Why Property Management Matters
When you purchase tangible assets with federal funds, the federal government retains an interest in those assets for the duration of their useful life. This means you cannot simply buy equipment, use it for the grant period, and then do whatever you want with it. The Uniform Guidance establishes specific requirements for how property must be managed, tracked, used, and ultimately disposed of. Failure to comply with these requirements can result in audit findings, cost disallowances, and an obligation to return the federal share of the property's value.
For healthcare organizations, property management is particularly relevant for medical equipment, IT infrastructure, vehicles, and clinical facilities. The distinction between equipment and supplies, the inventory requirements, and the disposition rules all have practical implications for how your organization manages its physical assets.
Equipment vs. Supplies: The $5,000 Threshold
The Uniform Guidance draws a critical distinction between equipment and supplies, because each carries different management obligations.
| Category | Definition | Key Requirements |
|---|---|---|
| Equipment (§200.1) | Tangible personal property with a per-unit acquisition cost of $5,000 or more and a useful life of more than one year | Inventory tracking, physical safeguards, disposition approval, federal interest |
| Supplies (§200.1) | All tangible personal property other than equipment (per-unit cost below $5,000 or useful life of one year or less) | Standard accounting records; no special tracking requirements |
| Computing Devices | Machines used for acquiring, storing, processing, and publishing data — classified as supplies regardless of unit cost if essential and allocable | Treated as supplies for purposes of charging to awards |
Organizations may use a lower capitalization threshold than $5,000 if that is their established policy. For example, if your organization capitalizes assets at $2,500, then all tangible personal property costing $2,500 or more with a useful life exceeding one year would be treated as equipment for purposes of 2 CFR 200 compliance. However, you may not use a threshold higher than $5,000 for federal award purposes.
Title and Ownership (§200.313)
Title to equipment acquired with federal funds vests in the non-federal entity — meaning your organization owns the equipment, not the federal government. However, this ownership comes with significant conditions. The equipment must be used for the authorized purposes of the project during the period of performance, and the federal government retains a conditional interest in the equipment that does not end when the grant ends.
During the period of performance, the equipment must be used in the program or project for which it was acquired. When the equipment is no longer needed for the original project, it may be used for other activities supported by the same federal agency, then for other federally-funded activities, and finally for non-federal activities — in that order of priority. The organization cannot sell, trade, or dispose of the equipment without following the disposition procedures described below.
Equipment Management Requirements (§200.313(d))
Organizations must maintain a property management system that includes all of the following elements for equipment acquired with federal funds:
- Property records — a description of the property, a serial number or other identification number, the source of funding (including the FAIN), who holds title, the acquisition date, the cost, the percentage of federal participation in the project cost, the location, use, and condition of the property, and any ultimate disposition data including the date of disposal and sale price
- Physical inventory — a physical inventory of the property must be taken at least once every two years and reconciled with the property records
- Control system — a control system must be in effect to ensure adequate safeguards to prevent loss, damage, or theft. Any loss, damage, or theft must be investigated
- Maintenance — adequate maintenance procedures must be in place to keep the property in good condition
- Disposition procedures — proper sales procedures must be established to ensure the highest possible return
Disposition of Equipment (§200.313(e))
When equipment acquired with federal funds is no longer needed for the original project or other federally-funded activities, the disposition rules depend on the current fair market value (FMV) of the item:
| Condition | Action Required |
|---|---|
| FMV of $5,000 or less per item | The organization may retain, sell, or otherwise dispose of the equipment with no further obligation to the federal agency |
| FMV exceeds $5,000 per item | The organization may retain or sell the equipment but must compensate the federal agency for its share. The federal share is calculated as the percentage of federal participation in the project cost multiplied by the current FMV or sales proceeds |
| Transfer to federal agency | The organization may transfer title to the federal government or a third party designated by the federal agency, and the organization is entitled to compensation for its non-federal share |
Real Property (§200.311)
Real property — land, buildings, and improvements to land or buildings — acquired with federal funds is subject to more restrictive conditions than equipment. Title vests in the non-federal entity, but the property must be used for the originally authorized purpose as long as needed for that purpose. The organization cannot dispose of or encumber the property without approval from the federal awarding agency.
When real property is no longer needed for the originally authorized purpose, the non-federal entity must obtain disposition instructions from the federal awarding agency. Options include:
- Retaining title after compensating the federal agency for its share of the current fair market value
- Selling the property and compensating the federal agency for its share of the proceeds (after deducting allowable selling costs)
- Transferring title to the federal agency or a designated third party
Intangible Property (§200.315)
Intangible property includes patents, copyrights, trademarks, and trade secrets acquired or produced under a federal award. The federal government reserves a royalty-free, nonexclusive, and irrevocable right to reproduce, publish, or otherwise use — and to authorize others to use — copyrighted work developed under a federal award for federal purposes.
For software developed under federal awards, the organization holds the copyright but must grant the federal government a license to the software. Research data produced under federal awards may also be subject to access and sharing requirements. Organizations should review the specific terms of their award for any additional intellectual property provisions.
Insurance Requirements (§200.310)
The non-federal entity must provide equivalent insurance coverage for real property and equipment acquired or improved with federal funds as it provides for property acquired with its own funds. If the organization does not insure its own property, it may be required to insure federally-funded property if the federal awarding agency determines that the risk is significant.
This provision requires that federally-funded property not be treated as less valuable than other organizational property. If your organization carries comprehensive insurance on its own vehicles, it must carry equivalent coverage on vehicles purchased with federal funds.
Supplies (§200.314)
Supplies have much simpler management requirements than equipment. Title to supplies acquired with federal funds vests in the non-federal entity upon acquisition. If there is a residual inventory of unused supplies exceeding $5,000 in total aggregate value upon termination or completion of the federal award, the organization must compensate the federal agency for its share or use the supplies for other federal projects.
For most healthcare organizations, the supply provision is relevant primarily at closeout. If your organization has a large inventory of unused medical supplies or office supplies purchased with federal funds at the end of the grant, you should account for them as part of the closeout process.
Practical Considerations for Healthcare Organizations
Medical Equipment
Healthcare organizations frequently purchase medical equipment (diagnostic imaging, laboratory equipment, dental chairs, telehealth systems) with federal grant funds. Each piece of equipment meeting the $5,000 threshold must be tracked in the property management system with all required data fields. When equipment serves multiple programs, the allocation methodology must be documented and the equipment records must reflect all funding sources.
IT Infrastructure
Electronic health record (EHR) systems, network infrastructure, and cybersecurity equipment purchased with federal funds are subject to the same property management requirements. Computing devices under the $5,000 threshold are treated as supplies, but servers, networking equipment, and other hardware above $5,000 are equipment. Organizations should ensure their IT asset management system captures the federal property data elements required by §200.313(d).
Vehicle Management
Mobile health units, outreach vehicles, and patient transport vehicles purchased with federal funds require property records, biennial inventory, insurance coverage, and disposition approval. Vehicle use logs should document that the vehicle is being used for the federally-authorized purpose, particularly if the vehicle might also be used for non-federal activities.
Property management intersects with several other compliance areas. For guidance on purchasing property, see our procurement standards chapter. For cost allowability of equipment and supplies, see cost principles. For property reporting at the end of an award, see closeout requirements.