- Purchase of Equipment on Federal Subawards
- Sponsor-UW-Subrecipient Relations
- Federal Government Typically Retains Equipment Ownership
- Subaward Template is Misleading
- Approval for Equipment Purchases
- What This All Means
- Subrecipient's Equipment Replacement
- Partial Purchasing
Outlined below are a number of factors to consider if a subaward issued under a federal (prime) award includes the cost of equipment. While this is written specifically for federal awards, the same concepts may apply for any subaward, depending upon the Sponsor’s requirements.
The Sponsor has issued the Award to the UW. The Sponsor is placing the responsibility for all Award funds, including the funds issued to the subrecipient, to the UW as the Pass-through Entity. Thus, UW has the responsibility of monitoring and managing the subrecipient’s purchases and activities.
Award compliance requirements (agreement clauses, sponsor regulations) all “flow down” to the subrecipient in the subaward agreement. It is the UW’s responsibility to ensure that the subrecipient complies with those requirements.
This means that:
- If there is an issue with the subrecipient, the UW – not the Sponsor – needs to resolve the issue.
- Any approvals required in the Subaward are the responsibility of the UW. If the Sponsor needs to approve an expense, it is the responsibility of the UW to obtain that Sponsor approval prior to approving such Subrecipient requests.
Federal regulations on equipment can be found at (2 CFR 200.313) . In summary, this regulation says:
- Title to equipment purchased on a federal award vests with the recipient (in this case, the UW). This means the UW is responsible for inventory of the equipment and including the equipment in its inventory reports to the Sponsor.
- Unless stated otherwise in the Award or by the federal agency, title is conditional which means:
- The federal sponsor has the rights to the equipment, which includes returning the equipment to the federal sponsor.
- The equipment must be made available for other federal programs during the period of the Award.
- Sponsor approval must be obtained to dispose (donate, sell, surplus, destroy) the equipment.
- This Conditional Title applies for the life of the equipment, which is typically longer than the award period.
Only the federal sponsor can relinquish title to equipment. The Sponsor can give unconditional title to either the UW or the subrecipient only upon written instruction – either as part of the award agreement or post-award – from the sponsor’s designated official.
The UW is part of the Federal Demonstration Partnership (FDP) and uses the FDP subaward template to issue agreements under certain federal awards. The template states that Title to any equipment purchased on the subaward rests with the subrecipient and refers to CFR 200.313. This is misleading because, as explained above, the title is conditional.
Attachment 2, Appendix A of the subaward template says, “In the event of a discrepancy between the Prime Award Terms and Conditions and the Terms included in the Research Subaward Agreement, the Prime Award Terms and Conditions language shall take precedence.” Which means that the sentence about title being with the subrecipient is superseded by the terms and conditions of the prime award. This means that unless the federal sponsor has stated specifically in writing (as part of the Award, federal agency regulations or other written communication) that title to the equipment is with the subrecipient, then title to the subrecipient is conditional and the federal agency retains control of the equipment as described in the previous section.
Standard federal regulations (2 CFR 200.439 (b) (2)) require sponsor approval for all equipment purchases. Sponsor approval must be obtained even if the equipment is purchased by the subrecipient.
Approval can be obtained in two ways:
- By itemization of the equipment in the subrecipient’s proposal budget, submission of the budget to the Sponsor, and the Sponsor’s full funding of the proposal budget; or
- Written sponsor approval obtained post-award.
If post-Award approval is required, then it is the UW (not the subrecipient) that seeks approval from the Sponsor. Remember there is no relationship between the subrecipient and the Sponsor.
A federal sponsor may waive or limit equipment purchase approval requirements. This can be done in one of three ways:
- the sponsor is party to the federal Research Terms & Conditions (RTC
- the sponsor stated in the award that equipment approval is not required; or
- Sponsor regulations waive or limit equipment purchase approvals. For example, some federal sponsor regulations state that approval is only required for equipment purchases over $25,000.
If the sponsor has waived or limited equipment purchase approval, then those waivers or limitations “flow down” through the UW to the Subrecipient in the subaward. If the Sponsor has waived equipment purchase approval, then the UW does not have to provide approval. However, UW can require approval for equipment purchases by including it in the subaward agreement. The subaward agreement can be more (never less) restrictive than the prime award.
Unless the federal sponsor has stated otherwise in writing, the following is typically the case for equipment purchased on a subaward:
- Conditional title is with the subrecipient
- The federal government has full title (rights to the equipment)
- The UW would be responsible to the federal government for the equipment for the life of the equipment, even though possession of the equipment is with the subrecipient.
- The UW would need to include the equipment in its inventory and notify the federal government if the equipment was lost, destroyed or otherwise no longer available for use.
- The UW would be responsible for ensuring that any necessary purchase approvals have been obtained
A subrecipient may request to re-budget subaward funds to purchase equipment used on the subaward. This can happen when the subrecipient's own equipment breaks or needs to be replaced. The issue with this is that the subrecipient was issued the subaward and the amount of funding with the understanding that the subrecipient had the necessary equipment to do the work. If the subrecipient needs new equipment, it is the responsibility of the subrecipient to replace the equipment; it should not be a case where the work cannot continue without new equipment.
Subrecipients may suggest that they can pay for part of the equipment. While this sounds like a generous offer, it actually creates more problems. We then have a case where two entities – the subrecipient and the federal Sponsor – partially own the equipment. This results in issues of who has title, who approves disposition, etc. It is highly recommended that there always only be a single entity or award that is purchasing a piece of equipment.