Only items costing $5,000 or more and having a useful service life of one year or more should be listed in the equipment line. Please keep in mind that the item must meet both criteria to be considered equipment. If both criteria are not met, the item will be budgeted as a material/supply. Cost estimates should include shipping charges and identify each piece of equipment with a corresponding cost. Provide a generalized specification and justify the need for the equipment in relationship to the statement of work (why do you need the equipment). Please be aware that these costs are subject to inflationary pressures and budget accordingly. For example, if you are conducting a study that requires a pick up truck capable of hauling a 3/4 ton of bio materials several times per day from a farm to a field lab and such a vehicle is not already available for use on your project, then instead of just writing “Need a truck for field work – $30,000” incorporate a reasonable explanation and generalized parameters so the reviewer can better understand the construct of your budget. A better presentation would be:

Note: The NC State DS-2 CAS Disclosure Statement, which sets forth the capitalization threshold and treatment of capitalized costs, supersedes sponsor guidance to the contrary. As such, it may be necessary to reconcile through the budget narrative the budgeting process and how the funds will actually be managed in the financial accounting system.

For example, Personal Computers, which are allowable costs to include in sponsored project budgets, rarely cost more than $5,000. As such, they will not be treated as an equipment item at NC State. In RARE circumstances, however, a sponsor may still promulgate inclusion of certain items in the equipment category those costs over a value less than the NC State $5,000 threshold, University accounting recommends to include the item in the Materials and Supplies category and include in your budget justification the reason you have presented the budget in this manner. A good example is as follows:

“[FIRST DESCRIBE THE CHARACTERISTICS OF THE PC, THEN…] A Personal Computer is necessary to carry out X, Y, and Z efforts under this project. Because the personal computer may also be used for A, B, and C efforts over the course of the project and these efforts may or may not be directly attributable to this effort, we request that XX% of the total cost be covered by [SPONSOR]. Also note that because NC State, under our federal cost accounting disclosure statement must treat as equipment only those items that meet certain other capitalization qualifications AND meet or exceed $5,000 in cost, the [pro rata] cost of this Personal Computer is included in the Supply category of the budget.”

Fabricated Equipment

Fabricated equipment is defined as an item of equipment that is built or assembled in its original form from individual parts by a PI and/or other sponsored project personnel, an internal shop, or an external shop. When a completed item of fabricated equipment has an aggregate cost of $5,000 or more, when its service life is longer than one year, and when that item will be recorded as capital equipment in the University’s capital asset management system, the individual component costs associated with the fabrication (regardless of the individual amounts) will not be assessed the Facilities & Administrative (F&A) rate. However, fabricated equipment costs do not include routine maintenance and repair costs associated with a piece of fabricated equipment.  Furthermore, equipment that is fabricated as a deliverable to the sponsor where title to the finished product will be transferred to the sponsor should include F&A charges. An instance where components are simply connected together in a system, such as when individual computers and servers are joined to create a network, does not constitute a fabrication.

Fabricated equipment must be identified prior to acquisition of component parts. Please note the fabricated equipment deliverable in the statement of work.  In the budget justification, specific guidance concerning the fabricated equipment should include:

  1. The specific relationship the activity will have with the performance of the overall project scope,
  2. How the component costs will be accounted,
  3. The anticipated functionality,
  4. The value of the finished fabrication, and
  5. The expected ownership vesting of the equipment.

Costs that should be budgeted and charged to a sponsored account include materials and supplies necessary for the fabrication, as well as any internal or external shop service fees. Although project personnel may participate in the fabrication, their salaries will not be exempt from the F&A rate assessment. Only labor costs that are implicit in the internal or external shop rates will be F&A exempt. Labor, travel, and other costs associated with the services of an outside party in a fabrication should be incorporated in the external shop service fees.

If a fabricated equipment item will have an aggregate cost of less than $5,000, the individual costs for all acquisitions are subject to the relevant F&A rate. If you initially anticipate that the total fabrication will cost more than $5,000 and as such exempt the individual components from F&A but the final product ends up aggregating to less than $5,000 then all component costs will then be subject to F&A.

Once your project is funded and you begin procuring fabricated equipment components, you will charge those individual costs to the equipment account code series (5000 series) but you will need to make a special notation on invoices prior to sending them to accounts payable. You must consult with your college business office prior to incurring fabricated equipment component costs so as to avoid administrative errors.

Remember: If ownership of the final product is to transfer to the sponsor, the F&A rate applies to the individual fabrication components.

For specific guidance on this matter call SPARCS at 515.2444 or email