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Our agency's policy is to capitalize all equipment items costing $1,000 or more and having a useful life of one year or more. Are we now required to change our policy to $5,000 or more because SED raised the threshold for equipment for grants and grant c

No.  The responsibility and authority to establish the appropriate dollar threshold for capitalizing equipment for financial statement purposes resides with the local agency.  However, for grants and grant contracts administered by SED, items with a unit cost of $5,000 or more must be reported in Code 20, Equipment, and items with a unit cost of less than $5,000, must be reported in Code 45, Supplies and Materials, on budgets (FS-10s), budget amendments (FS-10-As), and final expenditure reports (FS-10-Fs).