Responsible Offices: Sponsored Projects Accounting
Effective Date: December 2023

Program Income Policies and Procedures

During the course of performing a sponsored project, income from the project’s activities may be generated from internal or external sources. This type of income is generally called Program Income. The NIH Grants Policy Statement provides further guidance by stating that, “Program income is gross income earned by a grantee, a consortium participant, or a contractor under a grant that was directly generated by the grant-supported activity or earned as a result of the award.” Generally, the funding agencies allow the Principal Investigator to utilize the program income for additional project related expenses and/or they will apply it as an offset to future award amounts. Since the income is project related, Washington University in St. Louis is also required to separately monitor, account and report these dollars.

The Policies and Procedures noted below have been developed to provide the University’s research community with specific guidance about identifying and managing program income.


The University is required to treat program income generated via the performance of a sponsored project in a clear and consistent manner. The information noted below is based upon the applicable Federal guidelines, the University’s general ledger structure/system (Workday) and the current practices associated with this issue. The Principal Investigator (PI), r co-investigators and project staff, departmental administrative support staff and the central administrative offices should utilize this data to manage, collect, allocate, expend and report program income.


Per Uniform Guidance 2 CFR 200.80 and the NIH Grants Policy Statement, program income includes but is not limited to income resulting from the use or rental or real or personal property acquired under Federal awards, the sale of commodities or items fabricated under a Federal award, license fees and royalties on patents and copyrights, and principal and interest on loans made with Federal award funds.  Program income revenue may be accounted for in one of four ways (2 CFR 200.307):

  • Additive Alternative: Program income is added to the funds committed to the project/program and is used to further eligible project/program objectives.

Example:  The initial project budget was $500,000. $25,000 of program income is generated. The total project costs are now $525,000 ($500,000 expensed on the original budget and $25,000 expensed on the program income grant line.)

  • Deductive Alternative: Program income is deducted from total allowable project/program costs to determine the net allowable costs on which the Federal share of costs is based. This is similar to an applicable credit being applied to reduce the amount of the Federal award.

Example:  The initial project budget was $500,000. $25,000 of program income is earned. The adjusted project budget amount from the sponsor is reduced to $475,000 after gross program income is taken into account. Total project costs remain at $500,000 ($475,000 expensed on the parent budget and $25,000 on the program income grant line.)

  • Cost Sharing or Matching Alternative: Program income is used to finance some or all of the non-Federal share of the project/program. Requires prior approval from the Federal awarding agency.

The sponsored agreement (grant, contract or cooperative agreement) should specify which program income alternative is applicable to the project. In the event that the agreement does not specify the alternative to apply, the following steps should be followed:

  • NIH and Other Federal Awards: In the event that the Federal awarding agency does not specify a program income method, the additive method is generally the default approach used for applying program income to research awards. Funds may be retained and used to further eligible project or program objectives during the term of the award (2 CFR 200.307 (e)).
  • Income generated through non-federal awards is handled according to specific sponsor rules as referenced in the award document. If the sponsor is silent on the issue of program income, the income is not reportable and therefore not considered program income.

Regardless of the alternative(s) applied, program income may be used only for eligible and allowable project/program costs, in accordance with the applicable sponsoring agency guidelines and conditions of the award. The per unit/item fee invoiced to the internal/external party should be based on the actual direct costs (salaries, fringe benefits and supplies) incurred, per the applicable sponsoring agency cost principles (i.e., Uniform Guidance Subpart E – Cost Principles). Program income is subject to the annual Uniform Guidance audit and/or other sponsoring agency audit requirements. During the audit, the use of program income will be reviewed for compliance with the terms and conditions of the award/agreement, including allowability for costs, financial management and reporting.


The Principal Investigator (PI) should identify in the grant application the source(s) and use of program income, as applicable. This information should include details such as: a description of the goods or services to be provided and how they relate to the project, a description of the internal/external parties purchasing the goods or services, the calculation methodology and components of the fee to be charged and the amount of program income generated in each grant year (year #1 = $2,000, year #2= $3,000, year #3 = $2,500…). Subsequent to the grant being funded, the PI, departmental administrator and/or their designee are responsible for the following issues associated with the generation of program income:

  • Manage and allocate the resources required to provide services and/or items to the internal/external parties.
  • Monitor, invoice and collect fees/payments from internal/external parties.
  • Adjust and/or revise fees or billings to the internal/external parties as a result of material changes in volume and/or actual costs during the project period.

Every program income entity (e.g. each group that needs to track its separate balance) is required to have a unique cost center and business unit created for it.  The balance of their program income activities will be monitored in that business unit (note that most of the activity will also take place in that single cost center).  All the ISDs they create and send out to get paid funnel that revenue back into their business unit and main cost center. When SPA sets up program income grant lines, they setup a grant line with the cost center (or the special second cost center specifically to pay ISDs), business unit and program worktag of PG00379.  Accordingly, the revenue gets funneled to that cost center/business unit via the ISD process, and the expenses get funneled to that cost center/business unit via our cost share process, hence the balance of the program income entity is simply an income/expense statement for that business unit.

Other Issues

Costs incident to the generation of program income may be deducted from gross income to determine program income, provided these costs have not been charged to the award.

Unless the Federal awarding agency regulations or terms and conditions of the award provide otherwise, recipients shall have no obligation to the Federal Government with respect to program income earned from license fees and royalties for copyrighted material, patents, patent applications, trademarks, and inventions produced under the ward belongs to the recipients.

Proceeds from the sale of property (equipment) must be handled in accordance with the sponsoring agency’s property guidelines. In some cases, the proceeds from the sale of property must be credited back to original grant/funding sources. See the University’s Government Funded Property Policy for additional information.

Program income earned after the project period belongs to the recipient. These amounts do not have to be reported or remitted to the sponsoring agency.

Additional information is available in the STAR 311:  Program Income slides

Program Income Account Set-up, click here