Program income on a grant
The default method quietly shrinks your grant. Deduction vs addition, netting the cost of earning it, and the during-performance timing rule.
LAST REVIEWED 29 AUGUST 2026
If a grant-funded activity earns money — registration fees for a funded workshop, sales of a publication the grant produced, income from a service the award stood up — that money is program income, and it is not yours to simply spend. The Uniform Guidance has specific rules on how it can be used, and the default rule quietly works against you.
The default method reduces your award
Under 2 CFR 200.307, if the Federal agency does not specify a method, the deduction method applies: program income is deducted from total allowable costs, reducing the overall amount of the Federal award. Read that twice, because it is counter-intuitive. Earning $10,000 of program income under the deduction method does not give you $10,000 more to spend — it means you draw $10,000 less in federal funds. The income substitutes for the grant rather than adding to it.
The addition method is the one you want
The addition method does what most people assume happens by default: program income is added to total allowable costs, increasing the overall amount available for the project. Same $10,000 of income, but now it is $10,000 more of work you can do.
The difference between the two is entirely down to what the award says — and the default, if the award is silent, is the deduction method that shrinks your grant. So if program income is material to your project, this is worth checking in the terms early, and worth asking about before the award is finalised rather than after the income starts arriving.
The timing rule
When the income is earned changes what you can do with it. Program income earned during the period of performance may only be used for costs incurred during the period of performance, or for allowable closeout costs. Income earned after the period of performance generally carries no disposition requirements — unless the Federal agency or the award terms say otherwise, which some do.
The practical upshot is that program income is a small ledger of its own running alongside the award: a method that governs it, a window it has to be used in, and a net figure to track. Grantwell keeps that against the grant it belongs to, tied to the same period-of-performance dates as everything else, so the “use it during the period” rule is a visible deadline rather than a footnote.
This guide is general information about how grant compliance work is commonly organised, not legal, audit or accounting advice. Grant rules change, and terms vary by funder and award — always check your own award documents and the current regulation, and talk to your auditor about your specific circumstances.
Primary sources
- 2 CFR 200.307 — Program income — The deduction (default) and addition methods, netting incidental costs, and the during- vs after-performance timing rule.
- 2 CFR 200.1 — Definitions (program income) — What counts as program income — income directly generated by a supported activity.
This guide is general information about how grant compliance work is commonly organised, not legal, audit or accounting advice. Grant rules change, and terms vary by funder and award — always check your own award documents and the current regulation, and talk to your auditor about your specific circumstances.