Authority/Reference(s) 45 CFR 75, Subpart E; FAR; Uniform Grant Guidance (UGG); UGMS
Revision Date September 15, 2015


A supply is defined as any article costing less than $5,000 per unit and having a useful life of less than one year. Items meeting the cost standard but having a greater useful life expectancy are not considered consumable supplies as long as the cost of control and record keeping required on such items is reasonable in relationship to their value. Consumable supplies charged by a contractor as a direct cost must include only the supplies actually used to carry out the contract, and due credit must be given for any excess supplies retained or returned by vendors.

A computing device is a supply if the acquisition cost is less than the capitalization level or $5,000 regardless of the length of its useful life. Computing devices can be charged as direct costs, provided that the device is essential and allocable, but not solely dedicated, to the performance of the award.

The contractor must follow the Uniform Grant Guidance (UGG) and UGMS , as applicable, in calculating the costs of supplies.

Important: Certain types of items are classified as controlled assets. In contrast to supplies, a controlled asset is an item of real or personal property with an estimated life of greater than one year, but an acquisition cost of less than $5,000. These items are considered high risk and have a high potential for loss; therefore, controlled assets must be maintained in a contractor’s inventory system and tagged accordingly based on specified acquisition costs.

Cost reimbursement contractors should review the Comptroller’s State Property Accounting (SPA) user manual, available online for the most current listing of controlled assets.

Contractors must add these items classified as controlled assets to their inventory list based on the noted acquisition costs:

Item Acquisition Cost
Rifle and shotguns
Sound systems and other audio equipment
$ 500.00 - $4,999.99
Camera: portable, digital, single lens reflex
Video recorder/laser disc player
(TV, VCR, DVD player, camcorder)
Desktop and laptop computers
Printer (not portable)
Data projectors
Smartphones, tablets, and other hand held devices

Contractors should review the SPA manual periodically for the most current list.

Supply items usually fall into one of the following categories:

  • Office supplies: including clerical and bookkeeping items, such as pencils, paper, ledgers, staplers, binders, attendance books

  • Program supplies: vary depending on the service

  • Maintenance supplies: including items such as soaps, waxes, paper products, mops, cleaning products

  • Food: (allowable if clients receive meals or snacks as part of the service being purchased) including items such as meats, produce, canned goods, dairy products:

    • Food expenses for clients may be budgeted in the contract. Staff meals may be reimbursed through the contract, if eating at a facility with the clients is a condition of employment.  Food costs paid for by any other source, federal or state, are included in the total but are not reimbursable under the contract (not applicable to food services programs). 

    • Contractors that charge staff for their meals may reimburse these staff members on a fringe benefit basis, and this reimbursement may be budgeted as such. When staff must pay on a meal-by-meal basis, the staff may continue to pay in this manner and submit a bill similar to travel reimbursement. In either instance, the DFPS reimburses the contractor for reasonable costs incurred. Accountability by the contractor must be maintained for each meal.

The contractor has title to supplies and other expendable property upon purchase; however, if there is a residual inventory of unused supplies exceeding $5,000 in total cumulative value upon termination or completion of the contract or program and the supplies are not needed for any other federally-sponsored project or program, the contractor shall:

  • Return the excess supplies to DFPS; or

  • Compensate DFPS for its share of the supplies, whether the supplies are retained or sold. If sold, the contractor returns DFPS's share of the sale proceeds after deducting the cost of the sale.

The amount of compensation must be computed in the same manner as for equipment. See: Equipment.

A contractor cannot charge a fee for services less than a private company charges for the use of the supplies unless prior approval is obtained.