Contracts and Grants Accounting Program Income Procedures Effective July 1, 2014 C&G Training Presentation May 14, 2014 Objectives for this training: Introduce the types of program income and how they affect award budgets, spending Cover how to budget for and manage program income Provide managers with the information, tools needed to train their staff
What is Program Income? Some sponsored activities generate income as a by-product of the work performed. Federal regulations refer to this as "program income.” Examples: Income from fees, such as registration fees for conferences and workshops Fees charged for laboratory tests and analysis License fees and royalties on patents and copyrights Fees garnered from the use or rental of property acquired using award funds Proceeds from the sale items fabricated using award funds, such as software, CDs, tapes, or publications Authority to spend Funds from Program Income Funds committed by Sponsor
What is Program Income? When income is directly generated by a supported activity or earned as a result of an award, that income is subject to the terms and conditions of the sponsor and must be treated according to the sponsor’s requirements Income generated by federally sponsored activities is considered part of the award and must be spent on that award Funds generated on one award cannot be used on a different award Some NSF awards specify Program Income funds be spent first, i.e., before the sponsor is invoiced for expenses Program Income is “net” – the income generated covers the costs incurred Even if program income was not originally anticipated and noted in the proposal documents, it is part of the award funds and must be reported to the sponsor and used according to sponsor requirements.
Types of Program Income Regardless of the type of program income, the funds generated must be spent on the award Additive – program income funds are added to award funds, thus increasing the amount available to accomplish program objectives Deductive – total funds available to the project remain the same and the funds generated through Program Income are deducted from the financial commitment of the sponsor Matching – program income funds are used to finance the non-sponsor share of the award (mandatory or committed cost sharing) Add/Deduct – a portion of program income is added to the award funds (up to a limit specified by the sponsor) increasing the amount available to spend. The remaining program income is deducted from the sponsor’s financial commitment. It’s important to know the sponsor’s requirements, as this affect how the sponsor is invoiced, and may affect the PI’s authority to spend on the award. [in each of the following examples, we’ll apply $10,000 of net program income…]
Additive Program Income Increases the total amount available to spend Authority to Spend $110k Additive Program Income ($10k) Award amount $100k Funds committed by sponsor ($100k) Typically, program income generated by research awards follow the additive method, which increases the award’s total budget.
Deductive Program Income Income earned reduces the sponsor’s financial commitment Total amount available to spend remains the same Award amount $100k Funds committed by sponsor ($100k) Deductive Program Income ($10k) Typically, program income generated by non-research awards follow the deductive method, which reduces the sponsor’s commitment but does not change the award’s total budget. ($90k)
Matching Program Income Applies to cost sharing commitment, not award amount Uses income generated by award activities as cost sharing on the award Does not change the University’s cost sharing commitment Award amount $100k Funds committed by sponsor ($100k) Cost Share amount $25k Funds committed by University ($25k) Matching Program Income ($10k) Matching Program Income does not change the total cost sharing amount, rather, it changes how that commitment is funded. ($15k)
Add/Deduct Program Income Splits income between additive and deductive per sponsor’s requirements Increases the total amount available to spend up to a sponsor-defined limit Funds generated in excess of the limit reduce the sponsor’s financial commitment Authority to Spend $105k Additive Program Income ($5k) Award amount $100k Funds committed by sponsor ($100) Deductive Program Income ($5k) Some National Institute of Health (NIH) awards may require using the add/deduct method of program income accounting ($95)
Accounting for Program Income As soon as you have identified an activity that will generate income… Check your award documentation to determine the sponsor’s requirement for tracking and using program income Notify CGA, and let them know the ChartFields (Fund, Dept, Program Code, CF2) you will be using CGA will then create a specific CF1 value -- attributed “program income” with SPO award number as the attribute value – for you to use For Matching Program Income, the CF1 value assigned will represent both Program Income and Cost Sharing for the award (value begins with 2, has two attributes) CGA will update the PC ChartField mapping table so the new CF1 will function appropriately in BearBuy and BFS It’s critical that you inform CGA as soon as the income opportunity is identified – don’t wait for the income to be earned.
Recording Program Income Expenses When making purchases and recording expenses related to generating Program Income, use the appropriate expense account the C&G Fund the specific Program Income CF1 F&A will be assessed on Program Income expenses at the award funded rate
Program Income Expenses Sample Accounting Entries Recording of the Salary Expense BU Account Fund Dept Prg Cd CF1 CF2 PC BU Project Activity Analysis Type Amount 10000 50210 30451 30001 - 2P1000 CPFLD GM100 10000012 01 ACT 100 Cash 00800 -100 Recording of the related overhead BU Account Fund Dept Prg Cd CF1 CF2 PC BU Project Activity Analysis Type Amount 10000 57990 30451 30001 80 2P1000 CPFLD GM100 10000012 01 SFA 50 57998 19933 00510 - OFA -50
Recording Program Income Revenue When recording Program Income, use ChartFields: Revenue Account 45050 (only for Program Income revenue) C&G Fund Program Income Attributed CF1 If you will bill customers for program income, work with BPS and the BFS BI/AR team to generate those invoices within PeopleSoft. BPS will create charge codes associated with a Program Income ChartString When the invoice is generated, Program Income revenue will be recorded Payments will be routed to and applied by BPS If you do not bill customers for Program Income, create a CDS entry using the Program Income ChartFields listed above
Program Income Revenue Sample Accounting Entries When an invoice is sent to the customer: BU Account Fund Dept Prg Cd CF1 CF2 PC BU Project Activity Analysis Type Amount 10000 12303 30451 30001 - GM100 10000012 01 300 45050 2P1000 CPFLD PRI -300 Cash 69995 00800 CDS entry, when there is no customer invoice : BU Account Fund Dept Prg Cd CF1 CF2 PC BU Project Activity Analysis Type Amount 10000 Cash 69995 00800 - 300 45050 30451 30001 2P1000 CPFLD GM100 10000012 01 PRI -300
Net Program Income The net of Program Income will be contributed to award activities either as additive or deductive, per sponsor requirements Use only Revenue Account 45050 to record Program Income Expenses incurred to earn the Program Income BU Account Fund Dept Prg Cd CF1 CF2 PC BU Project Activity Analysis Type Amount 10000 45050 30451 30001 2P1000 CPFLD GM100 10000012 01 PRI -300 50210 - ACT 100 57990 80 SFA 50 Net Program Income -150
Contracts & Grants Implementation Project http://controller.berkeley.edu/departments/contracts-grants-accounting contractsgrants@berkeley.edu