MBP 224

Last Updated: April 1, 2016

Capital Asset Management (CAM)
Angell Building 
166 Service Road, Room 102
East Lansing, MI 48824 
Phone: 517-884-6081 | Fax: 517-353-2024  
Business Hours: Monday - Friday, 8:00 a.m. to 5:00 p.m.

I.    Policy Statement 
II.   Function 
III.  Capital Equipment Criteria 
IV.  Equipment Acquisition 
V.   Equipment Status Changes 
VI.  Equipment Tracking 
VII. Physical Inventory

I. Policy Statement

All equipment obtained by the university is subject to university control and may be disposed of only in accordance with established university policies and procedures as outlined in this section of the Manual of Business Procedures. Equipment obtained by the university includes that which is purchased with university, grant or contract funds, equipment contracted or loaned to the university from public or private entities, equipment received as a gift, or obtained by other means.

Organizations obtaining equipment are responsible for its use, maintenance, safeguarding, and disposal. Organizations are also responsible for updating any equipment record changes, such as transfers, loans, disposals, theft, or transfers of title.
 

II. Function

Capital Asset Management (CAM) oversees the university’s movable capital equipment. CAM is responsible for tracking the equipment obtained by the university from the date of acquisition to the date of disposal.

CAM is also responsible for coordinating the university's annual physical inventory and federal property control reviews. The information is available to university users, including organizational processors in the Capital Asset Management system (CAMs), the Office of Financial Analysis for financial reporting purposes; Contract and Grant Administration (CGA) for determining overhead rates and ensuring compliance with grant and contract awards; Internal Audit to monitor compliance with university guidelines; and provided to various external auditing agencies as needed. Therefore, it is absolutely essential that equipment records are precise and up-to-date.

 
III. Capital Equipment Criteria

Since the university uses equipment furnished (loaned) by the federal government and purchased with government funds, MSU must follow guidelines established by the Federal Office of Management and Budget (OMB) in Circulars A-21 (2 CFR 220) and A-110 (2 CFR 215). The university is responsible and accountable for all government equipment provided under any contract and must comply with Federal Acquisition Regulations (FAR) Subpart 45.5 and Federal Acquisition Regulations (FAR) Subpart 52.245 as in effect on the date of the contract.

(http://www.whitehouse.gov/omb/circulars_a021_2004/)

(http://www.whitehouse.gov/omb/circulars/a110/a110.html)

Definitions

Acquisition Cost: Purchase price less all discounts plus any trade-in allowance.

Accessory item: An item that facilitates or enhances the operation of equipment but which is not necessary for its operation.

Capital Equipment: An item that meets the criteria below is referred to as equipment.

Essential item: An item without which the basic unit of equipment cannot operate.

Fabricated Equipment: any equipment that:

  • meets the criteria below for equipment and
  • is fabricated, from separately acquired materials and constructed by Michigan State University trades, principle investigator(s), project representative(s) or any combination of these individuals
  • is a pre-approved project by CGA (projects using RC accounts) or CAM

U.S. Government furnished property (also referred to as federally loaned property): Property acquired by the US Government and subsequently delivered or otherwise made available to Michigan State University for use in performance of a contract or sponsored agreement.

U.S. Government owned property: Title remains vested with the US federal government. Includes both property acquired by Michigan State University and US Government furnished property where the title vests with the US Government.

Financial system: Kuali Financial System (KFS)


Criteria

MSU classifies items as capital movable equipment based on the following criteria:

  • non-expendable, tangible personal property with an acquisition cost of $5,000 or more per unit
  • has a useful life of more than one year, and
  • has the capacity to function as a stand-alone unit without the assistance of another unit

A system can include both essential items and accessory/auxiliary apparatus necessary to make the equipment usable for the purpose for which it was acquired. However, items purchased after the initial order will not be classified as equipment.

Upgrades of $5,000 or more to an existing system, if coded correctly, may be added to the original purchase value.

 
IV. Equipment Acquisition

The university obtains equipment from a variety of sources. This section lists the various methods of obtaining equipment at Michigan State University.

Purchase Orders

Equipment obtained by university, grant or contract funds is acquired by issuing a purchase order. Purchases must be coded with a movable equipment asset type code to be considered as equipment.

Gifts

All items, not just equipment, obtained by the university as gifts require the completion of the Consignment/Non-Cash Gift Form (.pdf). The form should be completed by the recipient and forwarded to the MSU Foundation for processing. See MBP Section 315 for further instructions. The value of the item is determined by its fair market value at the time the gift is given. The value will be indicated on the gift form. An appraisal, from an independent third party appraiser, must be submitted with the gift form, if the item is to be considered as equipment. CAM receives this form for all gifts after acceptance by the Board of Trustees.

Once the items have been accepted by the university, if they meets the definition of equipment, the receiving organization will initiate an add asset e-Doc in CAMs with an acquisition type “Gift”.

Consignment Equipment - On Loan

All items, not just equipment, obtained by the university on loan require the completion of the Consignment/Non-Cash Gift Form. The form should be completed by the receiving organization and forwarded to the appropriate areas. See MBP Section 315 for further instructions. Any questions should be directed to CGA or CAM.

CAM oversees all movable capital equipment that is loaned to the university. Once the items have been accepted by the university, the receiving organization will initiate an add asset e-Doc in CAMs with an acquisition type “Loan”. It is the organization's responsibility to notify CAM when the consignment status changes (i.e. loan changed to a gift, returned to the donor, or purchased by the organization).

Fabricated Equipment

Any equipment that meets the criteria for equipment as identified in Section III and is fabricated from separately acquired materials and constructed by Michigan State University trades, principle investigator(s), project representative(s) or any combination of these individuals is considered fabricated equipment. All non-labor costs, such as, component parts, materials, supplies, shop charges, etc., associated with the fabrication of the item are generally exempt from indirect cost charges.

Organizations wishing to purchase materials for the purpose of fabricating equipment must create a fabrication request e-Doc. All fabrication request e-Docs must be approved by CGA (projects using an RC account) or CAM. Once approved, CAM will create an asset record with an asset number. The asset number must be included on all future related acquisition documents. All related acquisition documents must use the correct object code and include the asset number. Any documents that do not provide the asset number will not be capitalized as fabricated equipment.

The fabricating organization is required to confirm the substantial completion of the project upon first use of the equipment for its basic intended purpose. If, upon substantial completion of the project the fabricated item meets the equipment definition, it is the responsibility of the fabricating organization to update the asset status code, asset type code and tag the asset. A fabrication is considered substantially complete when the equipment can be put into service and used.

NOTE: Work may continue to enhance the equipment after the date of substantial completion. Grant/contract monies can continue to be spent, if allowed by the sponsoring agency and approved by CGA for additional options or accessories that are equal to or in excess of $5,000 that may be added to the value of the equipment.

It is the responsibility of the requisitioning organization(s) to track all readily identifiable costs associated with fabricating the equipment. The organization is required to follow Generally Accepted Accounting Principles (GAAP), which allow for capitalization of costs that are “normal and necessary for the asset to be used for its intended purpose.” Such costs that are allowed and need to be tracked include but are not limited to: freight charges, customs charges, installation and set up costs (including cables and software installation), and site preparation. Examples of unallowed costs are: maintenance plans and warranties, operating supplies, handling fees and training costs, software licenses and project personnel salaries.

Federal Funds

All equipment purchased with federal flow-through funds must be necessary and reasonable for proper and efficient accomplishment of the project or program objectives. The organization and principal investigator are responsible to ensure that duplicative or unnecessary purchases are avoided.

Personal computers, printers and fax machines costing $5,000 or more are considered “General Purpose Equipment" and are generally not allowed on federal projects unless a convincing case can be made to show that these items will be used primarily to conduct the research associated with a particular grant or contract and that similar items are not readily available for use on the project. CGA will make this determination.

 
V. Equipment Status Changes


Transfer or Disposal of Equipment

Organizations transferring equipment to another organization must initiate a transfer e-Doc and the Fiscal Officer (FO) must approve it. If sponsored research funds were used to obtain the equipment the FO must forward the e-Doc to CGA for approval. Transfers of equipment purchased with sponsored research/agency funds require approval by the granting agency prior to any transfer or disposal. CGA can provide instructions and information on the proper procedures to follow.

Organizations are prohibited from selling or donating items to external (non-MSU) entities. Only the MSU Surplus has the authority to process sales or gifts to external entities. All items transferred to the MSU Surplus Store will be subject to one of the following procedures:

  • items will be made available for purchase by other campus organizations - MSU Surplus Store will transfer the items to the organization, or,
  • items will be made available for purchase by the general public, donated, recycled, or disposed of by other means - MSU Surplus Store will retire the items

Equipment transferred to the MSU Surplus Store for disposition will remain in the possession of the MSU Surplus Store until one of the above procedures is performed. Once the procedure is performed, the MSU Surplus Store will update the asset record. All changes in equipment status made during a fiscal year will be reflected in the annual report available to all organizations.

Loaning Equipment

The university discourages loaning out university-owned or government-owned property to entities, agencies, or individuals outside of the university for non-university related business. All property owned by the university, government-owned or government-loaned must be used exclusively for university related business.

Equipment Taken Off-Campus

Organizations needing to temporarily use equipment owned by the university, at an off-campus location over 30 days must initiate a loan e-Doc in which the off-campus location and person responsible for the item(s) while off campus will be recorded. The organization’s FO must approve the e-Doc. The CAM system business rules require loaned equipment to be returned or renewed within two years.

Retirement of Equipment

Organizations wishing to remove any equipment from the CAM may initiate a retirement e-Doc for lost, discarded, cannibalized, stolen, destroyed, or externally transferred equipment. In all other cases, the organization must transfer the equipment to the MSU Surplus Store. Details of the action requested should be documented (e.g. sponsored project number or letter of agreement) and attached to the e-Doc. The e-Doc must be approved by the FO. If equipment purchased with research funds is being retired the FO must forward the e-Doc to CGA for approval. This includes equipment removed as a result of a researcher changing universities. Additional information and examples can be found at http://www.cga.msu.edu under forms then equipment.

Sample memo: http://www.cga.msu.edu/pl/sitefiles/getfile.aspx?id=84

Sample equipment list: http://www.cga.msu.edu/pl/sitefiles/getfile.aspx?id=85

Lost, Damaged, Destroyed or Stolen Equipment

Organizations must have appropriate safeguards in place to prevent loss, damage, destruction or theft of equipment. It is the organization's responsibility to initiate an retirement e-Doc to update the asset status with in the CAMs, as soon as the facts become known, of all cases of loss, damage, destruction or theft of university and government-owned equipment in its possession or control.

Retirement e-Docs pertaining to theft require a Verification of Loss Statement from the Department of Police and Public Safety to be attached. The Verification of Loss Statement must outline the description of the stolen item, the date and circumstances of the loss, building and room number, steps taken to recover the property, and any other relevant information must be provided to the Department of Police and Public Safety. A copy of the Verification of Loss Statement must be attached to the retirement e-Doc and forwarded to the Office of Risk Management & Insurance by the FO.

In addition, government-owned equipment requires the FO to forward the e-Doc to CGA. CGA is then required to promptly notify the appropriate government agency's property administrator of all cases of loss, damage or destruction of government property. Note: The organization could be liable for this government property.

MSU requires, that any of its subcontractors possessing or controlling government property accountable under a government contract, to investigate and report all instances of loss, damage, or destruction of such property as well.

 
VI. Equipment Tracking

The tracking process for equipment begins when e-Docs are created that include appropriate equipment asset type code. CAM will consolidate information from the e-Docs and create the asset record.

Each piece of equipment is identified with a “Property of Michigan State University” identification label (asset tag) with a unique number (tag number). 

The asset tag must be placed on the front of the equipment where it is visible and easy to identify within 30 days of receipt of the equipment. If it is not feasible to place the asset tag on the front of the equipment, an alternate location may be chosen. Also, the asset tag field, in the asset record, must be updated within 30 days of receipt of the equipment.

It is the responsibility of the owning organization to inspect equipment on a regular basis to ascertain that it is in good working condition, to oversee a maintenance program for the protection and preservation of the equipment and to update asset records when needed.

Government Owned Property

This section provides general guidance for managing US Government owned property held or controlled by Michigan State University.

For contracts with federal sourced funding, MSU must comply with the requirements for US Government owned property set forth in the Federal Acquisition Regulations (FAR) part 52.245. Other contractual requirements for US Government owned property may also exist as part of the government contract or agreement. MSU is responsible and accountable for all US Government owned property in its possession and control.

Principal Investigators and administering departmental personnel should understand and have knowledge of the provisions of their sponsored award agreements. Please contact CAM at 884-6081 for questions or assistance related to your US Government owned property. 

Control and Use of Government Owned Property:

Government owned property, can only be used to perform the specific grant or contract activity for which it was obtained, unless otherwise specified in the award document or approved, in writing, by the government Contracting Officer, not just the Program Officer. Each piece of Government owned property is identified with a "Property of Michigan State University" identification label (asset tag) with a unique number (tag number) as well as a "Property of the U.S. Government" label that will indicate federal ownership. The Government label should be located near to the asset tag. The University system of record has identified the following financial object codes for use when purchasing Government owned property: 6498 (Fed Owned) and 6500 (Fabrication Fed owned).

Responsibilities of the Organization when receiving, transferring and retiring Government owned property include: ensuring proper identification labels are on the property, removing the "Property of U.S. Government" label when/if title is transferred to the University, and updating the asset record. The correspondence giving MSU title, or disposition instructions, must be approved by an authorized agency official, verified by CGA, and must be attached to this e-Doc. A Distribution of Income and Expense (DI) e-Doc must be created in KFS to change the object code of the property, from 6498 (Fed Owned) or 6500 (Fabrication Fed Owned) to 6497 (Fed Funded) or 6493 (Fabrication Fed Funded).

Maintenance, Repair and Protection of Government Owned Property

Government owned property requires special oversight procedures. This oversight requirement applies if the property is provided directly from a federal agency, or purchased on an MSU account that has the contract condition that title of the property remains with the federal government. It is the responsibility of the project's Principal Investigator(s) (PIs) to oversee the maintenance program for government owned property. The physical maintenance, repair, protection and preservation of the property can be performed by organizational or university personnel, or through external maintenance contracts. In all cases of government owned property, the PI(s) must have a plan to ensure proper repair, protection and preservation of the asset.

The PI(s) and/or other project personnel under the supervision of the PI(s) should regularly inspect the property to ascertain that it is in good working condition and still needed for the project for which it was obtained or a follow-up project if approved by the federal sponsoring agency. In addition, organizations with any excess property no longer needed for the federally-sponsored project, must contact CGA for proper action and notification to the government property administrator when required. Unneeded property must be adequately protected by the organization and PI(s) and properly maintained pending completion of disposition.

Subcontractor control

The Office of Sponsored Programs (OSP) is responsible for negotiating and executing subcontract agreements when the prime agreement is a federal contract. OSP ensures that’s the appropriate flow-down provisions from the prime federal contract are incorporated into any related subcontract agreements for property administration and disposition.

Subcontract recipient responsibilities are defined as listed below, subject to the terms and conditions of the subcontract issued:

  • Establish and maintain a system to control, use, preserve, protect, repair and maintain US Government owned property.
  • Investigate and report all instances of loss, damage, or destruction of any US Government-owned property.
  • Ensure that all Government owned property is marked with an indication of government ownership.
  • Periodically perform a physical inventory of all US Government owned property in possession.
  • Ensure that the Government owned property is only used for its intended purpose.

In the absence of acceptable internal control policies as related to Government owned property, subcontractor must agree to use MSU policy and procedures. CGA is responsible for submitting required US government owned property reports. Subcontractors may be required to submit periodic reports of federal property in their possession. At the conclusion of the subcontract, a final federal property report, related to the subcontract, will be obtained from the subcontractor as required by the terms and conditions of the prime federal contract.


VII. Physical Inventory

The university has the fiduciary responsibility of maintaining proper control over all of its equipment, regardless of the location or purpose. Failure to accurately account for equipment could preclude the university as a whole from applying for federal grants, as inventory records are subject to federal and other external audits. In addition, to meet insurance requirements for university-owned equipment, each organization must verify and update asset records to ensure that asset records are correct.

The physical inventory process differs on an alternating yearly (biennial) basis.

In a given fiscal year half of the campus organizations will be notified they are to conduct their own physical inventory. These organizations must verify their assets, update asset records, complete and return the certification form by the specified date.

CAM will assist in conducting a physical inventory for the other half of the campus organizations. It is the recommendation of Internal Audit and CAM that an organization representative assist with the physical inventory.

Remote locations are responsible for conducting their own physical inventory every year. They too, must verify their assets, update asset records, complete and return the certification form by the specified date. CAM may occasionally conduct a physical inventory at an off-campus location.

Verification of assets includes validating all information about the asset including location, proper utilization and that a continued need exists. If asset information changes during the fiscal year the organizational processor is responsible for updating asset records in a timely fashion.

Barcode scanners and a process to create a CSV file are available to assist organizations in updating their asset records and conducting physical inventories.

The following reports will be available to assist in validating your annual Capital Asset Inventory:

Asset Inventory - All inventoried items, active and fabricated, within an organization

Asset Additions Report - All inventoried assets new or transferred to an organization within the reporting fiscal year

Asset Disposals Report - All retired inventoried assets within the reporting fiscal year