Equipment Management Under Federal Grants: Purchase, Track, and Dispose

Understanding Equipment Under Federal Grant Rules

Equipment purchased with federal grant funds is subject to a distinct set of regulations that govern how it is acquired, used, tracked, and ultimately disposed of. The Uniform Guidance at 2 CFR 200.313 and 200.439 defines equipment as tangible personal property with a useful life of more than one year and a per-unit acquisition cost that equals or exceeds the lesser of the capitalization threshold established by the organization or $5,000. This definition is important because items that fall below this threshold are classified as supplies and subject to different, generally less restrictive rules.

Getting equipment management right is not optional. Federal agencies, auditors, and Offices of Inspector General routinely examine whether grantees have properly authorized equipment purchases, maintained adequate inventory records, and followed disposition procedures when equipment is no longer needed. Noncompliance can result in audit findings, questioned costs, or requirements to return proceeds from equipment sales to the federal government.

Purchasing Equipment with Grant Funds

Before purchasing equipment with federal funds, you must verify several conditions. First, the equipment must be included in your approved budget or approved through a budget modification. Second, the purchase must be necessary and reasonable for the performance of the grant. Third, your organization must follow its own procurement policies, which must meet the standards set out in 2 CFR 200.317 through 200.327.

Federal procurement standards require that equipment purchases above certain thresholds involve competitive bidding processes. For acquisitions exceeding the simplified acquisition threshold, currently set at $250,000, formal sealed bids or competitive proposals are required. For purchases below this amount but above the micro-purchase threshold of $10,000, price or rate quotations from an adequate number of qualified sources are expected.

Prior Approval Requirements

Many federal agencies require prior written approval before a grantee can purchase equipment, even if the equipment is listed in the approved budget. Check your notice of award and the agency's general terms and conditions carefully. Failing to obtain required prior approval is one of the most common equipment-related audit findings. When in doubt, contact your program officer before making the purchase.

For a comprehensive understanding of how equipment costs fit within the broader framework of federal cost principles, review our guide on grant budget fundamentals and federal cost principles.

Inventory Tracking and Property Management

Once equipment is acquired, the Uniform Guidance requires organizations to maintain property management standards that include several specific elements:

• Property records: Each piece of equipment must have a record that includes the description, serial number or other identification number, funding source, acquisition date, acquisition cost, percentage of federal participation, location, condition, and any ultimate disposition data.
• Physical inventory: A physical inventory of equipment must be taken and the results reconciled with property records at least once every two years.
• Control system: Organizations must maintain a control system to ensure adequate safeguards to prevent loss, damage, or theft. Any loss, damage, or theft must be investigated.
• Maintenance procedures: Adequate maintenance procedures must be implemented to keep equipment in good condition.

Tagging and Identification

Best practice is to affix a durable asset tag to each piece of grant-funded equipment at the time of receipt. The tag should include a unique asset identification number that corresponds to your property records. Many organizations use barcode or RFID tags that integrate with their asset management software, making physical inventories faster and more accurate. Even organizations using manual tracking systems should maintain a consistent numbering scheme and tag placement protocol.

Use and Access Requirements

Equipment acquired with federal funds must be used in the program or project for which it was acquired as long as needed, whether or not the project continues to be supported by the federal award. When the equipment is no longer needed for the original project, it may be used in other activities in the following order of priority: activities under a federal award from the same agency, then activities under a federal award from another agency. The equipment must be available for use on other projects in a way that does not interfere with the work on the project for which it was originally acquired.

Organizations must not use grant-funded equipment to provide services for a fee to compete unfairly with private companies that provide equivalent services, unless specifically authorized by federal statute. For guidance on managing these obligations alongside your other post-award responsibilities, see our guide on post-award grant management and compliance.

Disposition of Equipment

When equipment acquired with federal funds is no longer needed, the organization must follow specific disposition procedures. The rules depend on the current per-unit fair market value and the percentage of federal participation in the original purchase:

• Fair market value of $5,000 or less: The organization may retain, sell, or otherwise dispose of the equipment with no further obligation to the federal government.
• Fair market value exceeding $5,000: The organization may retain the equipment but must compensate the federal government for its share. The federal share is calculated by applying the percentage of federal participation in the original cost to the current fair market value. Alternatively, the organization may sell the equipment and pay the federal government its proportional share of the proceeds after deducting selling and handling expenses.

Documentation of the disposition process is critical. Maintain records of how fair market value was determined, whether through appraisal, comparable sales analysis, or other reasonable methods. If equipment is scrapped or discarded, document the reason and the method of disposal.

Integrating Equipment Management into Grant Operations

Effective equipment management is not a standalone function but an integrated component of your broader grants management infrastructure. Your accounting system should link equipment purchases to specific grant accounts. Your procurement files should contain documentation of the competitive process used. Your property records should be accessible to finance staff preparing financial reports and to auditors conducting equipment reviews.

Building this integration from the start of an award is far more efficient than reconstructing records during an audit. For strategies on structuring your budgets to properly account for equipment and other capital costs, explore our article on advanced grant budgeting strategies.

Learn more about grant writing strategies at Subthesis.

Master Every Aspect of Grant Management

Equipment management is just one of many post-award compliance areas that require specialized knowledge. The Complete Grant Architect course provides comprehensive training on procurement, property management, financial reporting, and every other aspect of the grant lifecycle. Enroll today and develop the expertise to manage federal equipment requirements with precision and confidence.