CRADLE TO GRAVE: WHAT YOU NEED TO KNOW ABOUT EQUIPMENT PURCHASED FOR A FEDERAL GRANT.
Think that you can spend grant funds and then be done with it?
Like the kid that won’t leave home after college, equipment purchases are one area of grants management that make you responsible for it from the purchase until the ultimate disposal.
The responsibilities don’t stop just because the grant is over.
Check out the Equipment Purchases Video Lesson
Length: Approx. 5 minutes
Grant Management Basics: Equipment Purchases
Before we look at equipment purchases, you should know what fits the Federal definition of “equipment” for the purposes of the Federal regulations.
Equipment includes tangible personal property.
Let’s break that down a bit.
Tangible property means it has a physical presence such as a jack hammer, unlike intangible property – for example; a copyright.
Personal property doesn’t mean for personal use, it just means that is equipment is not real property, like a building and land.
To meet the definition of equipment, the property must have a useful life of more than a year and an acquisition cost of more than $5,000 per unit.
If the property has a value of more than $5,000, but doesn’t have a useful life of at least a year, it would not be classified as equipment.
If the grantee has an internal equipment policy that defines equipment as less than the $5,000 Federal threshold, the grantee must use the same “lower amount” definition for equipment purchased for Federal purposes.
If your definition of equipment is consistent with the Federal definition you do not have this issue.
How equipment is divided up- look for two categories of equipment
Equipment purchased by Federal Awards is typically divided into two categories: “Special Purpose” equipment and “General Purpose” equipment.
“Special Purpose” equipment includes equipment which is used for research, medical, scientific and other similar technical activities.
“General Purpose” equipment is defined as equipment whose use is not limited to “Special Purposes” and includes items like copiers and vehicles.
How can equipment be charged to the project?
“Special purpose” equipment is generally allowable as a direct cost to the Federal award. Normally, the organization must have the prior approval of the awarding agency to purchase equipment costing over $5,000.
The regulations also state that “general purpose” equipment should not be charged as a direct cost to the Federal award without prior approval of the awarding agency.
Who owns the equipment?
Next, the title to equipment can either vest with the Federal Government, or the grantee as specified by the awarding agency. This is generally spelled out in the agency terms and conditions.
When the equipment is titled with the Federal Government, the recipient still has responsibilities to manage and care for the federally owned property.
One of these responsibilities is that the grantee must submit an annual listing of federally owned property which includes the location and condition of the property.
There are also special requirements for tracking and reporting on equipment.
These three areas related to equipment for both federally owned and recipient owned property are requirements for:
- 1) The equipment inventory listing
- 2) The requirement for an equipment physical inventory
- 3) The types of detail that must be included in the equipment records
What if we own the equipment?
When the recipient has title to equipment purchased with Federal funds, as opposed to equipment being considered federally owned, it is with the condition that the equipment will only be used by the program or project for which it was acquired.
However, the Federal agency retains the right to instruct the recipient to move equipment to a different project as long as the move won’t interfere with the original project objectives.
How else is the equipment restricted?
There are further restrictions on the use of equipment titled with the recipient.
The recipient can’t provide services to non-Federal organizations using the equipment at a cost lower than a private company would offer similar services unless the activity is specifically authorized by Federal statute.
Think of it this way, if the cost of equipment is borne by the Federal Government, the recipient could have an unfair advantage over a private company which has to purchase their own equipment.
Keep it safe.
As recipients of Federal awards, you must ensure that property is adequately protected from loss, damage, and theft.
There are many ways to accomplish this, from secure access to storage areas, to proper training of employees who use equipment in the field.
The best time to address adequate safeguards is before you have a loss.
Get rid of it.
Finally, when the equipment is no longer needed for the purpose that it was originally authorized for, the grantee should ask the awarding agency for disposition instructions.
P.S. Here’s even more free information.
Don’t miss your own really cool, one page “Quick Reference Guide: Equipment Purchases.”
(Just click on the link to download the .pdf file.)
Want to find out even more?
You can find out more about the various Cost Principles Requirements in our Grant Management Boot Camp
Grant Management Boot Camp includes 12 modules on the Administrative Requirements and Cost Principles. Lesson 6 cover Property Standards, specifically:
- Various types of property covered in the Standards
- Various ways that title to property purchased with Federal funds can be held
- Requirements for care and use of property
- Specific requirements related to disposing of property obtained during the award period