Lesson 87 · The Grant Architect

87. Equipment Vs. Supplies

30 min

By the end you'll be able to

  • Apply the federal definition of equipment (per-unit cost and useful life).
  • Classify tangible purchases as equipment or supplies.
  • Explain the procurement and property management implications of the classification.
  • Recognize the indirect cost recovery consequence of misclassification.

Equipment versus supplies is a classification problem with real financial consequences. Under 2 CFR 200 (as of November 2025), equipment is tangible personal property with a useful life of more than one year and a per-unit acquisition cost of 5,000 and one year.

You will learn why the classification matters beyond labeling. Equipment is excluded from the Modified Total Direct Costs base, so it does not generate indirect cost recovery. It triggers property management requirements: tagging, inventory, biennial physical inspection, screening for existing federally-owned items before purchase, and disposition rules at the end of the award. Equipment purchases above 7,500 instrument as a supply inflates indirect recovery (a finding) and evades property controls (a second finding from the same line).

By the end you should be able to look at any tangible purchase, apply the dollar-and-life test, classify it correctly, and write a budget justification that names the item, the unit cost, the useful life, and the role it plays in the funded work. Get this right and procurement, property management, and indirect recovery all flow correctly downstream.

Common mistakes

These are the traps learners hit most often on this topic. Knowing them in advance is half the fix.

  • Using a recipient threshold above the federal floor.

    The recipient may set a lower threshold, but never higher than $5,000. Internal policies that quietly raise the floor produce equipment that escapes property management.

  • Splitting an equipment purchase into smaller invoices.

    Invoice splitting to keep individual line items below $5,000 does not change the classification of a single asset and reads as evasion to an auditor.

Practice problems

Try each on paper first. Click Show solution only after you've made a real attempt.

  1. Problem 1
    Classify each purchase as equipment or supplies, with reasoning. (1) Laptop, 42,000, expected life 10 years. (3) Reagent kit, 4,800, expected life 5 years.
    Show solution

    (1) Laptop at 5,000), sits in MTDC, no property management beyond internal policy. (2) Spectrometer at 5,000, life over one year), excluded from MTDC, full property management applies, may trigger competitive procurement. (3) Reagent kit at 4,800, supplies under the federal floor (below $5,000), sits in MTDC, but the recipient may apply a lower internal threshold that reclassifies it as equipment for tracking purposes.

Practice quiz

  1. Question 1
    What is the federal definition of equipment under 2 CFR 200 as of November 2025?
  2. Question 2
    Why does equipment NOT generate indirect cost recovery under MTDC?
  3. Reflection 3
    In one or two sentences, explain why misclassifying a $7,500 instrument as a supply produces two simultaneous audit findings.

Lesson 87 recap

Equipment is tangible personal property with a useful life over one year and a per-unit cost of $5,000 or more. Misclassification produces simultaneous findings in indirect recovery and property management.

Coming next: Lesson 88 — AI Spotlight

Week 8 closes with an AI Spotlight: how to use AI safely for budget modeling, calculation checks, and justification drafting.

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