ADD-IM-85-4

Issued 3/8/89
Program Income - Administration on Developmental Disabilities (ADD) State Basic Support Program and Protection and Advocacy

TO:
Directors, State Administering Agencies
Chairpersons, State Planning Councils Directors, Protection and Advocacy Agencies
Executive Directors, State Planning Councils

SUBJECT:
Program Income - Administration on Developmental Disabilities (ADD) State Basic Support Program and Protection and Advocacy

 

LEGAL AND RELATED REFERENCES:
Developmental Disabilities Assistance and Bill of Rights Act of 1984, Public Law 98-527

45 CFR Part 1386, Developmental Disabilities Program, Final Rule

45 CFR Part 74, Administration of Grants

BACKGROUND:
The HHS regulations (45 CFR Part 74 Subpart F) covering the subject of the use and reporting of program income explain the meaning and of grant-related income and set forth the alternatives for its use. The purpose of this Information Memorandum is to explain the application of the program income regulations to the ADD Formula Grant Programs in order to achieve uniform understandings in the States.

INFORMATION:
45 CFR 74.41(a) describes program income as the gross income earned by a recipient during the period of grant support. For ADD, this means income realized during the Federal fiscal year which is to be used in the overall program, including projects, other subgrants, and contracts. The income also must be earned from activities,part or all of the cost of which is borne as a direct cost by either ADD Formula Grant, or counted as a direct cost towards meeting a cost sharing or matching requirement of an ADD Basic Support Grant. Income meeting this broad definition must be considered and reported as program income. There are several categories of program income and other grant-related income. Each of the categories is listed below with the applicable regulatory citation:

• General Program Income - 45 CFR 74.42

• Program Income proceeds from sale of real property and from sale of equipment and supplies acquired for use - 45 CFR 74.43

• Program Income - royalties and other income earned from copyrighted work - 45 CFR 74.44

• Program Income - royalties or equivalent income earned from patents or from inventions - 45 CFR 74.45

• Program Income after grant or subgrant support not otherwise treated - 45 CFR 74.46

• Interest earned on advances of grant funds - 45 CFR 74.47

Sections 74.43 through 74.47 can be considered special cases of grant-related and program income. Those sections provide specific guidance concerning the treatment of such income. The most common type of program income is general program income (45 CFR 74.42) which is simply all program income meeting the broad definition except for the special categories in sections 74.43 through 74.45.

Three options are authorized for the use of general program income. States should identify, in their State Plans, the option or options which will be used for reporting program income. The three options are:

• Deduction alternative (45 CFR 74.42(c))

• Matching alternative (not applicable for the Protection and Advocacy Program since there is no matching requirement) 45 CFR 74.42(d)

• Additional Costs alternative. 45 CFR 74.42(e)

Under the deduction alternative the income must be used for allowable costs of the program. Income is deducted from the total allowable program costs and third party in-kind contributions for the purpose of determining the amount to which the maximum Federal share percentage will be applied. The State must use the income to reduce the amount of Federal and non-Federal funds needed. Income must be used for current costs before Federal grant funds are used. However, the Commissioner, ADD, may authorize carry-over of income received to the next fiscal year. If such authorization is granted, the State shall use the income carried over before it uses Federal grant funds in that fiscal year. Requests to carry over general program income to the next fiscal year should be addressed to the Commissioner, ADD, and the reasons for the request should be clearly stated.

The matching alternative is only applicable to the Basic Support Program, since there is no matching requirement for the Protection and Advocacy Grant. Under the matching alternative, income must be used for costs that count toward satisfying a matching requirement. The income must be used for allowable costs of the program and must be used for current costs before Federal grant funds are used. Again, the Commissioner, ADD, may authorize carry-over of income received to the next fiscal year. If such authorization is granted, the State shall use the income carried over before it uses Federal grant funds in that fiscal year. Requests to carry over general program income to the next fiscal year should be addressed to the Commissioner, ADD, and the reasons for the request should be clearly stated.

The additional costs alternative may be used by the State under both ADD Formula Grants. The additional costs alternative permits the State to use income for costs that further the broad objectives of the ADD statute. Such costs, however, do not necessarily have to be allowable. General program income used under this alternative is not required to be used before Federal grant funds, since it will generally be used to expand the program or to support other projects or programs that further the ADD statute's objectives. Also, there are no requirements for States to request carry over of general program income used under this alternative.

As a reminder, States are not accountable for interest earned on advances of ADD Formula Grant funds. However, interest is considered as grant-related income, and States should be aware of their responsibilities in limiting such income by minimizing the time between the transfer of advances and their disbursement.

Instructions for reporting program income on the Financial Status Reports (SF-269's) are included in ADD-PI-84-2.

/signature/

Jean K. Elder, Ph. D.
Commissioner
Administration on Developmental Disabilities

INQUIRIES TO: Regional Administrators