Capital Equipment Policy

EFFECTIVE DATE: July 1, 1991 |LAST UPDATED: January 31, 2018 | Policy Section: buying-paying

Responsible Executive

Carolyn Ainslie, vice president for finance and treasurer

Responsible Office

Office of the Controller

Contacts

Ken Molinaro, controller, molinaro@princeton.edu or (609) 258-8576

Marcia Black, mblack@princeton.edu or (609) 258-1159

I. Policy StatementBACK TO TOP

This policy defines capital equipment and outlines related procurement, accounting, and reporting requirements. Each department is accountable for its own capital equipment, including safeguarding, maintaining, and tracking the location and status of individual items of equipment. Accurate maintenance of property records is essential to safeguard assets, ensure compliance with federal regulations, support adequate insurance coverage, and promote efficient use of property.

II. Who is Affected by this PolicyBACK TO TOP

All individuals responsible for purchasing, tracking, safeguarding, maintaining, disposing of, and reporting on capital assets.

III. Definitions

Aggregate Capitalization

Accounting convention that allows the capitalization of a group of items of tangible personal property costing less than $5,000 per unit, but $5,000 or more in the aggregate, that has a useful life of more than one year.  

Asset Custodian/Contact

The individual, designated by the department head or chair, whose responsibilities include securing capital equipment, maintaining capital equipment records in a timely manner, and participating as needed in equipment inventories or capital equipment verifications.

Betterment and improvement

Additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations or alterations to capital assets that cost $5,000 or more and that materially increase their value or useful life.   Repairs and maintenance are not betterments regardless of their cost.

Capital Equipment

An article of nonexpendable, tangible personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit.

Capital Cost

The net invoice price of the equipment plus expenditures necessary to place it into operation, including taxes, duty, transit insurance, freight, and installation.

Capitalize

To record an expenditure as the cost of an asset, where the expenditure (such as refurbishing a machine to extend its useful life) yields benefits over a period longer than one year.

Custodian

The custodian is the contact for capital equipment for a department; tags and monitors capital equipment and maintains records.

Disposal

Sales, transfers to other institutions, donation, loss, theft, surplus, scrap, use for parts, or any change of ownership.

Fabricated Equipment

A unique, identifiable, and discrete item that has a useful life of more than one year, and is made of material and components which cumulatively cost $5,000 or more.

Maintenance

The regular activity needed to keep equipment in normal or expected operating condition; maintenance is not a capital cost.

Repair

To restore normal production capacity and operation for expected service life of equipment; a repair does not extend the expected useful life or change the function of the equipment and so is not a capital cost.

IV. PolicyBACK TO TOP

CAPITAL EQUIPMENT ACQUISITION

Capital equipment is purchased in compliance with standard purchasing policies and procedures as prescribed by the Office of Finance and Treasury. Capital equipment purchases must be acquired via a requisition unless prior approval is provided by the Office of Finance and Treasury.   Donations of capital equipment must follow guidance and processes established by the Office of Advancement.   The Office of the Controller must be notified of any transfers in of capital equipment, or other non-purchase acquisitions.

Costs capitalized with the equipment:

  • Any initial modifications, attachments, accessories, or auxiliary apparatus that are necessary to make an item of capital equipment useable for its acquired purpose.
  • Shipping charges, protective in-transit insurance, freight, and installation costs.
  • Betterments or improvements as defined above.

Cost that should NOT be capitalized with the equipment:

  • Equipment repair costs. 
  • Separate warranty costs or maintenance contracts.
  • Demolishing or dismantling costs.
  • Spare or replacement parts.
  • Training costs that can be separately identified

For equipment purchased from sponsored research funds, the Department Administrator and Principal Investigator (PI) are responsible for ensuring compliance with sponsor agreements.   Equipment purchases funded by a Sponsored Research Project within 90 days of award expiration are normally not allowable unless a justification is given by the PI, such as:

  • The purchase is necessary to complete the research.
  • The PI is expecting the project to be extended. The department must have adequate funding in a non-sponsored chart string to be used to cover the cost of the capital expenditure in the event the sponsored funding does not materialize.
  • The PI has sponsor approval to purchase equipment within 90 days of award expiration.

Software

Operating and communication software should be capitalized when purchased with hardware if the combined purchase meets the capital equipment threshold. Subsequent or separate purchases of software may be capitalized based on the Software Cost Policy .

Aggregated Items

The accounting convention called “initial complement of equipment” allows the capitalization of a large number of smaller items of tangible personal property which would have a useful life of more than one year. This might be applied when a portion of a building is being refurbished and some of the new furnishings cost less than $5,000 each, but more than $5,000 in the aggregate. Consult with the Office of the Controller to determine the appropriate treatment of these items.

Fabricated Equipment

Fabricated equipment constitutes equipment that cannot be acquired “off the shelf” but must be fabricated from individual components. For more information see: Fabricated Equipment Policy

CAPITAL EQUIPMENT RECORDS

All capital asset records must be properly maintained. The Office of Finance and Treasury uses an asset management module in Prime Financials to track the capital assets.   Custodians are responsible for tagging capital equipment with bar coded tags provided by the Office of the Controller and for updating the initial capital equipment record in the Prime asset management module with relevant information, including manufacturer, model number, serial number, location, and other details about the asset within 30 days of receipt.   Updates to this information, as well as changes to equipment condition, location, custodian, transfers, and disposals, must be entered within 30 days.

For capital equipment purchased with federal funds, a maintenance repair record must be kept as long as the asset is in use, and the maintenance record should be attached to the equipment record.

A physical inventory of all capital equipment is conducted at least every two years.   The equipment custodian conducts the inventory by physically locating the equipment and updating the equipment record as needed.   The Office of the Controller will perform inventory validations.

LOST, STOLEN, OR DAMAGED PROPERTY AND EQUIPMENT

Departments must report all incidents resulting in equipment loss, damage, or destruction to the Department of Public Safety and the Department of Risk Management. Departments must update the equipment record in the Prime asset management module.

DISPOSAL

All sales and other disposals of equipment must first be entered and approved in the Prime asset management module, receive approval, and be coordinated through the Facilities Surplus Program on the nature of the equipment or the disposal, either ORPA, EHS, both, or others may need to provide approval prior to disposal.   The Office of the Controller reviews these and all other requests for disposal and approves or denies disposal.  

The University owns the property title to all equipment unless specifically stated otherwise in the applicable sponsored award terms and conditions.

Equipment purchased on sponsored funds cannot be sold, discarded, or transferred without consent of ORPA. ORPA will be notified of disposals when entered into the Prime asset management module and approve or deny the request for disposal.   The Department may not dispose of capital equipment that was purchased with sponsored funds until approval is received from ORPA.   Disposal of equipment involving the transfer to overseas locations, or to foreign persons in the United States, should be reviewed by ORPA for compliance with US government export control regulations.   The federal sponsor routinely reserves the right to assume title to capital equipment that is purchased with federal funds through final close-out of the award. In rare cases, the sponsor may request title after the award has been closed. ORPA handles those requests on a case by case basis.

If a Principal Investigator transfers from the University to a new institution and wishes to transfer capital equipment items, the Department must enter the request in the Prime asset management module and receive approval from ORPA before the capital equipment transfer can take place.   The Office of the Controller will assist in establishing fair market value of any equipment sold or transferred to another institution.

Any equipment that has come in contact with hazardous materials, has been noted as hazardous in the Prime asset management module, or in any way requires decontamination or removal of hazardous components during disposal requires approval by Environmental Health and Safety (EHS) prior to disposal.  

V. Procedures BACK TO TOP

VI. Forms BACK TO TOP

VII. Contact Roles and Responsibilities BACK TO TOP

VIII. Update Log BACK TO TOP

1/18/18

Updated to reflect terminology and procedures to support the new Prime Asset Management Module. Responsible office updated to Office of the Controller. Removed definitions for Amortize and Initial Complement of Equipment, added Aggregate Capitalization and Asset Custodian/Contact. Removed OMB statement under "Capital Equipment." Amortizing equipment over $5,000 removed. Capital Equipment Records updated to include time guidelines.

2/28/17

Updated to align with current business practices and our Prime systems implementation.

10/28/13

Added clarification regarding notifications in the event of lost, stolen, or damaged property.

3/22/13

Changed required physical inventory to once every two years (formerly once every three years).

11/28/12

Targeted updates to sections “Acquisition” and “Accounting: Government Sponsored Research” to clarify PI and Department responsibility for compliance with sponsored research terms. Vouchers are no longer circulated to ORPA, but ORPA is available for consultation.

3/7/12

New procedure "Transferring Equipment from the University" replaces old procedure "Procedures when Professors/Researchers leave the University and want to take equipment with them"; deleted VALUATION OF EQUIPMENT FOR DEPARTING FACULTY section and incorporated into new procedure.

2/25/11

No change to policy or substance; revised organization and language for web-based policy library.

7/1/91

Approved


 

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