Accounting for Program Income

Program income is gross income earned by the University that is directly generated by a supported activity or earned as a result of a federal award, in whole or in part, during the period of performance.

The period of performance is typically the award period but may be defined as alternative dates in the award document.

Examples of program income include:

  • Fees for services performed
  • Rent for the use of buildings or equipment acquired under federal awards
  • The sale of items fabricated under a federal award
  • Principal and interest on loans made using federal award funds is considered program income, however, if the principal/interest was earned from advance payments on a federal award, it is not considered program income

The following are not considered program income:

  • Interest earned on advances of federal funds (separate regulations apply)
  • Proceeds from the sale of real property or equipment (separate regulations apply)
  • License fees and royalties on research funded by a federal award (exempted per Bayh-Dole Act)
  • The following items are not program income, except as otherwise provided in federal statutes, regulations, or the terms and conditions of the federal award:
    • Rebates, credits, discounts, and interest earned on any of them
    • Taxes, special assessments, levies, and fines

Treatment of Program Income

Federal regulations provide for three methods of recording and using program income:

  • Additive: Program income realized is added to (i.e., supplements) the funds committed to the project by the federal or other awarding agency. The program income funds shall be used to support related project or program objectives.
  • Deductive: Program income realized is deducted from the total project allowable costs in determining the net allowable costs on which the federal or other sponsor share of costs is based. Under the deductive method, the total amount available to support the project remains unchanged from the original federal or other sponsor award.
  • Matching: Program income realized is used to finance the non-federal share of the project (i.e., meet cost sharing commitments). The amount of the federal award remains the same.

The appropriate recognition method is dictated by the federal awarding agency regulations or the terms and conditions of the award. If the awarding agency is silent, then the additive process has been designated as the default method by the University.

Only if explicitly authorized by the award (either directly in the award agreement/notice or indirectly through its underlying regulations), may the costs incidental to the generation of program income be deducted from gross income to determine program income. If authorized, only costs that have not already been charged to the federal award may be deducted. Costs incident to generation of program income shall be interpreted as expenses incurred within and in conjunction with the program income activity (service). Since these costs should be subtracted from the gross income (e.g., recharge revenue) note they could ultimately result in zero program income.

Recharge Subsidies:

UCSF should not use sponsored projects to directly subsidize a recharge operation. However, sponsored projects can provide a billing subsidy for eligible participants to receive recharge services. The billing subsidy process results in no program income to the federal award, only direct costs. To facilitate this process, the full costs of operating the recharge are included in the recharge project and an appropriate rate(s) is developed and approved for customer(s). Then, when services are provided to a customer, who is an eligible participant of a sponsored project, the sponsored project may pay a portion of the established recharge rate. The sponsored project needs to ensure that they are paying a consistent rate for all eligible participants.