FN34 Miscellaneous General Income & Expenses and Sponsored Residual Balances
Table of Contents
- Purpose
- Scope
- Authority
- Definitions
- Policy
- Roles and Responsibilities
- Internal Controls
- Monitoring and Compliance
- Audit Coordination
- Non-Compliance
- University Records Retention
- Further Information
- Cross References
- Policy Status
Purpose
This policy establishes The Pennsylvania State University's (“University”) requirements, expectations, and rules for classifying, managing, and overseeing miscellaneous income, miscellaneous expenses, and sponsored residual balances recorded in 59-type Internal Orders (IOs). Procedure FN2034 Processing Miscellaneous General Income & Expenses and Sponsored Residual Balances explains how to carry out these requirements by describing the steps, responsibilities, approvals, and controls needed to comply with this policy. Compliance with both this policy and its associated procedures is required. Individuals and units must follow the requirements in both documents.
This policy helps ensure transactions are recorded in the correct fund, follow University controls, meet sponsor and legal requirements, and are reviewed by the appropriate University office before they are processed.
Scope
This policy applies to all University employees, business areas, colleges, campuses, administrative units, and offices responsible for creating, managing, approving, recording, monitoring, or reporting transactions in 59-type IOs.
This policy governs the use of 59-type IOs for:
- Sponsored residual balances from fixed-price awards
- Royalties
- University-issued licenses
- Conferences and events
- Other approved miscellaneous income and expense activities
Penn State Health or its subsidiaries, and Pennsylvania College of Technology, each having separate governance structures and policies, are exempt from the requirements of this policy.
Authority
The authority responsible for approving and issuing this policy is identified in accordance with Policy AD00 Policy on Policies.
Definitions
- Conference
- a formal, planned event focused on discussion and the exchange of ideas about a specific subject, industry, or field. Conferences could be limited to a single day or occur over the span of several days; however, they have a defined duration.
- Event
- any organized occasion or gathering of university employees, students, and/or guests whether small or large, formal or informal including celebrations, fundraising.
- Fixed Price Award
- An award provided to the University by an external sponsor where payment is based on a fixed fee per unit of service or deliverables (rather than costs incurred).
- Internal Order
- The most granular of cost collectors in the University’s SIMBA ERP system used to plan, collect, and settle the costs of temporary or special projects. IOs are linked to a department’s cost center.
- Negative Residual Balance
- expenses incurred exceed the total payments received.
- Positive Residual Balance
- payments received exceed expenses incurred.
- Residual Income
- The unspent cash balance remaining in a sponsored account at the conclusion of the project. Residual income occurs when the income or revenue is greater than the expense incurred upon completion of the project.
Policy
The University uses 59-type IOs to collect, manage, and report approved miscellaneous income, expenses, and sponsored residual balances.
All transactions recorded in 59-type IOs must:
- Support a legitimate University purpose
- Be properly approved
- Be accurately recorded
- Be supported by appropriate documentation
- Comply with University policies and procedures
- Comply with sponsor requirements when applicable
- Comply with applicable laws and regulations
Procedure FN2034 Processing Miscellaneous General Income & Expenses and Sponsored Residual Balances provides the business processes needed to implement this policy.
Accepted Uses
59-type IOs may be used only for:
- Sponsored residual balances from eligible fixed-price awards.
- Royalty payments and related activity.
- University-issued licensing activity.
- Conferences and events.
- Other uses approved by the Controllership Team.
Procedure FN2034 Processing Miscellaneous General Income & Expenses and Sponsored Residual Balances contains the requirements for creating, managing, monitoring, and closing 59-type IOs.
Sponsored Residual Balances
The University may retain positive residual balances from certain fixed-price sponsored awards, including fixed-price contracts, fee-for-service agreements, and clinical trials, when permitted by sponsor terms and conditions.
Residual balances may occur when a project costs less than expected or when savings are achieved during the project.
Residual balances are University funds and must be used to support the University's academic and research mission.
Residual balances:
- Must comply with University policies and procedures.
- Must comply with sponsor requirements.
- May not be used for personal benefit or private purposes.
Research Accounting determines whether a residual balance is eligible for transfer.
The Controllership Team, Research Accounting, and OSP each perform their respective oversight responsibilities for sponsored residual balances in accordance with University policy and associated procedures.
If a project results in a negative residual balance, the responsible business area must provide unrestricted University funding to eliminate the deficit.
Transferring Residual Balances
Research Accounting is responsible for coordinating the review and transfer of eligible sponsored residual balances in accordance with University requirements, applicable sponsor terms and conditions, and Procedure RA2091 Fixed Price Residual Balances. Business areas are responsible for providing all documentation and information necessary to support the transfer and for resolving any outstanding financial issues before the transfer is processed.
Only balances remaining after all project work is complete and all allowable costs have been reviewed may be transferred.
Residual balances approved for transfer must be distributed in accordance with University requirements, sponsor terms and conditions, and applicable sponsored program procedures.
Research Accounting is responsible for determining the appropriate residual balance treatment and processing requirements.
Detailed transfer requirements are contained in Procedure FN2034 Processing Miscellaneous General Income & Expenses and Sponsored Residual Balances.
Principal Investigator Separation
Residual balance accounts do not transfer to another institution when a Principal Investigator (PI) leaves the University.
Business areas are responsible for ensuring residual balances remain appropriately managed after a PI separates from the University. Research Accounting is responsible for administering any required transfer or accounting actions in accordance with University requirements and associated procedures.
After a PI separates from the University, any remaining balance may be used only to support the University's academic and research mission and must be managed in accordance with University requirements.
Procedure FN2034 Processing Miscellaneous General Income & Expenses and Sponsored Residual Balances establishes the process for reviewing, approving, transferring, and managing residual balances after a PI separates from the University.
Royalties on Patents
The University may receive royalty income from patents, inventions, and other intellectual property.
Office of Technology Transfer (OTT) manages royalty agreements and related intellectual property activities.
The Controllership Team is responsible for accounting and financial reporting related to royalty activity.
The University Tax Office must be consulted before a royalty agreement is created or changed to ensure compliance with tax requirements and to evaluate potential unrelated business income tax (UBIT) implications.
The University administers royalty activity in accordance with applicable laws, regulations, and intellectual property requirements, including the Bayh-Dole Act of 1980.
University Issued Licenses
The University may receive revenue from licensing intellectual property and other rights.
OTT manages licensing agreements and related activities.
The Controllership Team is responsible for accounting and financial reporting related to licensing activity.
The University Tax Office must be consulted when licensing activity may create tax reporting obligations.
Hosting Conferences and/or Events
Business areas may use 59-type IOs to manage financial activity related to approved conferences and events.
Business areas are responsible for:
- Planning and managing conferences and events.
- Maintaining supporting documentation.
- Monitoring revenues and expenses.
- Reconciling financial activity.
- Funding any resulting deficits using unrestricted University funds.
Business areas must comply with all applicable University policies and procedures governing conferences, events, participant support costs, and business expenses.
Prohibited Uses
The following practices are strictly prohibited:
- Negotiating or executing sponsored agreements outside approved University processes.
- Depositing sponsored award funds into 59-type IOs.
- Depositing sponsored program income into 59-type IOs.
- Depositing restricted or unrestricted gifts into 59-type IOs.
- Depositing service center revenues or expenses into 59-type IOs.
- Depositing federal, state, foreign government, or pass-through sponsored funding into 59-type IOs.
- Using 59-type IOs to avoid University approvals, sponsor requirements, financial controls, procurement requirements, or tax reviews.
- Using residual balances for personal benefit or private purposes.
Failure to comply with these requirements may result in corrective action.
Roles and Responsibilities
| ROLES | RESPONSIBILITIES |
| Office of Sponsored Program | OSP reviews, negotiates, approves, and manages sponsored agreements in accordance with University requirements and applicable agreement terms and conditions. |
| Research Accounting | Research Accounting is responsible for oversight of sponsored residual balance eligibility determinations and ensuring residual balance activity complies with sponsor requirements, University policies, and applicable procedures. |
| Controllership Team | The Controllership Team oversees accounting, financial reporting and transaction processing of 59-type IOs. |
| Office of Technology Transfer | OTT manages intellectual property activities, including royalty and licensing agreements. |
| University Tax Office | The University Tax Office reviews transactions that may have tax consequences, including unrelated business income tax (UBIT). |
| Principal Investigators | PIs are responsible for completing sponsored projects, meeting sponsor requirements, and using residual balances to support the University's research mission. |
| Business Areas | Business areas are responsible for maintaining documentation, monitoring activity, reconciling transactions, and complying with this policy and related procedures. |
Internal Controls
Transactions recorded in 59-type IOs are subject to Policy FN00 Financial Governance and Internal Controls (pending).
Business areas must maintain controls that help ensure transactions are:
- Properly approved
- Correctly classified
- Adequately documented
- Accurately recorded
- Reviewed and reconciled on a timely basis
- Reported according to University accounting requirements
59-type IOs may not be used to avoid University controls, sponsor requirements, procurement requirements, tax reviews, or other established business processes.
Monitoring and Compliance
The Controllership Team, Research Accounting, OSP, and other authorized University offices may monitor activity to help ensure transactions are:
- Recorded in the correct fund and cost collector
- Processed through the appropriate University office
- Consistent with sponsor requirements
- Consistent with University accounting requirements
- Consistent with this policy and related procedures
Units that violate this policy may be required to take corrective action.
Audit Coordination
The Controllership Team, Research Accounting, Internal Audit, OSP (when sponsored programs are involved) and external auditors may review transactions recorded in 59-type IOs to verify compliance with:
- University policies and procedures
- Sponsor requirements
- Accounting standards
- Tax regulations
- Applicable laws and regulations
Business areas must cooperate with all audits and compliance reviews.
Non-Compliance
Failure to comply with this policy may result in corrective action, loss of privileges, financial responsibility for losses incurred, disciplinary action up to and including separation from employment or enrollment, and other actions permitted by law, regulation, collective bargaining agreement, sponsor requirements, or University policy.
Violations of University policy should be reported to the appropriate supervisor, unit manager, Human Resources representative, or the office responsible for the relevant policy or procedure. If these channels are insufficient or unavailable, individuals may submit an anonymous report through the Penn State University Hotline, accessible via the Reporting at Penn State website.
University Records Retention
University Records must be retained and managed in accordance with Policy AD35 University Archives and Records Management and the University’s Records Retention Schedules.
Additional questions may be directed to the Office of Records Management.
Further Information
For questions, additional details, or to request changes to this policy, please contact the Policy and Procedure Office by submitting a Technical Support Request form.
Cross References
- Policy AD00 Policy on Policies
- Policy AD35 University Archives and Records Management
- Policy FN03 Substantiation, Disclosure, and Accountability for the Receipt of Contributions from Non-Governmental Sources
- Policy FN27 Establishing and Billing Service Center User Rates
- Policy IP01 Intellectual Property and Technology Transfer
- Policy RA02 Stewardship of Sponsored Programs
- Policy RA04 Gifts, Grants, and Contracts (The Funding Matrix)
- Policy RA10 Costing Principles for Sponsored Awards
- Policy RA21 Development of Proposal Budget
- Policy RA90 Finalization and Closure
- Procedure CR2021 Accountability of Contributions from Non-Governmental Sources
- Procedure FN2027 Service Center Accounting
- Procedure FN2034 Processing Miscellaneous General Income & Expenses and Sponsored Residual Balances
- Procedure RA2091 Fixed Price Residual Balances
- Bayh-Dole Act of 1980
- Federally mandated Schedule of Expenditures of Federal Awards
- Federally mandated Section 117
Policy Status
Date Approved
August 21, 2026
Most Recent Changes
August 21, 2026 - New policy
Revision History
August 21, 2026 - Original