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Disposition of Equipment and Excess Supplies

When original or replacement equipment is no longer to be used in projects or programs currently or previously sponsored by the federal government, disposition of equipment shall be made as follows:

Equipment Less Than $5,000

Equipment with a unit acquisition cost of less than $5,000 may be retained, sold, or otherwise disposed of, with no further obligation to the federal government.

Equipment Greater Than $5,000

Equipment with a unit acquisition cost of $5,000 is usually retained or sold, with the federal government entitled to an amount calculated by multiplying the current market value or the proceeds from the sale by the federal share of the equipment. Of the amount due, $100 or 10 percent of the total sales proceeds (whichever is greater) may be deducted from the amount due for handling charges. The balance of money due will be remitted to the sponsor by check.

In some very limited instances, the federal agency may reserve the right to transfer equipment costing $1,000 or more. When this is the case, the award terms will stipulate so and specifically identify the property affected. This right lapses if it is not exercised before other permissible disposition takes place or before 120 days after the end of the grant. If the granting agency exercises this right, the grantee must be paid for the non-federal share of the market value plus shipping costs.

Special authority exists in some research grants to Universities to vest title to equipment and supplies without obligation to the federal government (i.e., exempt property). If the cost is over $1,000, this authority exempts the property from all rules except the right of the federal agency to require transfer.

Supplies Greater Than $1,000

If supplies exceeding $1,000 in total aggregate market value are left over upon expiration of the grant or subgrant for which they were acquired and the supplies are not needed for any project or program currently or previously sponsored by the federal government, the grantee may retain or sell them, paying the granting agency its share of the market value or sale proceeds. If sold, grantees may deduct from the federal share the greater of $100 or ten percent of the proceeds as selling expenses. The balance due is remitted to the sponsor by check.

If, at the end of the grant, the residual value of supplies is $1,000 or less, the grantee may, at its option, either retain or sell the property without compensating the federal agency.

Grantees should be careful not to build up an overly large inventory of supplies, particularly if the value greatly exceeds $1,000. These costs could be considered unallowable under the cost principle rules which stipulate that costs must be reasonable and necessary.