GAO

United States General Accounting Office

Report to the Chairman, Committee on 

Science, House of Representatives 

March 1999 FEDERAL 

RESEARCH

Guidance for 

Equipment Acquired 

Under Grants and 

Cooperative 

Agreements

GAO/RCED-99-73

United States

General Accounting Office

Washington, D.C. 20548 Letr

Page 1 GAO/RCED-99-73 Federal Research

GAO

Resources, Community, and

Economic Development Division Letr

B-281935

March 24, 1999

The Honorable F. James Sensenbrenner, Jr.

Chairman, Committee on Science

House of Representatives

Dear Mr. Chairman:

During fiscal year 1997, three agencies--the National Science Foundation 

(NSF), National Institutes of Health (NIH), and the National Oceanic and 

Atmospheric Administration (NOAA)--awarded over $12 billion in grants 

and cooperative agreements to nonprofit scientific organizations or 

nonprofit institutions of higher education to conduct basic or applied 

scientific research. These funds included several hundred million dollars 

for equipment.

As requested, we

• identified the guidance NSF, NIH, and NOAA used to ensure that the 

recipients of grants and cooperative agreements for scientific research 

provide management controls over the equipment they acquire with 

federal funds; and

• determined if four NSF recipients from the Washington, D. C., area had 

acquired equipment under 14 awards of varying dollar amounts.

Results in Brief Each of the three agencies generally allows the recipients of grants and 

cooperative agreements to have title to the purchased equipment, but they 

also provide some guidance on how recipients are to account for this 

equipment. After the grants and cooperative agreements are awarded, 

these agencies do not maintain records showing which equipment was 

actually purchased. However, the agencies have some assurance that the 

equipment was in fact purchased because these organizations have audits 

to ensure compliance with the award agreements, and these audits, 

together with the recipients’ proposals, identify the equipment that the 

recipients proposed acquiring.

We reviewed documents showing that the recipients we visited had 

acquired the equipment specified in their proposals, and we saw the 

equipment either being used or awaiting installation. 

Letr
B-281935

Page 2 GAO/RCED-99-73 Federal Research

Background Under the Federal Grant and Cooperative Agreement Act of 1977, as 

amended, executive agencies have the authority to give title to tangible 

personal property--including equipment--to nonprofit institutions of higher 

education or nonprofit organizations whose primary purpose is scientific 

research, if this property is acquired with federal funds under a grant or 

cooperative agreement for scientific research. The legislative history 

indicates that this authority is provided, in part, to eliminate the costs to 

the government associated with maintaining the property records for this 

equipment.

Using this authority, executive agencies can give title to such a recipient 

institution when (1) the recipient acquires the equipment using federal 

funds and (2) the agency decides giving title furthers its objectives. The 

agency head has discretion to give title without further obligation to the 

federal government or under the conditions that the head of the agency 

considers appropriate. 

Oversight of 

Equipment Acquired 

Under Grants and 

Cooperative 

Agreements

The Office of Management and Budget (OMB) has issued guidance to 

agencies on requiring recipients to maintain records for equipment 

acquired with federal funds. However, the Federal Grant and Cooperative 

Agreement Act of 1977, as amended, allows agencies to differ from this 

guidance in setting their own requirements for research equipment 

acquired under an award to conduct basic or applied scientific research by 

a nonprofit institution of higher education or a nonprofit organization 

whose primary purpose is conducting scientific research. For this type of 

equipment, the three agencies use their own guidance, which adopt 

different parts of the OMB guidance. While the agencies do not maintain 

records of the equipment after it is acquired, required annual audits help 

ensure that the equipment was purchased.

OMB Has Issued Guidance 

for Managing Property

OMB has issued guidance, in the form of property standards, for equipment 

that is acquired under grants and cooperative agreements with federal 

funds by institutions of higher education, hospitals, and other nonprofit 

organizations. Although such a recipient holds title to the equipment, the 

recipient is required to follow OMB’s guidance if the equipment has a useful 

life of more than 1 year and cost $5,000 or more. As part of this guidance, 

recipients are to maintain property management records that include a 

description of the equipment, the identification numbers, the source, the 

Letr
B-281935

Page 3 GAO/RCED-99-73 Federal Research

acquisition date, and the cost. The institution must inventory the 

equipment at least once every 2 years.

The OMB guidance also includes procedures for the disposition of the 

equipment. When this type of recipient no longer needs the equipment for 

the original purpose for which it was acquired, the recipient may use it for 

other federally sponsored activities. However, if the recipient does so, and 

the equipment has a current fair market value of $5,000 or more, the 

recipient must compensate the government for the percentage of the 

current fair market value attributable to the government’s share of the 

original project or program. If the recipient has no need for the equipment, 

it is to request disposition instructions from the federal government. These 

instructions may require the recipient to return the equipment to the 

government. Alternatively, the recipient can sell, transfer, or dispose of the 

equipment and reimburse the government for its fair share. 

Although OMB has issued guidance, the Federal Grant and Cooperative 

Agreement Act of 1977, as amended, gives the heads of executive agencies 

the discretion to give title to equipment acquired through grants or 

cooperative agreements for scientific research to certain types of 

recipients without further obligation to the federal government. The act 

also allows agencies to set general property standards for this equipment at 

their discretion. When the heads of executive agencies exercise this 

authority, the equipment is exempt from OMB guidance.

NIH, NOAA, and NSF Adopt 

Different Guidance for 

Exempt Equipment

The three agencies have different guidance for exempt equipment. NIH—

an agency within the Department of Health and Human Services—follows 

its Department’s guidance, which adopts parts of the OMB guidance. 

NOAA—an agency within the Department of Commerce—follows that 

Department’s guidance. Commerce fully adopted OMB’s guidance. NSF 

uses guidance that it developed. Table 1 compares the agencies’ property 

management standards and disposition guidance for exempt equipment.

Letr
B-281935

Page 4 GAO/RCED-99-73 Federal Research

Table 1: Guidance for Exempt Equipment Used by NIH, NOAA, and NSF

Source: GAO’s analysis of NSF, NIH, and NOAA’s guidance.

Annual Audits Provide 

Some Assurance That 

Proposed Equipment Was 

Acquired

After they award grants and cooperative agreements, NIH, NOAA, and NSF 

do not maintain records showing which equipment was actually purchased. 

The agencies have some assurance that the equipment was acquired 

because institutions of higher education or other nonprofit organizations 

are subject to the audit requirements contained in the Single Audit Act 

Amendments of 1996.1

 Under this act and OMB Circular A-133, nonprofit 

institutions of higher education and other nonprofit organizations that 

spend $300,000 or more in a year in federal awards must have an audit 

conducted for that year. Among other things, the audit is to assess the 

recipient’s compliance with the provisions of the award agreements 

identifying the equipment proposed for acquisition. 

Agency Title kept by

Property 

management 

standards 

Disposition of 

property

National Institutes of 

Health

Recipient None NIH may require the 

transfer of title to 

equipment to the 

government or a third 

party if equipment has 

an acquisition cost of 

$5,000 or more. If NIH 

exercises its rights to 

transfer property, 

guidance similar to 

OMB’s is followed.

National Oceanic 

and Atmospheric 

Administration

Recipient OMB’s guidance OMB’s guidance 

National Science 

Foundation

Recipient in normal 

situations and the 

government in 

special situations

OMB’s guidance NSF may identify items 

of $5,000 or more in 

which it retains the 

right to transfer title to 

the government or a 

third party. 

1

OMB’s audit guidance implementing the 1996 amendments is included in OMB Circular A-133, “Audits 

of States, Local Governments, and Non-Profit Organizations.”

Letr
B-281935

Page 5 GAO/RCED-99-73 Federal Research

Four Recipients 

Acquired the Property 

They Proposed

We reviewed 14 NSF research awards of varying dollar amounts that were 

awarded to three universities and one nonprofit organization in the 

Washington, D. C., area. We found that each recipient had documents 

showing that it had acquired the equipment specified in its proposals, and 

we saw the equipment either being used or awaiting installation. 

For 11 of the 14 awards, the NSF funds for equipment were supplemented 

by the recipients’ funds. Table 2 shows the equipment that we observed 

and the amounts that NSF and the recipients had proposed for the costsharing arrangements in the award documents. 

Table 2: Equipment Observed at the Four Institutions

aIncludes funds for installing the equipment.

Source: GAO’s analysis of NSF’s data.

Equipment Total proposed cost

Government’s share

of costs

Recipient’s share of

costs

Laser system $174,785 $94,785 $80,000

Workstations $63,978 $49,648 $14,330

Shaking table $485,186 $300,000 $185,186

Very high speed 

Backbone Network 

System $700,000 $350,000 $350,000

Electron microscope $617,000 $617,000 0

Laser system $85,000 $85,000 0

Electron microscope $603,176 $422,223 $180,953

High-resolution 

electron microscopy 

facilities $1,360,000a $680,000 $680,000

High performance 

computer system 

and X-ray detector $602,128 $402,128 $200,000

Very high speed 

backbone network 

system $196,200 $46,200 $150,000

Spectrophotometer $46,000 $46,000 0

Workstations $90,000 $45,000 $45,000

Supercomputer 548,480 $383,936 $164,544

Mass spectrometer $1,043,950 $574,172 $469,778

Letr
B-281935

Page 6 GAO/RCED-99-73 Federal Research

We found that the four recipients had acquired either the equipment they 

had proposed purchasing in their applications or similar equipment. 

Generally, the recipients explained that differences between the proposed 

and acquired equipment were due to manufacturers’ improvements or 

lower market prices between the time the equipment was proposed and 

acquired. 

All the recipients provided us with records showing that the equipment that 

they had proposed was acquired and listed in their records, and they 

explained that their equipment records were audited in accordance with 

the Single Audit Act Amendments of 1996 and OMB Circular A-133. We saw 

the equipment, but in some cases it had not been completely installed 

because more time was needed to build it or to modify buildings to house 

it. For example, one recipient had acquired a large electron microscope 

system, but modifications to the building that will house the equipment had 

not been finished. In these cases, we observed the equipment that had 

been acquired and stored at the recipients’ facility. 

Agency Comments NSF, NIH, and NOAA commented on the information in the report 

pertaining to their respective agency. They provided some technical 

clarifications concerning their guidance. We made the suggested revisions, 

and the agencies agreed that our report is factually correct. Additionally, 

the George Washington University, the Johns Hopkins University, the 

University of Maryland, and the Carnegie Institution of Washington agreed 

that the information concerning their awards was correct. 

Scope and 

Methodology

To identify the guidance NSF, NIH, and NOAA use to ensure that recipients 

of grants and cooperative agreements provide management controls over 

the property they acquire, we reviewed OMB’s and the three agencies’ 

guidance. Additionally, we discussed this guidance with representatives of 

the three agencies. 

To review the equipment acquired by recipients of grants and cooperative 

agreements awarded by NSF, we selected 13 grants and 1 cooperative 

agreement awarded to three universities and one nonprofit organization in 

the Washington, D. C., area: the George Washington University, 

Washington, D.C.; the Johns Hopkins University, Baltimore, Maryland; the 

University of Maryland, College Park, Maryland; and the Carnegie 

Institution of Washington, Washington, D.C. We selected the educational 

Letr
B-281935

Page 7 GAO/RCED-99-73 Federal Research

institutions because they were three of the largest recipients of NSF funds 

in the Washington, D.C., area. We selected the Carnegie Institution of 

Washington to include a nonprofit research organization in our review. At 

the recipients’ facilities, we reviewed documentation to show that the 

equipment was accounted for in the recipients’ records, observed the 

equipment, and spoke with either the principal investigators or with a 

person familiar with the operations of the equipment. 

We selected equipment for review by using NSF award data for fiscal year 

1992 through fiscal year 1997. These award data identify the award and the 

dollar amount that NSF budgeted for acquiring equipment under the award. 

After we selected the awards for our review, we obtained the individual 

award files from NSF and identified the equipment that the recipients had 

proposed acquiring. We selected equipment valued at different amounts 

for our review. 

We conducted our work from June 1998 through February 1999 in 

accordance with generally accepted government auditing standards. 

As arranged with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report for 7 days after the 

date of this letter. At that time, we will send copies to Senator John 

McCain, Chairman, and Senator Ernest Hollings, Ranking Member, Senate 

Committee on Commerce, Science, and Transportation; Senator Ted 

Stevens, Chairman, and Senator Robert Byrd, Ranking Member, Senate 

Committee on Appropriations; Representative George E. Brown, Jr., 

Ranking Member, House Committee on Science; Representative C. W. Bill 

Young, Chairman, and Representative David R. Obey, Ranking Member, 

House Committee on Appropriations; We are also sending copies of the 

report to the Honorable Jacob J. Lew, Director, Office of Management and 

Budget; the Honorable Dr. Rita R. Colwell, Director, National Science 

Foundation; the Honorable Dr. Harold Varmus, Director, National Institutes 

of Health; and the Honorable D. James Baker, Administrator, National 

Oceanic and Atmospheric Administration. Additionally, we are sending 

copies of this report to the Honorable Clayton D. Mote, President, 

University of Maryland; the Honorable William R. Brody, President, Johns 

Hopkins University; the Honorable Stephen Joel Trachtenberg, President, 

George Washington University; and the Honorable Dr. Maxine Singer, 

President, Carnegie Institution of Washington. We will also make copies 

available to others on request.

Letr
B-281935

Page 8 GAO/RCED-99-73 Federal Research

If you or your staff have any questions about this report, please call me at 

(202) 512-3841. 

Sincerely yours,

Susan D. Kladiva

Associate Director, Energy,

 Resources, and Science 

Letr
Page 9 GAO/RCED-99-73 Federal Research
Page 10 GAO/RCED-99-73 Federal Research

Appendix I

Comments From the National Science 

Foundation ApeInxdi

(141197) Lret
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the 

following address, accompanied by a check or money order made 

out to the Superintendent of Documents, when necessary, VISA and 

MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address are 

discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000

or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and 

testimony. To receive facsimile copies of the daily list or any list 

from the past 30 days, please call (202) 512-6000 using a touchtone 

phone. A recorded menu will provide information on how to obtain 

these lists.

For information on how to access GAO reports on the INTERNET, 

send an e-mail message with “info” in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at: 

http://www.gao.gov
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. GI00