Key Facts
- Equipment = $5,000+ per unit and 1+ year useful life (or your lower capitalization threshold). The 2024 revision raised it to $10,000 for newer awards.
- Governed by 2 CFR 200.313 — use, management, and disposition. Title is conditional.
- The $5,000 disposition threshold is based on current fair market value at disposition, not original cost.
- Three options when no longer needed: retain, sell, or transfer — with the federal share owed to the agency on items ≥ $5,000.
- Records: 3 years after final disposition (200.334), plus physical inventory at least every 2 years.
Summary
You bought a $40,000 piece of lab equipment with federal grant money. The project's over. Whose is it now? The answer is more complicated than "yours," and getting it wrong is a classic Single Audit finding. When you buy equipment with federal funds, the government retains a proportional financial interest, and that interest survives the end of the project period. You hold title — but conditionally. You can't just absorb the equipment into general use or sell it and pocket the money.
2 CFR 200.313 is the rulebook. It covers how you have to manage equipment during the award (inventories, controls, maintenance) and what you do with it after (disposition). The threshold that drives almost everything is $5,000 of current fair market value at disposition. Above it, the agency gets a say and a share. Below it, you're mostly free. The single most common mistake is just not tracking the equipment at all — and then not being able to account for it at closeout.
What's "Equipment" and What's Just "Supplies"
The line matters because equipment carries all these disposition obligations and supplies basically don't. Under 2 CFR 200.1, equipment is tangible personal property with a useful life of more than one year AND a per-unit acquisition cost at or above the lesser of your organization's own capitalization threshold or $5,000 (raised to $10,000 for awards under the 2024 revision). Both tests have to be met.
So a $3,000 laptop is a supply, not equipment, even though it lasts years — it's under the threshold. A $7,000 microscope is equipment. Acquisition cost includes the net invoice price plus the cost of modifications, attachments, and accessories needed to make it usable for its intended purpose. If your organization has set a capitalization threshold lower than $5,000, that lower number applies. Supplies have a much lighter touch — the main rule (200.314) is that if you have a residual inventory of unused supplies exceeding $5,000 in total aggregate value at closeout and they're not needed for another federal program, you may owe the federal share.
Managing Equipment During the Award
Before you even get to disposition, 200.313(d) imposes management requirements that auditors test. You must maintain property records that include a description, a serial number or other identification, the source of funding including the federal award identification number, who holds title, the acquisition date and cost, the percentage of federal participation, the location, use and condition, and ultimate disposition data. You must conduct a physical inventory and reconcile it to the records at least once every two years. You must have a control system to prevent loss, damage, or theft (and investigate any losses). And you must keep the equipment in good condition.
This is the part organizations skip, and then disposition becomes impossible because nobody can find the equipment or prove what it was. Set up the property record when you buy the item, not when the auditor asks.
GrantMetric Analysis
- The threshold is fair market value at disposition, not purchase price — and that usually helps you. People assume a $40,000 instrument is forever entangled with federal interest. But the $5,000 disposition trigger looks at the equipment's current fair market value when you dispose of it. A specialized instrument that cost $40,000 five years ago might be worth $3,000 today. If its current FMV is under $5,000, you can generally retain or dispose of it with no further obligation to the agency under 200.313(e)(1). Old, depreciated equipment often falls out of the federal interest by simple loss of value.
- Don't dispose of anything worth $5,000+ without written agency instructions. When equipment is no longer needed and its FMV is $5,000 or more per unit, 200.313(e)(2) requires you to request disposition instructions from the awarding agency. Selling it on your own and keeping the money is exactly the kind of unauthorized disposition that becomes a finding — and a repayment demand for the full federal share. Ask first. The agency will usually let you keep it (paying the federal share) or sell it (remitting the federal share, less up to $500 or 10% of proceeds for selling costs).
- The unaccounted-for asset is the finding waiting to happen. The most common equipment finding isn't a botched sale — it's that the organization simply can't account for the equipment at closeout. No inventory, no record of where the $12,000 server went, no disposition data. From the auditor's perspective, federal property that can't be located is missing property, and that's a serious finding. The fix costs almost nothing: tag the equipment when you buy it, keep the property record current, and physically verify it every two years.
The Three Disposition Options
When the equipment is no longer needed for the original project or any other federally funded activity, and its current per-unit FMV is $5,000 or more, 200.313(e) gives the agency three paths to instruct:
Retain it. You keep the equipment and compensate the federal government for its share — calculated as the federal participation percentage times the current fair market value. So if the federal share was 100% and the equipment is now worth $8,000, you'd pay the agency the federal portion of that $8,000 to keep it free and clear.
Sell it. You sell the equipment (using competitive procedures where appropriate) and remit the federal share of the proceeds to the agency. You're allowed to deduct reasonable selling and handling expenses — up to $500 or 10% of the proceeds, whichever is greater — before calculating the federal share.
Transfer it. The agency may direct you to transfer the equipment to another entity (often another federal awardee), in which case you're typically entitled to compensation for your share. The agency tells you where it goes.
If the agency doesn't respond to your disposition request within 120 days, 200.313(e)(3) lets you proceed as if instructed to retain or sell — but document that you asked and waited.
Records After Disposition
You're not done when the equipment is gone. Equipment records must be retained for three years after final disposition of the property under 200.334 — and that clock runs separately from your three-year financial-records clock, often ending later. The disposition record should capture how the equipment left your hands: sold (to whom, for how much, federal share remitted), retained (with the buyout amount paid), transferred (to whom, per which instruction), or — if it was below the $5,000 threshold — disposed of with no further obligation. Keep the agency's disposition instructions in the file too.
Equipment Disposition Checklist
- Maintain the property record from day one — description, ID number, funding source, cost, federal %, location, condition.
- Physically inventory at least every 2 years and reconcile to the records.
- At closeout, determine current fair market value per unit — that drives whether the $5,000 rule applies.
- Request agency instructions for items ≥ $5,000 FMV. Don't sell or repurpose on your own.
- Execute retain, sell, or transfer per instructions; remit or pay the federal share as required.
- Retain disposition records 3 years after final disposition — a separate clock from financial records.