Program Income and Cost Share
Purpose: To establish accounting control
of income from federally sponsored programs. Certain federal programs
generate income which either is subject to special rules and
restrictions or may be applied as additional program support.
Source: OMB Circular A-110
Definition: "Program income"
refers to that portion of gross revenues, including royalties, received
by or accruing to a grantee or contractor through activities undertaken
in the performance of a grant or contract whether received during or
after the grant or contract period. Program income includes, but is not
limited to, receipts from the sale, licensing, lease, rental, or other
arrangement for the use, release, dissemination or other disposal of
copyrightable or non-copyrightable material, property, services, and
inventions developed, produced, or acquired with sponsor support.
Program income is divided into federal share and the grantee's share on
the basis of their respective contributions to the cost of the program.
Policy: All program income
from federally sponsored awards must be accounted for in the Financial
Information System. All such income, if not subject to specific
contract or grant conditions, must be applied to provide additional
program support. It shall be added to the funds committed to the
program by the sponsor and be used to further program objectives.
Expenditures of such program income are subject to regular policy and
procedures including indirect cost charges.
Unless specifically outlined in the contract or grant,
the awardee shall have no obligation to sponsoring agencies with respect
to program income received beyond the life of the award. The Office of
Sponsored Projects Services has the responsibility to report for and,
when applicable, to remit any program income earned.
Cost Share Documentation
Cost Sharing on Sponsored Accounts: Cost sharing is defined as any form of cost related
contribution committed by NAU in a proposal for the performance of an
externally funded project. This commitment may be explicitly stated in
the budget or implicitly described in the proposal narrative. The main
authority for cost sharing in grants and cooperative agreements is OMB
Cost sharing may be required by the sponsoring agency or
offered by NAU to enhance the competitiveness of a proposal. Whatever
the situation, the obligation exists if a grant or contract is awarded
and must be documented in university records.
Responsibilities for Cost Sharing and Documentation:
Responsibility for meeting cost share commitments rests with the
Project Director. However, documenting cost share is a team effort. It
is important for the Project Director, Grant and Contract Services
(GCS), and Sponsored Project Services (SPS) to communicate immediately
after the receipt of an award to determine what needs to be done to
ensure that all cost share is provided and documented properly.
The ultimate responsibility of cost sharing rests with the Project
Director to ensure that the various contributors meet all obligations.
Any consequences of under-recovered cost sharing will rest with the
Project Director, department, or college.
Types of Cost Sharing Documentation:
There are different types of cost sharing, some more easily monitored
and documented. The most important step in properly documenting cost
share is for everyone who has made a commitment is aware of it and that
an adequate tracking system is established at the beginning of the
Companion Cost Share Accounts:
A Companion cost share account is set up to accumulate institutional
costs incurred on behalf of a sponsored project. They are designed to
make tracking and documentation of cost sharing easier and more
The Project Director for the sponsored account becomes
the responsible Org Manager for the account set up in ADVANTAGE and must
expend funds in accordance with the same allowability issues governed
by OMB Circular A-110. Companion accounts are then monitored by GCS
& SPS and are used to document cost sharing for the corresponding
sponsored project account.
Contributed Effort or release time is monitored through the Effort
Distribution Reporting system. This system parallels our payroll system
generating a report every two weeks. The form is signed by the
employee and the immediate supervisor and returned to SPS.
An Effort Distribution Report is a government
requirement (Office of Management and Budget, OMB Circular A-21)
It is a verification of how much effort was expended by
a given person toward a particular account.
The forms prove compliance and document we pay an
individual for his/her effort, not simply on a budget amount.
Percentages are used i.e. 100%=the employee's total
hours worked, e.g. if the employee worked 40 hours in a week then
100%=40 hours. If 16 hours were spent on one account and 24 hours on
another you have a 40%/60% distribution of effort split.
If any portion of employee's salary is not charged to a sponsored project account, then the attached
form has to be used to document release time during the course of the
project. The Project Director completes the form and returns it to
SPS. SPS verifies the hourly rate of pay with the payroll system. The
employee related expenses that relate to the release time can also be
used as cost share. The attached form should be completed during the time that the effort is completed and forwarded to SPS.
Equipment Matching Funds: When a Companion cost share
account is set up to be charged with a portion of an equipment purchase,
additional documentation is not usually required, if all expenditures
are properly split among the accounts sharing in the cost when the
purchase is made.
However, if the cost of the equipment is not properly
split when the requisition was submitted to Purchasing and costs were
posted to other accounts, documentation of the cost borne by other
accounts is required. Complete the attached form and return to SPS.
Other Direct Costs: Other commitments to share in project costs made by state or local
accounts must be documented in a separate cost share account. In the
case of subcontract cost share, the subcontractor must submit equivalent
documentation that shows how the cost was captured by their accounting
Waived Facilities and Administrative Costs:
Facilities and Administrative costs (indirect) that have been waived by
the university may be used as a form of cost share pursuant to OMB
Circular A-110 guidelines, up to the full negotiated rate/amount. If
waived F&A costs are allowable; the SPS accountant will calculate
the actual amounts to be documented.
Consequences of Under-reported Cost Share: For most
projects with cost share commitments, SPS is required to report total
project costs to the sponsor; sponsor and NAU costs. When NAU costs are
not adequately documented, it is reflected in the financial report to
Sponsors can respond to under-reported cost share by
withholding future funding to the institution at large, or to the
specific project in question.
Program Income as Cost Share:
The use of program income as cost share must be agreed upon with the
sponsor at the time of the award is received. Under the cost share
method, the program income received is used to cover part or all of the
matching funds (non-federal share) obligated by the university.