Computers and Electronic Devices
As a recipient of Federal Funds, UM is required to adopt costing policies that conform per Federal rules and regulations. The University's cost accounting practices are declared in the required filing of its Disclosure Statement (DS-2) to the audit agency of the US Department of Health and Human Services. The DS-2 defines costs that can be directly charged to sponsored programs as being allowable, allocable, reasonable, and consistently applied in like circumstances. Costs that support sponsored research on an indirect basis are also defined. Additional applicable Federal guidance in this area is provided by OMB Circular A-21, as well as Circular A-110.
Typically, personal and software are considered to be general office supplies and are not normally allowable direct cost unless the computer/software or electronic device is essential and unique to the proposed research project. If a computer/software purchase is requested, include the following in the budget justification:
- Detailed description regarding why the computer/software purchase is required to complete the objectives of the proposed project.
- Statement verifying that the requested computer/software is not currently available for use by the PI.
- Verification that the requested computer/software will be purchased in accordance with applicable cost principles.
Such information will document that the purchase conforms to the cost principles for educational institutions described in OMB Circular A-21. Costing guidelines specify that charges for computers and laptops, as with all other charges directly charged to sponsored awards, must be:
- Necessary for, and provide benefit to, the project;
- The computer/electronic device must be essential for project activities and its use should be sufficiently tracked during the life of the project.
- The computers/laptops function in direct support of specialized scientific equipment; or,
- The computer is specifically identifiable to the grant as an "unlike circumstance."
- Directly allocable;
- The principal use of the computer must be directly allocable to the purpose, goals, and activities of the funded project.
- If a computer is directly charged to a project and is used other than incidentally for general administrative purposes, some sharing of the cost is required.
- A computer may be allocated to one or more sponsored projects unless the sponsor's terms and conditions prevent such an allocation. Such an allocation requires that the computer be used primarily to conduct the research of each project.
- Reasonable; and,
- There must be an informed, prudent decision regarding the cost, utility, and value to the project.
- Non-personal in nature
While capital equipment (unit acquisition cost of $5,000 or more) is commonly eligible to be direct-charged to sponsored projects, the cost of personal computers and electronic devices has decreased in recent years to the extent that it seldom reaches the level of capitalizable equipment. Moreover, because personal computers and electronic devices are generally used for many different activities (e.g., instruction, research, administration, email, personal use), the default presumption by federal sponsors and auditors is that these are general purpose items and are considered to be an administrative cost covered by F&A reimbursement. As a result, the direct charging of their acquisition to a sponsored project is inappropriate.
In some cases, the use of personal computers and electronic devices specifically required for individual research projects can be justified as directly benefitting those awards. For example, in such specific situations, the purchase of personal computers and electronic devices can be an allowable direct charge to sponsored projects when the conduct of the research requires a computer (e.g., the computer is attached to a piece of equipment and is required for collection or analysis of data for the project, or the computer is specifically needed to record data while in the field, such as an archeological site). In such situations, the computer or electronic device must be used either exclusively or primarily for the project. The use of a computer to store non-sponsored projects information, or for use outside of the lab or office where the research is conducted (except for field work), is likely to raise the question of allowability during an audit.
To sustain an auditable justification of the allowability of computers charged directly to sponsored projects, the computer must be used primarily (at least 95%) for the programmatic conduct of the sponsored project. If a computer is 100% funded from sponsor, the computer should not be used for non-programmatic purposes on more than an incidental basis. Criteria for consideration include:
- The computer is never used for administrative support, such as purchasing and grant management, since these uses can never be directly charged to an award; and,
- The Incidental use of the computer …
- never interferes with project use
- is solely for convenience (e.g., responding to project related e-mails in a timely manner while away from the office)
- would not have justified purchase of the laptop
- never requires removing the laptop from the project location
- is minimal (less than 5%)
- generally does not result in non-project files or data being stored on the computer
The PI must conform to any specific restrictions or approval requirements of the sponsor and must assure that the computer would not have been purchased were it not to support the goals of the specific research project. In addition, software and/or upgrades purchased with restricted funds must be necessary for the conduct of the research and must also conform to the above requirements regardless of the computer on which they are installed. The PI is ultimately responsible for the charges to the sponsored project.
Documentation of Unlike Circumstances
In order to minimize disallowed costs through audit findings, personal computers and electronic devices with a unit cost of less than $5,000 will not be allowed as an approved expenditure on research funds unless unlike circumstances have been documented. In such cases, the need has been included in the original proposal and completely justified as to the reason it is being included, the purpose and benefit to the project have been fully described, it is clearly documented that the project will be negatively impacted by not purchasing the computer, and the purchase has been approved by the sponsor.
To provide evidence of unlike circumstances, the Principal Investigator must document in the proposal:
- the use of the computer is beyond the normal and customary use and application of computers in the day-to-day operations of the laboratory,
- how the computer directly benefits the project, and
- how the purchase is different from similar items provided by the department or otherwise are treated as F&A costs.
The request must be reviewed and approved by ORSP, and once full documentation has been provided to and approved by the sponsor, the University will allow the direct expense.
If the need for a personal computer or electronic device develops during the project and was not requested in the original budget, the PI must provide documentation of unlike circumstances for review and approval as described above.
Definition and Examples
General purpose equipment. Permanent equipment that is usable for other than research, medical, scientific or technical activities, whether or not special modifications are needed to make it suitable for a particular purpose, fall under the definition of general purpose equipment and are typically unallowable as direct costs. Examples include office equipment and furnishings, air conditioning equipment, reproduction and printing equipment, motor vehicles and computer equipment.
Capital equipment. Purchase of personal computers and laptops with a unit acquisition cost of $5,000 or more with a useful life greater than one year on sponsored projects are considered capital equipment and are allowable as direct costs, provided that the equipment purchase conforms to all of the costing principles. The primary determinant of allowability is the requirement that the equipment is necessary to fulfill the objectives of the sponsored project; the dollar value is not sufficient in and of itself to permit allocation to an award.
EXAMPLES of Specific Sponsor Guidance
Specific guidance varies significantly by sponsor. As supplementary guidance, excerpted below are policy statements regarding laptop computers from several Federal agencies:
NIH Grants Policy Statement
Direct Costs and Facilities and Administrative Costs. Project costs consist of the allowable direct costs directly related to the performance of the grant plus the allocable portion of the allowable F&A costs of the organization, less applicable credits (as described below and in the cost principles). A direct cost is any cost that can be specifically identified with a particular project, program, or activity or that can be directly assigned to such activities relatively easily and with a high degree of accuracy. Direct costs include, but are not limited to, salaries, travel, equipment, and supplies directly benefiting the grant-supported project or activity.
Several recently awarded NIH grants have specifically disallowed the purchase of computers in the Notice of Award, citing: "This award does not include funds for the support of computers, and printers as requested in the application. In accordance with OMB Circular A-21, these costs are considered unallowable as direct costs, but, if appropriate, may be charged to the project as F&A costs."
NSF Proposal and Award Policies and Procedures Guide
General Purpose Equipment. Expenditures for general purpose equipment are unallowable unless the equipment is primarily or exclusively used in the actual conduct of the research.
NASA Guidebook for Proposers
General purpose equipment (i.e., personal computers and/or commercial software) is not allowable as a direct cost unless specifically approved by the NASA Award Officer. Any general purpose equipment purchase requested to be made as a direct charge under this award must include the equipment description, an explanation of how it will be used in the conduct of the research proposed, and a written certification that the equipment will be used exclusively for the proposed research activities. The need for general purpose items that typically can be used for research and non-research purposes should be explained.
Purchase of Personal Computers and/or Software ARe usually considered by NASA to be general purpose equipment that must be purchased from general, organizational overhead budgets and not directly from the proposal budget unless it can be demonstrated that such items are to be used uniquely and only for the proposed research.