For higher education institutions, the change in federal capitalization rules marks an opportunity to take a fresh look at their capital asset management program. With the option to increase the capitalization threshold for movable equipment to $10,000, there’s an opportunity to reset policies, streamline processes, and focus on the creation of long-term efficiencies. While each institution must carefully evaluate its unique circumstances, embracing this change is a strategic move toward ease of compliance, sustainable efficiency and a better experience for property teams and department personnel.
Assessing the Impact Of Asset Recapitalization
Before implementing the threshold increase, it’s crucial to conduct a thorough analysis of its impact. For many institutions, moving to a $10,000 threshold will remove a significant number of assets from capitalization, particularly in categories like lab equipment or technology.
Start by evaluating the potential impact on your institution’s indirect cost rate (ICR or F&A), especially during a base year. Here are the top three questions to consider:
- How many assets will be removed from the books?
- What is the total impact on overall costs and the book value of these assets?
- What will the impact be on the calculated indirect cost rate?
If your current ICR is calculated based on the existing $5,000 threshold, you may need to wait for your next rate negotiation to adopt the new threshold, as federal auditors will likely not reopen prior years set on predetermined rates.
Ensuring Compliance Through The Recapitalization Process
The good news is that this shift doesn’t necessarily require a massive overhaul. Institutions can retain assets under the new $10,000 limit with remaining net book value, or remove them based on audit recommendations. It’s essential to engage with your indirect cost group and auditors to ensure compliance with federal regulations and indirect cost agreement terms.
Your property control teams will also play a key role in determining which assets, while below the new threshold, should still be tracked as “sensitive” or “control” items based on asset policies, local regulations, or state statutes. This ensures that valuable or sensitive equipment, even if under $10,000, is still properly inventoried and accounted for.
A Reset for Efficiency: The Role of RFID Tags
For many institutions, the shift to a higher threshold offers an ideal moment to modernize asset tracking by incorporating RFID technology. Implementing RFID tags not only provides a clear identifier for qualifying assets but also unlocks significant efficiencies across the inventory management process.
By transitioning to RFID, institutions can streamline physical inventories, increase asset find rates, and reduce the time spent on tracking. The combination of RFID tags and mobile verification technology streamlines the inventory process by enabling efficient asset tracking. Department staff can use smartphones to scan barcodes for verification, even without specialized apps. For more comprehensive verification, property control teams or outsourced resources can rely on dedicated RFID tools. For assets that remain under the new $10,000 threshold but require ongoing tracking, RFID helps maintain compliance with minimal administrative effort.
The recapitalization shift is more than just an accounting change—it’s a strategic opportunity to realign capital asset management with modern technologies and processes that deliver lasting benefits. By using this reset to embrace RFID technology, institutions can drastically reduce the time and cost of maintaining asset records, increase accuracy, and future-proof their compliance practices.
As each institution approaches this threshold change, prioritizing long-term efficiency and operational improvements will allow for smoother inventories, fewer errors, and better use of resources.