What to Do with Equipment Purchased Using Federal Grant Funds
When a federally funded project comes to an end, organizations often ask: What happens to the equipment we bought using those grant dollars? Can it be kept? Sold? Reused? The answer lies in a key compliance concept known as equipment disposition.
Understanding how to handle equipment at the end of a grant is essential for remaining compliant with federal regulations—especially those outlined in 2 CFR Part 200, also known as the Uniform Guidance. This post breaks down the rules, thresholds, and best practices you need to know to properly manage federally funded equipment.
What Is Equipment Disposition?
Equipment disposition refers to the process of determining what to do with equipment acquired with federal funds after it's no longer needed for the original grant project—or for any other federally supported activity.
Even if the grant has been closed out, federal agencies retain an interest in equipment purchased with their funds. That means you can’t simply keep or dispose of the items without following the appropriate steps. The value of the equipment, when it was purchased, and what it’s worth now all play a role in what you're allowed to do.
What Qualifies as “Equipment”?
According to 2 CFR 200, equipment must meet three criteria:
Tangible personal property (i.e., something you can physically touch),
Useful life of more than one year, and
Acquisition cost of at least $5,000 per unit for grants issued before October 1, 2024, or $10,000 per unit for grants issued on or after October 1, 2024.
If the item doesn’t meet these criteria, it is treated as supplies, and different rules apply.
When Is Disposition Required?
If your organization no longer needs the equipment for:
The original grant project, and
Any other federal award or program,
then you are required to follow disposition rules. This applies even if the equipment is still in your possession after the grant has closed.
If Equipment Is Worth Less Than the Threshold
Here’s some good news: If the fair market value (FMV) of the equipment is less than or equal to $10,000 (or $5,000 for older grants), you have more flexibility.
You may:
Retain the equipment,
Sell it, or
Dispose of it,
without needing to repay the federal government or request instructions—as long as the FMV is under the applicable threshold.
Important: Use a reasonable method to determine FMV, such as depreciation schedules or resale comparisons, and document everything. Don’t use the original purchase price—use the current value at the time of disposition.
Example:
An organization bought laptops for a training program funded by a federal grant that started after October 1, 2024. At the end of the program, the laptops are now worth $8,000. Since the FMV is below $10,000, the organization can sell or keep them without needing to notify the agency, as long as they document the process.
If Equipment Is Worth More Than the Threshold
If the fair market value exceeds $10,000 (or $5,000 for older grants), additional steps are required. The federal agency’s share of the equipment’s current value must be considered.
You typically have two options:
1. Sell the Equipment
You must return the federal share of the proceeds from the sale. That share is based on how much the agency contributed to the original purchase.
You can deduct selling and marketing expenses, which are capped depending on the grant’s issue date:
Up to $1,000 for grants issued after October 1, 2024,
Up to $500 or 10% of the sale price (whichever is less) for grants issued before October 1, 2024.
2. Retain the Equipment
You may keep the equipment but must reimburse the federal agency its proportional share of the current fair market value.
Example:
An organization buys lab equipment for $100,000. The federal grant covered 80% of the cost. Years later, the FMV is $20,000.
The federal share is 80% of $20,000 = $16,000.
If sold, and the allowable marketing cost is $1,000, the agency is owed $15,000.
If kept, the organization must pay the agency $16,000.
A Third Option: Transfer
In some cases, you may be instructed to transfer the equipment to:
The federal government, or
An eligible third party (e.g., another nonprofit, state agency, or a federal entity),
If this happens, your organization may be entitled to compensation for your share of the fair market value.
When No Instructions Are Provided
If the grant does not include specific guidance about disposition, you must:
Follow the Uniform Guidance in 2 CFR 200, and
Contact your funding agency for further instructions.
Silence in your grant award does not mean you’re free to act as you choose. Agencies may have stricter requirements than the federal minimums, so always review your grant’s terms and conditions thoroughly.
Best Practices for Compliance
To stay compliant and audit-ready:
Track all equipment purchased with federal funds. Keep a detailed inventory including cost, funding source, condition, location, and use.
Determine FMV using reasonable methods and document it.
Maintain an audit trail for all disposition decisions.
Review grant terms and your organization’s internal policies. If your policies set a lower threshold (e.g., $2,500), follow the more restrictive rule.
Contact the funding agency if you’re ever unsure.
Final Thoughts
Equipment disposition is not just a financial or logistical task—it’s a compliance requirement. By understanding the thresholds, documenting decisions, and following both federal and internal policies, your organization can close out grants properly while avoiding costly mistakes.
Remember: Equipment remains "federal" until all disposition steps have been completed.
🎧 Want to explore this topic in more depth?
Listen to the full podcast episode here.
It’s packed with clear examples, detailed breakdowns, and practical advice to help you stay compliant and confident.
