Equipment

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 of the following criteria on a per item basis:

  • Cost at or exceeding $5,000
  • Useful life of two or more years
  • 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 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)

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.

Account Account Description Account Long Description
614000 Equipment -greater than $5,000 To record assets that cost $5,000 or more, with a useful life exceeding two years.
614030 Equipment Cost Distribution To record the cost of equipment purchased by two or more separate chartfields.  The chartfields contributing the greatest share towards the purchase price of the equipment is charged for the entire cost of the asset at an equipment account other than 614030, usually account 614000.  The same chartfields are credited at 614030 for the amount of all other contributions by all other chartfields.   The other chartfields are debited at 614030 to record their share of the cost of the purchase.  If there is a Federal Project/Grant involved the entire cost must be charged to the Federal Grant and cost shared from there.
614020 Prefabricated Structures Account to track the expenses for prefabricated structures.  
614050 Software > $500,000

To record cost of software that is greater than $500,000, to be capitalized.

If software is developed internally the costs should be recorded in the fund 81000 (Construction – Info Tech) or 81500 (Construction – Hospital IT) using the proper accounts for capital versus non-capital.  Further discussion on internally developed software is provided in a separate document.
614060 Equip Fabrication-Spon Only To record the non-labor cost of fabrications that is estimated to exceed $5,000. Upon completion of the fabrication, the total cost should be re-accounted to 614000 to be capitalized and included in the equipment inventory.  A set of separate chartfields is established to accumulate all non-labor costs. This account is generally used in Sponsored Funds but can be used in the Current Funds with consultation from Financial Operations.
614210 Equip – Upgrade Existing Equip To record cost of upgrades that increases the value and performance of a piece of equipment.  This will be added to the original cost of equip >$5K.  Minimum threshold of $5,000 per upgrade component.
614240 Equip – Federal Accountability To record equipment, whose title may revert under some named condition to an outside sponsor, usually a federal agency.
614300 Sponsored Owned Equipment To record costs of equipment purchased by the university, but title will rest with a sponsor.   Use of the equipment will remain with the intended project until the sponsor calls for it. Items will not be added to the U-M Asset Management System but will be monitored by Property Control
614330 Sponsor Owned Equip – Fab To record cost of a component that is added to the original piece of equipment or is a component of the original equipment owned by the sponsor.
615570 Musical Instruments> than $5k To record musical instrument purchases that cost $5,000 or more per unit, with a useful life exceeding two years.

 

Purchasing Category Codes 

Category Code Category Description Account Account Long Description
EQPCL Equipment – Capital Lease 614105 To record and track all capital lease expenses. A capital lease is defined as purchase of a capital item on a payment plan
EQPCM U-M Equip Owned Fab – Spon Only 614060 To record the non-labor cost of fabrications that is estimated to exceed $5,000.  This account is to be used for Sponsored Funds only.
EQPFA Equip – Federal Accountability 614240 To record equipment, whose title may revert under some named condition to an outside sponsor, usually a federal agency.
EQPMS Equipment Operating Leases 614120 To record and track lease monthly payments.
EQPMT Equipment 614000 To record assets that cost $5,000 or more, with a useful life exceeding two years.
EQPNI Clinical Equip Need Inspection 614100 To record costs of Health System capital equipment that needs inspection prior to patient service use by departments.
EQPPR Equipment Partial Replacements 614180 To record costs of a replacement, for a part that wears out or breaks within the original piece of equipment.  This cost is not added to the original cost.  Minimum threshold is $2,000.
EQPSC Sponsor Owned Equip – Fab 614330 To record cost of a component that is added to the original piece of equipment or is a component of the original equipment owned by the sponsor.
EQPSO Sponsored Owned Equipment 614300 To record costs of equipment purchased by the university, but title will rest with a sponsor.   Use of the equipment will remain with the intended project until the sponsor calls for it.
EQPTP Third Party Owned Equipment 614320 To record costs of equipment owned by a third party, purchased on federal projects.  Title will rest with a third party upon completion of the project.
EQPUE Equip – Upgrade Existing Equip 614210 To record cost of upgrades that increases the value and performance of a piece of equipment.  This will be added to the original cost of equip >$5K.  Minimum threshold of $5,000 per upgrade component.
EQPXE Xerox Equip Equity Payment 614090 To record lease payments related to the lease agreement program we have for printer and copiers.
GENMU Musical Instruments 615570 To record the purchase of musical instruments that cost $5,000 or more, with a useful life exceeding two years.

 

Computer Clusters

Definition of a Computer Cluster: A computer cluster is comprised of a master unit and combined units (“nodes”) that function together as parallel computing units to serve a specific purpose.  These nodes may individually cost less than $5,000 but more than $5,000 when aggregated. 

In order to capitalize a computer cluster, all of the following criteria must be met:

  1. One computer unit will be designated as the master unit and added to asset management as a parent asset.  That unit will be assigned a tag number, which will be affixed to it;
  2. The nodes are interconnected and work together to serve a specific purpose, with the expectation that all nodes in the combined unit remain with the master unit and are not to be interchanged with other clusters;
  3. The nodes of a cluster are physically located together in a single location, rather than distributed within a building or multiple buildings (See point 2 above);
  4. A clear reason for the use and acquisition of the cluster exists.  If a cluster is being purchased on a sponsored project, the reason for the use and acquisition must be documented in the grant proposal budget justification.  If funds are being re-budgeted after an award has been made to purchase the cluster, the reason for use and acquisition must be documented either in a re-budgeting request to the funding agency or in the grant file maintained with the department and Sponsored Programs;
  5. The intent of the computer cluster is to operate for a minimum of 5 years (the current useful life of computers);
  6. The title to the equipment must vest with the University of Michigan.  Sponsor titled equipment is not tracked within the universities asset management system.
  7. Units are required to provide Property Control with the serial numbers of the master unit as well as all nodes.

Upgrades to Computer Clusters: Once a computer cluster has been established, additional nodes and related components can be added to the existing cluster.   This does not include replacing a computer that already exists within the cluster.  These additional nodes will be added costs to the existing cluster as a child asset to the parent asset of the main cluster if all of the following criteria are met:

  1. Cost of the upgrade is at least $5,000 per unit (current equipment upgrade threshold);
  2. Addition contains at least one node;
  3. Addition meets the original cluster criteria;
  4. Relationship to master unit or parent asset is identified on the Purchase Order (PO).
  5. Units are responsible to inform Property Control of serial numbers of the master unit as well as all nodes.

The upgrades will be assigned non-tag numbers in the asset management system as a child asset of the master unit or parent asset for tracking purposes only.

Disposal of Computer Clusters: Below is a list of options for disposing of computer clusters and related components.  If a unit is unsure of which parent and child assets they have ownership of, it can be reviewed via a departmental inventory listing available from Property Control at propertycontrol@umich.edu.

  1. When the computer cluster has exhausted its usefulness and both the master unit and all nodes are to be disposed, the standard disposal process is to be followed, which includes filling out a Declaration of Surplus (DOS) form and sending it to Property Disposition.  Documentation should include all relevant tag numbers for each item being disposed.
  2. When only the master unit is in need of replacement due to age or mechanical issues the proper disposal methods should apply.  Any nodes remaining to be attached to a new master unit must be communicated to amtransfers@umich.edu so that they can be transferred to the new master unit.
  3. When a singular node or child asset is in need of disposal, the standard disposal process is to be followed, which includes filling out a Declaration of Surplus (DOS) form and sending it to Property Disposition.  Documentation should include all relevant tag numbers for all items being disposed.

Equipment Transfers between University Departments:

To process equipment asset transfers between university departments, send an email to amtransfers@umich.edu and include the asset transfer form (in Resources section of page) and an email between both departments acknowledging the release and receipt of the equipment being transferred, which will provide Financial Operations the information needed to process the transfer in the asset management system.

What to do with Equipment claim checks from Risk Management:

When an item has been destroyed (theft, fire, flood, etc.), a claim through Risk Management should be processed.  Refer to Risk Management’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 Chartfield 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 amtransfers@umich.edu for processing:

  • A copy of the claim form from Risk Management
  • 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