Many institution’s use a Property Inventory System as another point of audit focus. The proper identification and use of equipment is critical to the institution’s management of both the direct and indirect costs of research. The integrity of the system depends on individuals throughout the institution’s campuses paying proper attention to the acquisition, use, tracking, physical inventory and disposition of equipment.
At many institutions Capital equipment is defined as equipment with an acquisition cost of $5,000 or more, is non-consumable (doesn’t change form with use) and a useful life of more than one year. Fabricated equipment, where the aggregated cost of the components is $5,000 or more and where the fabricated asset has a useful life of more than one year, is also defined as capital. Capital assets are typically updated as received in the institution’s property inventory system within 10 days from receipt of inventory tag.
Make sure to check the terms and conditions of your particular award document (and any general terms and conditions it may incorporate by reference) for information related to:
- Allowability of equipment charges
- Equipment title and title transfer information
- Joint funding
- Fabrication of equipment
Any of these conditions require careful attention from time award is established through project completion.
Some awards may also require advance notification or prior written approval from the sponsor before equipment can be purchased. In these cases the written approval of the Sponsor’s Grant or Contracting Officer must be obtained before acquiring the equipment. This is particularly important during the beginning of a project (don’t order equipment prior to the effective date of the award unless authorized) and during the last 90 days of the award period.
If you intend to use a piece of equipment to support multiple projects, or to support both sponsored and unsponsored activities, there should be an appropriate, documented allocation of the cost. If a piece of “special purpose”, i.e. scientific, equipment is purchased especially to carry out a particular project, A-21 allows that the expense may be charged fully to the project, even if it is subsequently used for other purposes after award has ended.
In addition, if you plan to purchase “general-purpose” equipment for your project, you may need prior sponsor approval. You will also need to include a particularly clear justification in your proposal, and consider carefully the appropriate allocation of the cost of such equipment. As with administrative costs, the direct charging of “general-purpose” equipment or non-technical equipment is subject to significant audit scrutiny by the institution and possibly external reviewers. (This includes the acquisition of desktop computers). Such acquisitions are often unallowable.
Make sure you have title to equipment purchased or written permission under a sponsored agreement before you trade it in, take it with you to another project or institution, or surplus it. It is important to get prior written permission from the sponsor before you do anything with equipment that you do not have clear title to, especially disposition of property. Before any equipment can be moved off-campus, all of the following officials and offices must approve the request:
- Responsible department chair
- Responsible dean or director
- Director of Sponsored Programs Services
Equipment Purchase
All purchases funded by sponsors are subject to university policies and procedures.
There are four ways orders for equipment may be committed to vendors: by purchase order, department order, purchasing card transaction or blanket order. Many institutional business policies prohibit commitment of orders to vendors without one of these purchasing authorizations. The direct buy limit is $2,500. Equipment and supplies costing in excess of that limit will be competitively bid or ordered from a sole source vendor with the appropriate documentation.
Taxation on purchases
In most states the purchase of goods and services is generally, taxable (so when you prepare your budget for equipment, don’t forget to include cost of shipping and applicable tax); however, certain equipment purchased for institutional research and technological development activities may qualify for exemption from state sales and use tax. The tax exemption provides a cost savings dependent on state tax rates. Careful attention must be given to certifying purchases for tax exemption.