Equipment

Standard Practice Guide 520.1: Acquisition, Use and Disposition of Property (Exclusive of Real Property) provides guidance on the proper acquisition, management and disposal of equipment.

Equipment (including Musical Instruments) is capitalized and depreciated if it meets all the following criteria on a per item basis:

• Cost at or exceeding $5,000
• Useful life of one year or greater
• Freight, transportation charges and installation costs, if billed separately, are excluded from the cost of the asset.    

Financial Operations’ policy states that assets will only be retired in Asset Management when one of the following criteria have been met:

• Item has been sold to an external entity,
• Item has been traded in towards the purchase of a new item,
• Item has been scrapped as no longer useful,
• Item has been transferred to another Institution or university,
• Item has been destroyed (i.e. theft, fire, flood, damaged, etc.)
• Item cannot be physically located (due to theft or inability to locate)
   

All university property being disposed of is required to go through Property Disposition per SPG 520.01.  A General eDOS should be used for disposals through Property Disposition.  For instructions on completing this form, please refer to the eDOS Knowledge Base (KB). 
Please note that Financial Operations’ policy requires assets that are either partially or fully depreciated, but still in use, to remain in asset management until they are retired for one of the above reasons.  For more information on university policies regarding disposition of assets, see SPG 520.01.

Equipment Account Codes

Currently the university uses ten account codes to categorize moveable equipment purchases; See below for a list of the accounts with descriptions.  The Procurement system has category codes specifically for equipment; See below for list of purchasing category codes to use when ordering equipment through Procurement Services.

Purchasing Category Codes 

Fabricated Equipment

Equipment fabrication is the process of constructing a piece of capital equipment that upon completion must have an expected useful life of one year or more and an estimated non-labor cost of building the equipment must be in excess of $5,000. 

Key Unit Responsibilities:

1. Ensure fabrication components are coded to account 614060 (for university owned equipment) or account 614330 (for Sponsor owned equipment)
2. Notify Sponsored Programs (for sponsored fabrications) or Financial Operations (for non-sponsored fabrications) when the fabricated equipment is completed and in use
3. Facilitate tagging and notify appropriate personnel within the department of the completed equipment as necessary.
    

If the equipment fabrication is related to a sponsored project grant a new Sub (FAB) Project/Grant should be opened through the Sponsored Programs Office.  If the equipment fabrication is related to a non-sponsored project/grant, it is recommended that a separate project/grant be established to track all the costs.

• Allowable fabrication expenses to be capitalized should include the non-labor costs of materials built into (or components of) the working fabricated equipment. These expenses should be accounted for on accounts 614060 or 614330.
• Unallowable fabrication expenses include salaries, fringes, tools or other supplies used to create the equipment but otherwise not part of the working piece of equipment (i.e., hammers, drills, ladders, flux pens), postage, telephone, copying, gas cylinder rentals, warranties, freight that is separately billed, general or office supplies, custodial charges, consumable items such as chemicals/reagents/gases, items that are used up in the fabrication process, and items that are available for use on other projects. These costs are allowable on the project but are not part of the capital costs of the fabricated equipment. They will likely be moved to the Parent upon closeout.
   

Upon completion of the fabrication reach out to the Sponsored Programs Office or Financial Operations for assistance in transferring the fabrication in expenses to capital equipment expenses so that the item can be recorded in the university asset management system.

Contacts: 

• Sponsored Programs Project/Grant Coordinator for the Fabrication Sub project/grant
  Plant fund team in Accounting Operations at [email protected]
  Property Control at [email protected]

   

Equipment Trade-ins

A department/unit identifies the need/desire to trade in equipment towards the purchase of new equipment. They should contact Procurement who will work with them and the supplier to obtain the proposal for the trade-in. Procurement will perform the following steps to ensure the university and department receives a fair price for the trade-in and new piece of equipment. 

• Contact Property Control to obtain clearance for all sponsor funded equipment (any equipment purchased on funds 20000 or 25000) that is to be traded in.  No sponsor titled equipment can be traded in.
• Contact Property Disposition to obtain a Fair Market Value (FMV) analysis of the equipment being traded in after receiving clearance from Property Control and negotiate with supplier to settle on a fair trade-in value based on the FMV.
• A trade in form is required when trading in equipment to a supplier.  For instructions on completing this form, please refer to the Trade-In (KB)
• Send all supporting documentation (DOS, FMV, New PO #) to Financial Operations, where the equipment that was traded-in can be removed from the asset management system and the newly purchased equipment added to asset management.
   

Equipment Warranty Swaps

An even warranty swap occurs when a piece of capital equipment (tagged asset) malfunctions or needs repairs that are covered under the warranty, obtained at purchase.  The following steps are required to ensure the capital equipment asset records are updated appropriately.

• Contact the manufacturer to facilitate the warranty exchange with your department
• Notify Property Control that a warranty swap is occurring
• Property Control will follow up near the estimated delivery day
• Property Control will send a tagger to tag the equipment and update the asset management system with the new information.
• Contact Property Control with any questions at [email protected].
   

Equipment Transfers between University Departments:

To process equipment asset transfers between university departments the following steps are required.

1. Complete the asset transfer form (in the Resources section of the page)
2. Obtain an email between both departments acknowledging the release and receipt of the equipment being transferred
3. Send an email to [email protected] with the asset transfer form and approval email between the departments attached.
   Once the above information is received and confirmed, Financial Operations will process the transfer in the asset management system.
    

What to do with Equipment claim checks from Insurance and Claims Administration (Risk Management):

When an item has been destroyed (theft, fire, flood, etc.), a claim through Insurance and Claims Administration should be processed.  Refer to Insurance and Claims Administration’s Property Insurance Coverage website for more details.  Property insurance coverage covers property losses associated with all campuses. Coverage provides for University of Michigan Owned or Leased Property – Replacement cost or actual cash value of equipment will be reimbursed upon receipt of a properly submitted claim.  Claims checks should be deposited to the Chartfields in which you are purchasing replacement equipment at account code 620130 to allow for proper accounting by Financial Operations within the general ledger and the asset management system.

Financial Operations needs proper documentation of a successful claim to remove an asset from service.  Please send the following documentation to [email protected] for processing:

• A copy of the claim form from Insurance and Claims Administration
• A completed DOS form with Insurance and Claims Administration Short Code 947944 for the Credit if sold
• Cash Receipt Number for the deposit of the claim check
• Equipment tag number
• PO number for the replacement equipment, if the equipment was replaced
   

How to Handle Affiliate-Related Assets:

The information below establishes guidelines around how to handle assets owned by affiliates of the University of Michigan as well as assets owned by the university but housed in affiliate space.  There are several possible scenarios surrounding these types of assets to be addressed.

Affiliate owned assets in affiliate owned space:

• All assets will be recorded on the affiliates balance sheet and income statement as appropriate.
• No assets will be recorded in the university’s asset management system.
• Asset stewardship is the responsibility of the affiliate

Affiliate owned assets in university owned space:

• All assets will be recorded on the affiliates balance sheet and income statement as appropriate.
• No assets will be recorded in the university’s asset management system.
• Asset stewardship is the responsibility of the affiliate
   

University owned assets in affiliate owned space:

• All assets will be recorded on the university’s balance sheet and income statement as appropriate.
• All assets will be recorded in the university’s asset management system.
• The departments owning the assets are to follow university policies regarding equipment.
  • Proper recording of purchases in the general ledger as well as in asset management
  • Proper stewardship of assets through the inventory management process
    • Location of assets in an affiliated maintained space must still be inventoried according to university policy.
    • Arrangements may be made with the affiliate in question to handle inventory and other needs on a case-by-case basis.
  • Proper disposal of assets by following the University’s Asset Management Equipment Retirement policy