When a trainee is receiving a monthly fellowship through a sponsored training grant (sponsored grants are accounted for in the Oracle Grants Accounting application, but not all PTAO project strings are sponsored grants) and the department wishes to supplement the amount of that fellowship from departmental funds but not change what that person is doing, the supplement should be given as additional fellowship dollars. This is accomplished by filling out an online Oracle ACT Form showing the increase in the total award amount on the trainee assignment with a funding distribution account(s) in the Oracle General Ledger unrestricted funds, or with a source account in the restricted funds other than the sponsored grant accounts shown for the amount of the increase. In such a case, the supplement must not be submitted as salary/wages, because no service requirements have been added to his/her responsibilities. UAB should not pay salary/wages to someone who is not providing services.

When an individual is both a trainee and an employee, it is important that we properly establish which activity is being supplemented. In addition to the specific documentation we maintain related to a supplement, the IRS will also look at such factors as:

  • Did the individual increase the hours worked on the job as an employee? If so, that could justify an increase in the wages, but not in the fellowship.
  • Did the rate per hour or per month increase for the individual's work, based upon performance on the job or to compete with the pay scale for similar jobs? If so, that could easily justify an increase in the wages, but not in the fellowship.
  • Does the rate of compensation for the job represent reasonable compensation for the services actually being performed? If the wages are less than a reasonable level of compensation, then the IRS could assert that part of the fellowship should be treated as wages.