1. Contracts and Grants Accounting C&G Training Presentation May 14, 2014 Program Income Procedures Effective July 1, 2014

2. 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 2 Funds from Program Income Funds committed by Sponsor Authority to spend

3. 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 3 What is Program Income?

4. 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. 4 Types of Program Income

5. Additive Program Income Increases the total amount available to spend 5 Funds committed by sponsor ($100k) Funds committed by sponsor ($100k) Authority to Spend $110k Additive Program Income ($10k) Award amount $100k

6. Deductive Program Income Income earned reduces the sponsor’s financial commitment Total amount available to spend remains the same 6 Funds committed by sponsor ($100k) Funds committed by sponsor ($100k) Award amount $100k Deductive Program Income ($10k) ($90k)

7. Matching Program Income Uses income generated by award activities as cost sharing on the award Does not change the University’s cost sharing commitment 7 Funds committed by sponsor ($100k) Funds committed by sponsor ($100k) Award amount $100k Funds committed by University ($25k) Funds committed by University ($25k) Matching Program Income ($10k) Applies to cost sharing commitment, not award amount Cost Share amount $25k ($15k)

8. 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 8 Funds committed by sponsor ($100) Funds committed by sponsor ($100) Authority to Spend $105k Additive Program Income ($5k) Award amount $100k Deductive Program Income ($5k) ($95)

9. 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 9

10. 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 10 Recording Program Income Expenses

11. Program Income Expenses Sample Accounting Entries 11 Recording of the Salary Expense BUAccountFundDeptPrg CdCF1CF2PC BUProjectActivityAnalysis Type Amount 10000502103045130001-2P1000CPFLDGM1001000001201ACT100 10000Cash3045100800---GM1001000001201--100 Recording of the related overhead BUAccountFundDeptPrg CdCF1CF2PC BUProjectActivityAnalysis Type Amount 10000579903045130001802P1000CPFLDGM1001000001201SFA50 10000579981993300510802P1000--1000001201OFA-50

12. 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 12 Recording Program Income Revenue

13. Program Income Revenue Sample Accounting Entries 13 BUAccountFundDeptPrg CdCF1CF2PC BUProjectActivityAnalysis Type Amount 10000Cash6999500800-------300 100004505030451300012P1000CPFLDGM1001000001201PRI-300 CDS entry, when there is no customer invoice : BUAccountFundDeptPrg CdCF1CF2PC BUProjectActivityAnalysis Type Amount 10000123033045130001---GM1001000001201-300 10000450503045130001-2P1000CPFLDGM1001000001201PRI-300 10000Cash6999500800-------300 10000123033045130001---GM1001000001201--300 When an invoice is sent to the customer:

14. Net Program Income The net of Program Income will be contributed to award activities either as additive or deductive, per sponsor requirements 14 BUAccountFundDeptPrg CdCF1CF2PC BUProjectActivityAnalysis Type Amount 100004505030451300012P1000CPFLDGM1001000001201PRI-300 10000502103045130001-2P1000CPFLDGM1001000001201ACT100 10000579903045130001802P1000CPFLDGM1001000001201SFA50 Net Program Income-150 Use only Revenue Account 45050 to record Program Income Expenses incurred to earn the Program Income

15. Contracts & Grants Implementation Project 15 http://controller.berkeley.edu/departments/ contracts-grants-accounting contractsgrants@berkeley.edu