Capital Expenditures with Federal Funds
Capital expenditure with federal funds refers to the use of sponsored project money to purchase, construct, or improve capital assets such as land, buildings, and equipment.
In accordance with federal regulations, the University uses its own documented procurement procedures. These procurement procedures comply with applicable federal laws and standards (2 CFR 200.318(a); 2 CFR 215).
Capital Asset Thresholds
University Policy 908 defines capital assets (property and equipment) as items that are relatively permanent, have an expected useful life of more than one year, and meet or exceed the following unit cost thresholds:
- 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
The University conducts periodic inventories of all capital property and equipment. Business Services – Property Management performs these inventories at least once every two years.
Purchase of Equipment with Federal Funds
Non-expendable property may be purchased with federal funds only if:
- The purchase is specifically approved in the award document, or
- Prior written approval is obtained from the sponsoring agency’s grant or contract officer.
All special terms and conditions of the award must be followed and may require sponsor signatory approval.
Before acquiring federally funded equipment, departments must screen existing University property to ensure that suitable and available equipment is not already owned by the University. Federal screening requirements also apply (see Equipment Charges to Federally Funded Projects below).
A. Equipment Screening
When required by a funding agency, external equipment screening must be completed prior to acquisition and in accordance with agency requirements. Departments are responsible for completing the screening process and ensuring approved documentation is retained in the award file.
Departments must work closely with Business Services – Purchasing and the Capital Assets Accountant during the initial requisition process.
To comply with federal requirements to avoid unnecessary purchases, 2 CFR 200.318(d), departments must make reasonable efforts to identify surplus equipment by:
- Reviewing departmental surplus
- Reviewing campus surplus
- Reviewing system-wide surplus
This process should include consultation with key personnel at each level to determine whether comparable or functionally equivalent equipment is available.
B. Equipment Charges to Federally Funded Projects
Cost-reimbursement contracts subject to Federal Acquisition Regulations (FAR) Part 45 typically require equipment screening through the sponsoring federal agency. In addition, agencies such as NASA and the Department of Defense impose agency-specific pre-acquisition screening requirements.
Business Services – Purchasing will obtain competitive pricing in accordance with University procurement policies unless a sole-source purchase is justified. Sole-source justifications must be fully documented in writing.
General Purpose Equipment
“General purpose equipment” refers to items not limited to research, medical, scientific, or other technical activities, as defined in 2 CFR 200.48. Examples include:
- Office furniture and equipment
- Modular offices
- Telephone and IT systems
- HVAC equipment
- Printing and reproduction equipment
- Motor vehicles
Capital expenditures for general-purpose equipment, buildings, or land are not allowable as direct charges unless approved in advance by the awarding agency, 2 CFR 200.439(1).
Because these items support general administrative functions, the federal government reimburses their use through depreciation included in the University’s Facilities & Administrative (F&A) rate. Vehicle purchases are typically unallowable; allocable usage may instead be met through rental services.
Federal Contracts and Property Management
These guidelines outline the University's responsibilities for managing federal property in accordance with 2 CFR 200 and FAR requirements. If a conflict exists between these guidelines and a specific award, the award terms take precedence.
Prior to requisitioning new property, departments must confirm that suitable equipment is not already available within the University.
The University will:
- Verify that equipment is authorized in the approved budget and obtain written agency approval if required
- Provide Business Services – Purchasing and the Capital Assets Accountant with title information indicating whether:
- Title vests immediately with the University
- Title vests with the University until project completion
- Title remains with the federal government
- Maintain property records through Business Services – Property Management, FAR 45.508-1.
- Submit final property and disposition reports to the contracting officer as required
- Ensure secure storage for idle government-owned equipment, FAR 45.612.
- Obtain written sponsor approval prior to disposal of federal property
Property records must be accurate and include, at a minimum:
- Property description
- Manufacturer, model, or serial number
- Funding source and award number
- Title holder
- Acquisition or receipt date and cost
Federally-Owned Property
Property purchased with federal funds is tagged and tracked by the University. Departments must take special care to prevent loss, damage, or theft. Any incident must be fully documented and, if the property is federally owned, reported to the sponsoring agency.
Federally owned property may only be used for purposes explicitly authorized in writing by the sponsoring agency.
Subcontractor Control of Property
Agreements with subcontractors must include provisions addressing care, custody, and use of property in compliance with the prime federal contract, FAR 45.502(d). Subcontractors assume responsibility and risk of loss while the property is under their control.
Subcontractor property and records must be available for inspection, and inventory procedures must meet University and federal standards.
Repairs
The University typically does not capitalize equipment repairs. However, grant-funded repair costs may be capitalized as equipment if the repair is necessary to make used equipment operational.
Definitions and Regulatory References
Key federal regulations and definitions are found in 2 CFR 200.1, including:
- Capital
- Equipment
- Special Purpose Equipment
- General Purpose Equipment
- Acquisition Cost
- Capital Assets
Federally-Owned Property: Title remains with the federal government; annual inventory reporting is required, and disposition instructions must be obtained upon project completion (2 CFR 200.312(a).
Exempt Property: Title may vest with the recipient without further federal obligation when authorized by statute, 2 CFR 200.312(c).
Non-Expendable Property: Equipment acquired with federal funds; title may vest in the recipient subject to federal conditions.
Permanent Equipment: Non-expendable tangible property with a useful life greater than one year and a unit cost of $5,000 or more.
Recipient: An organization that receives a federal award directly to carry out a project or program.