Justification Nation Part 5: Equipment – It’s Where The Rubber Meets the Road

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Equipment is considered by most sponsors, and most institutions, to be an item of property that has a cost of $5,000 or more and an expected service life of more than one year. Items that cost less than $5,000 are budgeted as supplies and services.

If it were this easy – we could stop here! I’m currently working on a state of Illinois contract – where the equipment threshold is considered $500, and the purchase of equipment is not permitted. (Say it with me – yeesh – depreciation expense!)

Most sponsors however, understand that the research enterprise requires the support of equipment costs, especially certain types of equipment. How do we make this happen on applications, and what considerations need to be kept in mind?

General Considerations When Budgeting Equipment As Part of An Application

1. Documentation is required. When budgeting equipment, documentation for the cost of the item will be needed as part of the budget justification – this is an area where the PI cannot ballpark the cost, or add an item at the last minute.

2. The $5,000 base cost includes a lot! The acquisition cost of an item of equipment includes modifications, attachments, and accessories needed to make it usable for the proposed research. So if the item costs less than $5k, but the additional costs bring it up to that amount, the combined costs must be budgeted as equipment with NO associated facilities and administration costs.

3. Fabrication materials needed to build equipment fall under this guideline. If the materials you are budgeting for to create a piece of equipment for the proposed research exceed $5,000, it is equipment and cannot draw F&A. If the combined cost is under $5K, the materials should be budgeted as supplies (and listed in that section of the budget justification).

WHY EQUIPMENT IS PRIMARILY A POST-AWARD CONCERN

  • When an award starts, the investigator is typically concerned with hiring, getting the project up and running and usually the equipment is not needed until after that. Getting the investigator to order the equipment and get it in the door, and up and running when they have other things to do is difficult. (Ensuring that equipment is not purchased in the last year of an award is essential!)
  • Bringing in equipment means tracking depreciation and service costs (service costs are allowable on out years.)
  • Managing equipment depreciation and service costs in the context of a recharge or service center is even more important, because of compliance issues, and rate setting.

TIP: Make sure that your equipment and resources page is up-to-date and supports your budget and budget justification for the equipment in the proposal. It’s easy to use a boilerplate justification that may not be the most current, but the PI could also use the resources page to support the need for the equipment she is requesting.

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