Program Income in Sponsored Projects Policy

1. Purpose of Policy

The purpose of this policy is to establish guidelines with regard to the accountability of program income on externally funded sponsored projects as noted in the Code of Federal Regulations Title 2: Grants and Agreements Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Part 200).

2. Stakeholders Most Impacted by the Policy

This policy applies to all faculty and staff engaged in sponsored research and creative scholarship projects and activities conducted under the auspices of Western Michigan University whether the activities are conducted on or off campus.

3. Key Definitions

Program income: the gross income earned by the recipient that is directly generated by a supported activity or earned as a result of the sponsored project.

4. Full Policy Details

4.1 Use of Program Income - In general, sponsors require program income revenue to be used before sponsor funds. Program income must be utilized in a manner that is allocable, allowable, and reasonable to the project.  Expenses that are unallowable on the sponsored project are also unallowable as program income.

4.2 The Principal Investigator is responsible for identifying actual and potential program income at the proposal stage. Some proposal applications provide a separate section for outlining anticipated program income.  If this information is required, the Principal Investigator should discuss first with Research and Sponsored Programs and, if necessary, contact the sponsor to inquire whether the funded activities might generate program income and whether it will be reportable.

4.3 Treatment of Program Income - Program income (the appropriate use and reporting) shall be handled in accordance with the awarding agency’s requirements. Common treatment options include:

• 4.3.1 Additive Method – Program income is used to supplement the awarding agency’s funds to continue program objectives.
• 4.3.2 Matching Method – Program income is used to finance the non-federal portion of the program; to satisfy all or part of a matching requirement.
• 4.3.3 Deduction Alternative – Program income is used to reduce the agency’s share of the total allowable program costs.

Unless specified by the awarding agency, the University shall have no obligation to the Federal government or other awarding agency regarding program income after the end of the project period. Treatment of program income varies by agency. The Principal Investigator should contact the Grants and Contracts Office to determine the appropriate treatment of program income

4.4 Reporting Program Income - Program income, in accordance with specific agency requirements, is reported to the sponsoring agency on financial reports prepared periodically by the Grants and Contracts Office.  Note: while all program income must be sent to Grants and Contracts for recording, not all program income must be reported to the sponsor.  Grants and Contracts will determine which program income should be reported to the sponsor.

4.5 The following are some examples of program income:

• 4.5.1 fees for services such as laboratory drug testing and conference fees;
• 4.5.2 proceeds from sale of equipment or supplies purchased or constructed with grant funds if title does not vest in the grantee;
• 4.5.3 usage or rental fees charged for use of facilities or equipment purchased with grant funds, such as computer use charges or copy charges;
• 4.5.4 funds generated by the sale of commodities, such as sale of tissue cultures, cell lines or research animals;
• 4.5.5 third party patient reimbursements for hospitals or other medical services where such reimbursement occurs because of the grant supported activity; and
• 4.5.6 patent royalties,  copyright royalties, and funds generated by the sale of educational materials, including curricula and software.Although all are considered program income, they are not reportable as program income unless the terms and conditions of the award indicate otherwise.

4.6 Program income does not include:

• 4.6.1 patient care credits;
• 4.6.2 interest earned on advances of federal funds;
• 4.6.3 receipt of principal on loans, credit, discounts, etc. or interest earned on them; or
• 4.6.4 taxes, special assessments, levies, and fines raised by government recipients.

5. Accountability

5.1 Failure to adhere to these Federal regulations in connection program income may result in the withholding of new awards.

5.2 Additional consequences for non-compliance include possible individual discipline for failure to follow applicable University policies and requirements.

6. Related Procedures and Guidelines

NA

7. Additional Information

Contact the Grants and Contracts Office if you think that a sponsored project will generate program income or if you need further information on the handling and treatment of program income.

8. FAQs

8.1 Who determines what requirements apply to the use of program income?

Grant award provisions or terms and conditions provide direction on the treatment of program income.  An award may also specify whether a grantee is accountable for program income earned after the end of the project period. If the award is silent on that point, accountability ends at the conclusion of the project period and associated final reporting.

8.2 Are there limitations on what I can pay for with program income?

Program income must be used for the purposes of the grant. You can use program income to cover costs allowed for the federal and non-federal shares of the grant. During the project period, program income may not be used by the grantee for other organizational purpose.

8.3 Is the use of program income subject to audit?

Yes, auditors may sample your revenue sources to identify any funds that would be considered program income under the grant and review your general ledger documentation to ensure you have used the program income as required under your grant provisions or terms and conditions.