income to the award.

Expenditures that are posted against program income must be allowable and in compliance with terms and conditions of the designated sponsored award.

In the event program income remains at the end of the award, the additional income is considered part of the award funding.  In accordance with sponsor policy; program income earned during the period of the award either remains with, or is returned to, the sponsor.

Unless otherwise specified in the terms and conditions of the award, Yale is not required to report program income earned and accrued after the period of support has expired from the sponsor.

If authorized by awarding agency regulations or the terms and conditions of the award, 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.

Expenditures posted against program income must be in compliance with terms and conditions of the designated sponsored award.

Total program income received should be reported on the sponsor’s required financial report form, e.g., Federal Financial Report.

Principal Investigators

• Identifies sources of actual and potential program income at the proposal stage; complete required program income sections in the sponsored proposal, as necessary; develop plan for using program income;
• Discusses anticipated program income with the department administrator or business support center;
• Verifies program income on reports; and
• Addresses account balance issues at final project termination.

Department Administrator/Business Support Center

• Assists Principal Investigator in calculating prices according to this policy; billing properly for products or services which produce program income;
• Reconciles revenue invoiced or submitted against financial reports;
• Monitors program income in account and any limits that are set by the sponsor;
• Deposits income received in accordance with University’s revenue policy; and verifies program income receipt on financial report.

Office of Sponsored Projects – Award Management

• Reviews proposal for anticipated program income;
• Contacts sponsor to discuss anticipated program income, if necessary;
• Advises on the appropriate use of reportable program income;
• Notifies PI and department of possible program income.

Office of Sponsored Projects – Financial Management

• Ensures the proper treatment of program income and that it is properly recorded and accounted for;
• Determines whether program income is reportable or non-reportable;
• Reports program income to sponsor in financial reports;
• Advises Principal Investigators, department administrators and business support centers on the proper accounting and tracking of program income; and
• Assist departmental personnel in the collections of outstanding program income receivables, if necessary.