Creating Equipment Lease-Purchase Requisitions (Installment Purchases)

Use this process to enter the required information for equipment lease-purchases so that fund liens can be accurately established and tracking of inventorial equipment can be successful.

Note: Any type of Lease-Purchase (Installment Purchase) is a Restricted Purchase. The purchase order MUST be reassigned to a Central Purchasing Buyer. (See Assigning a Purchase Order to a Different Buyer.) In Banner, set up the lease as a blanket purchase with a “B” purchase order number (see Purchase Order Assignment.) Equipment Lease-Purchase requests are typically initiated in the CruzBuy system, however the Purchase Order must be created in FIS Banner.
Go to http://purchasing.ucsc.edu/howto/leasepurchasechart.html for more information about Lease-Purchases.

Definitions
Procedure

Definitions

Lease-Purchase (also called an Installment Purchase): A contract executed by the University and another party containing all terms and conditions for acquisition of property by means of scheduled installment payments of specified amounts of money during the life of the contract. Conditional title to the equipment vests in UC upon receipt of the equipment. The equipment is inventoried at inception of the contract. If you are unsure about the nature of the contract, contact Equipment Administration.

A lease-purchase or installment purchase differs from a lease. (For definition of a lease, see Creating Equipment Lease Requisitions.) With a lease-purchase, the intent is to purchase equipment and UC is committed over the term of the contract. Even if the contract states that it is cancellable in the event of loss of funding, it is considered non-cancellable. The assumption is that UC has in “good faith” set sufficient funds aside in order to enter into the contract. Third-parties may provide the financing.

When a lease-purchase involves a trade-in, refer to Equipment Trade-Ins (Purchased or Leased).

Procedure

Important: It is essential that the lease-purchase purchase order maintain integrity over term. All activity relating to the contract must be kept on the same PO number (i.e. original contract, all payments, like-for-like exchanges, etc.). Do NOT create a new purchase order for a new fiscal year.


Note: Maintenance agreements should be on a separate purchase order. If a separate PO is not possible, ask the supplier to either bill the lease and maintenance separately, or invoice UCSC with separate line items for the lease portion and maintenance portion on each invoice.

1. Enter the requisition with COMMODITY LEVEL ACCOUNTING according to the instructions in Creating a Requisition: Commodity Level Accounting FPAREQN. Include the detailed information listed below.

• In FOAPOXT, select and insert clause LEASEPUR in document text.
  The LEASEPUR clause must print on the PO and must include a specific contact person to send the Amortization Schedule to.
  
  Type [F10] Commit and return to FRAREQN by clicking on the Exit icon.
   
• When you provide the commodity description, you MUST specify the equipment manufacturer and model number.

2. For UNIT OF MEASURE, specify month or year as appropriate.

Note: Sales tax is usually paid up front in a lump sum. For third-party financing, sales tax is paid to the manufacturer/vendor by the financing company and no separate line item is required.

3. If tax is to be paid by separate lump sum, record another commodity line using NOTX in the tax field and account code 007010 or 007020 as appropriate.
    
4. In the QUANTITY field, enter the number of payments to be made in the current fiscal year only. This quantity needs to reflect either 12 monthly or 4 quarterly payments, this may vary depending on the number of months remaining in the current fiscal year.
    
5. In the UNIT PRICE field, enter the total of each individual payment and use account code 007090 for this commodity.
    
6. In Line Item Text, FOAPOXT, insert the INVEQUIP clause and complete all applicable fields
    
7. In FOAPOXT, choose the applicable warranty clause: WTY.1YR, WTY 2 YR, WTY5YR, WTY30D, OR WTY90.
    
8. After entering all lease information in FOAPOXT, commit changes by typing [F10] Commit and return to FPAREQN by clicking on the Exit icon.

Important: If no dollar amount is assigned to the trade-in of University-owned equipment, contact Equipment Administration to determine the correct procedure for disposing, surplusing and removing the equipment from inventory.

9. Arrow down and enter another commodity line for trade-in if applicable. Refer to Equipment Trade-Ins (Purchased or Leased) for procedure.
    
    
10. To allow the PO to remain open for multiple fiscal years, arrow down and enter other commodity line items as follows:
    
    Enter a line item for each fiscal year for the life of the lease.
    For example:
    07-08 lease purchase
    08-09 lease purchase
    09-10 lease purchase

Note: These commodities are mandatory for all leases. They allow the Purchase Order to remain open for multiple fiscal years.
 

11. Enter the UNIT OF MEASURE as “EA,” the QUANTITY as “1” and UNIT PRICE as “$10.00.”
     
12. In Line Item Text FOAPOXT, type “IGNORE THIS LINE ITEM.”
     
13. Commit your FOAPOXT changes by typing [F10] Commit, Right Click - Save, or clicking on the Save icon . Type [control q] Exit Screen, Right Click - Exit, or click on the Exit icon to return to FPAREQN.

14. Complete the remainder of the requisition as you would for Creating a Requisition: Commodity Level Accounting FPAREQN.

Important: All Lease Purchase Orders must go through a Central Purchasing buyer. See Assigning a Purchase Order to a Different Buyer.