Equipment Titling: Conditional vs. Federal Title

When a federal award pays for a piece of equipment, “who owns it” is not a single answer. Depending on how the equipment entered the project, one of three distinct legal regimes under the Uniform Guidance (2 CFR Part 200, Subpart D) governs who holds title, what the holder is allowed to do with the property, and what happens to it at the end of the award. Getting the regime wrong — treating conditionally titled equipment as if the institution owns it outright, for example — is a real, recurring audit and compliance exposure for research offices.

The Three Equipment Ownership Regimes at a Glance

Research administrators encounter three distinct property-title situations, each governed by a different section of 2 CFR Part 200:

Recipient-acquired equipment (conditional title) — the recipient buys the equipment with award funds. Title vests in the recipient immediately upon acquisition, but that title is conditional: the federal government retains an interest in the property until specified conditions are satisfied. Governed by 2 CFR 200.313 (Equipment).
Federally owned property — the federal government itself supplies the equipment to the recipient rather than the recipient buying it; title never transfers and stays with the government throughout. Governed by 2 CFR 200.312(a)-(b). See CASRAI’s companion guide, Government-Furnished Property in University Research Awards, for the custodial mechanics of this regime.
Exempt property — a narrow subcategory of recipient-acquired property where a specific federal statute authorizes the awarding agency to vest unconditional title in the recipient, with no further federal responsibility. Governed by 2 CFR 200.312(c). This only applies when both a statute permits it and the award’s terms and conditions explicitly say so — absent that combination, title defaults back to conditional under 200.313.

This guide focuses on the distinction that trips up research offices most often: conditional title versus federally owned property. For the separate threshold question of whether an item counts as “equipment” at all versus a consumable supply, see Supplies vs. Equipment Under 2 CFR 200.1. For the day-to-day recordkeeping and inventory-control obligations that attach once title has vested, see Property Management System Requirements for Federally-Funded Equipment (2 CFR 200.313).

What “Conditional Title” Actually Means (2 CFR 200.313)

Under 2 CFR 200.313(a), title to equipment purchased with federal award funds vests in the recipient (or subrecipient) upon acquisition. But that title is conditional unless a federal statute specifically authorizes the awarding agency to vest unconditional title in the recipient without further responsibility to the federal government, and the agency has actually elected to do so for that award. Absent that statutory election, every piece of recipient-acquired equipment carries conditional title by default — this is the normal case, not the exception.

A conditional title means the institution genuinely owns the equipment in the ordinary sense — it appears on the institution’s books, the institution is responsible for maintaining and insuring it — but that ownership comes with strings attached for as long as the federal interest exists. In practice, the conditions include:

Authorized-purpose use. The equipment must be used for the project it was acquired for during the period of performance, and when no longer needed for that project, made available for other federal-award activities in a defined priority order (activities sponsored by the same awarding agency first, then other federal agencies).
No disposal or encumbrance without approval. The recipient cannot sell, transfer, or otherwise dispose of the equipment, or encumber title to it (for example, pledging it as loan collateral), without the awarding agency’s approval, for as long as the federal interest attaches.
Recordkeeping and physical inventory. The recipient must maintain equipment records (description, serial or ID number, funding source, acquisition date and cost, federal percentage of participation, location, condition, and disposition data) and perform a physical inventory reconciliation at least once every two years — the specifics are covered in CASRAI’s property management system requirements guide.
Disposition rules tied to fair market value. When the equipment is no longer needed on any federal project, 200.313(e) sets the disposition path: below the $10,000 fair-market-value threshold, the recipient may keep, sell, or otherwise dispose of it with no further federal obligation; above that threshold, the federal government is entitled to a share of the proceeds proportional to its original percentage contribution to the purchase.

Note that 200.313(b) also carves out states, local governments, and Indian tribes: they may follow their own state/tribal equipment management laws and procedures instead of the federal disposition rules above, so long as those procedures are consistent with the statute’s general property-management objectives. Universities and other non-governmental recipients don’t get that carve-out and follow the federal rules as written.

The practical upshot: conditional title is real ownership, but it is ownership held in trust for the life of the federal interest. Once the equipment is fully depreciated/disposed of consistent with the rules above, or the specific conditions in the award terms are satisfied, the federal interest lapses and, functionally, the institution’s title stops being encumbered — though the Uniform Guidance does not describe this as title “becoming” unconditional; it simply means the conditions that constrained the conditional title have been met.

Federally Owned Property: Title That Never Transfers (2 CFR 200.312(a)-(b))

Federally owned property is a different situation entirely: the recipient never buys the equipment. Instead, the federal government furnishes property it already owns — for example, a specialized instrument a sponsoring agency ships to a university lab, or equipment transferred from a government facility for use on a specific project — and the recipient simply holds and uses it in custody. Because the recipient never acquired the property, there is no acquisition moment for title to vest at; title stays with the federal government from beginning to end.

The obligations that come with holding federally owned property are custodial rather than ownership-based:

The recipient must maintain an inventory of the federally owned property in its custody and submit that inventory annually to the federal awarding agency or the pass-through entity, per 200.312(a).
When the property is no longer needed, the recipient must request disposition instructions rather than disposing of it independently — the awarding agency directs what happens next, per 200.312(b), potentially including declaring the item excess and routing it through federal excess-property channels.
There is no fair-market-value threshold, no proceeds-sharing calculation, and no path to the recipient simply keeping the property free and clear — because the recipient never held title in the first place, there’s nothing for a threshold to convert into recipient ownership.

This is the regime covered in depth in CASRAI’s Government-Furnished Property in University Research Awards guide, including the custodial recordkeeping and tracking obligations specific to holding, rather than owning, federal property.

Exempt Property: The Narrow Statutory Carve-Out (2 CFR 200.312(c))

Exempt property sits conceptually between the two regimes above. Like conditional-title equipment, it starts as property the recipient acquires under a federal award. But under 200.312(c), if a federal statute specifically authorizes the awarding agency to vest title in the recipient without further responsibility to the federal government — and the agency’s award terms actually invoke that authority — the recipient receives unconditional title from the outset, functionally comparable to equipment the institution bought with its own unrestricted funds.

Two things make this a narrow exception rather than a general escape hatch from 200.313:

It requires an actual statute granting the awarding agency this authority; not every federal program has one, and 200.313’s conditional-title default applies unless that authority both exists and is invoked.
It requires the agency to affirmatively elect to use that authority and say so in the award’s terms and conditions. A research office should never assume exempt-property treatment applies — check the specific award document, not the general regulation.

Because exemption status is award-specific and depends on program-level statutory authority that varies by awarding agency, a research office encountering an equipment title question should confirm the applicable regime directly in the notice of award or grant agreement rather than assuming default conditional-title treatment applies universally.

Side-by-Side Comparison

Dimension	Conditional Title (200.313)	Federally Owned Property (200.312(a)-(b))	Exempt Property (200.312(c))
Who holds title	Recipient, subject to federal interest	Federal government, throughout	Recipient, unconditionally
How the equipment arrived	Purchased by the recipient with award funds	Furnished directly by the federal government	Purchased by the recipient with award funds
Use restrictions	Authorized project use, then priority-order availability to other federal awards	As directed by the awarding agency	None beyond ordinary institutional policy
Disposal/encumbrance	Requires federal agency approval	Requires disposition instructions from the agency	Recipient’s own discretion
Disposition at end of need	Keep/sell freely under $10,000 FMV; proceeds shared above that threshold	Agency directs disposition; no recipient retention right	No federal disposition role
Reporting	Property records plus biennial physical inventory	Annual inventory report to the agency	None specific to title beyond standard grant reporting
Prerequisite	Default regime; no statute required	Federal government supplied the property, not the recipient	Specific federal statute plus explicit award-terms election

Why the Distinction Matters in Practice

This isn’t an academic distinction. It has direct operational consequences for research offices, sponsored-programs staff, and principal investigators:

Institutional financial statements and net asset treatment. Conditionally titled equipment generally appears on the institution’s books as an asset (subject to the federal interest), while federally owned property in the institution’s custody typically does not — the institution never held title to record.
Selling or repurposing equipment. A lab manager who wants to sell an underused piece of equipment, or redeploy it to a non-federally-funded project, needs to know which regime applies before acting. Selling federally owned property without agency disposition instructions, or disposing of conditionally titled equipment above the $10,000 threshold without accounting for the federal share of proceeds, are both compliance failures an audit will catch.
Using equipment as collateral. Because conditional title cannot be encumbered without federal agency approval, institutions cannot pledge federally interested equipment as security for a loan or lease without that approval — a constraint that can surprise finance offices structuring equipment financing.
Principal investigators changing institutions. When a PI moves and wants to bring equipment along, the receiving and releasing institutions need to know whether the item is conditionally titled equipment (a transfer the current title-holder and the federal agency must approve) or federally owned property (which the departing institution never had authority to transfer in the first place; only the federal agency can redirect it).
Institutional mergers, closures, or department restructuring. Any change in the legal entity holding title triggers a review of federally interested equipment inventories — this is precisely the kind of event that surfaces equipment nobody remembers is conditionally titled.

Frequently Asked Questions

Can a university sell equipment bought with federal grant funds?

Yes, but only within the rules in 2 CFR 200.313(e). If the equipment’s fair market value is under $10,000, the recipient may sell it with no further obligation to the federal government. Above that threshold, the federal government is entitled to a share of the sale proceeds based on its percentage share of the original acquisition cost. Selling equipment above the threshold without accounting for that federal share is a compliance violation, not a discretionary institutional decision.

Does conditional title mean the federal government could take the equipment back?

Not directly — conditional title means the recipient’s ownership is subject to conditions (authorized use, no unapproved disposal or encumbrance, proceeds-sharing on disposition), not that the government can unilaterally repossess the item. The mechanism is more like a lien or reversionary interest that constrains what the title-holder can do, rather than outright government seizure.

What’s the difference between federally owned property and government-furnished property (GFP)?

In the grants context (2 CFR Part 200), “federally owned property” under 200.312 is functionally the grants-world analogue of what federal contracting calls “government-furnished property” under the FAR/DFARS framework: government-owned property placed in a contractor’s or recipient’s custody for use on a federal project. The regulatory regimes are not identical — contracts use different property-management systems and reporting mechanics than grants — so don’t assume a FAR-based GFP process satisfies a 2 CFR 200.312 obligation, or vice versa, if your office handles both instrument types.

How do I know if my award’s equipment qualifies as exempt property?

Check the award’s specific terms and conditions and notice of award document. Exempt-property treatment under 200.312(c) requires both a federal statute authorizing the awarding agency to vest unconditional title and an explicit election by the agency to do so in that award. It is never a default assumption — if the award documents don’t say so explicitly, treat the equipment as conditionally titled under 200.313.

Who is responsible for equipment records once title vests?

The recipient institution, regardless of which regime applies, though the specific records required differ. Conditionally titled equipment requires the full property record set (description, identification numbers, funding source, cost, federal share, location, condition, disposition) and a physical inventory at least every two years, detailed in CASRAI’s property management system requirements guide. Federally owned property requires an annual inventory submission to the agency instead.

Equipment Titling Under Federal Awards: Conditional Title vs. Federally-Owned Property