COMMONLY ASKED QUESTIONS ABOUT EQUIPMENT UNDER GRANTS

NIH GUIDE, Volume 24, Number 15, April 28, 1995



P.T. 34



Keywords:

  Grants Administration/Policy+ 

  INSTRUMENTS/INSTRUMENTATION/DEVICE 



National Institutes of Health



The National Institutes of Health (NIH) Grants Policy Office and

awarding institutes and centers frequently receive questions from

research administrators and investigators regarding equipment

purchased with Public Health Service (PHS) research grant funds.  To

assist recipients of PHS research grants, NIH staff have developed

the following questions and answers regarding equipment.  The

information below does not represent new policy or a revision to

policy.  Rather, it is a summary of current regulations and policies

pertaining to grant equipment.  The answers provided are based on the

assumption that there are no special requirements in the program

legislation or regulations or special terms and conditions of award

that would supersede the regulations and policies cited below.



Appropriate citations to policy or regulation appear within or

following each answer.  The HHS regulations on the Administration of

Grants appear in the Code of Federal Regulations (CFR) at 45 CFR 74

and 45 CFR 92.  Part 74 is applicable to all recipients except those

covered by Part 92, which governs awards to state and local

governments.  The regulations at Part 74 were recently revised to

implement the revision to OMB Circular A-110, and were published in

the Federal Register on August 25, 1994 (Vol. 59, No. 164).



The PHS Grants Policy Statement (GPS) was revised effective April 1,

1994, and an addendum was effective February 15, 1995.  A single copy

of each was mailed to all current PHS grantee organizations, which

may photocopy the documents as needed.  NIH grantees that did not

receive a copy may contact the NIH Division of Research Grants,

Office of Grants Information, on 301/435-0714 to request a single

copy.  In addition, the GPS is available on the NIH Gopher.  The NIH

Gopher contains information about NIH, including the NIH Guide for

Grants and Contracts, and has text-searching capabilities.  It is

possible to ~tunnel~ to the NIH Gopher (gopher.nih.gov) if you have

access to a system with Gopher.  Local computer support should be

consulted for additional information or assistance



If you have additional questions that cannot be answered by the

sponsored research office at your organization, you should contact

the grants management specialist identified on your PHS Notice of

Grant Award.



WHAT IS THE DEFINITION OF EQUIPMENT?  The definition for equipment,

as stated in 45 CFR Parts 74 and 92, is an article of tangible

nonexpendable personal property having a useful life of more than one

year and an acquisition cost of $5,000 or more per unit.  However,

consistent with recipient organizational policy, lower limits may be

established.  Grantees may implement the new definition (provided

they do so consistently on an organization-wide basis) even though

the definition in the cost principles may not yet correspond.  (45

CFR Part 74.2 and 74.34)



DOES THE $5,000 THRESHOLD (UNDER THE REVISED 45 CFR PART 74) ONLY

APPLY TO EQUIPMENT PURCHASED AFTER THE EFFECTIVE DATE OF THE

REVISION?  No.  If grantees elect to implement the revised

definition, it should be applied to all grantee equipment.  Grantees

are not required to track equipment under two different definitions.



DOES EQUIPMENT PURCHASED UNDER A GRANT BELONG TO THE PRINCIPAL

INVESTIGATOR/PROGRAM DIRECTOR?  PHS research grants are made to an

organization on behalf of the Principal Investigator (PI) or Program

Director.  Title to equipment acquired with HHS funds vests in the

organization receiving financial assistance directly from an HHS

awarding agency to carry out a project or program, subject to certain

restrictions described at 45 CFR Part 74.34 (see next question).

Whereas in the past, title to equipment, property, and supplies

purchased under a research grant to a for-profit organization vested

in the Federal Government, the revised HHS regulations now permit

for-profit grantees to retain title.  (45 CFR Part 74.34)



CAN HHS REQUIRE THE TRANSFER OF EQUIPMENT FROM THE GRANTEE TO ANOTHER

PARTY?  Yes, HHS has the right to require equipment (including title)

purchased with grant funds to be transferred to the Federal

Government or to an eligible third party named by the HHS awarding

office, under the conditions specified in 45 CFR Part 74.34(h).

Although it is seldom necessary to do so, this right may be invoked

in cases where a grant is transferring to a new organization and the

equipment purchased with grant funds is needed to continue the

research at the new grantee organization.  (45 CFR Part 74.34; GPS,

p. 8-13)



DOES THE GRANTEE ORGANIZATION HAVE AN OBLIGATION TO THE GOVERNMENT

FOR EQUIPMENT AFTER A GRANT HAS ENDED?  Non-profit institutions of

higher education and nonprofit organizations whose primary purpose is

the conduct of scientific research (hereinafter referred to as exempt

grantees) hold title and are exempted from further obligation to the

Federal Government for equipment acquired under a PHS grant for

support of basic or applied scientific research (except for the HHS

right to require transfer as described above).  Nonexempt grantees

(hospitals, for-profit organizations, and non-profit organizations

whose primary purpose is other than scientific research) hold title

and must follow the requirements described in 45 CFR Part 74.34 and

the PHS Grants Policy Statement, pp. 8-10 through 8-14.



WHEN IS PHS PRIOR APPROVAL REQUIRED TO PURCHASE EQUIPMENT?  Prior

approval for the purchase of equipment is required if it will

represent a change of scope for the project.  If the purchase will

require significant rebudgeting (see GPS p. 8-1), the grantee

organization is required to consult with the grants management office

for a decision as to whether the rebudgeting constitutes a change of

scope.  In addition, the purchase of equipment exceeding $25,000 (per

unit), when not included in the originally approved budget, requires

prior approval from PHS, unless the grant was awarded under the

Federal Demonstration Project or Expanded Authority terms and

conditions.  (GPS, p. 8-4)  (Note: equipment costing in excess of

$25,000 requires prior approval regardless of the amount of PHS funds

to be applied toward the purchase, e.g., even if only $5,000 of

grants funds will be used toward the purchase of equipment costing

$25,001).



IS PHS PRIOR APPROVAL REQUIRED IN ORDER TO REBUDGET FUNDS FOR THE

PURCHASE OF GENERAL PURPOSE EQUIPMENT?  PHS no longer differentiates

between general purpose and special purpose equipment.  Thus, other

than as described above for equipment in excess of $25,000 or a

change of scope, PHS prior approval is not required.  However, the

expenditure must be reasonable and necessary for the conduct of the

grant activities, as well as allowable and allocable as a direct cost

to the grant.



IS PHS PRIOR APPROVAL REQUIRED TO PURCHASE EQUIPMENT IN THE FINAL SIX

MONTHS OF THE PROJECT PERIOD?  No.  PHS eliminated this prior

approval requirement with the revised PHS Grants Policy Statement

effective October 1, 1990.  Nonetheless, all charges to a grant

project, particularly in the final months of the project period, must

be allowable and allocable as a direct cost to the grant, and be

reasonable and necessary for the conduct of grant activities.

Equipment may not be purchased simply to use an unobligated balance

remaining at the end of the project.



WHAT HAPPENS TO EQUIPMENT WHEN THE PI MOVES TO ANOTHER ORGANIZATION?

The grantee organization is the legal entity to which a grant is

awarded.  When the PI moves to another organization, the following

options apply in the order listed.  (45 CFR Part 74.34 and GPS, p. 8-

13)



(1)  The grantee organization may request continuation of the project

under the direction of an alternate PI.  If the alternate PI is

approved by PHS, the grant will continue and thus title to the

equipment purchased under the grant will remain with the original

grantee organization.



(2)  The organization may relinquish its interests and rights in the

grant to the PI's new organization.  If the new organization is

approved by the PHS awarding component to continue the grant

activity, then the grant will be awarded and any equipment purchased

with grant funds and still needed for the grant project would be

expected to transfer to the new grantee organization, which would

assume title.  If the original grantee does not voluntarily agree to

relinquish equipment with the grant, HHS may require transfer of the

equipment as specified in 45 CFR Part 74.34(h).



(3) If an alternate PI is not accepted by the PHS awarding component

(or no alternate is nominated), and the original grantee refuses to

relinquish its rights in the grant to the new organization (or if the

new organization is not accepted by the PHS awarding component to

continue the research), then the grant will be terminated.  Title to

equipment will remain with the original grantee organization, subject

to disposition or use as described below.  The PI's new organization

may submit a new application through the regular NIH peer review

process to request support for the research.



It is important to reiterate that a change of grantee may not take

place where it will involve the transfer of a grant to or between

foreign institutions or international organizations.  (GPS, p. 8-3)



WHAT EQUIPMENT MAY BE CHARGED AS AN ALTERATION AND RENOVATION (A&R)

EXPENSE?  Fixed equipment, such as casework, a fume hood, a large

autoclave, or biological safety cabinet, is an allowable A&R charge.

Furnishings and movable equipment are not allowable as A&R costs.

Additional information on alteration and renovation costs can be

found in the PHS Grants Policy Statement on pp. 7-2 and 7-3.



UNDER CONFERENCE GRANTS (R13 OR U13), MAY GRANT FUNDS BE USED FOR THE

RENTAL OF EQUIPMENT?  Grant funds may be used for the rental of

necessary equipment under a conference grant.  Funds may not be used

for the purchase of equipment.  (GPS, p. A7-2)



MAY GRANTEES USE EQUIPMENT ACQUIRED WITH HHS FUNDS TO PROVIDE

SERVICES TO NON-FEDERAL ORGANIZATIONS?  Yes.  However, nonexempt

grantees are specifically prohibited from doing so for a fee that is

less than private companies charge for equivalent services, unless

specifically authorized by Federal statute, for so long as the

Federal Government retains an interest in the equipment.  For both

exempt and nonexempt grantees, user charges will accrue as program

income and must be reported on the Financial Status Report (SF 269).

(45 CFR Part 74.34(b)(1) and 74.24)



ARE DEPRECIATION OR USE CHARGES ON EQUIPMENT AN ALLOWABLE COST ON A

GRANT?  Depreciation or use charges on equipment are an allowable

cost, but not normally allocable as a direct cost to a grant.  Such

charges are usually included in the organization's indirect cost base

for determination of its indirect cost rate.  Depreciation or use

charges on equipment acquired under a federally supported project are

unallowable.  (GPS, p. 7-6)



ARE COSTS OF INSURING EQUIPMENT PURCHASED WITH PROJECT FUNDS AN

ALLOWABLE EXPENSE?  Normally these costs are included in the

organization's indirect cost base, but may be allocable as a direct

cost if this manner of charging is the normal organizational policy,

consistently applied regardless of the source of funds.  (GPS, p. 7-

8)



WHAT SHOULD A GRANTEE DO IF A PIECE OF EQUIPMENT IS LOST, DAMAGED, OR

STOLEN?  The grantee is responsible for maintaining an internal

control system to insure adequate safeguards to prevent loss, damage,

or theft of equipment purchased with PHS grant funds.  If such a

system does not exist or is lacking in any way, the grantee must

implement any necessary corrective actions.



For non-exempt grantees, if damage, loss, or theft occurs despite the

fact that the recipient has the required control system in place,

there will be no obligation to PHS for the equipment, unless the

recipient receives compensation for the damage, loss, or theft from

insurance or some other source.  If the grantee is compensated for

the damage, loss, or theft, but does not replace the equipment for

use on the grant, the rules regarding sale of equipment apply (45 CFR

Part 74.34(g)).



HOW MAY EQUIPMENT BE USED AFTER THE END OF A GRANT? Exempt grantees

hold title and are exempted from further obligation to the Federal

Government for equipment acquired under a PHS grant for support of

basic or applied scientific research, except for the HHS right to

require transfer as described above.



Nonexempt grantees hold title and shall use the equipment in the

project or program for which it was acquired as long as needed,

whether or not the project or program continues to be supported by

Federal funds, and shall not encumber the property without approval

of the HHS awarding agency.  When no longer needed for the original

project or program, the recipient shall use the equipment in

connection with its other federally sponsored activities, if any, in

the following order of priority:



(1) Program, projects or activities sponsored by the HHS awarding

agency;

(2) Program projects or activities sponsored by other HHS awarding

agencies;

(3) Program, projects or activities sponsored by other Federal

agencies.



If the grantee no longer needs the equipment for the above purposes,

the grantee may retain the equipment for other uses, provided that

compensation is made to the original HHS awarding agency or its

successor.  If the recipient has no further need for the equipment,

it shall request disposition instructions from the HHS awarding

agency.  See 45 CFR Part 74.34(g) for additional information.



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