Changing the University's Definition of Equipment

Implementation Plan

Please See Also:
     Frequently Asked Questions About the New Definition of Equipment
     Equipment Reference Table

The University of California currently uses a minimum dollar threshold of $500 in its definition of equipment for purposes of capitalization, inventory, and indirect cost application and calculation. Federal regulatory changes in 1993 and 1996 would permit the University to increase this threshold from its current level of $500 up to $5,000. Following eighteen months of discussions within the University, Senior Vice President Kennedy announced a new equipment threshold to Chancellors on January 27, 1998. Effective July 1, 1998, equipment will be defined as articles of non-expendable tangible personal property having a useful life of more than one year, and an acquisition cost of $1,500 or more per unit. Items of furniture meeting the new definition of equipment must also be capitalized and inventoried. To moderate the effect of this change on contracts and grants, SVP Kennedy allowed for a limited exception for purposes of indirect cost application.

The long-run effect of the revised definition will be a lower administrative burden on departments as well as administrative units, and improved compliance with materiel management and federal audit requirements. As with any change, however, there will be some short-term costs associated with implementation. Senior Vice President Kennedy requested that my department immediately develop an implementation plan to provide for an orderly transition, minimize the costs and efforts of implementation, and maximize its short and long-term benefits of reduced administrative burden and enhanced compliance with University and Federal property inventory requirements. The plan was developed with cooperation from a variety of Office of the President and Campus functional offices.

IMPLEMENTATION PLAN:

During FY 1998-99, all purchases and acquisitions will continue to be processed with the same equipment definitions ($500) and coding as in FY 1997-98, except that items of furniture purchased on or after July 1, 1998, must also be coded as equipment when appropriate. Effective July 1, 1999, all transactions will be processed using the new threshold of $1,500.

All grants and contracts will be given a one year delay in applying the higher threshold. In exchange, all awards will be required to apply the higher threshold beginning July 1, 1999. This delay should allow a reasonable amount of time for budgeting at the proper levels. Effective immediately, all project proposals with performance periods beyond July 1, 1999, should budget for indirect costs using the $1,500 definition of equipment.

Effective July 1, 1998, physical verification and tracking will be required only for items valued at or above $1,500.

The University’s financial statement for the fiscal year ending June 30, 1999, shall reflect the new threshold of $1,500.

INTENDED RESULTS:

This plan is intended to achieve the following:

Simplify the transition and minimize the associated costs and efforts.

There will be little apparent change to the general campus community in FY 1998-99, except for the preparation of grant and contract proposal budgets for periods beyond July 1, 1999, and the inclusion of furniture items as equipment.

It will not be necessary to identify sponsored projects with different thresholds, nor to support a process to identify the different level of thresholds.

Accounting and/or Procurement offices should begin to prepare campus personnel to use the $1,500 threshold for purchases and acquisition effective July 1, 1999.

Maximize the benefits of the change.

Effective July 1, 1998, campuses will not be required to physically inventory items between $500 and $1,499. This will reduce the items requiring physical inventory by almost 50%, thus greatly reducing this administrative burden.