Capital Expenditures with Federal Funds

Per Federal policy, the recipient may use its own documented procurement procedures provided they conform to applicable Federal law and standards (2 CFR 200.318 (a) and 2 CFR 215 (A-110)).

University Policy 908 defines capital assets and property/equipment as relatively permanent in nature with an expected useful life of more than one year and a unit cost that meets or exceeds the following:

  • Buildings $ 25,000
  • Building Improvements $ 25,000
  • Equipment $ 5,000
  • Infrastructure $500,000
  • Intangible Assets $100,000
  • Intangible Assets (software) $5,000
  • Land (no minimum)
  • Land Improvements $ 25,000
  • Library Books & Materials (no minimum)
  • Museum & Art Collections $ 5,000

It is the policy of the University to conduct periodic inventories of all property/equipment. Business Services - Property Management conducts such inventories - at a minimum - on a biennial basis.

Purchase of Equipment with Federal Funds

Non-expendable property can be acquired with federal funds only if the purchase has been specifically approved in the award document or by prior approval in writing of the agency’s grant or contract officer. Special terms and conditions of the award should be adhered to, and may require prior signatory approval from the sponsor. Prior to acquiring new, federally-funded property, the existing property inventory must be screened following the procedures described below under A. Screening, to ensure that there is no existing property owned by the University that is appropriate and available for use. In addition, there are federal screening requirements. See B. Equipment Charges to Federally-Funded Projects below.

A. Screening

External equipment screening as required by any funding agency shall be performed prior to acquisition and in accordance with the agency requirements. Departments shall be responsible for the screening procedure with the external funding agencies and completed approved screening documents will become a part of the award file. Departments must work closely with Business Services - Purchasing and the Capital Assets Accountant to perform screening as part of the initial purchase requisition.

Prior to acquisition, the requisitioning department will make a reasonable effort to ascertain whether like and acceptable surplus equipment is available within the University system.

2 CFR 2000.318(d) and OMB A-110 requires avoiding unnecessary purchases. This effort should include:

  • Review departmental surplus for excess equipment that would be suitable for use.
  • Review campus surplus for excess equipment that would be suitable for use.
  • Review system wide surplus for excess equipment that would be suitable for use. 

The review process should include contacting key personnel at each of the levels to determine availability of surplus equipment the unit may have in its control and is similar or functionally equivalent to the equipment being considered for acquisition.

B. Equipment Charges to Federally-Funded Projects

Cost-reimbursement type contract awards that are subject to the Federal Acquisition Regulations (FAR) Part 45, usually require screening through the sponsoring federal agency. In addition, NASA and the Department of Defense have agency specific pre-acquisition screening requirements for cost type FAR contracts.

Business Services - Purchasing will solicit for competitive prices for purchases in accordance with University Procurement Regulations and Procedures unless the principal investigator has justified the use of a sole source supplier. Such justification must be detailed and documented in writing. 

General Purpose Equipment

Except for fixed price contract funds, "general purpose equipment" means equipment which is not limited to research, medical, scientific, or other technical activities [2 CFR 200.48 and Circular A-21 J.18.a(4)].  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.  The purchase of vehicles is typically disallowed because of the inability to meet allocability requirements; however, allocability of vehicle usage can be met through use of UM's Motor Pool or rental companies.  Capital expenditures for general purpose equipment, buildings and land are unallowable as direct charges except where approved in advance by the awarding agency [2 CFR 200.439 (1) and Circular A-21 J.18.b(1)]. This type of equipment is general, and administrative support equipment is furnished by the University per the terms of its Disclosure Statement.  The federal government pays proportionally for its use through the depreciation included in the F&A rate.

Federal Contracts and Property

This section details the University guidelines for the management of federal property as required by the Federal Acquisition Regulations, 2 CFR 200, and OMB Circulars A-110, and A-21. If there is a conflict between the conditions and specific grants or contracts, the provisions of the individual agreement supersede those contained in these guidelines.

Prior to requisitioning new property, the existing property inventory must be screened to ensure that there is no existing property owned by the University that is appropriate and available for use.

The University will:

  • Check the applicable federal contract or grant to verify that property (equipment) is included in the budget. If property has not been authorized, approval as required by the applicable agency must be obtained in writing prior to further processing of the requisition.
  • Provide Business Services - Purchasing and the Capital Assets Accountant the following information:
    • Title vests immediately with the University. 
    • Title vests with the University until completion of the project, at which time the title will transfer to the federal government. 
    • Title remains with the federal government.
  • If capital assets were purchased, Business Services - Property Management maintains records of property acquired.  (Ref. FAR 45.508-1)
  • As specified and required by contractual obligation, final reports of property, including requests for disposition, shall be reported in a timely fashion to the contracting officer or designated administrative property officer.
  • For government equipment no longer being utilized, the accountable department shall provide a secure method of storage (FAR 45.612).
  • Disposal of federal property is subject to the provisions of 2 CFR 200, OMB Circular A-110, FAR Subpart 45.6, and to the approval and conditions of the sponsoring agency. Written approval from the federal sponsoring agency must be obtained prior to requesting authorization for disposal.
  • Property records shall be maintained accurately and shall include, per  2 CFR 200 and OMB Circular A-110:
    • A description of the property.
    • Manufacturer's serial number, model number, or other identification number. 
    • Source of the property, including grant or other agreement number. 
    • Whether title vests in the university or the federal government. 
    • Acquisition date (or date received, if the property was furnished by the federal government) and cost.

Federally-Owned Property

Property purchased by federal funds is affixed with a University of Montana property tag and internally tracked [2 CFR 200 and OMB Circular A-110].

Particular care must be exercised to prevent loss, damage, or theft of property. The departmental property custodian shall investigate and fully document any loss, damage, or theft of nonexpendable property. If the property was owned by the federal government, the federal sponsoring agency and the property administrator at the federal cognizant agency must be notified. 

As required by the cognizant federal agency, the University shall report the total acquisition cost of federally-owned property for which the University is accountable under each contract with each agency, including federally-owned property in the possession of subcontractors. 

Federal property may under no circumstance be used for purposes not specifically authorized in writing by the sponsoring agency.

Subcontractor Control of Property

Each agreement entered into by the University with a subcontractor shall contain specific provisions with respect to the subcontractor's responsibility for the care, custody, and use of the property in accordance with the terms and conditions of the prime contract with the federal government. [FAR 45.502(d)]

The subcontractor shall assume the responsibility and obligations of the University including risk of loss with respect to the property while under the subcontractor's control. All actions of the subcontractor are subject to the terms of the prime contract related to the care, utilization, storage, movement, and disposition of the property. [FAR 45]

The property and pertinent records of the subcontractor are to be available at all times for inspection by the University and federal government.

The inventory procedures of the subcontractor are to be reviewed by the University and designed to meet the requirements of the University and the federal government.


The University of Montana typically does not capitalize equipment repair.  However, if grant funded, such expenses may be capitalized and charged as equipment if the repair is necessary for the purchase of used equipment to be operational.


Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards 2 CFR 200:

  • §§200.13 Capital expenditures
  • 200.33 Equipment
  • 200.89 Special purpose equipment
  • 200.48 General purpose equipment
  • 200.2 Acquisition cost
  • 200.12 Capital assets.

OMB Circular A-21:  "Cost Principals for Educational Institutions." This Circular establishes principles for determining costs applicable to grants, contracts, and other agreements with educational institutions.

OMB Circular A-110:  “Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations.”  The purpose of this circular is to set forth standards for obtaining consistency and uniformity among Federal agencies in the administration of grants to and agreements with institutions of higher education, hospitals, and other non-profit organizations.

Federally-owned Property:  “Title to federally-owned property remains vested in the Federal Government. Recipients shall submit annually an inventory listing of federally-owned property in their custody to the Federal awarding agency. Upon completion of the award or when the property is no longer needed, the recipient shall report the property to the Federal awarding agency for further Federal agency utilization.” [2 CFR 200.312 (a) and 2 CFR 215.33.a(1)]

Exempt Property:  “When statutory authority exists, the Federal awarding agency has the option to vest title to property acquired with Federal funds in the recipient without further obligation to the Federal Government and under conditions the Federal awarding agency considers appropriate. Such property is "exempt property." Should a Federal awarding agency not establish conditions, title to exempt property upon acquisition shall vest in the recipient without further obligation to the Federal Government.” [2 CFR 200.312 (c) and 2 CFR 215.33.b]

Non-expendable Property:  Equipment acquired by a recipient with Federal funds. Title may vest in the recipient, subject to conditions of 2 CFR 215.34.

Permanent Equipment:  Per 2 CFR220.45 J.18.a.2 (OMB Circular A-21), as “… an article of nonexpendable, tangible personal property having a useful life of more than one year and an acquisition cost which equals or exceeds the lesser of the capitalization level established by the organization for financial statement purposes, or $5,000.”

Personal Property:  Personal property is defined as property of any kind except real property.  It may be tangible, having physical existence, or intangible, having no physical existence, such as copyrights, patents, or securities.

Real Property:  Real property is considered land, including land improvements, structures and appurtenances thereto, but excludes movable machinery and equipment.

Recipient:  An organization receiving an award directly from awarding agencies to carry out a project or program is defined as a recipient.