Equipment acquisition, use and disposition requirements under Federal financial assistance awards are found in 2 CFR 200.
This information applies to:
All grants and cooperative agreements
Equipment may be an allowable cost to a Federal award or subaward when its need and utility in completing a project are justified by the non-Federal entity and approved by the Federal awarding agency or pass-through entity. In general, equipment is defined as an item with a per-unit acquisition cost of $5,000 or more, having a useful life of more than one year, unless the non-Federal entity sets their equipment capitalization level at a lower dollar threshold. Tangible personal property that does not meet this definition is generally considered "supplies".
Equipment may fall into one of four categories of "equipment" defined in the Uniform Guidance: computing devices, general purpose equipment, information technology systems, or special purpose equipment. Federal financial assistance applicants and recipients/subrecipients should be familiar with these differing types and the specific requirements that determine the allowability of each under an award.
Applicants seeking to acquire equipment on a U.S. Fish and Wildlife Service award or subaward must obtain prior approval from the Service or pass-through entity. They do so by providing a justification for the equipment need, with cost estimates, in the grant application. If the need wasn’t anticipated, an award recipient or subrecipient may request purchase approval during the award period of performance through a budget amendment. These are both considered “prior approval” requests. The Service or pass-through entity will determine the allowability of the equipment purchase request within the context of the project objectives and activities, and in accordance with any program funding restrictions. The Service or pass-through entity gives approval of equipment purchase requests to a recipient in the Notice of Award or amendment, with any special terms and conditions that may apply.
The costs of depreciation, equipment rental, and operating and maintaining acquired equipment are also allowable under a Federal award. More information about the allowability of these costs can be found under Related Pages.
The requirements for the use, management, and disposal of equipment acquired under a Federal award varies by the type of non-Federal entity recipient. States follow the requirements in 2 CFR 200.313(b); all other non-Federal entities follow 2 CFR 200.313(c) through (e). Special terms and conditions for equipment use, management, and disposition may also be applied by the Service or pass-through entity to an award.
2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
§200.2 Acquisition cost.
Acquisition cost means the cost of the asset including the cost to ready the asset for its intended use. Acquisition cost for equipment, for example, means the net invoice price of the equipment, including the cost of any modifications, attachments, accessories, or auxiliary apparatus necessary to make it usable for the purpose for which it is acquired. Acquisition costs for software includes those development costs capitalized in accordance with generally accepted accounting principles (GAAP). Ancillary charges, such as taxes, duty, protective in transit insurance, freight, and installation may be included in or excluded from the acquisition cost in accordance with the non-Federal entity's regular accounting practices.
§200.12 Capital assets.
Capital assets means tangible or intangible assets used in operations having a useful life of more than one year which are capitalized in accordance with GAAP. Capital assets include: (a) Land, buildings (facilities), equipment, and intellectual property (including software) whether acquired by purchase, construction, manufacture, lease-purchase, exchange, or through capital leases; and (b) Additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations or alterations to capital assets that materially increase their value or useful life (not ordinary repairs and maintenance).
§200.13 Capital expenditures.
Capital expenditures means expenditures to acquire capital assets or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life.
§200.20 Computing devices.
Computing devices means machines used to acquire, store, analyze, process, and publish data and other information electronically, including accessories (or “peripherals”) for printing, transmitting and receiving, or storing electronic information. See also §§200.94 Supplies and 200.58 Information technology systems.
Equipment means tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-Federal entity for financial statement purposes, or $5,000. See also §§200.12 Capital assets, 200.20 Computing devices, 200.48 General purpose equipment, 200.58 Information technology systems, 200.89 Special purpose equipment, and 200.94 Supplies.
[78 FR 78608, Dec. 26, 2013]
§200.48 General purpose equipment.
General purpose equipment means equipment which is not limited to research, medical, scientific or other technical activities. Examples include office equipment and furnishings, modular offices, telephone networks, information technology equipment and systems, air conditioning equipment, reproduction and printing equipment, and motor vehicles. See also Equipment and Special Purpose Equipment.
§200.58 Information technology systems.
Information technology systems means computing devices, ancillary equipment, software, firmware, and similar procedures, services (including support services), and related resources. See also §§200.20 Computing devices and 200.33 Equipment.
§200.89 Special purpose equipment.
Special purpose equipment means equipment which is used only for research, medical, scientific, or other technical activities. Examples of special purpose equipment include microscopes, x-ray machines, surgical instruments, and spectrometers. See also §§200.33 Equipment and 200.48 General purpose equipment.
Supplies means all tangible personal property other than those described in §200.33 Equipment. A computing device is a supply if the acquisition cost is less than the lesser of the capitalization level established by the non-Federal entity for financial statement purposes or $5,000, regardless of the length of its useful life. See also §§200.20 Computing devices and 200.33 Equipment.
See also §200.439 Equipment and other capital expenditures.
(a) Title. Subject to the obligations and conditions set forth in this section, title to equipment acquired under a Federal award will vest upon acquisition in the non-Federal entity. Unless a statute specifically authorizes the Federal agency to vest title in the non-Federal entity without further obligation to the Federal Government, and the Federal agency elects to do so, the title must be a conditional title. Title must vest in the non-Federal entity subject to the following conditions:
(1) Use the equipment for the authorized purposes of the project during the period of performance, or until the property is no longer needed for the purposes of the project.
(2) Not encumber the property without approval of the Federal awarding agency or pass-through entity.
(3) Use and dispose of the property in accordance with paragraphs (b), (c) and (e) of this section.
(b) A state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Other non-Federal entities must follow paragraphs (c) through (e) of this section.
(1) Equipment must be used by the non-Federal entity in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award, and the non-Federal entity must not encumber the property without prior approval of the Federal awarding agency. When no longer needed for the original program or project, the equipment may be used in other activities supported by the Federal awarding agency, in the following order of priority:
(i) Activities under a Federal award from the Federal awarding agency which funded the original program or project, then
(ii) Activities under Federal awards from other Federal awarding agencies. This includes consolidated equipment for information technology systems.
(2) During the time that equipment is used on the project or program for which it was acquired, the non-Federal entity must also make equipment available for use on other projects or programs currently or previously supported by the Federal Government, provided that such use will not interfere with the work on the projects or program for which it was originally acquired. First preference for other use must be given to other programs or projects supported by Federal awarding agency that financed the equipment and second preference must be given to programs or projects under Federal awards from other Federal awarding agencies. Use for non-federally-funded programs or projects is also permissible. User fees should be considered if appropriate.
(3) Notwithstanding the encouragement in §200.307 Program income to earn program income, the non-Federal entity must not use equipment acquired with the Federal award to provide services for a fee that is less than private companies charge for equivalent services unless specifically authorized by Federal statute for as long as the Federal Government retains an interest in the equipment.
(4) When acquiring replacement equipment, the non-Federal entity may use the equipment to be replaced as a trade-in or sell the property and use the proceeds to offset the cost of the replacement property.
(d) Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements:
(1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property.
(2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years.
(3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated.
(4) Adequate maintenance procedures must be developed to keep the property in good condition.
(5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return.
(e) Disposition. When original or replacement equipment acquired under a Federal award is no longer needed for the original project or program or for other activities currently or previously supported by a Federal awarding agency, except as otherwise provided in Federal statutes, regulations, or Federal awarding agency disposition instructions, the non-Federal entity must request disposition instructions from the Federal awarding agency if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal awarding agency disposition instructions:
(1) Items of equipment with a current per unit fair market value of $5,000 or less may be retained, sold or otherwise disposed of with no further obligation to the Federal awarding agency.
(2) Except as provided in §200.312 Federally-owned and exempt property, paragraph (b), or if the Federal awarding agency fails to provide requested disposition instructions within 120 days, items of equipment with a current per-unit fair-market value in excess of $5,000 may be retained by the non-Federal entity or sold. The Federal awarding agency is entitled to an amount calculated by multiplying the current market value or proceeds from sale by the Federal awarding agency's percentage of participation in the cost of the original purchase. If the equipment is sold, the Federal awarding agency may permit the non-Federal entity to deduct and retain from the Federal share $500 or ten percent of the proceeds, whichever is less, for its selling and handling expenses.
(3) The non-Federal entity may transfer title to the property to the Federal Government or to an eligible third party provided that, in such cases, the non-Federal entity must be entitled to compensation for its attributable percentage of the current fair market value of the property.
(4) In cases where a non-Federal entity fails to take appropriate disposition actions, the Federal awarding agency may direct the non-Federal entity to take disposition actions.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75884, Dec. 19, 2014]
§200.439 Equipment and other capital expenditures.
(a) See §§200.13 Capital expenditures, 200.33 Equipment, 200.89 Special purpose equipment, 200.48 General purpose equipment, 200.2 Acquisition cost, and 200.12 Capital assets.
(b) The following rules of allowability must apply to equipment and other capital expenditures:
(1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity.
(2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval [PKA1] of the Federal awarding agency or pass-through entity.
(3) Capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency, or pass-through entity. See §200.436 Depreciation, for rules on the allowability of depreciation on buildings, capital improvements, and equipment. See also §200.465 Rental costs of real property and equipment.
(4) When approved as a direct charge pursuant to paragraphs (b)(1) through (3) of this section, capital expenditures will be charged in the period in which the expenditure is incurred, or as otherwise determined appropriate and negotiated with the Federal awarding agency.
(5) The unamortized portion of any equipment written off as a result of a change in capitalization levels may be recovered by continuing to claim the otherwise allowable depreciation on the equipment, or by amortizing the amount to be written off over a period of years negotiated with the Federal cognizant agency for indirect cost.
(6) Cost of equipment disposal. If the non-Federal entity is instructed by the Federal awarding agency to otherwise dispose of or transfer the equipment the costs of such disposal or transfer are allowable.
(7) Equipment and other capital expenditures are unallowable as indirect costs. See §200.436 Depreciation.
[78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75886, Dec. 19, 2014]
The Council on Financial Assistance Reform's (COFAR) Frequently Asked Questions on 2 CFR 200 (July 2017 update)
.33-1 Capitalization Level for Software
Q. Section 200.33 includes information technology systems in the definition of equipment. Section 200.58 includes software in the definition of information technology systems. Does this mean that the lesser of the capitalization level established by the non-Federal entity for financial statement purposes, or $5,000 applies to software?
A. Yes, the maximum capitalization level of $5,000 applies to software. This definition encompasses purchased software that comes with the hardware with a unit cost greater than $5,000. It does not include internally developed software projects which are to capitalized in accordance with GAAP for financial statement purposes.
.313-1 Equipment and Conditional Title
Q. Section 200.313(a) of the guidance specifies that title for equipment acquired under a Federal award will vest upon acquisition in the non-Federal entity as a “conditional title”. This is new terminology for those non-Federal entities that have followed Circular A-110. What is meant by “conditional title” and will this affect how non-federal entities have historically accounted for equipment ownership?
A. There is no change intended in the Uniform Guidance for how non-Federal entities should account for equipment ownership. The concept of “conditional title” always has been in effect, and simply means that equipment ownership vests in the non-Federal entity at the time of acquisition and that it is contingent on meeting the requirements for use, management, and disposition of the equipment as required in section 200.313.
.313-2 Changes to Equipment Inventory Systems
Q. Section 200.313(d)(1) of the guidance specifies the attributes that must be maintained in the property records of the non-Federal entity. For non-Federal entities that have followed Circular A-110, there are two changes:
- “percentage of Federal participation in the project costs” (Uniform Guidance) versus “information from which one can calculate the percentage of Federal participation in the cost of the equipment” (A-110 .34(f)(1)(vi)), and
- “the location, use and condition of the property” (Uniform Guidance) versus “location and condition of the equipment and the date the information was reported” (A-110 .34(f)(1)(vii)).
Are non-Federal entities expected to change the attributes of their property records and ultimately be required to implement costly changes to their existing equipment inventory systems?
A. No. The requirements for property records have not substantively changed in the Uniform Guidance. The requirements for property records are meant to ensure that the non-Federal entity maintains an equipment inventory system that demonstrates the non-Federal entity has an effective system of controls to account for and track equipment that has been acquired with Federal funds. Non--Federal entities are not expected to change their equipment inventory systems or the data elements contained in those systems, if they are in compliance with the current requirements in Circular A-110. In the examples in the question:
- The percentage of Federal participation in the cost of equipment in Circular A-110 was identical to the percentage of Federal participation in the cost of the original project or program. One could infer that from the amount of compensation a recipient was required under 2 CFR 215.34(g) to make to a Federal agency at the time of disposition—i.e., “compensation shall be computed by applying the percentage of Federal participation in the cost of the original project or program to the current fair market value of the equipment.” The A-110 requirement in 2 CFR 215.34 for the recipient’s records to have information from which one could calculate the percentage of Federal participation in the cost of the equipment then required two numbers, the percentage of Federal participation in the original project or program and information from which one could derive the current fair market value. The Uniform Guidance makes that more explicitly clear through the definition of “Federal interest” in 2 CFR 200.41; and
- “the location, use and condition of the property” is referring to an indicator in the property records that the specific equipment item is active and linked with the appropriate Federal award, identical to the requirement in Circular A-110.
The COFAR will review these sections and consider whether any technical corrections are needed for clarity in the Uniform Guidance.
Frequently Asked Questions
How do I determine the "per-unit acquisition cost"?
This cost is not just the net base price of the equipment. It also includes the cost of any modifications, attachments, accessories, or auxiliary components that make the equipment usable for the purpose for which it was acquired (§200.2). For example, you need a histology/pathology microscope that can capture images for a digital tissue sample catalog you're creating as part of a project. The base microscope will cost $4,100, but you also need the digital camera attachment which will cost $1,100. Used and maintained together as one unit, the per-unit acquisition cost is therefore $5,200 and would require prior approval for the purchase.
If the item I want to purchase has a per-unit acquisition cost of less than $5,000, is it a “supply”? I don’t need to request prior approval from the Service then, right?
It depends. If your organization does not set an equipment capitalization level or sets the level at $5,000, an item less than $5,000 would be considered a ‘supply’ and would not require prior approval from the Service to purchase. If your organization sets a lower equipment capitalization level, you would need to determine if the per-unit acquisition cost meets or exceeds that level in order to determine if prior approval is required. (See §200.33 Equipment and §200.12 Capital Assets.)
When do I need to request approval from the Service to purchase equipment – when the per-unit acquisition cost is $5,000 or more, or once the cumulative total of equipment to be purchased reaches $5,000?
Neither depicts the prior approval requirement circumstance. The prior approval requirements in §200.313 and §200.439 are set at the unit cost level, not the cumulative total cost. Applicants and recipients must seek prior approval from the Service for the lesser dollar threshold of these two circumstances: 1) equipment per-unit acquisition cost is $5,000 or more, or 2) equipment unit cost is at or exceeds the equipment capitalization level established by the non-Federal entity.
How do I find what my organization’s equipment capitalization level is?
Speak with your organization’s purchasing or contracting office or asset manager. Your organization should have a policy or procedure for defining and managing its capitalized assets.
I plan to subaward funds under this award. Do I need to review and approve equipment costs of my subrecipient?
Yes. As a pass-through entity, you are responsible for determining the allowability of equipment purchase requests and providing specific approval to the subrecipient in the award letter with any special terms and conditions that may apply. (See §200.439.)
Should I consider renting or leasing the equipment I need to carry out the project versus purchasing equipment?
Yes. Conducting a rent/lease vs. purchase analysis using local market rates is a best practice to help recipients and the Service determine the best and most cost efficient way to achieve the project objectives. Including this analysis within your budget justification is encouraged. (See §200.465 Rental costs of real property and equipment.)
Who owns the equipment acquired under a Federal award or subaward?
The recipient or subrecipient retains a conditional title to the equipment once an award or subaward has ended under the condition that the equipment is used and disposed of in accordance with §200.313(b), (c) and (e).
May the Service require the recipient to return the equipment once the award has ended?
No. The Service cannot require the return of equipment. If the recipient cannot continue to use the equipment as described in §200.313(c), the Service may request the equipment be transferred to the Federal government in its disposition instructions. The Service must then compensate the recipient for its attributable percentage of the current fair market value of the equipment. (See §200.313(e)(3).)
What do I do with equipment purchased on a Federal award once the award has ended?
State recipients must use, manage, and dispose of equipment acquired under a Federal award in accordance with state laws and procedures (§200.313(b)) and should refer to their Notice of Award for any additional terms and conditions that may apply to the acquired equipment.
For all other non-Federal entity recipients, and in accordance with the terms and conditions of the award, equipment must continue to be used in the program or project for which it was acquired, for as long as it is needed. When no longer needed for the original program or project, the equipment may be used to support: 1) other Service grant-funded activities, then 2) other Federally-funded activities (see §200.313(c)(1).) These recipients must also continue to manage the equipment in accordance with the requirements at §200.313(d). If you will not need the equipment after the close of an award or subaward, you should request disposition instructions from the Service or pass-through entity (see §200.313(e)).
Can I sell equipment purchased under a Federal award when it is no longer needed?
Yes. State recipients may dispose of the equipment in accordance with state laws and procedures (§200.313(b)), unless special terms and conditions regarding disposition have been applied to the award.
For all other non-Federal entity recipients, when the equipment is no longer needed to support the original program or project, or other Federally-supported activities, the recipient must request disposition instructions from the Service if required by the terms and conditions of the award (see §200.313(e)). The Service may authorize the sale of equipment through these instructions. The Service is entitled to receive the portion of the sale proceeds from items sold having a current per-unit fair-market value greater than $5,000 corresponding to their participation rate in the original purchase. For example, if a vehicle that was purchased on an award where the Service contributed 75% of the total award costs was sold after the award closed for $10,000, the Service would be owed $7,500 from the sale. The Service may permit the recipient to deduct and retain from the Federal share $500 or 10% of the proceeds, whichever is less, for its selling and handling expenses. If you are authorized or required by the Service to sell the equipment, proper sales procedures must be established to ensure the highest possible return (see §200.313(d)(5)).
I need to replace equipment acquired under a prior Federal award for use on the continuing project. May I use the trade-in or sale value to reduce the acquisition cost of replacement equipment?
Yes. State recipients may replace the original Federally-funded equipment if in accordance with state laws and procedures (§200.313(b)), unless special terms and conditions regarding disposition have been applied to the award.
For all other non-Federal entity recipients, you may use the trade-in or sale value of the original equipment being replaced to offset the acquisition cost of the replacement property. (See §200.313(c)(4)).
All recipients should first determine if the acquisition cost of the replacement equipment requires the prior approval of the Service before purchasing the equipment (§200.313 and 200.439). If prior approval requirements apply, you should include details of the original Federally-funded equipment and replacement equipment to be acquired, trade-in or sale value of the original equipment, and the new reduced acquisition cost for the replacement equipment in your purchase request to the Service.
How may we charge the costs of operating and maintaining the acquired equipment to an award?
Operations and maintenance expenditures for equipment are allowable direct costs to a Federal award. Examples of operating expenditures include fuel, insurance, and labor to operate the equipment. Examples of maintenance expenditures include oil, tires, and repair parts and labor. Recipients may also develop equipment use rates from a pool of all operating and maintenance costs (see related page Depreciation / Equipment Use Rates for guidance on properly developing these rates). Recipients must ensure all operations and maintenance costs are properly allocated to Federal and non-Federal funding sources that share in the use of the equipment.
Is Federally-funded equipment reviewed in an audit?
Yes, the equipment retains a Federal interest even when the Federal award is closed. OIG auditors will request a copy of your organization’s equipment inventory and will select a sample to verify compliance with the equipment use, management and disposal requirements at §200.313(b) through (e).