SUBJECT:

Implementation of $1,500 Threshold for Equipment

After almost two years of evaluation, a significant change in the
definition of equipment is being made for all of the University of
California. Effective July 1, 1998, equipment is defined as "articles
of non-expendable tangible personal property having a useful life of
more than one year, and an acquisition cost of $1,500 or more per
unit." The major changes from the current definition are:
(1) an increase from the current acquisition cost threshold of
$500 or more, and (2) the inclusion of office furniture and fixtures
within the definition of equipment.

The benefits of this change are: (1) a significant reduction in the
administrative burden to academic and research departments
associated with tracking and inventorying equipment items, and
(2) improved compliance and reduced risk associated with material
management and federal audit requirements.

The new definition will be phased in during fiscal year 1998/99
as follows:

A. During FY 98/99, all purchases and acquisitions will continue
to be processed with the same equipment definitions ($500) as
in FY 97/98.

B. Items of furniture purchased on or after July 1, 1998 must be
coded as equipment when meeting the new definition.

C. Effective July 1, 1999 all transactions will be processed using
the new threshold of $1,500.

D. The delay to July 1, 1999 in applying the new $1,500 threshold
should allow a reasonable period of time for contract and grant
proposal budgets to be structured with the appropriate allocation
between direct and indirect costs. Any grant or contract having
a performance period which extends past July 1, 1999 and
anticipates the purchase of equipment after that date, should be
budgeted on the basis of the new $1,500 threshold. In this manner,
the budget will properly anticipate the July 1, 1999 effective date.

E. Effective July 1, 1998 physical verification and tracking of equipment
will be required only for items valued at or above the new $1,500 threshold.

Extensive guidance and FAQ's are currently being developed and
should be available on a web site within a few days. Another notice
will be sent at that time, indicating the web address, as well as
individual contact people and phone numbers for clarification of
issues not addressed on the web site.

The purpose of this notice is to give as much advance notice as
possible to research faculty and administrators who may be
developing proposal budgets which would extend beyond the
July 1, 1999 implementation date.

Don Larson Controller