Program Income


Program Income is gross revenue generated from activities associated with or generated as a result of a federal sponsored Award. Federal regulations define Program Income (2 CFR 200.80 Program income) as gross income earned that is generated directly by a federally supported activity (e.g., conference fees) or earned as a result of the federal Award during the life of the Award (e.g., fees for services performed). Program Income is subject to all federal requirements as stipulated in 2 CFR 200.307 Program income.

Program Income Examples on Federal Awards

  • Fees earned from services performed under the Award, such as laboratory tests. 
  • Funds generated from sales of commodities and research materials, such as tissue cultures, cell lines, and research animals developed or acquired under the Award.
  • Conference fees charged when the Award funds the conference.
  • Income from registration fees, consulting, and sales of educational materials developed or acquired under the Award.
  • Sale, rental, or usage fees, such as fees charged for the use of computing or laboratory equipment purchased with Award funds.
  • Funds generated from the sale of software, tapes, or publications. Keep in mind that royalties from Patents and Copyrights are generally not reportable as program income.

Revenue generated in association with a sponsored Award that is not federally funded or is a fixed price contract is typically NOT considered subject to Program Income requirements. This type of revenue should instead be managed in accordance with the sponsor’s requirements in the Award or the sponsor’s regulations. If the sponsor is silent on revenue generation, the revenue does not need to be reported to the sponsor and therefore is not treated as Program Income. All revenue-generating activities, including Program Income, are handled according to the UW policy for non-sponsored Award related income found in APS 32.1 Accounting for Revenues from Sales of Goods and Services.

Some federal programs do not require recipients to account for Program Income (e.g., NIH S10 Equipment Awards). Always review the Award document, program announcement, and sponsor policies for the Program Income requirements for your Award.

Program Income Requirements

The guidelines and procedures that follow are intended to ensure compliance with Federal regulations and UW policies and procedures for income generation. As always, the Award terms and conditions and federal agency-specific requirements must also be followed. If there is a conflict within any of the federal regulations, see the Federal Regulation Hierarchy Pyramid.

Program Income is administered through a Program Income sub budget established under the Award (parent budget). Program Income sub budgets are set up by Grant & Contract Accounting (GCA). Visit the GCA website for information on establishing a Program Income sub budget.

Program Income Expenses

Typically, there are expenses associated with the generation of Program Income. A best practice is to charge the expenses to the Program Income sub budget. The expenses charged to the Program Income sub budget must meet the Four Cost Principles

For Example, Department A has a federal Award that included the purchase of a scanning machine. A specific type of reagent is required to complete each scan. The department charges for scans completed by other departments. 

Scenario A: Sponsor allows costs to be deducted from Program Income. The reagent is charged to the Program Income sub budget; the Program Income balance is calculated as Revenue earned less Expenses.

Scenario B: Sponsor does NOT allow costs to be deducted from Program Income. The reagent is charged to the Parent Budget; the Program Income balance is calculated as the Revenue earned.

Program Income Revenue

Revenue generated by the activity is posted to the Program Income sub budget. Only the revenue described in the original Request for Program Income can be recorded in Program Income sub budgets; other revenue cannot be added to a Program Income sub budget.

Revenue Ownership

Because the Program Income was generated utilizing federal sponsor resources, the revenue generated is the property of the federal sponsor and not the department or the UW. As such, it is to be accounted for and expended in accordance with federal sponsor requirements. 

Award Valuation

Program Income revenue may be accounted for in one of four ways depending on sponsor requirements. If the Award or federal agency does not specify the method to be used, the Additive Method should be applied (see 2 CFR 200.307 Program income).

1. Additive Method

Program Income funds are added to the amount of the Award. The additional funds are used to cover allowable expenses and are used by the department to further eligible project or program objectives.


The Award Budget = $100,000

The net Program Income generated = $10,000

The total amount available to expend on the Award objectives = $110,000

The total amount actually expended on this Award = $90,000

The total amount refunded to the sponsor = $20,000 (total available funds of $110,000 – actual expenditures of $90,000)

2. Deductive Method

Program Income funds are deducted from the amount of funding provided by the sponsor to complete the terms of the Award. 


The Award Budget = $100,000

The net Program Income generated = $10,000

The maximum amount provided by the Sponsor = $90,000

The total amount available to expend on the Award objectives = $100,000

The total amount expended on the Award = $95,000

The total amount refunded to the sponsor = $5,000 (total available funds of $100,000 - $95,000 actually expended = $5,000)

3. Matching (Cost Share) Method

Program Income funds are used to meet a Cost Share commitment. Only expenses incurred to further project/program objectives qualify as cost share. Costs incurred to generate Program Income may not qualify.


The Award Budget = $100,000

The Cost Share commitment = $15,000

The total amount required to achieve the Award objectives = $115,000

Cost Share commitment met = $10,000

The total amount expended on the Award = $90,000

Cost Share commitment to still be met = $5,000

The total amount to refund to sponsor = $10,000

4. Add/Deduct Method

A portion of Program Income is added to the Award amount as specified by the awarding agency; additional Program Income funds are deducted from the Award amount. NIH and NSF so far are the only federal sponsors to employ this treatment.


The Award budget = $100,000

The net Program Income generated = $35,000

The sponsor allows the first $25,000 to be added to the Award; Award value = $125,000

The balance of the Program Income = $10,000 ($35,000 - $25,000) is deducted from the original Award Budget amount provided by the Sponsor = $100,000 - $10,000 = $90,000

Total Award amount = $90,000 sponsor funds + $35,000 Program Income = $125,000

Customer Invoicing

Program Income revenue is funds received for the sale of goods or services. Program Income revenue can come from Internal or External Sales.

Internal Sales

An Internal Sale is when the revenue is generated by charging another UW budget. Charges to other UW budgets require authorization from the department being charged. The department with the Program Income budget should retain the authorization on file in accordance with the University's Records Retention Schedule.

Internal Sales are completed using a Cost Transfer Invoice (CTI). UW's Financial Reporting office has instructions for using CTIs.

External Sales

An External Sale is when revenue is generated via an external source of funds, such as cash or credit card, and the goods or services are being purchased by a customer outside of the UW (a retail sale). External Sales will incur an additional 8% Service Charge, paid by the customer. Departments should work with Invoice Receivables to obtain invoice formats and to use central billing and collection services.

State sales tax is normally collected on all retail sales to non-UW entities. Sales tax charged must be appropriate and in accordance with state laws and sponsor and UW policies. Also, retail sales may be subject to federal Unrelated Business Income Tax (UBIT). UW's Tax Office has more information on UBIT.

Sponsor Reporting

GCA will report Program Income earned and expended to the federal sponsor on the Federal Financial Report (FFR), the Federal Cash Transaction Report (FCTR), and/or any report format as required by the sponsor. Contact GCA for more information on sponsor invoicing with Program Income accounts. 


Program Income expenses and revenue are subject to audit. Documentation must be maintained by the department and readily available in the event of an audit or other review. This includes but is not limited to:

  • Sponsor approval (if required)
  • Description of the income-generating activities
  • Method used to calculate the rates
  • MAA’s approval of the rates or sponsor’s stipulation of the rates
  • Billing records identifying the budget numbers (internal customers) and customers (external customers) and amounts charged or invoiced
  • Revenue (income) generated
  • Any changes in rates (if applicable)

Award Closeout

Upon completion of the Award, the Program Income sub budget may be closed out along with the parent budget. If there is a continuation budget, the Program Income sub budget may become a sub budget under the continuation parent budget.  

Beginning January 1, 2018, to ensure accurate financial reporting and to ensure that any deficits are addressed in a timely manner, Program Income sub budgets will be closed out upon completion of the competing segment of an Award. A new Program Income Request Form must completed and a new sub budget will be established, if needed, at the beginning of the next competing segment. 

Any Program Income surplus (revenue greater than expenses) must be used to offset the Federal share of expenditures, in accordance with the Federal regulations. [2 CFR 200.305(b)(5)] The offset of the Federal share of expenditures is part of the final reconciliation process performed by Grant and Contract Accounting at the close of the competitive segment.

If the Program Income sub budget has a deficit balance (expenses are greater than revenue), the deficit balance will be covered by any surplus remaining on the parent budget. If the parent budget is fully spent, the deficit balance must be transferred to a budget specified by the department in accordance with the University’s Deficit Resolution Policy.

If the activity can be continued in a self-sustaining manner (e.g., revenue can cover expenses) after the end of the Award, a new Service/Recharge center budget should be established. No balance (surplus or deficit) can be carried forward to this Service/Recharge Center budget. The Management Accounting & Analysis (MAA) website has more information.

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