CONTRACT AND GRANT MANUAL
Chapter 15 -- Property
Revised February 14, 2006
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Table of Contents
15-110 APPLICABILITY OF UNIVERSITY POLICY
15-124 General and Special Purpose Equipment
15-125 Expendable Personal Property
15-130 CONTRACT AND GRANT OFFICER RESPONSIBILITIES
15-200 TITLE AND OWNERSHIP OF PROPERTY
15-221 Risk of Loss/Damage to Sponsor Property
15-300 CONTROL AND MARKING OF PROPERTY
15-350 USE OF PROPERTY FOR AUTHORIZED PURPOSES
15-500 DISPOSITION OF PROPERTY
15-540 USE OF PROCEEDS UPON SALE
15-550 TRANSFER OF PROPERTY TO ANOTHER INSTITUTION
15-999 RELATED UNIVERSITY REFERENCES
EXTERNAL REQUIREMENTS--FEDERAL
15-F01 OMB Circular No. A-110, ___.30 through ___.37, Property Standards
Property management is an essential function of the University because a large portion of the corporation's assets is made up of equipment and other property. Sound and prudent property management practices at the local level must be guided by consistent and articulated property management policies and procedures that apply Universitywide. In addition, the University must meet its responsibilities to extramural sponsors when they support the acquisition of equipment under their awards. Section 15-F01 of this chapter outlines the Federal property standards with which University property policy and procedures comply.
Primary University guidance about the post-award management and disposition of tangible personal property owned by or in the custody of The Regents is contained in Business and Finance Bulletin BUS-29, Management and Control of University Equipment. This Manual Chapter supplements BUS-29 with respect to the University's contract and grant administration function. Property policy and procedures also are discussed in several other University documents, which are referenced in Section 15-999, Related University References, of this Manual Chapter.
15-110 APPLICABILITY OF UNIVERSITY POLICY
University property management policy and procedures as implemented by the Director--Strategic Sourcing apply to all property, including that acquired under extramural awards, with the exception of:
--property/assets in the custody of the Treasurer pursuant to Section 21.4 of the Bylaws of The Regents of the University of California; and
--government-owned property at the DOE Laboratories (to which DOE policies apply), namely, Lawrence Berkeley Laboratory (LBL) and Lawrence Livermore National
Many of the terms related to property administration, including "fabricated property," "industrial plant equipment," "government-furnished property," "excess government property," and "Federal surplus property," are defined in Section A.V. of BUS-29 (http://www.ucop.edu/ucophome/policies/bfb/bus29a.pdf). Definitions of key terms that are used in this Manual chapter are given in Sections 15-121 through 15-128 and 15-240, below.
"Personal property" is tangible property of any kind, except real property.
"Equipment" is defined in Section J.18.a.(2) of OMB Circular A-21, Cost Principles for Educational Institutions (http://www.whitehouse.gov/omb/circulars/a021/a21_2004.html), as "an article of non-expendable tangible personal property having a useful life of more than one year, and an acquisition cost which equals or exceeds the lesser of the capitalization level established by the institution for financial statement purposes, or $5,000." The University of California has established a capitalization threshold of $5000. Items that cost less than $5000 or have a useful life of one year or less are considered supplies. In some cases, a purchased item may be a system made up of separate or separable parts, but it must be sold as a system by the vendor in order to qualify as a single piece of equipment. Merely grouping individual items on one purchase order does not constitute purchase of an equipment system. (See Chapter 7-205 and Chapter 2-526).
"Inventorial equipment" refers to equipment (as defined above) that is recorded in the University's inventory system. With some exceptions, University-owned equipment that is free-standing is considered inventorial equipment. Firearms, regardless of cost, always are inventoried, as is equipment acquired under non-Federal awards that set a dollar limit of less than $5000 for inventorial items. Government-owned equipment is always considered inventorial. Items that enhance the value or prolong the useful life of the equipment on which they are installed or attached are considered capital equipment if they cost more than $5000. However, the cost of these items is added to the value of the equipment to which they are installed or attached and the items are not separately tagged and inventoried.
15-124 General and Special Purpose Equipment
"Special purpose equipment" is equipment which is used only for research, medical, scientific, or other technical purposes. "General purpose equipment" is equipment which is not limited only to research, medical, scientific, or other technical purposes (e.g., office furniture, computers, air conditioning). Equipment that is specifically designed for scientific purposes is special purpose equipment. Equipment that is not specifically designed for scientific purposes still may qualify as special purpose equipment if its use for scientific purposes makes it unusable for general purposes (e.g., a refrigerator used for storing radioactive or hazardous materials).
15-125 Expendable Personal Property
"Expendable personal property" (e.g., supplies) is all tangible personal property other than nonexpendable property.
"Theft-sensitive items" are items whose acquisition cost is below the inventorial threshold of $5000, but which a campus chooses to carry on its inventory for tracking and control purposes. Examples of theft-sensitive items are given in Section A.VI.A.4. of BUS-29.
The term "exempt" refers to exemption from further accountability to the Federal government. "Exempt property" is tangible personal property acquired in whole or in part with Federal research grant funds, the title to which is vested in the University without further obligation to the Federal government, unless the sponsoring agency explicitly reserves the right to transfer title and issues disposition instructions within 120 days after the end of the Federal support of the project for which the property was acquired. Most equipment acquired by the University under Federal research grants qualifies as "exempt property" pursuant to Pub. L. 95-224. This statute, approved February 3, 1978, authorized Federal agencies, in their research grants to colleges and universities, to vest title to equipment purchased with grant funds in the recipient institution. Equipment acquired under other types of funding mechanisms, e.g. training grants and contracts, is considered "nonexempt."
15-130 CONTRACT AND GRANT OFFICER RESPONSIBILITIES
Campus Contract and Grant Officers have certain responsibilities specifically pertaining to property administration, pursuant to Section B.II.B. of BUS-29. These responsibilities are:
1. Upon receipt of an award, to notify the Equipment Management Department of the award provisions regarding reporting and vesting of title; and
2. To notify the Equipment Management Department whenever an agency at the beginning or at any time during the performance of a contract or grant transfers title to equipment to the University or accountability for equipment from one extramural award to another.
15-200 TITLE AND OWNERSHIP OF PROPERTY
Strictly speaking, title to or ownership of all University property is vested in The Regents of the University
of California. In this Chapter, phrases such as "title vesting in the University" and "title vesting
in The Regents" are used interchangeably.
The Board of Regents is responsible for all property to which The Regents holds title. Custodial responsibility for other property rests with the Board of Regents to the extent that it has explicitly agreed to accept responsibility therefor. By authority provided in Section 100.4(a) of the Standing Orders of The Regents of the University of California, the President of the University has assigned to the Senior Vice President--Business and Finance general responsibility for the care and custody of property belonging to The Regents. The Senior Vice President--Business and Finance has assigned responsibility for the management and control of inventorial equipment through the Associate Vice President--Business and Finance to the Director--Materiel Management (see Section A.III. of BUS-29).
Under Federal contracts title to equipment acquired by the University using contract funds and costing $5,000 or more usually remains with the Government unless the contract states otherwise; when the acquisition cost is less than $5,000, title usually vests in the University. As stated in both FAR 52.245-2 Alternate II (for fixed-price contracts) and 52.245-5 Alternate I (for cost-reimbursement contracts),
Title to equipment (and other tangible personal property) purchased with funds available for research and having an acquisition cost of less than $5,000 shall vest in the Contractor upon acquisition or as soon thereafter as feasible; provided, that the Contractor obtained the Contracting Officer's approval before each acquisition.
The University may request that title to Government-owned equipment be transferred to the University. The decision to exercise this option should be made on a case-by-case basis.
When title vests in the Government, the University acts as custodian of the equipment. The University also acts as custodian of the equipment when the equipment is furnished by the Government and the Government retains title.
Under Federal grants, the University normally gains title to equipment acquired with grant funds upon acquisition. Although the Government may specifically reserve the right to transfer title either to itself or to a third party, in practice this seldom happens.
Under State of California awards, the State normally retains title but upon request allows the University to use the equipment after the expiration of the award.
Under non-Federal awards, title to and disposition of any equipment purchased with sponsor funds should be specified in the award terms. The preferred option is for the University to take title to the equipment upon acquisition.
University procedures for the care, maintenance, records, physical inventory, and control of inventorial equipment, as outlined in BUS-29, are designed to comply with virtually all sponsor requirements regardless of whether or not the sponsor retains title (see 15-F01).
In reviewing proposals and awards that involve the acquisition of equipment, Contract and Grant Officers should take into account concomitant direct costs for the University that may be allocable to the sponsor. In addition to any acquisition costs, shipping, sales taxes (see Chapter 7, Section 7-221), maintenance and repair costs (see Chapter 7, Section 7-209), registration and licensing costs (e.g., for vehicles--see Business and Finance Bulletin BUS-8, Acquisition and Disposition of University Vehicles), storage costs (see Sections C.II. and C.V.-VII. of BUS-29), insurance (see Chapter 7, Section 7-207 of this Manual and Section 15-221, below), and disposition costs (see Section L of BUS-29) may be allocable to the sponsor.
In addition, equipment acquisition may have indirect cost implications because of the additional administrative time needed to inventory and report on the equipment. Charges for equipment acquired under Federal awards, however, may not be included in calculations of the depreciation/equipment use component of a campus's or Laboratory's Federal indirect cost rate (see Section B.IV.B. of BUS-29). In cases when part of the acquisition cost of the equipment is from Federal and part from non-Federal sources, the Federal portion must be excluded from indirect cost calculations.
15-221 Risk of Loss/Damage to Sponsor Property
Agreeing to act as custodian for sponsor-owned property may require the University to assume responsibility for loss or damage to the property. This contractual obligation is covered automatically under the University's General and Automobile Liability Self-Insurance Program (Business and Finance Bulletin BUS-75) for campuses and medical centers. The University's insurance program does not apply to the DOE Laboratories (LBL, LLNL, LANSL, and LREH). Losses or damage must be reported within 24 hours to the campus police and risk management department.
If the terms of an extramural award require that the University have and maintain specialized insurance coverage, then Contract and Grant Officers should consult with local Risk Managers to determine whether the required coverage is already available. If the risk is not covered by the University's existing self-insurance or insurance programs, three options are available: (1) the property should not be accepted; (2) the department or unit responsible for administering the award should identify a fund source that would cover any liability; or (3) the risk management department may be asked to determine if insurance can be purchased. The insurance cost would be a cost charged to the extramural award.
Campuses and Laboratories should have procedures in place to ensure that all required approvals are obtained before acquiring, modifying, renovating, and/or disposing of property using extramural funds.
If research involves the modification of a piece of equipment and title to that equipment rests with the University, such modification is subject only to University approval. However, when title rests with the fund-granting source, prior approval by the source is usually required.
For a variety of reasons, the University often must create property that is not available elsewhere. Fabricated
property items are created either for use by the sponsor or for use by the University. Standard items that are
altered or customized to make them usable on a sponsored project do not qualify as fabricated property.
Fabricated items regardless of cost that are either created for transfer to a non-University entity, or are expected to have a useful life of less than one year, do not meet the University's definition of inventorial equipment and should not be treated as such. The components, labor and all other costs of fabrication are included in the indirect cost rate base and are assessed applicable indirect costs. Indirect cost calculations on fabricated items that meet the University's definition of inventorial equipment are described in Chapter 2-526 of this Manual.
Additional information concerning fabricated equipment is found in Section B.I.C. of BUS-29; Accounting Manual Chapter P-415-32, Plant Accounting: Inventorial Equipment--Fabricated Items; and Chapter 7, Section 7-205 of this Manual.
15-300 CONTROL AND MARKING OF PROPERTY
In accordance with Section C of BUS-29,
The head of the custodial department [i.e. the department that has custody of the equipment] and the Principal Investigator have the primary responsibility for the care, maintenance, records, physical inventory, and control of inventorial equipment and other University or extramurally-funded property. They must maintain up-to-date departmental records and, if a contract is involved, initiate such forms as are necessary to fully inform the Equipment Management Department as to all provisions of each contract document respecting the care, custody, maintenance, records, control, and all transactions involving said property so that the Equipment Management Department may properly carry out its functions respecting inventorial equipment.
Section F of BUS-29 describes the University system for identifying, marking, and recording property in the custody, possession, or control of the University. In general, with respect to University inventorial equipment:
all inventorial equipment is identified, marked with the property number, and recorded promptly upon receipt. It shall remain so identified as long as it is in the custody, possession, or control of the University. Assigned property numbers are recorded on all applicable receiving, shipping, and disposal documents, and any other records that may be a part of the Equipment Management system. Such markings and identification are removed or obliterated from the equipment only when sold, scrapped, or otherwise disposed of. Once a property number has been assigned, no change is made during the life of the item regardless of inter-departmental or inter-campus transfers except in the case of the inter-campus transfer of a motor vehicle. When a vehicle number is changed, the property number reflects the change. A property number register is maintained by each campus Equipment Management Department. (BUS-29, Section F.I.)
The University system for identifying inventorial equipment and accessories/components purchased for equipment is known as the Classification Code system. Guidelines for assigning Classification Code numbers to inventorial equipment acquisitions are issued by the Director--Materiel Management.
See Sections F.II. and F.III. of BUS-29 for information on the identification of Government inventorial equipment and other Government property.
Custodial departments are to take physical inventories at least every two years. The department head or Principal Investigator should verify the existence, current utilization, and continued need for the equipment inventoried. The local Equipment Management Department normally verifies the departmental inventories on the basis of statistical sampling, with all departments being sampled at least once every two years. Other verification procedures (such as one based on a bar code program) may be used in lieu of statistical sampling if accepted by the University's cognizant auditor for property management systems (see Section 15-340, below).
Complete physical inventories of government equipment may be made by the local Equipment Management Department if required by the terms of a contract.
Physical inventories are also normally performed by the local Equipment Management Department, in coordination with the custodial department and the Principal Investigator, upon termination or completion of a government contract. Disposition instructions are requested from the agency by the Equipment Management Department as required under the contract. The requirement for an inventory may be waived by the Property Administrator when the equipment has been authorized for use in a follow-on contract. (See Section J of BUS-29 for further information.)
Campus property management systems are audited on an annual basis by the Office of Naval Research. Campus audits are coordinated by the Office of the President Research Administration Office in consultation with the Materiel Management Office as appropriate.
DOE Laboratory property management systems are audited by the Department of Energy.
15-350 USE OF PROPERTY FOR AUTHORIZED PURPOSES
Section N of BUS-29 states that:
Use of University materiel, or property in the care and custody of the University, by University employees for personal purposes is not allowed except with the approval of the Chancellor, or, as appropriate, the Senior Vice President--Business and Finance or the Vice President--Agriculture and Natural Resources.
Unless precluded or restricted by the terms of the award, equipment purchased with Federal grant funds may generally be shared as long as this does not interfere with accomplishing the objectives of the project for which the equipment was originally purchased.
Equipment loans are covered in Section D.V. of BUS-29. Subparagraph A of Section D.V. states that
Equipment, title to which is not vested in the University but which is in the care and custody of the University, cannot be loaned without the specific written approval of the title holder.
Subparagraphs B. through E. of Section D.V. outline procedures for recording loans of University-owned equipment under intramural loans, extramural loans, and inter-campus loans.
Each subagreement entered into by the University whereby Federal or State government property may come under the control of a subcontractor must contain specific provisions concerning the subcontractor's responsibility for the care, custody, and use of that property. These provisions should require, by flowing down requirements in the prime award, that the subcontractor assume the responsibility and obligations of the University with respect to that property while it is under the subcontractor's control. These obligations will include appropriate care, utilization, storage, movement, disposition, and record keeping. See Section M of BUS-29 for further information.
Systems that enable the University to comply with most sponsor equipment reporting requirements are outlined
below in Sections 15-410 through 15-430, below. When special reports covering equipment are required by the sponsoring
agency, the Principal Investigator or head of the custodial department is responsible for furnishing whatever descriptive
and operating technical data may be necessary to enable the campus Equipment Management Department and other departments
involved to meet the reporting requirements. (BUS-29,
Section C.VIII.)
Campuses and Laboratories are responsible for reporting in the Corporate Contract and Grant (CGX) system all extramural awards that primarily support the acquisition of University-owned equipment. The Project Type for such awards is "Equipment." (See Chapter 10, Section 10-420.)
Pursuant to fiscal closing schedules established by the Corporate Accounting Office, campuses are responsible for producing various reports for local and Office of the President use. Data specifications and requirements are outlined in the Corporate Equipment Facilities System Data Requirements.
Custodial departments are required by Section C.VII. of BUS-29 to maintain equipment in the condition received or better, normal wear excepted, in order that the longest useful life is secured. Equipment records are to be kept that show equipment condition according to the condition codes outlined in Section C.VII.C. of BUS-29. The department having custody of the equipment must indicate condition on the Annual Register of Inventorial Equipment when the listing is returned to the campus Equipment Management Department.
15-500 DISPOSITION OF PROPERTY
Sponsor requirements for the disposition of property acquired under extramural agreements are controlling. When title to the property vests in the sponsor, the University should normally receive specific disposition instructions from the sponsor. When title vests in the University, a general rule of thumb is that the property should continue to be used for the purpose for which it was acquired as long as it is needed or useful. When no longer needed or useful, and when there are no other obligations to the sponsor in connection with the award under which the property was acquired, the property may be disposed of in accordance with Section L.I. of BUS-29. Contract and Grant Officers should generally not accept award terms that impose unusual or administratively burdensome disposition requirements.
Any inventorial or non-inventorial equipment that is declared surplus or excess by a department may be disposed of as outlined in Business and Finance Bulletin BUS-38, Disposal of Excess Material and Transfer of Federally-Funded University-Owned Material. This equipment may be sold, traded-in, or transferred to another department on campus or at another University campus. See Section 15-550, below, when the transfer involves another institution. All transfers of equipment must have prior written approval of the local Equipment Manager.
With respect to selling surplus property, a Federal funding source may not be charged for an item of equipment if that same item was originally purchased with Federal funds.
Requirements for disposition of Federal Government property are found in Section L.II. of BUS-29.
There are basically two ways in which the question of disposition of government property under a Federal contract may arise: when the property becomes excess to the contract for which it was provided and when the contract is completed. If the property becomes excess during the life of the contract, it is screened against needs of other contracts. If there is a need, the Contracting Officer is asked for authority to use or transfer; if there is no need, the property is reported as excess in the manner prescribed by the Property Administrator.
Upon completion of a contract, the University will submit to the Contracting Officer a list (property/equipment report) certified as to quality and quantity of any or all items of final inventory, exclusive of items disposition of which has already been directed or authorized by the Contracting Officer. The Contracting Officer will then issue disposition instructions.
Federal requirements for disposing of Government property furnished under Federal grants are outlined in Section ___.33 of OMB Circular A-110 (see 15-F01). The University must submit an annual inventory to the sponsoring agency at the end of the project for which the equipment was furnished, or when the equipment is no longer needed. The agency will then issue disposition instructions.
15-540 USE OF PROCEEDS UPON SALE
When the terms of the award permit the University to retain the net proceeds from the sale of University-owned personal property no longer needed, the property may be disposed of and the proceeds distributed in accordance with Business and Finance Bulletins BUS-38, Disposal of Excess Material and Transfer of Federally-Funded University-Owned Material, and A-51, Application of Proceeds From the Sale, Trade-in or Transfer of University Property. In general, net proceeds may be retained by the department releasing the property. These proceeds are considered "program income" if the property was purchased under a Federal grant, and, according to Section ___.24 of OMB Circular A-110, are covered by the rules in Section ___.33 of that Circular (see 15-F01).
15-550 TRANSFER OF PROPERTY TO ANOTHER INSTITUTION
When a Principal Investigator transfers to another institution, University-owned property acquired under that Principal Investigator's extramural awards may also be transferred in accordance with Section VIII of BUS-38. That Section of BUS-38 provides the following criteria that must be met in order to effect such transfers:
--the property must be available for transfer;
--a written request to transfer the property must be made by the departing faculty member;
--required approvals must be obtained;
--the recipient institution must agree, in writing, to accept title, with the understanding that the property is for the initial use of the new faculty member; and
--unless specific provisions are made in the terms of a contract or grant, transfers of property to individuals or for-profit organizations are prohibited.
Rental and lease costs for equipment and other property are covered in Chapter 7, Section 7-214 of this Manual. Procedures for accounting for and recording property acquired via conditional sales contracts or lease-with-purchase options are detailed in Section D.III. of BUS-29 and Accounting Manual Chapter L-217-11, Accounting and Reporting for Leases and Installment Purchase Contracts.
In accordance with Section ___.44(a)(2) of OMB Circular A-110, the University purchasing system must provide that
Generally, this means that if the total lease cost to be charged to the sponsor(s) is more than the purchase price, the equipment should be purchased outright rather than rented (all other things being equal).
Under Bylaw 21.3(f):
* * *
* * *
In 1993, under Standing Order 100.4(cc), the President was authorized to approve and exercise real property leases of ten years or less and that are for no more than a certain dollar amount for the initial year. This dollar amount is adjusted for inflation each year. In 1993 the threshold was $250,000. In 1987, the President delegated to Chancellors, Lab Directors, and the Vice President--Agriculture and Natural Resources authority to execute real property leases that do not exceed five years or $50,000 in any year.
Basically, in compliance with the above provisions, approval of real property leases with The Regents as tenant, the Research Administration Office follows a three-tier structure:
In all cases the lease agreement must facilitate achieving the goals of the extramurally-sponsored project.
Primary University guidance relating to the lease/purchase of, and construction on, real property is contained in the University Facilities Manual and Lease Administration Manual. When a lease agreement must be approved by The Regents before execution by the Secretary, the Lease Administration Manual guidelines should be followed. See also 7-214 for information on rental and lease costs allocable to sponsored agreements.
15-999 RELATED UNIVERSITY REFERENCES
15-F01 OMB Circular No. A-110, ___.30 through ___.37, Property Standards
PURPOSE
The purpose of OMB Circular A-110, Property Standards, is to prescribe uniform standards governing management of property furnished by the Federal Government or whose cost is charged to a project supported by a Federal grant or other agreement.
APPLICABILITY
The standards promulgated by A-110 are applicable to all Federal agencies in their administration of grants to, and other agreements with, public and private institutions of higher education, public and private hospitals, and other quasi-public and private non-profit organizations. The term "other agreements" does not include procurement contracts but does include cooperative agreements.
SUMMARY OF PROVISIONS
A schematic summary regarding title, use, and disposition of property covered by A-110 is presented below:
SCHEMATIC SUMMARY OF A-110 PROPERTY STANDARDS|
Tangible Property |
Intangible Property |
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|
Real Property |
Personal Property |
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|
Non-Expendable |
Expendable |
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|
Federally Owned |
Exempt |
Other |
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| title to vest in recipient | title remains with the Government | title to vest in recipient unless not in best interest of Gov't. | title to vest in recipient | title to vest in recipient | Dept. of Commerce regs. apply w/respect to title |
| agency to issue disposition instructions | agency to issue disposition instructions | agency may reserve right to transfer title | agency may reserve right to transfer title | ||
| recipient to use property for authorized purposes as long as needed for orig. proj.; subsequent use as approved by agency; when no longer needed recipient to get disposition instructions from agency | recipient to submit annual inventory at end of project or when no longer needed; recipient to get disposition instructions from agency | recipient has no other obligation unless agency has reserved right to transfer title and issues disposition instr. within 120 days after end of project | recipient to use property on proj. as long as needed regardless of funding period; sharing is encouraged; when no longer needed recipient can dispose of and, if market value is $5000 or more, compensate the Gov't. or request disposition instructions | recipient to use any residual over $5000 on other Federal proj. or compensate the agency | recipient to report any patentable inventions; author or recipient is free to copyright materials developed but must grant non-exclusive license to the Gov't. |
PRIMARY UNIVERSITY RESPONSIBILITY
The Director--Materiel Management is responsible for issuing implementing guidelines to campuses to ensure compliance with the provisions of the property standards of A-110.
UNIVERSITY IMPLEMENTATION
Business and Finance Bulletin BUS-29, Management and Control of University Equipment, provides the primary University guidelines for implementing the provisions of the property standards of A-110.