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5.30 Fabricated Equipment

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Policy Information

Policy Number: 5.30 Effective Date: 03/21/2022
Responsible Unit: Property Management Last Revised Date: 6/30/2023
Email:  FNSV-PropertyManagement@arizona.edu Phone: 520-621-8609

Purpose and Summary

The purpose of this policy is to define what can be considered a Fabrication and to provide direction to University of Arizona (University) departments on cost accounting for Fabricated Equipment.

Note: Equipment fabricated with the intent to deliver to a sponsor upon completion is considered Deliverable Equipment and is covered under PMM 5.10.

Source

Arizona Board of Regents Policy, including but not limited to: 3-801 and 3-802
Public Law 100-679 (41 U.S.C. 1502)

Applies only to equipment purchased on sponsor funds or furnished by a sponsor: 

  • Government Property, 48 C.F.R. § 45
  • Government Property, 48 C.F.R. § 52.245-1
  • Government Property, 48 C.F.R. § 245
  • Government Property, 48 C.F.R. § 1852.245
  • Uniform Guidance, 2 C.F.R. § 200

Scope

This policy applies to all University locations and units, including all University extensions, satellite locations, and off-site campus units, both domestic and international.

Definitions

  1. Capital Movable Equipment (Capital Equipment): Equipment with a total cost of $5,000 or greater that is stand-alone, complete in itself and has a useful life of one year or more. 
  2. Fabricated Equipment (Fabrication): A unique stand-alone piece of equipment constructed from individual parts that requires creative design effort by University personnel and cannot reasonably be purchased “off the shelf” from a vendor or commercial supplier (i.e., it is one-of-a-kind).  
  3. Production Equipment: Equipment necessary to produce Fabricated Equipment, and not intended to be incorporated into the equipment being produced.

Policy

  1. Fabricated Equipment must be accounted for in the University official system of record with a property tag number and follow the cost accounting requirements outlined here.  
  2. The following principles must be followed to ensure accurate administration, accounting, classification, stewardship, and reporting of Fabricated Equipment that is intended to be utilized by the University upon completion. 
    Included in the asset value:
    The following expenses are included in calculating the value of a Fabrication:
    • Raw materials and parts to be affixed to the equipment. Quantities of goods acquired must be reasonable and directly allocable to the specific fabrication.
    • Reasonable start-up supplies and parts to be incorporated in or otherwise consumed in the research and development of the fabrication.
    • Shipping and handling
    • Third party installation charges from outside vendors or authorized internal service centers
    Excluded from the asset value:
    The following expenses are not included in calculating the value of a Fabrication:
    • Production Equipment
    • Documentation
    • Repair or maintenance expense
    • Administrative support
    • Enhancements that are not integrated into the equipment
    • Facilities and Administrative (F&A) costs
    • Department Labor
    • Payroll Expenses
    • Travel
  3. Unused material remaining after the completion of the fabrication must be accounted for and reported according to University policies, applicable federal regulations and/or the terms and conditions under the sponsor award. All inquiries concerning handling of any excess material must be directed to Sponsored Projects Services (SPS) - Property team.
  4. The fabrication may require the acquisition of additional equipment to produce. Standard capital movable equipment policy and procedure will be applied to the acquisition of Production Equipment. 

Procedure

Asset Fabrication - University Funding Only

Principal Investigator & Department

  1. Prior to purchase, the department or PI shall complete section I of the Fabrication/Deliverable Equipment Request form and submits via email to Financial Services, Property Management.

Property Management

  1. Complete section II and III of the Fabrication/Deliverable Equipment Request form and return to department or PI.

Principal Investigator & Department

  1. The department initiates the purchase of components for the Fabricated Equipment through the appropriate document in UAccess Financials. Below are items to consider when creating the document:
    1. The completed Fabrication/Deliverable Equipment Request form shall be attached to the first purchase document.
    2. Each purchase must reference the University pre-assigned tag number.
    3. Expenses included in the asset value are charged to the appropriate University Owned Moveable Capital Acquisitions/Equipment Object Code (7610-7730). 

Property Management

  1. Review and process all purchases for correct usage of object codes in UAccess Financials documents.
  2. Create and maintain asset records in UAccess Financials as purchases are made

Principal Investigator & Department

  1. Upon fabrication completion, Department or PI shall complete the Fabricated Equipment Completion form and submit via email to Property Management.

Property Management

  1. The Asset Type is changed to depict the actual type of asset, and the In-Service-Date is updated to reflect the date in which the asset was placed into service and began utilization
  2. The completed Fabricated Equipment Completion form shall be attached to the Asset Edit document in UAccess Financials.

Asset Fabrication – Fully or Partially Sponsor Funded Fabrications

Principal Investigator & Department

  1. At time of proposal, include Fabricated Equipment in the grant proposal equipment line-item budget and budget justification submitted in UAccess Research for review and approval by Sponsored Projects Services (SPS). 
  2. Upon receipt of award and prior to first purchase, the department shall complete section I of the Fabrication/Deliverable Equipment Request form.

Sponsored Projects Services

  1. Review and complete section II of the Fabrication/Deliverable Equipment Request form.  
  2. Forward to Financial Services, Property Management for pre-assigned asset tag A-tag for University Titled, S-tag for Sponsor Titled.

Property Management

  1. Review and complete section III of the Fabrication/Deliverable Equipment Request form.
  2. Log the pre-assigned tag number until the first purchase is made and the document is created in UAccess Financials.
  3. Provide the completed form to SPS and the PI/department.

Principal Investigator & Department

  1. Once approval is obtained from SPS and the pre-assigned asset tag number is received from Property Management, the department may proceed with purchasing the components for the Fabricated Equipment. Below are items to consider when creating a document in UAccess Financials:
    1. The completed Fabrication/Deliverable Equipment Request form shall be attached to the first purchase document.
    2. Each purchase must reference the University pre-assigned tag number.
    3. If a purchase is split-funded, the cost allocation basis should be documented; sponsor restrictions may prevent split-funding.
    4. Allowable purchases are charged to one of the following object codes depending on the titleholder:
      1. University owned (A-tag): 7610-7730
      2. Sponsor Owned (S-tag): 7760

Sponsored Projects Services & Property Management

  1. Review and process all purchase documents for correct usage of object codes in UAccess Financials.

Property Management

  1. Create and maintain asset records in UAccess Financials as purchases are made.

Sponsored Projects Services

  1. Complete any required property reports to sponsors, including annual report on Work-in-Process when applicable.

Principal Investigator & Department

  1. Upon fabrication completion, Department or PI submits the Fabricated Equipment Completion form to SPS & Property Management via email.

Property Management

  1. The Asset Type is changed to depict the actual type of asset, and the In-Service-Date is updated to reflect the date in which the asset was placed into service and began utilization.
  2. The completed Fabricated Equipment Completion form shall be attached to the Asset Edit document in UAccess Financials.

Frequently Asked Questions

  1. What are some distinguishing characteristics of Fabricated Equipment?
    The main characteristics of Fabricated Equipment are:
    1. Creative effort in the design: If creative effort on the part of the University faculty is necessary for the completion of the design specification of the equipment, and if the equipment cannot reasonably be built by an off-campus vendor.
    2. Change in the name of the equipment: If the component parts of the finished equipment bear no relationship in name to the finished equipment, the activity should be considered fabrication. For example, a Time Machine is a piece of Fabricated Equipment consisting of many parts expertly fitted together thus creating an item that cannot be readily purchased.
    3. Complexity of construction: If the construction is complex, the activity is fabrication.
       
  2. How is a Fabrication distinguished from a Deliverable?
    The end user of the equipment is the main distinguishing factor. If the equipment is being fabricated for use by the University, it is a fabrication and falls under this policy. If the equipment will be sent to a sponsor upon completion, it is considered a Deliverable and falls under policy 5.10.
     

  3. How is Fabrication distinguished from betterment?
    There are two main distinguishing factors. A betterment improves the quality or extends the life of an asset already in use. A fabrication is creating a new piece of equipment which has never been created before. If the equipment is already in use, any added components that would increase the capacity or useful life of the equipment would be considered a Betterment. The betterment does not result in a name change to the existing asset.  The betterment is treated as a capitalized expense if the value of added components is $5,000 or more and the asset's depreciated value exceeds the value of the planned betterment.  Additions of less than $5,000 are charged to an operating expense object code. The cost of repair and maintenance of capital equipment is always expensed, regardless of the amount.
     

  4. Can Fabricated Equipment be disassembled when no longer needed?
    To maintain the integrity of Fabricated Equipment throughout its lifetime, removing or borrowing parts from such equipment is not allowed. Therefore, University procedures for removal of the equipment from its inventory must be followed prior to disassembling or removing parts from the item. 
     

  5. Are Fabricated Equipment and Deliverable Equipment charged Facilities and Administrative (F&A) costs, also referred to as indirect costs? 
    The charges follow the F&A rate and base for the account.  If the account follows the standard Modified Total Direct Costs (MTDC) model under the University’s negotiated indirect cost rate agreement, capital purchases are excluded from the F&A base. If the account does not follow this model, please reach out to SPS Postaward Services at sponsor@arizona.edu for guidance.

Related Information

Fabrication/Deliverable Equipment Request form
Fabricated Equipment Completion form
Arizona Board of Regents Policy Manual
Code of Federal Regulations