Funds received from federal grants may be used to purchase fixed assets, if allowed by the awarded federal grant contract. When the fixed asset is no longer needed for the project funded by the grant, the fixed asset may be disposed. In the following excerpts (shown in italics below) from
Federal Grants Management Handbook, guidelines for the disposal of such assets are outlined:
Real Property includes buildings, land (including improvements), and structures.
If a grantee can no longer use the real property, the federal agency will direct the grantee to:
- Sell the property and pay the federal agency its share of the proceeds according to matching or cost-sharing ratios;
- Retain the property and pay the agency its share of the market value of the property; or
- Transfer title to the federal agency and receive its share of the market value.
Equipment includes tangible personal property having an acquisition cost in excess of $5,000 and a useful life of more than one year. (Note that Central Michigan University expenses purchases of tangible personal property with an acquisition cost of less than $5,000 as a low value asset at the time of purchase.)
If... the current market value of the equipment is less than $5,000, the grantee may sell or retain it without compensating the federal government. If the property is worth $5,000 or more, a grantee has several options from which to choose (see the
Federal Grants Management Handbook for more details). However, (
I)n absence of instructions from the awarding agency within 120 days after the end of federal support of the project, grantees may either retain or sell the equipment and pay the federal agency their share of the market value. A grantee can sell the equipment and pay the agency its share of the proceeds, which, in the case of a university, is the proceeds, less the greater of $500 or 10%, whichever is less.
Central Michigan University Accounting Services will review the disposal of fixed assets annually to determine if proceeds from the sale of any fixed assets must be remitted to the federal agency that originally awarded the funds.