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  • 1.  Capital Equipment Depreciation handling

    Posted 11 days ago
    Edited by Lydia Prentiss 11 days ago

    Hello! I'm a new member here.

    I've seen some recent conversations about capital equipment tracking, so it seems this is a recurrent topic.

    I'm curious whether members could share their thoughts and experience around handling capital equipment depreciation costs. 

    If your institution allows the inclusion of core instrument depreciation in service center or core rates, how do you ensure that the costs are identified and excluded from your institution's F&A rate proposal? Are core instruments identified at the inventory or asset-record stage, or is a financial adjustment made after the fact? What methods have been useful?

    It seems to me that tracking this accurately could be difficult or nearly impossible depending on institutional factors (size, complexity, systems investment and staff capacity). Your perspectives on this would be really helpful.

    Thank you!



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    Lydia Prentiss
    Senior Cost Analyst
    University of Maryland
    College Park, MD 20742 MD
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  • 2.  RE: Capital Equipment Depreciation handling

    Posted 5 days ago

    Hi Lydia - 

    I have 2 perspectives since I changed Institutions 1 1/2 years ago.  My previous state institution did not include depreciation in internal rate calcs - it was part of the F&A.   It was included in external. 

    My current institution does include depreciation in all rates including internal.   They also had a 5 year depreciation schedule - which was crazy given how expensive this equipment is.  We just switched it to 10 years for all service center equipment, but that still significantly increases the internal rates.    My preference was the previous model...

    Happy to chat! 



    ------------------------------
    Susanna Perkins
    Exec Director, Research Facilities
    Worcester Polytechnic Institute
    Worcester, MA
    508 831 6577
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  • 3.  RE: Capital Equipment Depreciation handling

    Posted 4 days ago
    Hi Lydia,

    I just saw your post today and wanted to offer a few thoughts.

    I would recommend that you request documentation that provides a list of current core equipment that shows purchase dates and the depreciation schedule.  I would do this whether or not you include it in the formula for determining core rates.  I was not provided such a list until I actually asked for it at my former institution, and when I reviewed it, I noticed lots of errors.  Fortunately, I was able to get all of the issues fixed.  I am not sure why there were so many errors, other than changes in administrative personnel and a general misunderstanding of the expected lifespan of lab equipment.  In microscopy, most equipment should be depreciated over a 10-15 year timespan (e.g. depending on equipment, whether purchased as new or used, etc.).  When I reviewed my list, I had equipment that was being depreciated over 20+ years. There was equipment on the list that was no longer present in the facility.  I even saw instances where service contracts and software packages were included on the listing.  All of these types of errors can affect a core's ability to update/replace/dispose of equipment.  It can also cause issues when the "Asset Tag Team" walks through the facility.  Whether or not you include depreciation schedules in your core rates, I do think it's important to review the list and to make sure the depreciation schedules are correct.  At my former institution, we did not take depreciation schedules into consideration for our core rates, but they did affect conversations about disposal/replacement of equipment.  I had one case of a microscope I wanted to dispose of, and I wasn't given permission to do so due to the depreciation schedule.  It was purchased as "used" and was already 15 years old and had something like 10 years left on its depreciation schedule.  I had to argue that the depreciation schedule was incorrect, and that it didn't make sense to leave a useless microscope sitting in a lab for 10 years gathering dust.  Luckily I was able to make the case, and it did not affect the rates we were charging to use the facility.

    Anthony Stender
    former core lab manager





    Original Message


  • 4.  RE: Capital Equipment Depreciation handling

    Posted 4 days ago

    Hi Anthony,

    Thanks for your thoughtful reply.  You raise an important point: the impact of having accurate lists goes beyond compliance and finance (rate setting and institutional IDC), but has an actual impact on a Core's operations- since these instruments can be central to the Core's ability to function. There is a real impact when capital equipment inventory lists are incorrect or depreciated incorrectly.

    Two years ago, my office began collecting a list of capital equipment from each Core as part of the rate renewal process, but so far we haven't been able to synchronize with the inventory process, which is managed by another office.

    A coordinated process that links inventory with this portion of the rates (for example- adding a "Core" identification field to the existing inventory database), seems like it would be ideal. That way, we could reliably distinguish between Core and Non-Core capital equipment when accountants make depreciation entries.. Even if the institution decided not to allow equipment depreciation in rates (leaving them in the F&A rates instead), a unified process seems like it would make sense. Maintaining information in a single source should ease the administrative burden for many.

    This kind of change would require significant leadership buy-in- since it would require coordination across offices with different priorities. That can be a challenge in large institutions- particularly if Core Facilities are not currently very high on the list of research priorities. From the perspective of Core managers, do you think this kind of thing would be worth the push? Or are there other higher priorites? 



    ------------------------------
    Lydia Prentiss
    Senior Cost Analyst
    University of Maryland
    College Park, MD 20742 MD
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    Original Message


  • 5.  RE: Capital Equipment Depreciation handling

    Posted 3 days ago
    At JHU everything used to be amortized over 10 years, but we have been able to worked with fixed assets to have them ask what the expected life is of any new piece of equipment, which has helped a lot. Some things are set for 5 years, some for 7, 10, etc.

    Part of this came about because our institution put together a “Business Skills at JHU” course for core directions which brought together the leaders of many groups like compliance and finance and fixed assets. They worked together with some experience core directors to develop this course which explains the things the University needs to know, why things are done the way they are, talks about compliance and other aspects of running a core. Part of those conversations in developing the course also helped the administration understand some of the frustrations from the core director side, and changes were made on both sides.


    Original Message


  • 6.  RE: Capital Equipment Depreciation handling

    Posted yesterday

     

     

    I am curious whether part of the depreciation discussion includes concerns such as expiration of service contracts by companies (they stop providing service) or increased cost (above standard inflation) for service contracts.  These may be considered recurring expenses, but maintenance is necessary for the operation of the object.  Perhaps parts replacement should be broken out of repair costs as capital.  Why is a laser treated as capital in the initial purchase but as an operating cost or consumable eight years later when it needs to be replaced?   I understand there may be accounting rules, but institutions may have additional policies.  Supporting extraordinary service may be less onerous than providing capital for a substantially larger new purchase.

     

     

    Michael Cammer, Sr Research Scientist, DART Microscopy Laboratory

    NYU Langone Health, 540 First Avenue, New York, NY  10016

    Office: RB (formerly Skirball) 4-102  -- call if door is locked (phone near elevators)

    Office: 646-501-0567 Cell (voice only, not text): 914-309-3270  Michael.Cammer@med.nyu.edu  

    http://nyulmc.org/micros  http://microscopynotes.com/ 

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    Original Message


  • 7.  RE: Capital Equipment Depreciation handling

    Posted yesterday
    Michael,

    I think you are asking some very valuable questions. Part of the challenge when buying new equipment is being able to foresee how much longer the vendor will continue to support that model of instrument.  On occasion, vendors have been able to tell me when they plan to discontinue support, but usually they don't give much notice. I probably wouldn't recommend that a core facility purchase an instrument without at least five years of guaranteed support by the vendor, or the ability to capture significant revenue in that time.  Another option I explored was the option of short-term leases of equipment, which I thought had lots of appeal for the accountants and skirted the concerns about service contracts, but that option faced a lot of skepticism at my former institution.  

    In the microscope space, I do know of a company that will service older microscopes, and they have always been able to find replacement parts for me.  However, I have found that when a vendor stops software support and discontinues software updates, that tends to be a bigger headache than a lack of hardware support.  I don't know that deprecitation discussions ever really discuss the role of software, but they probably should.  Every time a new Windows is rolled out, it seems that every vendor rolls out a new product because the old product doesn't work on the new version of Windows.

    I wish I had good answers for your other questions. 

    Anthony Stender



    Original Message


  • 8.  RE: Capital Equipment Depreciation handling

    Posted 4 days ago

    Hi Susanna,

    Thanks for your reply- comparing different institutions, and your observations about the impact of different institutional decisions on the rates themselves. There are many factors, and it seems that institutions make different choices based on their particular needs. Thanks for the offer to chat. I'll send a direct message!



    ------------------------------
    Lydia Prentiss
    Senior Cost Analyst
    University of Maryland
    College Park, MD 20742 MD
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    Original Message


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