Federal Compliance over Equipment

by Chris Goeman, CPA, CGFM, Audit Manager

Posted on April 16, 2019

Before a local government accepts federal funding to purchase equipment, it’s important to understand the compliance requirements attached to the acquisition, maintenance, and disposition of equipment. In addition to understanding the compliance requirements, local governments must design and implement controls which will provide reasonable assurance of compliance. The costs of non-compliance can be severe including audit findings, questioned costs, and loss of future funding.

The first step in determining if your local government has or will acquire equipment subject to federal compliance requirements is to examine how the Federal government defines equipment. 2 CFR 200.33 defines equipment as “tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-Federal entity for financial statement purposes, or $5,000”.

The next step is determining where the federal funding was sourced from to acquire the equipment. When funding is passed through the State to your local government, the State’s policies and procedures over equipment apply. Therefore before acceptance of a grant, the grantee should request the State’s policies over equipment management and disposition to ensure the local government has the appropriate resources and controls in place. When funding is received directly from a Federal awarding agency, the local government must adhere to 2 CFR 200.313. These post-award requirements are provided in a checklist below (also available for download here), which can be used as a tool for your local government to ensure policies and procedures are designed around these requirements to achieve reasonable assurance of compliance.