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 Post Award Accounting Services and Fiscal Compliance (PAASFC) 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 Circular A-110. 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, Office of Grant and Contract Services (OGCS), and Post Award (PAASFC) 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.

Project Director/Department:  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 project.

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 efficient.   

The Project Director for the sponsored account becomes the responsible Project Manager (PM) for the account set up in PeopleSoft and must expend funds in accordance with the same allowability issues governed by OMB Circular A-110.  Companion accounts are then monitored by OGCS & PAASFC and are used to document cost sharing for the corresponding sponsored project account.  

Contributed Effort:  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 PAASFC.   An Effort Distribution Report is a government requirement (Office of Management and Budget, OMB Circular A-21)   

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.                  

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 system.                  

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 PAASFC Post Award Administrator will calculate the actual amounts to be documented.  

Consequences of Under-reported Cost Share:  For most projects with cost share commitments, PAASFC 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 the sponsor.  

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.