{"id":20137,"date":"2024-05-20T09:53:21","date_gmt":"2024-05-20T13:53:21","guid":{"rendered":"https:\/\/marymount.edu\/?page_id=20137"},"modified":"2024-05-20T09:53:21","modified_gmt":"2024-05-20T13:53:21","slug":"capital-purchases-and-leasing","status":"publish","type":"page","link":"https:\/\/marymount.edu\/faculty-and-staff\/financial-services\/procurement-and-payables\/capital-purchases-and-leasing\/","title":{"rendered":"Capital Purchases and Leasing"},"content":{"rendered":"
Any and all\u00a0 property purchased or acquired are deemed assets of the University. A capital purchase is any item that has a purchase value that exceeds $5,000 or more and has a useful life of more than one (1) year. In order to be considered a capital purchase, the asset must also be an individual, stand-alone, movable or tangible item. Examples include:<\/span>\u00a0<\/span><\/p>\n A lease-purchase involves an item paid for on an installment payment basis, where the\u00a0 University assumes outright ownership when the terms of the lease purchase agreement are completed. Lease purchases are materialized\u00a0 when the lease purchase agreement has been signed and after the first payment is made.<\/span>\u00a0<\/span><\/p>\n Software purchases become a capitalized item when the purchase price exceeds $100,000. The capitalization threshold for software over $100,000 includes: license fees (single or multiple), annual fees (one or multiple years), testing fees, setup fees and delivery cost.\u00a0<\/span>\u00a0<\/span><\/p>\n The threshold cost of more than $5,000 must include any associated charges and fees. If the amount is below the threshold, it is not considered capital. Examples of associated charges and fees include:<\/span>\u00a0<\/span><\/p>\n Leases are legally binding, non-cancelable contracts that financially obligate the University. The Lessor (e.g. bank) owns the equipment throughout the contracted lease period and maintains a security interest or lien on the equipment. Departments have a fiduciary responsibility to safeguard the leased equipment in their care.\u00a0 If the equipment is stolen and\/or damaged, appropriate University personnel must be notified because the University is responsible for the prompt replacement of the equipment. A Lease may not be canceled for any reason prior to the end of the term without incurring severe financial repercussion.<\/span>\u00a0<\/span><\/p>\n Leasing goods is subject to the same policies and procedures that would apply to the acquisition of any piece of capital equipment, such as computers, scientific equipment, or business-related equipment.<\/span>\u00a0<\/span><\/p>\n Leasing is a <\/span>financing mechanism<\/span><\/b>, not a funding source. The acquiring department must identify the funding source before entering a lease. <\/span>In order to be considered for leasing, the item must have a value of at least $50,000. <\/span><\/b>A\u00a0 primary reason to lease rather than buy an item is because the needed item is so expensive that its direct purchase is not possible or not permitted due to limited funding sources (in the case of sponsored project leasing) or other financing mechanisms are unavailable or more expensive than leasing.<\/span>\u00a0<\/span><\/p>\n The lease or buy decision and the identification of the type of lease that would be most appropriate must take into consideration the following criteria:<\/span>\u00a0<\/span><\/p>\n 1. Operating or Fair Market Value Leases:<\/span><\/b>\u00a0<\/span><\/p>\n An Operating\/Fair Market Value Lease is essentially a long term rental of equipment and\/or payment for the use of equipment over a specified term. At the end of the lease term, the equipment must be either returned to the lessor or purchased for the current fair market value (FMV).<\/span>\u00a0<\/span><\/p>\n 2.\u00a0 Finance or Capital Leases:<\/span><\/b>\u00a0<\/span><\/p>\n In a Finance\/Capital Lease, the payments are structured like a regular loan (with interest) under which the school or department owns the leased item at the end of the lease term for a nominal cost (generally a value of $1.00).<\/span>\u00a0<\/span><\/p>\n The types of capital equipment that are covered by this policy are typically (but are not limited to) the following:<\/span>\u00a0<\/span><\/p>\n Schools and departments can request leasing of capital equipment and installed software only. Software may only be leased under a Finance\/Capital Lease. Extended warranties and service contracts are not included in leases. Leases require a\u00a0 Purchase Order (PO) and must have available funds budgeted and guaranteed for the full term of the lease. Leases require receipt and acceptance. All equipment leased on the same schedule must be located at the same address and must be delivered and installed at the same time. This is necessary to avoid lengthy delays in finalizing the lease, increased financing charges such as interim rents, and delays in payments to the equipment vendors.<\/span>\u00a0<\/span><\/p>\n Lease terms are based on equipment cost and useful operational life. A lease term may not exceed the useful operational life of the equipment.<\/span>\u00a0<\/span><\/p>\n A.\u00a0 Lease Documentation and Signing Authority<\/span><\/b>\u00a0<\/span><\/p>\n Leases require extensive documentation and review in addition to approved requisitions and POs in order to implement. The following documents are typical of leasing documentation: Lease Proposal (Lease Financing Quote or Offer), Master Lease Agreement (MLA), Lease Schedule, Delivery & Acceptance Form and Third Party Assignment.<\/span>\u00a0<\/span><\/p>\n B.\u00a0 Leasing Process<\/span><\/b>\u00a0<\/span><\/p>\n Procurement Services is responsible for managing the capital leasing process at the University.<\/span>\u00a0<\/span><\/p>\n With the exception of copiers, printers, scanners and postage meter leases, all other leases are processed, executed, managed and paid centrally through Procurement Services. Payments are administered centrally to ensure timely payments, avoidance of late fee finance charges and the mitigation of the risk of default by the University. Payments are scheduled once a Purchase Order has been established, lease documents have been properly executed, equipment has been inspected, received and satisfactorily installed, (when applicable). Payments are subject to the execution of a Payment Authorization Schedule providing authorization to Procurement Services by the department to schedule payments to the lessor. This document must be signed by the respective authorized officers at the school or department.<\/span>\u00a0<\/span><\/p>\n Lease documents received by departments must be forwarded to Procurement for review and execution. The University only enters into lease agreements with lessors approved by Procurement. Approved lessors are those with whom a Master Lease Agreement (MLA) has been negotiated and executed by the\u00a0 Procurement Services.<\/span>\u00a0<\/span><\/p>\n A. Department\/School<\/span><\/b> –<\/span><\/b> It is the responsibility of the appropriate staff in a department or school to:<\/span>\u00a0<\/span><\/p>\n Note: If the source of funding for equipment is to be from sponsored project funds and the proposal budget indicates that the equipment is to be leased rather than purchased, the department and the Principal Investigator must document the leasing requirement and guarantee availability of funding for the term of the lease.<\/span>\u00a0<\/span><\/p>\n B.\u00a0 Procurement Department<\/span><\/b> \u2013 <\/span><\/b>It is the responsibility of the Procurement Department to:<\/span><\/p>\n \u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" What Is a Capital Purchase? Any and all\u00a0 property purchased or acquired are deemed assets of the University. A capital purchase is any item that has a purchase value that exceeds $5,000 or more and has a useful life of more than one (1) year. In order to be considered a capital purchase, the asset […]<\/p>\n\n
When Is a Lease Purchase Capitalized?\u00a0<\/span><\/h2>\n
When Is a Software Purchase Capitalized?\u00a0<\/span><\/h2>\n
What Costs Are Included in Purchase Cost?<\/h2>\n
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What is Capital Leasing?\u00a0\u00a0<\/span><\/h2>\n
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Types of Leases:<\/h3>\n
What Capital\/Goods are covered by the Leasing Policy?<\/h2>\n
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General Guidelines\u00a0<\/span><\/h2>\n
Responsibilities\u00a0<\/span><\/h2>\n
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