APPROVED BY:
CFO
DATE:
December 2003
PROCESS FOR LEASE
MANAGMENT
I.
PAGE TOTAL: 6
Date of Initiation/Revision
January 1, 2004
II.
Policy Classification
Senior VP Administration and Finance & CFO delegated to Office of Treasury
III.
Policy Summary
This policy establishes the process of all requisitions for purchase of equipment to be funded by a lease.
IV.
Related Policies
Purchasing via Lease
V.
Delegation of Authority
The Office of the Senior Vice President for Administration and Finance and CFO has delegated authority
for this process to the Office of Treasury.
VI.
Policy Statement
The purpose of this process is to identify equipment and related purchases that can be specifically
identified for purchase and externally financed with a lender other than long term bonds.
Capital equipment is generally acquired by outright purchase. On occasion, circumstances may require a
lease on equipment to support the business need for the equipment. In this case, either a lease or a
lease/purchase may be used to acquire the capital equipment. The absence of current funding does not
constitute a good reason to choose a lease over a purchase option.
Department of Treasury may decide to lease equipment when leasing demonstrates the most sound
business decision for use of the available financial resources. A lease analysis must be prepared which
reflects quantitative analysis and qualitative factors for consideration of the lease versus buy decision.
The advantages of leasing should be considered in the lease analysis:
 Transfer of the risk of loss and resale/disposal to the lessor
 Transfer of the risk of technological obsolescence to the lessor
 Preserves capital and avoids large cash outlays
 Bundles one-time costs with ease
 Matches the cost with the useful life of the equipment
 May offer other value-added life of the equipment
 May provide operating flexibility to meet changing conditions and demands
VII.
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Definitions
Capital Lease – is a contract where the lessee assumes all risk of ownership and the equipment
is recorded as an asset and the lease is recorded as a debt/liability.
Contract – is an equipment agreement between the lessee and the lessor.
Lessee – University of Rochester
Lessor – Financial institution or lender granting temporary ownership of the equipment through
the contract.
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VIII.
Operating lease – is a contract which is written for considerably less than the life of the equipment
and ownership is not attainted.
Purchase Order – PO, document issued by Purchasing to the vendor from the requisition (s) that
was prepared by the department administrators that identifies the equipment or items to be
purchased. The PO will include the lease company name, address, telephone number and lease
schedule number.
Requisition – document prepared by the department administrators that details the desired vendor
and equipment details relating to the desired purchase.
Sub ledger sub code for lease payments to lessor will be 221x where x is equal to the sub ledger
number.
Cost - includes cost plus the cost of modifications, attachments or the apparatus necessary to
make it usable for the purpose for which it is acquired. Taxes, duty, protective-in transit insurance,
freight and installation cost are also to be included in the final cost of the equipment.
Long-term Bonds – These bonds have a duration of more than six years or an average effective
maturity of more than 10 years. (primary focus on corporate and investment – grade bonds)
Responsibilities
The Office of the Treasury, Budget Office and the departmental business administrators will work together
to determine appropriate level of financing required. In most cases, the amount will have been determined
through annual budgetary process.
The business administrators within the departments who have accountability for purchasing of capital
equipment will assure that purchases paid by lease funds accommodate the intended goal established
during lease negotiation. The business administrator will also monitor the purchase requisitions to assure
effective processing of the invoices. In addition, the business administrator will reconcile and monitor the
purchase requisitions issued against the lease to the available lease funds schedule prepared by the
lease company. It is the responsibility of the department administrators to assure there are funds
available for the purchase requisitions that are issued.
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IX.
Procedures
Dept. Administrators, Treasury and Budget Office confirm appropriate approval
by Board of Trustees or other approving board as a capital project.
Upon approval, department submits requisition; including equipment details and
a printed copy of “lease vs. buy” model based on estimated cost.
Send information to & discuss
with Treasury
Treasury will issue request for Proposal
for lease bids
> $1 Million
< $1 Million
Treasury submits to Board of Trustee for
Approval
Treasury analyzes responses to RFP & funding
Treasury communicates to Budget Office & Business Administrator
Treasury and Budget Office approval of lease facility, Treasury
signs lease commitment
Go to Step 2.
Step 1: Verify Leasing or Purchasing
[Process]
Upon identification of external funding requirements, departmental administrators will confirm approval of
project as an approval capital project by the appropriate approval authority, ie. Board of Trustees, MC
Board of Trustees, etc. After approval is confirmed, departmental administrators will prepare appropriate
documentation to include approval date by the Board, detailed equipment listing to include vendors, make
and model of equipment, as well as any soft costs that may be incurred for installation of the equipment.
1.1 Each departmental administrator will be responsible for preparing a Purchase Requisition (PR),
including equipment details.
1.2 Departmental administrator will put estimated cost into “lease vs. buy” model, and prints the result
with the PR for the expenditure approval.
1.3 Following is the detail requirement for the PR.
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Each department will prepare the requisition with the following information reflected on the requisition:
 Provide detailed information on items to be purchased
 Use 0-00000-0000 as the account number
 In bottom right comer, put “L” on the New P.O.# line
 Identify the name of project/item number as appears on documentation used to establish
financing on the requisition for internal reporting purpose.
 Include lessee name and address on each requisition if known
 Provide name/e-mail of contact person who will receive shipment
 Identify the individual who is authorized for invoice approval on the requisition
 Request the make on the requisition that model and serial numbers of the equipment be included
in the invoice.
 Note that shipping be identified separately on the requisition.
Retain a copy of the purchase order for the department/unit preparing the purchase order.
1.4. Department Administrators submit the PR and discuss details with Treasury.
1.5. Treasury will prepare a Request for Proposal (RFP) for lease bids.
1.6 If the Purchase amount is greater than $1 million, Treasury will prepare documents and send them to
Board of Trustee for approval.
1.7 If the purchase amount is less than $1 million, go to the next process.
1.8. Treasury will further analyze responses to RFP and search funding.
1.9. Then, Treasury will communicate with Budget office to confirm appropriate amounts and lease
options.
1.10. Upon both Treasury and Budget Office approval, Treasury will sign lease commitment. Funds will
be available within two weeks of lease commitment.
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Step 2: Leasing / Purchase Process
Step 1
Forward PR to Purchasing
“Bill To” indicates the
leasing company
address
Purchase Order
Department receives
PO
Vendor receives PO
& sends equipment
Invoice
Copy to the business
administrator
responsible for lease
management.
Requirements
on PR are met?
Y
Retain a copy for
future reference.
Pay to the Vendor
N
Invoices mailed to
lessor
Lessor forwards to
UR for approval.
Obtain departmental
approval and
Treasury approval
Invoices mailed to
UR
Y
Requirements
on PR are met?
N
Ask Vendor to
revise and send to
lease company.
Return approved
invoice to the Bank
Lease Company
issue payment and
create a CEA
Treasury &
department keep
copy of CEA
[Process]
2.1 Treasury will forward the requisition, along with the funding decision to the Purchasing Department.
However, if a specific departmental administrator is assigned to the project, this individual will be given
authority to sign the purchase requisition (s) with the lease company information identified on the
requisition (s). The “Bill To” will indicate the leasing company, including the lease schedule number.
2.2 Purchasing will return a copy of purchase order to the department/unit. A copy is forwarded to the
business administrator responsible for lease management and the lease company.
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This individual will check to make sure all requirements on the requisition (refer to requisition
requirements above) are correctly stated on the purchase order.
This individual will also maintain a copy and all related documentation for future reference.
2.3 Once the PO has been verified by the department, the equipment will be ordered and subsequently
received by UR.
2.4 (Required) The invoice will be mailed directly to the lessor. The lessor will then forward the invoice to
UR for approval. Departmental approval and approval by the Treasury Office are required before
payment will be made to the vendor. The Treasury Office will return the approved invoice to the bank.
2.5 If the invoices are mailed directly to UR, the department administrator must verify that all the
requirements on the purchase order (refer to requisition requirements above) are correctly adhered to
on the invoice. If not, the vendor must issue a corrected invoice. Upon receipt of an accurate invoice,
the department administrator must approve payment, and forward to the Treasury Office. The
Treasury Office will approve payment and forward to the leasing company (bank).
2.6 Upon receipt of the approved and signed invoices, the leasing company will prepare a Certificate of
Equipment Acceptance (CEA). The CEA will be sent to and signed by Treasury Office. Copies of all
CEA documents will be sent to department business managers and accounting/finance, if
appropriate, for documentation. A copy of the leasing company summary of invoice payments to
vendors will be forwarded to department business managers on a periodic basis.
X.
Policy Review
The leasing policy will be reviewed periodically by the Offices of Purchasing and Treasury. The Office of
Purchasing will receive suggestions for review and coordinate the review of the policy with Treasury.
Use of Section for Policy, Procedure and Process
Section
Policy
Date of Initiation/Revision
yes
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Procedure/Process
yes