Nonprofit Accounting Basics

Equipment and Real Property Management


John Meriscko

National Association of County and City Health Officials

Equipment and real property management provides standards for the use and disposition of equipment and real property purchased with federal funds. These requirements cover records and inventory management.

Equipment - Title to equipment acquired by a non-federal entity with federal awards vests with the non-federal entity. Equipment means tangible nonexpendable property, including exempt property, charged directly to the award having a useful life of more than one year and an acquisition cost of $5000 or more per unit. However, consistent with a non-federal entity’s policy, lower limits may be established.

A state shall use, manage, and dispose of equipment acquired under a federal grant in accordance with state laws and procedures. Subrecipients of states who are local governments or Indian tribes shall use state laws and procedures for equipment acquired under a subgrant from a state.

Local governments and Indian tribes shall follow the A-102 Common Rule for equipment acquired under federal awards received directly from a federal-awarding agency. Institutions of higher education, hospitals, and other nonprofit organizations shall follow the provisions of OMB Circular A-110. Basically, the A-102 Common Rule and OMB Circular A-110 require that equipment be used in the program for which it was acquired or, when appropriate, other federal programs. Equipment records shall be maintained, a physical inventory of equipment shall be taken at least once every two years and reconciled to the equipment records, an appropriate control system shall be used to safeguard equipment, and equipment shall be adequately maintained. When equipment with a current per unit fair market value of $5000 or more is no longer needed for a federal program, it may be retained or sold with the federal agency having a right to a proportionate (percent of federal participation in the cost of the original project) amount of the current fair market value. Proper sales procedures shall be used that provide for competition to the extent practicable and result in the highest possible return.

Real Property - Title to real property acquired by non-federal entities with federal awards vests with the non-federal entity. Real property shall be used for the originally-authorized purpose as long as needed for that purpose. For non-federal entities covered by OMB Circular A-110 and with written approval from the federal-awarding agency, the real property may be used in other federally-sponsored projects or programs that have purposes consistent with those authorized for support by the federal-awarding agency. The non-federal entity may not dispose of or encumber the title to real property without the prior consent of the awarding agency.

When real property is no longer needed for federally-supported programs or projects, the non-federal entity shall request disposition instructions. For purposes of this compliance requirement, the recipient makes the request to the federal-awarding agency. Subrecipients make requests through the recipient (pass-through entity) and do not make requests directly to the federal-awarding agency. The pass-through recipient is required to comply (ensure compliance) with the direction of the federal-awarding agency and the terms and conditions of its award. When real property is sold, sales procedures should provide for competition to the extent practicable and result in the highest possible return. If sold, non-federal entities are normally required to remit to the awarding agency the federal portion (based on the federal participation in the project) of net sales proceeds. If the property is retained, the non-federal entity shall normally compensate the awarding agency for the federal portion of the current fair market value of the property. Disposition instructions may also provide for transfer of title in which case, the non-federal entity is entitled to compensation for its percentage share of the current fair market value.