- Identify sources of potential and actual program income:
- What is program income?
If the sponsored activity generates any money, the proceeds from the sale
will be program income. Common types of program income are fees from conferences
and the sale of pamphlets or conference materials. Other examples include:
- income from fees for services performed such as laboratory tests.
- income generated from the use, sale, or rental of equipment purchased
or fabricated with project funds.
- proceeds from the sale of excess supplies or equipment purchased
or fabricated with project funds.
- income from the sale of research materials such as animal models.
- sales of products with an accompanying material transfer agreement.
The only revenue that is not program income is:
- patient care credits (third party reimbursements)
- interest earned on advances of funds (this is temporary investment pool or TIP income),
- credits, discounts, loans, etc., (both principal and earned interest), and
- taxes, special assessments, levies, and fines raised by government recipients.
What is meant by "actual" and "potential" program income?
Actual program income is a part of the proposal or award budget, for example if the project involves organizing
a conference and the registration fees are part of the proposal budget, the registration fee revenue is program
income.
Potential program income is additional funds that may be generated if there is an opportunity, for example surplus supplies are sold.
- Check 'yes' to the program income question on the Proposal
Routing Form (PRF):
- The federal government requires this information on its proposal applications. For consistency and oversight, the University requests this information for all proposals.
- Complete any required program income sections in the application:
- Any incomplete application may be rejected without review by the sponsor.
- Contact Sponsored Projects Administration (SPA) to discuss potential program income and whether it is reportable.
- SPA checks with sponsor policies to determine how the income will be handled,
whether it must be reported to the sponsor, and whether any technology transfer issues are involved.
This step is extremely important because program income that does not have to be reported to the sponsor is handled as an external sale. The process for handling the revenue will be entirely different.
If the revenue will be program income and will be added to award funds, consider whether the additional funds will result in a workscope change. If so, it may help to discuss this matter with SPA in order to determine whether sponsor prior approval is needed.
-
Contact External Sales regarding pricing, tax, and contract terms for anticipated program income.
- Because program income becomes an external sale after the grant/contract
is closed, pricing, tax, and indemnity issues should be addressed
at the beginning of the sales process. If these issues are not addressed until the end of the project period, the price of the item might not accurately reflect the cost of its production and the sale might result in a net loss to the department.
- Plan for using program income: discuss anticipated program income with the department administrator.
- This communication is needed to ensure that the department administrator
knows that program income is expected on the project and the nature of that
revenue. The department administrator can then verify the process to be used
in invoicing the item.
The department administrator also needs to know how program income is to
be handled in the project budget. The sponsor's policies will determine
whether these funds can be added to or deducted from the total award amount.
If it will be added, the department administrator will have to know how
these funds will be spent, for example additional supplies or equipment.
- Verify receipt of project income on financial reports.
- The principal investigator uses the University’s financial reports on the web to monitor receipt of program income. If the principal investigator believes that program income has been generated but is not appearing on the reports, he or she must work with the department administrator to determine why. It may be necessary for the department administrator to initiate collection actions.
Principal investigators also monitor the level of program income on financial reports as part of their project oversight. A high level of program income may signal a change in workscope.
- At final project termination, address account balance issues.
- For federal sponsors, federal regulations require the University to use program income funds before
sponsor funds. If funds remain in the project or program income account after
the project has terminated, this money is the sponsor's and must be returned to the sponsor. If the principal investigator wishes
to retain these funds, he or she must write a letter to the sponsor requesting
to use these funds and outlining a plan for their use. This letter must be
sent to SPA for endorsement and forwarding to
the sponsor.
For nonfederal sponsors, how leftover program income funds are to be handled depends on the sponsor
and contract involved. In the absence of a non-federal sponsor's policy,
the program income will be considered non-reportable and will be retained by the University.
- Complete the External Sales Action Form if program income is generated after the project ends.
- Federal regulations clearly state that any program income earned after the project has terminated is not covered by their policy. Therefore revenue generated after the project is complete is an external sale and should be handled according to the External Sales Policy.