Computer Purchases on Federal and Federal Pass-Through Funds

Background

Computers are generally used for various activities such as instruction, research, administration, email, and personal use. It is important to ensure their allowability and allocability as a direct cost to sponsored projects before the purchase has been made. Computer purchases being charged to federal funds should be:

• Essential for the purpose of carrying out a specific aim of the funded project.
• Necessary for project activities and not simply for general administrative, instructional, or departmental use, and
• Allocated to the grant on a reasonable basis that reflects the relative benefit received by the funded project

Computer purchases on federal awards require clear justification and documentation to support allowability and allocability when charged to sponsored projects.

Computing devices are not automatically allowable as direct charges to a federal award and should be charged only when justified for a specific research or sponsored program purpose. The term “computer” encompasses all information technology devices, including high-end mainframes, minicomputers, personal computers, tablets, notebooks, iPads, docking stations, and other peripheral devices, regardless of whether the item meets Purdue’s capital equipment threshold. Effective at Purdue on July 1, 2026, the capital equipment threshold is $10,000. Other computer-related equipment includes printers, scanners, bar code readers, and connectivity devices (routers, modems, etc.).

To learn more about the federal regulations governing computer purchases, refer to the Uniform Guidance cost principles on allowability and allocability, including 2 CFR 200.403 and 2 CFR 200.405, as well as 2 CFR 200.453(c), which specifically addresses computing devices.

Update: Although the Uniform Guidance increased the equipment capitalization threshold from $5,000 to $10,000 in October 2024, Purdue will implement this change effective July 1, 2026. In accordance with Purdue Supplemental F&A Instruction 1, purchases made on or after July 1, 2026 that are less than $10,000 will be treated as supplies rather than capital equipment.

Budget Justifications

Purchases of computers on federal funds should be driven by the need for the computer to conduct the research project. This should be included in the budget justification, and the benefit should be easy to discern. The programmatic personnel on the project should be able to describe why the computer is essential to the project.

Budget Justification Example 1

3 laptop computers are requested as budgeted project costs ($1,000 each). Research personnel (GRA’s and RA’s) will take these laptops to the field to record data during interviews with human subjects, assist with statistical analysis, and facilitate communications among research project personnel through the 12-month survey period.

Budget Justification Example 2

A laptop is included as a budgeted project cost ($989) for dedicated observations and travel between the telescope in Chile and Purdue.

Budget Justification Example 3

This project will require extensive word processing, record keeping, and maintenance of large databases and data analysis. For this reason, we request 2 IBM compatible Pentium II-level workstations as budgeted project costs ($1,400 each), which each include CPU, color monitor, graphics card, keyboard, CDROM drive and a minimum 4 gigabyte hard drive.

Budget Justification Example 4

A total budgeted cost of $9,000 is requested in the first year for computers, with another $3,000 in budgeted computer costs in year two and $3,000 in year three. These funds are for computers needed to run the Peiometrix THz-TDS system, as well as laboratory computers and laptops that will be needed for detector testing and especially detector control at the Advanced Photon Source experiment.

Computer Purchase Review (Federal Funds)

Computer purchases must satisfy the following criteria to be allowable as a direct cost on a federally sponsored program:

• The computer must be essential for project activities and must provide benefit to the project
• It must be allowable to the project and the sponsor must permit the use of funds for this purchase
• It must be allocable.
  • The computer is to support the project’s programmatic activities, and it would not have been purchased other than to support the goals of the project
  • If a cost benefits two or more projects, it may be charged directly to those projects if the proportional benefit to each project can be determined without undue effort or cost
  • A computer may be allocated (distribute the cost) to one or more sponsored projects, and the allocation method should be included in the backup documentation for the purchase

Refer to Cost Account Standards (CAS) Classification of Cost Items – Computing Devices for further information.

For additional Purdue review requirements, refer to Procurement Services Special Purchases. Computer purchases of $10,000 or greater require pre-approval from Procurement Services and may be considered a special purchase. Procurement Services will evaluate the request and determine the appropriate procurement method, which may or may not include a competitive bidding process. In addition, Sponsored Program Services requires completion of the Verification of Equipment Non-Availability Form for equipment purchases exceeding $25,000 that are charged to federal funds. For more information, visit the Procedures for Screening Equipment to be Purchased with Federal Funds page on the Property Accounting website.

Backup Documentation

Backup documentation should include answers to the following questions:

• Was the need to purchase the computer documented adequately in the budget justification?
• If not properly justified in the proposal, supporting documentation of the specific need for the computer should be obtained and filed with the purchase request. Retain a copy of the documentation in the Business Office electronic file.  As a best practice, attach documentation including date and individual providing the justification to the Ariba requisition.
• For purchases late in a project, is the benefit and need for the computer explained?

Hints & Reminders

The following hints and reminders will help with the review of potential computer purchases.

• During the proposal preparation process, if it is determined a computer will be necessary for the project the computer should be budgeted and included in the budget justification. The justification must describe how the computer directly benefits the project.  In the case of module budgets, this justification should be retained internally within the Coeus development module when provided.
• Receipt of a new award does not automatically mean that a computer can be purchased to support the project. The computer should be essential to the project.  Justification of the item must occur prior to the purchase, and it is recommended that this occurs within the proposal.
• If the cost of the item benefits two or more projects, it may be charged directly to those projects if the proportional benefit to each project can be determined without undue effort or cost. The allocation method should be included in the backup documentation for the purchase.
• Computer purchases in the final months of a project period raise audit concerns. What is the benefit to the sponsored project?  Obtain documentation and keep it for audit purposes.  All charges to a project, particularly in the last 90 days of the project period, must be allowable and allocable as a direct cost, and be reasonable and necessary for the conduct of remaining project activities.  If the computer is expected to be used beyond the project expiration date, the cost should not be allocated 100% to the expiring project unless continuation funding from that same sponsor is expected.
• Purchases to just use remaining funds at the end of a project are unallowable.

Roles & Responsibilities

Many individuals involved in the purchase of computers play a part in ensuring the purchase is appropriate.  Below is a listing of these roles and responsibilities.

• Principal Investigators/Faculty
  • Anticipate computer costs and ensure they are included in the original budget, budget justification and proposal sent to the sponsor.
  • Responsible for understanding the costing principles.
  • Determines the benefit of the computer purchase for the project.
  • Identify situations where the computer will not be used 100% on the project and indicate the cost distribution based on the intended use.
• Sponsored Program Services – Pre Award
  • Determine if computers or related devices are expected to be purchased with project funds. If so, ensure they are identified and justified adequately in the budget and budget justification.  If justification is not required by the sponsor, upload justification (if provided) within the Coeus development module for reference in the event of an award.
• Business Office Personnel
  • Ensure that the computer was included in the budget and budget justification
  • If not included, then determine if approval is needed and prepare justification with information provided by the researcher. Attach document to the requisition.
  • Determine if the purchase is made in the last 90 days of the project. If so, obtain documentation on how the computer will benefit the project so near the end of the project and include with the purchase request.  Keep documentation for audit purposes.
• Sponsored Program Services – Post Award
  • Respond to questions regarding computer purchases, costing principles and/or sponsor policy guidelines
  • Review transactions when preparing financial reports, closing accounts and when conducting other regular reviews to verify the charges are appropriately documented and allowable.
  • As appropriate, request sponsor prior approval for computer devices not justified in the proposal if required by the award terms or sponsor policy.

Computer Purchase Samples

Example 1

After a federal project started, there is a major malfunction of a computer used by a secretary that provides some support to the PI of the project. The computer is over 4 years old, and it needs to be replaced. What would you do when the request to buy a new computer had the entire cost indicated to be charged to the federal project?

• Was a computer budgeted and justified in the proposal for this federal project?
• Because the computer is assigned to a secretary, determine whether it supports the project’s programmatic activities or is primarily for general administrative or instructional purposes. If it also supports non-project activities, 100% allocation to the project cannot be justified.
• If any portion of the cost is to be charged to the project, obtain documentation supporting the specific project benefit and a reasonable allocation method based on expected use.
• Determine whether sponsor approval is required by the award terms or sponsor policy.

Example 2

A 3-year project was recently funded for $12,000,000. There is a request for an initial purchase of 4 computers and a printer. The budget justification included $100,000 for computers/printers. The justification included $2,500 per person for computers and $25,000 for printers. What would you do?

• Determine whether these are the computers and printer included in the original budget and budget justification. If so, confirm that the purchase is consistent with the approved budget, award terms, and project needs, and retain supporting documentation.
• If there are additional or different computers not originally budgeted, ask why they are necessary, how they will benefit the project, whether they will be used 100% on the project, and if not, obtain documentation supporting the cost allocation.
• Determine whether sponsor approval is required for any unbudgeted purchase under the award terms or sponsor policy.

Example 3

A 2-year project is within 3 months of ending and the PI needs to purchase a computer to present results at upcoming seminars and a conference. What questions would you ask? What would make this an allowable and allocable charge to the project?

• Determine whether the computer was in the original budget. If not, have it explained why the need was not identified in the proposal and document the specific benefit to the remaining project activities. Request sponsor approval only if required by the award terms or sponsor policy.
• Will the computer be used for other activities? If so, obtain documentation supporting a reasonable allocation based on the relative benefit received.
• If the computer is to be used only on this project, is it expected to be used beyond the project expiration date? The cost should not be allocated 100% to the expiring project unless continuation funding from the same sponsor is expected and the project will continue to receive the benefit.
• Check the available project balance to ensure the purchase is not simply using remaining funds and that it is reasonable, necessary, and allocable to the project.

Example 4

An NIH project just began 2 months ago and there is a request for a computer to be purchased entirely with project funds. The budget and budget justification did not include a computer. There were computer supplies mentioned. What would you do?

• Because computer supplies were budgeted, there may have been an intent for some computer-related costs on the project; however, that does not by itself justify an unbudgeted computer purchase. Have it explained why a computer was not in the original budget and obtain documentation of the specific need for the computer and how it will benefit the project.
• Will the computer be used 100% on the project? If not, obtain documentation supporting the cost allocation. Determine whether sponsor approval is required by the award terms or sponsor policy.

Example 5

There is a request in late July 2021 for an Apple MacBook Pro with an estimated cost of $2,200. The cost distribution is equally distributed to 3 different federal projects. Project A ends 3/31/2023, Project B ends 8/31/2021, and Project C ends 7/31/2022. What questions do you ask before processing the request? (Assume it is December 2021.)

• Is a computer budgeted for each of the 3 projects? If not, obtain documentation supporting the specific need for the computer and a reasonable allocation method for each project. Determine whether sponsor approval is required under any of the award terms or sponsor policy.
• Since Project B ends in less than 90 days, why is it being charged the same amount as the other 2 projects that run longer? The allocation should reflect the relative benefit each project is expected to receive.

Check the available balance on Project B to ensure the purchase is not simply using remaining unexpended funds and that the documented allocation basis is reasonable.