9.3 Capital Equipment
1. What Is Capital Equipment
Equipment must meet all of the following three criteria to be considered capital equipment.
- Acquisition cost $5,000 or greater
- Useful life of more than one year
- Be an individual, stand-alone, moveable, tangible item
2. Purchasing Capital Equipment
Check the terms and conditions of the particular award for information related to the acquisition, ownership and disposition of property. Some awards do not allow the purchase of particular types of equipment, while other awards are made specifically for that purpose. Some require pre-approvals before equipment may be purchased.
It is important to document allocability of the equipment to the project. Similar to the rules for the direct charging of administrative expenses, there is a parallel requirement for a good budget justification whenever you plan to charge general purpose equipment to a project.
It is critical to use correct Expenditure Types for equipment purchases. Refer to the Commonly Used Expenditure Types chart. Capital equipment is identified with a barcode tag and the DPAs (Department Property Administrators) enter the information into Stanford’s online system of record Sunflower Assets (SFA).
The federal bias is that such equipment is an indirect cost. If you need to purchase such equipment specifically for a project, the budget justification should be detail how it is linkage of the expense to the technical work of the project. There are no indirect cost charged on non-capital equipment costing less than $5,000. View rates to apply each fiscal year here.
Stanford’s equipment inventories and property management systems are under scrutiny by the Office of Naval Research, Stanford’s cognizant government agency.
3. Sponsor Owned Equipment
Sponsored owned property may have acquisition and reporting thresholds different than Stanford’s so you must review the terms & conditions for exceptions.
Transactions for equipment purchased for the government are not taxable. This is not the same as purchasing equipment on a government grant or contract.
Regarding equipment purchases, tagging and recording, contact your Department Property Administrator.
Regarding IDC, contact the Cost and Management Analysis office.
4. Equipment Title
Correct determination of equipment title prior to placing purchase requisition is critical. It will determine whether the transaction is taxable. It also defines identification, stewardship and reporting compliance requirements for the asset as well as disposition options available at the end of its useful life. Purchases where title vests with the sponsor at time of acquisition are not taxable.
Several sources of information are used for determining title:
- Sponsor and award type
- Terms and conditions within each individual award
- Source of funding
- Method of acquisition
If there is conflicting information, the terms of the award supersede.
Title may change throughout the life of the asset. Project management and department personnel should work closely with their Property Service Representative in the Property Management Office to ensure title is correctly reflected on the asset record at all times.
5. Equipment Purchase on Grants
Generally speaking, for equipment purchased with sponsor funds on a grant, title will vest with Stanford University at the time of acquisition. This requires sales/use tax to be applied to the purchase transaction. In these cases, sales tax is an allowable direct charge to the sponsored project
Unless otherwise specified in the grant, equipment is defined as items that meet the following criteria.
- Must cost more than $5,000
- Must have a useful life of more than one year
- Are freestanding; not permanently affixed to a building
In rare cases when equipment is furnished on a grant, it is treated as sponsor owned. Some federal sponsors retain right to title and may opt to reclaim the property up to 18 months after completion of award.
6. Equipment Purchases on Contracts
Determination of title for property purchased with contract funds (primarily federal contracts) can be more complex. A single award may have a mixture of equipment with title vesting with Stanford or with the sponsor at the time of acquisition.
The terms and conditions of may vary from contract to contract. Unless otherwise specified in the contract, the primary determining factor within a contract will be the FAR (Federal Acquisition Regulations) property clause invoked in the contract.
Later during the life of the award, title to the equipment purchased may transfer to Stanford.
For sponsor titled equipment, notification must be made to the Sponsor upon completion of contract performance or when the item is no longer necessary for the purpose for which it was acquired on the contract. The PMO serves as liaison between Stanford and the sponsor to determine the appropriate disposition of the equipment. Timely reporting is very important.
Tax paid inappropriately must be covered by departmental, non-sponsored funds. Equipment furnished by Sponsor, remains sponsor-owned. Nonfederal, sponsor owned equipment is taxable (e.g. State of California); Stanford may request title transfer to sponsor owned property upon completion of an award.
7. Equipment Deliverables
Terms and conditions of a sponsored agreement may require the purchase and/or fabrication of specific equipment items for delivery to the sponsor. Equipment deliverables should be explicitly identified for the project. Items should be listed in the contract’s Contracts Deliverables Requirements List (CDRL). Coordinate with the (PMO) early and throughout the project.
Logistics are usually required for equipment deliverables. They may include: moving the asset during preparation for delivery, documentation, packaging and transportation. Close participation with the Property Management Office is important.
Key issues relative to equipment deliverables
- Delivery dates and award end dates
- Delivery and acceptance points
- Origin or destination
- Coordination with subcontractors
- Inventory and disposal of residual materials