Introduction

This chapter compiles the applicable federal, state and agency requirements governing program income. In the event of conflict between these standards and federal or state statute or regulation, the federal or state statute or regulation will apply.

Record retention and access requirements are provided in Appendix K to this manual. All financial and programmatic records, supporting documents, statistical records, and other records pertaining to an award of federal or state funds must be retained and made available to authorized entities or their representatives in accordance with applicable administrative requirements.

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General

Gross income that is directly generated by a grant supported activity, or earned only as a result of the grant agreement during the grant period is program income, and shall be disbursed before requesting additional cash payments for the same program.

Program income is, “gross income received by the grantee or subgrantee directly generated by a grant supported activity, or earned only as a result of the grant agreement during the grant period.” “Grant period” refers to the time between the effective date of the award and the ending date of the award reflected in the final financial report.

According to the administrative requirements cited at the end of this section, “Grantees are encouraged to earn income to defray program costs.” However, Contractors shall disburse program income and interest earned on such funds before requesting additional cash payments for the same program. Program income includes:

  • Income from fees for services performed
  • Income from the use or rental of real or personal property acquired with grant funds
  • Income from the sale of commodities or items fabricated under a grant agreement
  • Income from payments of principal and interest on loans made with grant funds.

Except as otherwise provided in regulations of the federal or state awarding agency (i.e., Workforce Investment Act), program income does not include:

  • Interest on federal grant funds (but see Entity and Program Specific Considerations)
  • Rebates, credits, discounts, refunds, and interest earned on any of them
  • Royalties and license fees for copyrighted material, patents, and inventions developed by the grantee or subgrantee unless specifically identified as program income by the grant agreement or federal agency regulations
  • Proceeds from the sale of real property or equipment (such proceeds should be handled in accordance with Chapter 13 of this manual)
  • Income earned after the date of the award

Entity Specific Considerations:

Governmental Entities (and Other Entities Subject to the Uniform Grant Management Standards (UGMS)). Contractors that are governmental entities or that are otherwise subject to UGMS, must promptly, but no less than quarterly, remit interest earned on advances of federal funds to the Agency so that it may be remitted to the federal awarding agency as required by federal and state regulations. The Contractor may keep interest amounts up to $100 per year for administrative expenses. Interest earned in excess of $250 per year from purely state sources is considered program income. Earnings attributable to federal funds may be used only in accordance with applicable federal law and regulations.

Nongovernmental Entities. Contractors that are nongovernmental entities and that are not otherwise subject to UGMS must remit interest earned on advances to the Agency on an annual basis, so that it may be remitted to the federal awarding agency in accordance with federal regulations. Interest amounts of up to $250 per year may be retained for administrative expenses. State universities and hospitals must comply with the Cash Management Improvement Act as it pertains to interest.

Program Specific Consideration:

Workforce Investment Act (WIA). If program income is earned at the One-Stop as a result of shared costs or activities, then that income must be distributed to all organizations and/or programs that participated in the activity or cost. The program income must be allocated in the same proportion as the shared costs. Program income must be expended on allowable grant activities and is subject to the requirements discussed in this chapter related to earnings and expenditures. All programs funded under Title I of WIA must treat interest income as program income pursuant to WIA §195(7)(B)(iii) and 20 CFR §667.200(a)(7).

Authority:

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Uses

Program income must be accounted for and reported in a manner that is consistent with applicable administrative and program requirements.

The uniform administrative requirements cited at the end of this section provide that, unless the grant agreement or federal regulations specify another alternative (or combination of alternatives), program income shall be deducted from outlays that may be both federal and non-federal as described below for the deduction method. In specifying alternatives, the federal or state agency may distinguish between income earned by the Contractor and income earned by subcontractor, and between the sources, kinds, or amounts of income. When federal or state agencies authorize the alternatives in paragraphs (2) and (3) below, program income in excess of any limits stipulated shall also be deducted from outlays in accordance with the deduction method.

  • Deduction. Ordinarily program income shall be deducted from total allowable costs to determine the net allowable costs. Program income shall be used for current costs unless the federal or state agency authorizes otherwise. Program income that the Contractor did not anticipate at the time of the award shall be used to reduce the federal or state agency and grantee contributions rather than to increase the funds committed to the project.
  • Addition. When authorized, program income may be added to the funds committed to the grant agreement by the federal or state agency and the Contractor. The program income shall be used for the purposes and under the conditions of the grant agreement.
  • Cost sharing or matching. When authorized, program income may be used to meet the cost sharing or matching requirement of the grant agreement. The amount of the federal or state grant award remains the same. Requirements for cost sharing and matching are outlined in Chapter 4 of this manual.

The uniform administrative requirements cited at the end of this section also provide that, “If authorized by federal regulations or the grant agreement, costs incident to the generation of program income may be deducted from gross income to determine program income” (net method). If not authorized, all gross income derived from program income generating activities is accounted for as program income and all expenditures incurred in generating that income are charged to appropriate cost categories (gross method). For additional discussion of the “net” and “gross” methods of accounting for program income, see the U.S. Department of Labor Employment and Training Administration’s One-Stop Comprehensive Financial Management Technical Assistance Guide, pages II-7-5 and II-7-6.

Program Specific Consideration:

Workforce Investment Act (WIA). Program income earned under WIA must be used in accordance with the addition and net methods described above. Therefore, the cost of generating the program income is subtracted from gross program income earned, and the net amount is added to the contract.

Authority:

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