New York University

School of Medicine

 

Policy #3.5

 

Program Income Earned on Sponsored Projects

 

 


Responsible Office: Finance/Sponsored Programs              Original Issuance: 6/01/2006

                                Financial Services

 

Responsible Official:   Anthony Marsicano                             Last Revision: 6/01/2006

 

 


Contents:

 

I.          Policy Summary & Purpose

II.                   Definitions

III.                  Policy Statement

IV.                Roles and Responsibilities

V.                  Procedures

VI.                Special Situations/Exceptions

VII.               Applicable Regulations

VIII.             Handling Program Income at Proposal Time

IX.                Handling Program Income During the Project Period

X.                  Attachment

 

I.      Policy Summary & Purpose

 

There are circumstances where as a result of receiving a federal award, additional income is generated by grant-supported activity or earned as a result of the award.  This policy and its procedures address the definition, management, reporting and monitoring of program income from sponsored projects.   Program income may be generated as a result of Sponsored activities, and in some cases must be reported to the sponsor.  The   Office of Management and Budget Circular A-110 and agency implementing policies and regulations require the identification, recording, and in most instances reporting income that is generated during the project period.  To be consistent in managing program income, the New York University School of Medicine (NYUSOM) extends the requirements to nonfederal sponsors. 

 

The purpose of this policy is to ensure that program income is managed consistently and in accordance with NYUSOM guidelines, Circular A-110 and sponsoring agency requirements.  

 

 

 

 

 

 

 

 

 

II.      Definitions

 

Program Income – Gross income earned by the recipient of sponsored awards that is directly generated by a supported activity (OMB Circular A-110) or earned as a result of the award.  Examples of what program income could 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 fabricated with project funds.

·         Proceeds from the sale of software, tapes, or publications.

·         Income from the sale of research materials such as animal models.

·         Sales of products or commodities.

·         Licensing fees, and royalties from patents, while forms of program income, are only reportable if the result of an NIH award.

 

Program income does not include:

 

·         Applicable credits such as refunds

·         Interest earned on advances of federal funds

·         Receipt of principal on loans, credits, discounts, etc. or interest earned on them

·         Taxes, special assessments, levy, and fines

 

Net Program Income – Gross program income less any costs incidental to the generation of program income, provided these incidental costs have not been charged to the award.

 

Project Period – The total time for which support of a project has been programmatically approved. The total project period comprises the initial competitive segment, any subsequent competitive segments resulting from a competing continuation award, and non-competing extensions.

 

Sponsored Project – An externally funded activity that is governed by specific terms and conditions.  Sponsored projects are usually separately budgeted and accounted for, and subject to terms and conditions of the sponsoring organization.  Sponsored projects may include grants, contracts, and cooperative agreements for research, training, patient care, etc.  

 

 

III.      Policy Statement

 

NYUSOM requires principal investigators to identify potential program income on projects from both federal and non-federal sponsors.  The nature of this income must be appropriately documented and the resulting revenue properly recorded.  The treatment and recording of program income should be in accordance with the requirements established by the sponsor and the procedures in Part V of this policy.

 

IV.      Roles & Responsibilities

 

 

Principal Investigator - The Principal Investigator (PI) is responsible for identifying potential program income to the Sponsored Programs Administration (SPA) at the time a sponsored project application is prepared.  If program income is identified after the application process, the PI should contact SPA.

PI is responsible:

  • To develop a plan to use program income
  • Notify the department administrator when program income is anticipated
  • And to monitor receipt of program income

 

Sponsored Program Financial Analyst – Once identified, the Sponsored Program Financial Analyst (SPFA) is responsible for monitoring program income, ensuring funds are suitably deposited, and when required, reports program income amounts on Financial Status Report.

 

Department Administrator – Assists the PI in identifying program income during the application phase, and ensures that it is properly identified as received.  Assist PI in ensuring that all program income is properly directed to the SPFA for monitoring, recording, depositing and reporting. 

 

Sponsored Programs Administration - SPA will: 1) assist the PI in identifying, budgeting and calculating program income, 2) determine the appropriate program income rules that apply to each award, 3) determine whether program income is reportable or non-reportable, 4) notify the sponsor of any program income not originally included in the award application, and, 5) determine the treatment of reportable program income.

 

Technology Transfer - The Department of Technology Transfer will identify and notify SPA of any income generated from license fees and royalties on patents and copyrights under federally sponsored projects.

 

Department Chair - The Department Chair is responsible for determining the use of

program income generated after the project period, unless restrictions on or reporting requirements on this income are imposed by agency regulations or the terms and conditions of award. 

 

 

 

 

V.      Procedures

 

A.      Identification of Program Income

 

A.1       In order to effectively budget the sponsored project, the PI (or other individuals preparing the grant application) should identify the source and amount of program income anticipated and include it in the budget and grant application for all competing applications and non-competing continuation applications.

 

A.2       If program income is identified after the application process, the PI should contact SPA and the SPFA to disclose the program income.  

 

A.3       If anticipated program income does not materialize, the PI should contact SPA and the SPFA to disclose the shortfall. 

 

 

B.        Reporting Program Income

 

B.1         The reporting of program income must be in accordance with the requirements established by the sponsoring agency.  Agency policies identify the types of program income that are required to be reported and the treatment.

 

B.2       Under certain circumstances special reporting conditions apply to royalty and licensing fees from federally funded inventions and patents.

 

B.3       Program income earned after the project period has ended is not required to be reported, unless otherwise provided in awarding agency policies or the terms and conditions of the award. 

 

C.        Treatment and Use of Program Income  

 

C.1      The treatment of program income is dictated by the sponsoring agency’s requirements and the award terms and conditions. The following methods exist relative to the treatment of program income:

 

C.1.1   Additive Method - Program income is added to the funds awarded by the `  sponsor and used to advance the project objectives.

 

C.1.2   Deductive Method - Program income is deducted from total project allowable costs in determining the net allowable costs on which the Federal share of costs is based.

 

C.1.3   Cost Sharing Method - Program income is used to Finance the non-Federal share of the project or program.

 

C.1.4    Additive with Dollar Limits – Certain sponsors establish a specific dollar threshold, limiting the amount of program income that may be treated through the additive method.  In these cases, any program income in excess of the established dollar limit shall be subject to the deductive method. 

 

 

C.2      Unless directed otherwise by the agency policies or award terms and conditions, the treatment of program income at NYUSOM will be as follows:

           

C.2.1   The additive method will be used for NIH research projects, program projects, and K awards, unless a cost sharing or matching requirement is specifically required by award.

 

C.2.2   The deductive method will be used for non-research awards from agencies other than NIH.

 

C.2.3   If the award has a specific cost sharing or matching requirement, program income will be used to satisfy this requirement.

 

C.2.4   The additive method with dollar limits will be used with other NIH awards.  NIH policy allows the additive method to be used for the first $25,000 of program income and the deductive method for any income in excess of $25,000.

 

C.3      If program income earned after the project period is unrestricted, it may be used at the discretion of the Department Chair.

 

 

D.        Accounting for Program Income 

 

D.1      All program income needs to be recorded to a separate chartfield combination and tracked together with the sponsored project.

 

VI.      Special Situations/Exceptions

 

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 NYUSOM, then the sponsor might consider it to be program income.  Check with sponsor policies or the terms and conditions of the award.  

 

 

VII.      Applicable Regulations

 

OMB Circular A-110, Section 24

 

Applicable sponsoring agency’s regulation codifying of OMB Circular A-110

 

NIH Grant Policy Statement , Part II

 

 

VIII.      Handling Program Income at Proposal Time

 

This procedure contains the appropriate steps in order to correctly identify and record program income in a proposal.

 

  1. Identify revenue-generating activities

 

The Principal Investigator (PI) is responsible for identifying potential program income to the Sponsored Programs Administration (SPA) at the time a sponsored project application is prepared.

 

Any external or internal sale that results from a sponsored program activity is likely to be program income.  See Section II for details.

 

  1. If required, complete program income statement to be included in proposal or include program income in the budget.

 

Some proposal applications (i.e. NIH PHS 398 for Federal applications) provide a separate section for outlining anticipated program income.  If this information is required, the principal investigator must provide it. It is appropriate to discuss first with SPA and, if necessary, SPA will contact the sponsor whether funded activities might generate program income and whether it will be reportable.

 

  1. If PI has identified in the proposal, SPA will indicate on Remarks Section on the Authorization Form.

 

 

IX.      Handling Program Income During the Project Period

 

This procedure contains the appropriate steps to take in order to correctly identify, record, report, and monitor program income during the project period.

 

  1. Identify potential program income and whether it is reportable to the sponsor.

Any revenue that is associated with or generated by a sponsored project and does not come from the sponsor is potentially program income. The principal investigator is responsible for contacting Sponsored Programs Administration (SPA) in order to discuss potential and actual income-generating opportunities and how the revenue will be used.   SPA will also determine whether the program income will be reportable to the sponsor.

 

  1. Pricing:  Rate schedule used in generating program income must be fully documented and supported, especially if being charged to Federal Grants (i.e. See Service Center Policy #3.2)

 

  1. Plan for using program income.

Once the principal investigator has set a price for the product or service that will generate the program income, he or she must contact SPA to discuss the appropriate method of handling the revenue. 

 

SPA 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 work-scope changes.

How program income can be utilized:

1.See Section V-C.

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

 

1.      Additive Method:  the total project cost could be $130,000.

2.      Deductive Method:  the sponsor will now only fund $70,000 of the project's costs.

3.      Cost Sharing Method:  if the University were required to supply matching funds, e.g., $50,000, the University would now have to provide $20,000.

4.      Additive with Dollar Limits: if the sponsor limit is $25,000, then $25,000 will be added to the total project cost, with $5,000 being deducted from the sponsor's payment to reduce their share to $95,000. The total amount available is now $125,000.

 

  1. Discuss anticipated program income with the department administrator.

The principal investigator must ensure that the department administrator knows that program income is expected on the project and the nature of that revenue.  The principal investigator also informs the department administrator regarding how program income is to be handled in the project budget.

 

  1. Invoice for the product or service.

When the program income is generated, it is important that both PI and department administrators are aware that this activity is taking place and is properly associated with Program Income chartfield.  The preferred method is to use the invoice template in (Attachment 1).

 

  1. Receive program income

Customers should refer to the School of Medicine invoice when they send program income checks, money orders, or bank drafts.  All checks should be made to NYU School of Medicine.  Indicate the project generating program income on the TROC when depositing check into the discretionary chartfield.

 

  1. First program income receipt only

Set up discretionary chartfield established by completing the “NB-A Chartfield Request Form” (Attachment 2) electronically and sending the form to General Accounting.  The chartfield should be titled “Program Income-(insert project title)” in the title of the discretionary chartfield to properly track the project generating revenue.

Note:  Each sponsored account generating Program Income requires a separate discretionary account.

  1. Use program income.

Program income must be spent following the terms and conditions of the sponsored award.

 

Program income must be utilized in a manner that is allocable, allowable, and reasonable to the project.  Expenses that are unallowable on the main project account are also unallowable on the program income account.

 

Facilities & Administrative (F&A) cost and fringe benefit rates will be charged on program income at the same rate as the primary sponsored project.

 

According to A110, Section 22- Payments, program income is expected to be spent before grant funds.

 

 

  1. Verify program income on reports

The principal investigator uses the School of Medicine eReports 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 works with the department administrator to determine why.  It may be necessary for the department administrator to initiate collection actions.

 

It is critical to monitor and report program income appropriately on the Financial Status Report (FSR) and bimonthly Grant Status Reports. 

 

 

  1. Monitor program income levels

Sponsored Programs Administration:
SPA monitors program income to evaluate whether a significant level of income has been reached.  A significant level is considered to be 25% or more of the total cumulative award amount.  If this level has been reached, SPA consults with the PI and appropriate institutional officials to determine disposition of the new program income.

SPA also determines whether the program income is to be used according to the "additional" method and whether any limit set by the sponsor has been or is close to being reached. If so, SPA contacts the PI to discuss handling options.

Principal Investigators:
Principal investigators monitor the level of program income on eReports/Grants Status Reports as part of their project oversight.

 

  1. Report program income, if required

SPA determines whether the program income must be reported to the sponsor.  If required, Finance prepares and sends these reports or includes the necessary information in the financial reports.

 

 

X.      Attachments

 

A.      Program Income Invoice

B.     NB-A Chartfield Request Form

 

 

 

 

 

 

 

Policy_Program Income3.5.doc