Office of Research and Project Administration

SPONSORED PROGRAMS COMPLIANCE

15. Equipment

Administrative Responsibilities/Issues:

Why property management is important to the University of Rochester?

Property management is a key component in an efficient, professionally administered business. It supports the educational, research and administrative missions of the University. The benefits include:

• Readily identify availability of equipment
• Meet departmental management needs
• Comply with external regulations
• Saves money by reducing waste, redundancy and equipment loss
• Allows the University to have an accurate record of its investment in equipment
• Facilitates tracking and recording of maintenance and warranty information
• Provides data which enables the University to obtain indirect cost recovery for equipment depreciation
• Allows the University to issue timely and accurate property reports

Our policies and procedures are reviewed and approved by the Department of Health and Human Services, the University's Federal cognizant agency. In addition, University Internal Audit may review and audit the physical inventory and reconciliation processes to ensure they are in compliance with overall University policies and procedures. Refer to University policy (Equipment Inventory Control) on the Finance Department web page at http://www.rochester.edu/adminfinance/finance/equip.htm .

The University of Rochester's Property Management System is a point of audit focus. The proper identification and use of equipment is critical to the University's management of both the direct and indirect costs of research. The integrity of this system depends on individuals throughout the campus paying proper attention to the acquisition, use, tracking, physical inventory and disposition of equipment.

Capital equipment is defined as any unit item with a life expectancy of at least one year and having an acquisition cost of $1,000 or more. Shipping, taxes, in-transit insurance and installation charges should be included under this category for new purchases, provided these costs are included on the original purchase order. If an item falls outside this definition (i.e. auxiliary supplies), it is considered "expendable materials and supplies". Equipment rental or lease, for instance, is not included in the capital equipment definition. In addition, repair services are generally not allocable to the equipment subcode.

Fabricated Equipment is defined as special purpose equipment that is to be assembled or fabricated that will result in an article of nonexpendable tangible property having a useful life of at least one year, and total acquisition cost of $1,000 or more. The fabricated unit consists of items or assemblies of parts that are interconnected and interdependent so as to become a new functional entity for a special purpose.

Be sure to check the terms and conditions of your particular award for information related to:

• allowability of equipment charges
• equipment title
• joint funding or
• fabrication of equipment.

Any of these conditions require careful attention at the time that the award is established and throughout the life of the project.

Awards may also require advance notification or prior approvals of equipment acquisitions.

In these cases, the written approval of the funding agency's Grant or Contract Officer must be obtained before acquiring the equipment. This is particularly important 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 activity, 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, OMB Circular A-21 allows that the expense may be charged fully to the project, even if it is subsequently used for other purposes.

In addition, if you plan to purchase "general-purpose" equipment for your project, you will 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" or non-technical equipment is subject to significant audit scrutiny by both the University and external reviewers. Such acquisitions are often unallowable.

Refer to University policy (University of Rochester Guidelines on Determining the Allocability and Allowability of Equipment Purchased from Sponsored Program Funds) on the ORPA web page at http://www.rochester.edu/ORPA/policies/.

Ideally, all equipment purchases are itemized and approved in the original proposal. Obviously, unforeseen equipment purchases are often necessary; therefore, Departments should be cognizant of any sponsor restrictions on the purchase of unapproved equipment. Most of our major granting agencies have given universities great latitude in rebudgeting costs; however, sponsor regulations do vary with respect to the allowability without specific approval.

Unless otherwise restricted in the grant document, the following Federal granting agencies do not require approval for unbudgeted equipment costs:

• Public Health Service (including NIH)
• National Science Foundation
• Department of Energy
• U.S. Department of Agriculture
• Office of Naval Research
• Air Force Office of Scientific Research

The following granting agencies have some restrictions on the purchase of unbudgeted equipment:

• NASA : Sponsor approval is required for unbudgeted scientific equipment costing $ 5,000 or more. All general purpose equipment requires approval.
• Army Research Office : Sponsor approval is required for unbudgeted equipment costing $ 5,000 or more.
• Voluntary Health Agencies : Most voluntary health agencies (American Heart Association, American Cancer Society, etc.) require approval for all unbudgeted equipment or rebudgeting.

Federal and state contracts, on the other hand, normally require approval from the Contracting Officer for equipment not approved in the budget. The approval threshold may vary, and the contract terms and conditions should be reviewed.

The following summarizes the responsibilities of Departments with respect to approval of equipment purchases:

• Departments should determine the allocability and allowability of equipment purchases. Individual grants and contracts should be reviewed to determine if any special conditions or restrictions exist. ORPA should be consulted at any time if questions arise.
• Purchase of equipment that could be also used for general purposes, e.g. computers (unless the purchase has been separately identified in the sponsor approved budget) requires a written justification prepared and signed by the Principal Investigator. This justification should state the technical purpose for which the equipment is being purchased and that the equipment will be used solely for the project(s) that financed the purchase. This justification should be kept in the Department's award file along with a copy of the requisition or purchase order.
• Purchase of scientific equipment normally does not require a written justification by the Principal Investigator, unless: a) it is purchased under an award that requires sponsor approval; b) the award contains a special requirement; or c) exceptional circumstances exist. Letters requesting sponsor approval for unbudgeted equipment must be co-signed by ORPA.
• Equipment justification must be retained by the Department in award-related records and are subject to University retention requirements. Written justification for equipment purchases will be subject to audit by University or sponsor auditors, and Departments are required to comply with any audit requirements and/or recommendations. The University's retention requirement for sponsored programs is three (3) years after final payment, unless the sponsor dictates a longer retention period.
• Departments must ensure that correct subcodes are used for equipment purchases and that the Principal Investigators (or someone designated by him/her in writing) have approved the purchase. For those Departments that have centralized support, the Department administrative designee must sign all purchases.
• For those Departments involved in equipment fabrications, only components of the fabrication should be allocated to the X2690 subcode. Tools, non-fabrication supplies, labor costs are not allowed under the X2690 subcode. Initial fabrication requests must still be approved by ORPA.
• Refer to University policy (University of Rochester Guidelines on Fabrication of Special Purpose Capital Equipment) on the ORPA web page at http://www.rochester.edu/ORPA/policies/.

Disallowances or negative findings resulting from non-compliance with the aforementioned Department responsibilities will be the responsibility of the Principal Investigator and Department. Monetary penalties will be assumed by unrestricted Departmental accounts.

In addition to being available to offer guidance on questions of allowability and allocability, ORPA is responsible for the following:

• Approving and initializing all initial fabrication requests and forwarding fabrication information to Finance and Purchasing Services.
• Cosigning all equipment requests that require sponsor or Contracting Officer approval. Note that institutional (ORPA) approval is required by sponsor policy for any rebudgeting request.

The following guidelines should be used when disposing of University of Rochester equipment, and are to be used in conjunction with the University's Policy and Procedures for Surplus Property on the ORPA web page at http://www.rochester.edu/ORPA/policies/ .

In general, equipment may be disposed of in the following manner:

• Trade-in
• Cannibalized Equipment
• Disposed / Scrapped Equipment
• Sold Equipment
• Returned to Vendor
• Stolen Equipment

Departments wishing to sell equipment must follow the procedures outlined in the Surplus Property Program and guidelines established by external sponsors. Departments should seek the assistance of Purchasing Services.

Prior to disposing of any equipment, it must be determined if the University has any obligations to a third-party sponsor with respect to the equipment. If equipment was purchased under sponsored funding, it must be determined whether the equipment is:

• Sponsor-owned : equipment purchases made with contract funding are generally sponsor-owned; however, in rare situations, this condition may also apply to grants;
• University-owned : most equipment purchased under grants or gifts is University-owned.

After determining who has title to equipment, it must be ascertained whether the project that the equipment was purchased for is still on-going. If the project is still on-going, the University normally has an obligation to utilize the equipment for the purposes of the project, or perhaps to make the equipment available to other federally-assisted projects.

If it is determined that the sponsored project has ended and the University retains title to the surplus property, the University may still have obligations with respect to the equipment. Note: it is the University's policy that in no instances should Federal funding be used to buy surplus equipment that was originally purchased with Federal funds.

Because the requirements of equipment disposition differ slightly among granting agencies, refer to a summary of Federal regulations attached to University policy (University of Rochester Equipment Disposition Guidelines) on the ORPA web page at http://www.rochester.edu/ORPA/policies/.

As indicated in aforementioned summary of Federal regulations, the Federal government may retain title to equipment purchased under awards. Typically, this happens when work is done at a government facility, under cooperative agreements, and under contracts.

Retention by the University of Federally-owned property may occur when a contract is completed or terminated provided that the government has approved the transfer of title to the University. Normally, it is the University's responsibility to request that title be transferred upon completion of the project, or that it be "abandoned in place" at the University. Upon completion of the project, Property Accounting will notify the Principal Investigator to determine whether transfer of title is appropriate. Any request to transfer title will be sent to the agency by Property Accounting, with a copy to ORPA.

If title to Federally-owned property remains vested in the Federal government when the property is no longer needed, the University shall report the property to the Federal awarding agency for Federal agency utilization. If the Federal awarding agency has no further need for the property, it shall be declared excess and reported to the General Services Administration, unless the Federal awarding agency has statutory authority to dispose of the property by alternative methods. The Federal awarding agency shall issue appropriate instructions to the University.

It is the responsibility of the University to notify, in writing, the Federal agency when Federally-owned property is lost, damaged, destroyed, or consumed. It is the responsibility of the Principal Investigator and Department to notify Property Accounting of such incidents; notification to the agency will be done by Property Accounting. Failure to inform the Federal agency may result in University liability to the government with subsequent appropriate reimbursement.

The University has delegated the oversight of equipment control to Property Accounting. Disposition of equipment must be coordinated through this office. When necessary, the Office of Research and Project Administration should be consulted when disposing of equipment purchased with sponsored funds.