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Federal Grant Compliance Requirements, Part X: Program Income and Reporting

Sara BrainardPart X of our federal grant compliance requirements will cover program income and reporting.  Some organizations may have income generated by a federally funded project, referred to as program income.  Program income must be accounted for in specific ways and reported to the granting agency.  In addition, almost all federal awards require some type of reporting, whether it is financial information or performance accomplishments.  These requirements allow the granting agencies and recipients to monitor the cost and effectiveness of federal programs.

Program Income:
Program income is gross income directly generated by the federally funded project.  For example, a housing grant may provide homes at reduced rent for eligible families.  The rental income received from tenants would be considered program income.  Program income may include, but is not limited to:

  • Income from fees for services performed
  • Use or rental of real or personal property acquired with grant funds
  • Sale of commodities or items fabricated under a grant agreement
  • Repayments of principal and interest on loans made with grant funds

Program income does not include interest on grant funds, rebates, credits, discounts, or refunds except as otherwise provided in the terms and conditions of the award.  If authorized by the awarding agency, costs incurred for the generation of program income may be offset with the income produced to determine the program income, unless these costs have already been charged to the grant.

So what is an organization to do with program income? The monies generated in these circumstances may be used for:

  • Expenses under the grant project
  • Added to the project budget
  • Used to meet matching requirements.

Sometimes a grant award will stipulate if program income is less than a certain threshold ($25,000 for example) the organization does not have to consider it part of the program.  Also, unless specified otherwise, organizations have no obligation to the awarding agencies for program income earned after the end of the grant period.  Program income is sometimes included on reports filed with the granting agency.

Reporting:
As noted above, almost every grant requires some kind of reporting to the awarding agency.  The most common types of reporting include financial and performance reports; however there may be special reporting required, such as allocating program funds.

Financial Reporting:  An organization reports program expenses and income on a cash or accrual basis, as prescribed by the awarding agency.  If the organization maintains its records on a cash basis, it does not have to change their accounting system to an accrual basis; however it must have a process in place to reconcile the financial reports to the accounting records.  Financial reports are usually submitted monthly or quarterly using the following forms:

  • SF-270 Request for Advance or Reimbursement:  Used to request reimbursement payments under non-construction programs and may be required to request advance payment.
  • SF-271 Outlay Report and Request for Reimbursement for Construction Programs:  Used to request funds for construction projects unless they are paid in advance.
  • SF-425 Federal Financial Report:  Used to report expenditures under federal awards as well as cash status (when applicable).

Performance Reporting:  In addition to the income and expenses within a grant award, some grants require information to determine the effectiveness of the grant.  For instance, an organization may have to report the number of children served or families housed.  This information is usually reported at least annually, but not more than quarterly.  Information included in these reports includes:

  •  A comparison of actual accomplishments with goals and  objectives established for the period
  • Reasons why established goals were not met, if appropriate
  • An analysis and explanation of cost overruns or high unit costs, if appropriate

Currently there are no standard performance reports for all federal programs similar to the financial reports above; however the federal awarding agencies are working towards this goal.

Subrecipient Reporting:  If an organization passes grant funds to sub-recipients, equal to or exceeding $25,000, additional reporting under the Federal Funding Accountability and Transparency Act may apply.  The organization and sub-recipient would be required to register in the Federal Funding Accountability and Transparency Act Sub-award Reporting System (FSRS) and report sub-award data through this website.  Reporting requirements continue even when the award is passed along to a subrecipient.  See a future article on subrecipient monitoring.

See our previous newsletters and upcoming newsletter articles providing specific details on each of the 14 compliance requirements. Please contact Traci Hanson, Shelley Goodrich, or Sandra Weaver with specific questions.

Sara Brainard

Sara Brainard

CPA at Ketel Thorstenson, LLP
Sara joined the Ketel Thorstenson team in September of 2008. She is a National American University graduate with a Bachelor of Science in Accounting.
Sara Brainard

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