Systems and Procedures
A Division of The Office of Budget and Finance
A Division of The Office of Budget and Finance
Program income or grant-related income on grants, contracts or cooperative agreements or other sponsored activity is to be accounted for in accordance with the Uniform Guidance 2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and the applicable regulations or grant policies of the funding agency, as well as any special terms and conditions identified in the applicable individual award document. Caution should be taken as Federal programs/regulations have specified requirements on how program income earned during the contract/grant period can be used. For additional information, refer to the specific grant or contract terms and conditions and the guidance available in Policy RA66 Program Income.
Any income related to projects financed in whole or in part with sponsored funds that are generated during the project period must be separately accounted for and identified with the grant number(s) of the sponsored project involved.
The method of accounting for any such program income is to establish a separate 45 Internal Order/Sponsored Program (IO/SP) under the grant that will be used to record all program income as well as all related expenses. This separate IO/SP is created using the Internal Approval Form (IAF tab for Award Set-Up in the Strategic Information Management System - SIMS) or by sending a request via the Manual Account Set-Up Form to Research Accounting. See the ORIS-SIMS: Creating a New IAF knowledge base article for complete details). The IO/SP should begin with Program Income in the title.
To record income to the newly established sponsored program use general ledger account 47003400 Program Income, in conjunction with the appropriately established cost collector, on Journal Entries used to record the revenue to the University records.
Any unspent Program Income remaining at the end of a sponsored project is the sponsor's money. If there are remaining program income funds at the end of a sponsored project, costs that were charged to the project itself must be moved off and onto the program income account to spend those funds. Per the Uniform Guidance, grant recipients must use program income first before requesting cash payments from the sponsor.
Permitted expenditures from program income must be charged to the same IO/SP established to track program income. Expenditures would be charged to an appropriate 5xxxxxxxx Expenses GL. See the Procurement Search Tool for the list of General Ledger Accounts having identified payment methods. Expenditures on program income must follow the same rules of allowability, allocability, and reasonableness as the grant itself, meaning if a cost is unallowable on the grant itself, it cannot be charged to the grant's program income account. Program income must be used for the original purpose of the project.
Violation of a financial policy and/or procedure should be reported to your supervisor, unit manager, Human Resources representative, and/or office responsible for the policy and/or procedure. Where those resources are inadequate, you may choose to make an anonymous report through the Penn State University hot line by calling 1-800-560-1637.
The Research Administrator or the Financial Officer, if a Business Area does not have a Research Administrator, is responsible for ensuring that procedures pertaining to the accountability and safeguarding of all cash receipts, cash funds, and other assets are established and followed in accordance with approved University policies and procedures. Regular audits relating to advances, cash, travel, equipment accountability, and other expenditures provide a means to protect University assets. The Research Administrator or the Financial Officer is responsible for collaborating with Internal Audit when audits are being performed in the administrative area. Audits relating to sponsored activities or other audits performed by external auditors may also be performed. The Financial Officer would also be responsible for collaborating with the external auditor and/or a central university officer related to these procedures.
University Records must be retained and managed in accordance with Policy AD35 University Archives and Records Management and the University's Records Retention Schedules.
There are no exhibits associated with this document.
For questions or additional details, please contact Research Accounting.
April 22, 2025