1. Question: Who owns the title to the equipment?

Answer: The University owns the title to the equipment, unless specifically stated otherwise in the grant terms and conditions. Departments cannot authorize equipment to be transferred or sold without prior approval from Purchasing and ORPA.

2. Question: After a piece of equipment is acquired, are there any other costs which might subsequently be capitalized?

Answer: Yes. Under the concept of betterment and improvements, costs incurred subsequent to the acquisition of an item of equipment which results in extending the life or increasing the productivity of the asset should be capitalized if they individually meet the criteria of $5,000 cost per item and a useful life of more than one year. Components that do not meet the individual acquisition criteria are typically not capitalized unless they are purchased within six months of the initial purchase of the main piece of equipment and if they are essential for making the piece of equipment meet its originally intended use. Examples include, modifications, attachments, accessories, taxes, freight, and installation. Contact the Purchasing Department with any questions.

3. Question: What Software is capitalized?

Answer: Operating and communication software when purchased with a computer will be capitalized. Subsequent purchases of operating and communication software will be capitalized if each item is over the $5,000 threshold as described under the policy for betterment and improvements. Application software is only capitalized when it is included in the initial purchase price of the computer itself and not readily identifiable as a separate component of that price. In general, the cost of either purchasing or developing computer software cannot be capitalized unless it is for administrative use. Reference the software capitalization and accounting definition dated 06/03.

4. Question: Does this mean that if at the same time I am buying a computer I buy supplies and a maintenance agreement that they should be ordered and identified separately?

Answer: Yes. Such charges should be coded and treated as operating expenses.

5. Question: What are examples of items not capitalized?

Answer: Maintenance and repairs, whether on an ad hoc or contract basis, are not capitalized. Maintenance is the regularly recurring activity of keeping equipment in normal or expected operating condition. Repair is the activity of putting equipment back into normal or expected operating condition. The total effort to obtain the expected service life for normal production capacity during the life of the capital equipment item, including when necessary the replacement parts, is considered repairs and maintenance and should be treated as a current operating expense. Consumable supplies and license fees are not capitalized.

6. Question: What accounts can purchase capital equipment?

Answer: Capital equipment may be purchased directly against 4XXX and 6XXX project / grant with ORPA approval; and 2XXX, and 8XXX accounts. Equipment may not be purchased against general funds in 1XXX accounts. Instead, they would need to be charged to an 8XXX account or, if the equipment will be amortized.

7. Question: How would I normally get money in an 8XXX account?

Answer: The Capital Finance Office enters these budgets at the beginning of the year, roughly at the same time the operating budget is set.

8. Question: Can research equipment be charged to 8XXX accounts?

Answer: No. Research equipment must be purchased with departmentally restricted or sponsored funds, or allocations made from the Science Fund.

9. Question: Is there any other way to get money in an 8XXX account?

Answer: There are circumstances when a department can convert funds from 1XXX accounts to 8XXX accounts. For example, if a department had been intending to buy an item from its operating account but the unit price ended up above the $5,000 threshold, such a conversion would be appropriate. Similarly, if a request for funds from the equipment reserve were denied, a department might feel that acquiring that proposed item was a higher priority than certain of their other operating expenses. In such cases, the department could request the Budget Office to convert funds. Contact the Budget Office for more information.

10. Question: To request an appropriation to an 8XXX account for a piece of instructional equipment, general office, or support equipment, what information is needed?

Answer: While you should use your own judgment in determining what information best explains and justifies your request, it is generally helpful for us to know whether this is new or replacement equipment, the age and condition of equipment being replaced, the trade-in value of old equipment, the specific circumstances that make the new personnel or maintenance costs associated with the acquisition of the equipment proposed they must be specifically identified. Similarly, if there are specific unusual facilities related requirements, either in the installation and utility hook-up or an ongoing operating cost, these need to be cited.

11. Question: What is the University’s policy on amortizing equipment over $5,000?

Answer: Equipment that is generally amortized, charged to 81XX accounts, and subsequently recovered over time from departmental operating budgets includes the following:

a. Computers and similar office automation equipment – PCs, terminals, fax machines, etc.

b. Equipment used by central University service departments who recover their costs through rates charged to other departments.

c. Major equipment purchases designated to reduce staff needs or expenses in the department’s regular budget, such as labor saving equipment or items currently being obtained under some kind of lease arrangement.

Such items should not be proposed as candidates for funding from the Equipment Reserve (8XXX accounts).

12. Question: It is ever possible to capitalize items which cost less than $5,000 per item?

Answer: There is an accounting convention called initial complement of equipment which allows the capitalization of a large number of smaller items of tangible personal property which would have a useful life of two years or more. This might be applied when a portion of a building was being refurbished and some of the new items of furnishing cost less than $5,000.

13. Question: Is furniture normally amortized?

Answer: Items of furniture are not normally amortized. Furniture items costing less than $5,000 are treated as any other operating expense. Items costing more than $5,000 might require a transfer between 1XXX and 8XXX accounts, if the source is to be general funds. However, when a department is buying a large quantity of furnishings all at one time, they may request authorization from the Finance Office to amortize the entire purchase over a number of years.

14. Question: What happens if a charge for freight or a similar expense for a piece of new capital equipment comes in after the initial purchase and gets charged to and coded as an operating expense or charged to an operating account?

Answer: You can use an inter-departmental invoice to record an item as equipment within the same account. If it is necessary to transfer a charge from an operating (1XXX) to a capital account, process an inter-departmental invoice to make the change.

15. Question: Does the University have a capital equipment inventory system?

Answer: Yes. The Purchasing Department manages a capital equipment system which maintains the details, location and bar codes for all University-owned capital equipment items.

16. Question: Are there special rules for equipment bought against government sponsored accounts?

Answer: Yes. Sponsors have various requirements for equipment purchases. All purchase requisitions or IIs on 4XXX or 6XXX project/grants must be approved by ORPA. The Office of Research and Project Administration is responsible for administering this policy. It is also their responsibility to make sure that acquisitions of general purpose equipment (such as a typical PC) be documented as to its specific project purpose.

17. Question: How do I get approval to fabricate equipment under a sponsored research account and what are the F&A implications?
Answer: ORPA must approve any fabrication requests for sponsored research accounts in advance of the assembly and capitalization of the item. If approved, component parts can be purchased without an F&A charge but shop labor bears the University’s full F&A costs.

18. Question: Who gets the proceeds from the sale of equipment?
Answer: All sales of equipment must be coordinated through the Purchasing Department's Surplus Program. If the equipment was originally purchased on a 4XXX or 6XXX account or through a startup account, ORPA will determine if any Federal or University regulations apply to the sale proceeds.