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EFFECTIVE: 08/01/2005  

Definition Post Award Accounting
Program Income How Program Income Can Be Used
Exclusions Which Handling Method Is Used For A Particular Project?
Special Situations Related Policies
General Procedures Procedures


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To ensure compliance with federal program income requirements, including identifying program income in proposals and in the accounting system, using the program income appropriately, and reporting it to the sponsor.



  1. Code of Federal Regulations (CFR) Title 2, Part 215 (Officie of Management and Budget Circular A-110), Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations, establishes uniform regulations for each federal agency to follow regarding the administration of projects sponsored by the federal government. In addition, each federal agency has its own regulations that are listed in the CFR and explained in the agency's policy handbook (if it has one).

  2. 2 CFR 215.24 states that program income earned during the project period shall be retained by the recipient and, in accordance with federal awarding agency regulations or the terms and conditions of the award, shall be used in one or more of the following ways.

    1. Added to funds committed to the project by the federal awarding agency and recipient and used to further eligible project or project objectives.

    2. Used to finance the non-federal share of the project or program.

    3. Deducted from the total project or program allowable cost in determining the net allowable costs on which the federal share of costs is based.

  3. The proper ways to use project income are discussed more fully in the section "How program income can be used."

Program Income[top]

  1. Gross income earned by the recipient that is directly generated by a supported activity or earned as a result of the award. Examples of program income include:

    • income from fees for services performed such as laboratory tests.
    • money generated from the use, sale, or rental of equipment purchased with project funds.
    • proceeds from the sale of supplies or equipment purchased or frabricated with project funds.
    • income from the sale of research materials such as animal models.
    • fees from participants at conferences or symposia (see EXAMPLES attached.)
    • sales of projects with an accompanying material transfer agreement.
    • royalties from patents and copyrights (see special situations and exclusions).

  2. Program income does not include:

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

  3. Note: while all program income must be identified and recorded in the accounting system, not all program income must be reported to the sponsor.


  1. Unless federal awarding agency regulations or the terms and conditions of the award provide otherwise, recipients shall have no obligation to the federal government regarding program income earned after the end of the project period. However, a general area of work may be supported over several years by a federal sponsor. The sponsor may consider that a current award to the institution is for the same general area of work and may want to be notified of income produced. If this is a possibility, then the sponsor should be notified and asked to determine if the income should be reported as program income.

  2. This policy does not include revenue generated through programs funded by sources other than sponsored projects, for example performing arts programs funded by private gifts.

  3. This policy does not include non-reportable program income such as income received on non-federal awards that are silent on program income. Also, program income earned from license fees and royalties for copyrighted material, patents, patent applications, trademarks, and inventions produced under an award are not reportable, unless the federal awarding agency regulations or the terms and conditions of the award provide otherwise.

Special Situations[top]

  1. Honoraria. Honoraria and fees earned from speaking engagements related to the sponsored program are not considered as program income if they are paid directly to the investigator. If the honorarium is paid to the university, then the sponsor might consider it to be program income. Check with your campus research office.

  2. Royalty Income. Royalties from copyrights, while defined as program income, are not reportable unless the terms and conditions of the award indicate otherwise. Royalties resulting from patents are program income but the university has no obligation to report on them.

    If the university receives income from the sale of a non-patented, but potentially patentable invention, then the campus business office, campus research office, and UT Research Foundation should be notified. It may be advisable to notify the sponsor of the income to determine if it should be reported as program income.

General Procedures[top]


  1. The principal investigator should include anticipated program income in the proposal budget. The campus research office should identify potential program income while reviewing the proposal and ensure that it is properly identified and budgeted according to federal and sponsor regulations. See the section below regarding how program income can be used.

  2. The university should apply the program income federal requirements to subrecipients.

Post Award Accounting[top]

  1. The departmental business manager should deposit program income receipts into the sponsored restricted WBS element using cost element 700900. The Controller's Office or campus business office should determine whether or not program income is reportable to the sponsor and report as required.

How Program Income Can Be Used[top]

  1. The campus research office reviews sponsor policies to determine their requirements. It is important for principal investigators to know how program income will be used because additional award funds could result in workscope changes. Reportable program income revenue can be handled in one of four ways, depending on the sponsor's policies:

    1. Matching - income is used to finance the nonsponsor or nonfederal share of the project.

    2. Addition - income is added to the amount allowable for project costs.

    3. Deduction - income is deducted from the amount reimbursed by the sponsor.

    4. Add/Deduct - the addition method is used up to an agency dollar limit. After that point, the deduction method is used.

  2. Example: A sponsor awards $100,000 for a project. The project generates an income of $30,000.

    1. Matching: if the university were required to supply matching funds, e.g., $50,000, the university would how have to provide $20,000.

    2. Addition: the total project cost could be $130,000.

    3. Deduction: the sponsor will now only fund $70,000 of the project's costs.

    4. Add/deduct: if the sponsor limit is $25,000, then $5,000 will be added to the total project cost, but $5,000 will be deducted from the sponsor's payment to reduce it to $95,000. The total amount available is $125,000.

  3. Note: If funds are remaining at the end of a project, these funds are assumed to be the sponsor's funds, not program income.

Which Handling Method is Used for a Particular Project?[top]

  1. 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 "program income," it is program income according to university and federal definitions of the term.

  2. Federal Sponsors. Individual agency policies determine how the income will be handled. However, most federal agencies specify that:

    • Research awards: the addition method will be used.
    • Non-research awards: the deduction method will be used.

  3. 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 in either invoices or financial reports and will be handled according to the addition method.

  4. Sales Tax. If program income is generated from the sale of taxable goods or services, then sales tax should be charged. Contact the campus business office regarding procedures for collecting and remitting sales tax.
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