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Finance Procedures Manual

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Asset Control and Management (6000) Procedures

Procedure Number Procedure Name Category Content
6005 Fixed Assets Asset Control and Management (6000)

.100 General

Responsibilities and procedures described in this section apply to the acquisition, transfer, disposition, reporting, and physical inventory of university assets. JMU procedures are applied in conjunction with the CAPP Manual and ASTM International E53 standards on Property Management Systems. These procedures are necessary to effectively manage and control university assets and to comply with federal, state, and university guidelines and generally accepted accounting principles.

.200 Definitions

Asset: (1) Anything owned having monetary value; (2) tangible or intangible items owned by an entity that have probable economic benefits that can be obtained or controlled by the entity (ASTM E2135).
ASTM International: One of the largest standards development and delivery systems in the world; ASTM standards are voluntary consensus documents that guide in research, design, manufacturing, marketing and trade.
Cannibalization: removal of serviceable components from one item of equipment in  order to install them on another item of equipment.
CAPP Manual: Commonwealth Accounting Policies and Procedures, developed by the State Comptroller
DPO: Departmental Purchase Order; usage of DPO is limited to items that are considered eVA exclusions.
EICR: Equipment Inventory Change Request form.
ETF: Equipment Trust Fund; established to provide funding to update equipment needed for instruction and research; SCHEV, VCBA and the Department of Treasury share administrative responsibilities.
ESN: Equipment Service Number; blue decal assigned to computer equipment by PC Services
Equipment: Agency property of any kind, which meets the following criteria: Is complete in itself; does not lose its identity or becomes a component of the building where it resides; and, is of a durable nature with a useful life of two years or more.
eVA: electronic Virginia, the State's online procurement system, used by the university for purchases.
Financial Reporting: An organizational unit within the Finance Division which is responsible for accounting and financial reporting of fixed assets, including related debt and real estate and equipment operation leases.
Fixed Assets: When lower case (fixed assets), a general term which includes all types of fixed assets: land, buildings, improvements other than buildings, construction in progress, equipment, library/reference materials, artwork and historical collections, and certain internal-use software; when capitalized (Fixed Assets), the organizational unit within the Accounting and Reporting area of the Finance Division, which is responsible for the accounting and financial reporting of fixed assets, including tracking titles, deeds, and easements, as well as periodic inventories of fixed assets.
Fixed Assets Coordinator: The liaison between a university department and the Office of Fixed Assets and Surplus Property.  This person is designated by a Department Head and is responsible for maintaining equipment records, assisting with the annual physical inventory, scheduling appointments for decaling equipment, and communicating with Fixed Assets staff to ensure accurate equipment data through the use of the Equipment Inventory Change Request (EICR) form.  The Fixed Assets Coordinator is responsible for completing EICR forms for his/her department to send items to the Surplus Property Warehouse, transfer items to another department, and accept items transferred to his/her department from another.
PO: Purchase Order
SCHEV: State Council of Higher Education for Virginia
Sunflower System: the university's web-based asset management system, which supports all lifecycle asset management events from acquisition through disposal, including barcode scanning software for physical inventories.
Surplus property: When lower case (surplus property), equipment and supplies no longer needed by a department awaiting transfer or disposal; when capitalized (Surplus Property), the section of Fixed Assets responsible for managing surplus property.
VCBA: Virginia College Building Authority.

 

.300 Responsibilities

.310 Fixed Assets

  • To maintain the official fixed asset master file records for university assets.
  • To summarize financial activity for inclusion in the plant fund portion of the University’s financial statements.
  • To interpret and comply with university, federal, and state policies and procedures regarding fixed assets and surplus property.
  • To manage the surplus property operations.
  • To provide customer service for university departments.
  • To coordinate the physical inventory process for the university annually.

.320 Financial Reporting

  • To perform accounting and reporting for capital projects.
  • To perform accounting and reporting for debt (bonds used to fund capital projects, capital leases, and installment purchases).
  • To administer operating lease databases for real estate and equipment.
  • To summarize financial activity for inclusion in the plant fund portion of the university's financial statements.

.330 Department Heads

  • To ensure that equipment belonging to their department is adequately controlled and safeguarded.
  • To designate an individual as the departmental Fixed Assets Coordinator for maintaining equipment records, conducting an annual physical inventory, scheduling appointments for decaling equipment, and communicating with Fixed Assets to ensure accurate equipment data.
  • To approve EICR forms related to their department's inventory.

.340 Departments

  • To assist Fixed Assets staff in conducting an annual physical inventory and providing results for updating the official fixed asset records.
  • To report regularly to Fixed Assets (using the EICR form) equipment transfers from one department to another department, equipment relocation to a different building, or property disposals as a result of trade-in, cannibalization for parts, theft, or other insurable loss.

.400 Capitalization Policy

With the exception of donated assets, fixed assets are accounted for at the original acquisition cost, which includes the purchase price or constructed cost, plus any cost incurred to place an asset into service. Donated assets are recorded at fair market value at the date of donation. Asset acquisitions that have an original unit cost of $5,000.00 or greater and a minimum useful life of 2 years are capitalized for inclusion in the university’s financial statements and recorded in Sunflower Systems. Acquisitions of ETF assets costing between $500.00 and $4,999.00 are considered controllable and recorded in Sunflower Systems to provide accountability and to safeguard the asset until ownership passes to the University.  Additionally, assets on loan to the university and assets from a granting agency which require training, and cost between $2,000.00 and $4,999.00, are considered controllable and recorded in Sunflower Systems to provide accountability and to safeguard the assets.

.500 Equipment Trust Fund (ETF)

The Equipment Trust Fund Program administered by SCHEV provides an additional funding source that allows higher education institutions to purchase equipment for instructional use. Equipment purchased with Trust Fund monies is not owned by the University, but is tied to leasing agreements with the VCBA. Once a leasing agreement has been satisfied (for a particular allocation), ownership passes to the University. In addition to general rules applicable to all equipment, specific guidelines apply to the acquisition, maintenance, and disposal of ETF equipment. Failure to satisfy these requirements could jeopardize future allocations of ETF monies. Refer to specific ETF guidelines listed below:

ALL ETF EQUIPMENT:

  • Must be used in programs of instruction, research, and academic support throughout its useful life or until ownership passes to JMU.
  • Is eligible for surplus only after ownership passes to JMU.
  • Lost or stolen must be replaced with departmental funds.
  • Must be an individual item that costs at least $500 or must be a functional unit where the aggregate cost of individual components is $500 or greater. Components of a functional unit perform a specific task and must remain assembled as a unit.
  • Must be decaled within 45 days of receipt for identification and tracking purposes.
  • Must be maintained in good working condition by the department and must be physically located in accordance with Sunflower Systems records.

.600 Acquisitions

.610 Identifying Fixed Asset Items and Decaling

By analyzing daily the "Potential Fixed Assets" report generated from the university's financial information system, the Fixed Assets Assistant Manager identifies equipment purchases for decaling. The report provides a list of all accounts payable vouchers recorded in equipment accounts (2xxxxx) and select service and supply accounts (1xxxxx) regardless of cost. The Assistant Manager selects expenditure transactions that are $5,000.00 or greater, Equipment Trust Fund purchases (all regardless of cost), Local/Agency fund purchases ($5,000.00 or greater) or partial payments. Actual scanned vouchers are reviewed in detail online. Equipment purchases are written up on a Sunflower systems input document and assigned barcode decal numbers based on the following criteria:

BAR CODES

  FUNDING SOURCE ORG CODES DOLLAR CRITERIA DECAL NUMBER SERIES DECAL COLOR & DESCRIPTION
  Operating
(E&G, Aux)
1XXXXX or 3XXXXX $5,000 or Greater Decals Prefixed with "1" Black & White -
Property of JMU
  Capital Projects 7XXXXX $5,000 or Greater Decals Prefixed with "1" Black & White -
Property of JMU
  Local Funds 8XXXXX $5,000 or Greater Decals Prefixed with "1" Black & White -
Property of JMU
  Equipment
Trust Fund
100062 All Regardless Of Cost Decals Prefixed with "8" Red & White -
Property of JMU Equipment Trust
  Grants &Contracts 5XXXXX $5,000 or Greater Decals Prefixed with "9" Red & White -
Property of JMU Restricted

Decal numbers assigned to assets are recorded in an Access database to track issuance for tagging and return of the input document for entry in SunFlower Systems.

Acquisitions of land, buildings, and improvements other than buildings are identified through the capital project process. Financial Reporting personnel perform a year-end review of non-capital projects coordinated primarily through Facilities Management.

Fixed asset acquisitions are made subject to approved operating and capital project budgets in conjunction with Section 7005, Procurement.

.620 Decaling Equipment

Following assignment of decal numbers, the departmental Fixed Asset Coordinator is contacted to schedule an appointment for decaling equipment purchased by their department. Information identifying the equipment is provided when the appointment is set up. Decaling should be completed within 30-45 days following acquisition of the equipment. Decaled assets are listed on departmental inventory reports that are updated annually by Fixed Assets through the physical inventory process. Each department has an obligation to notify Fixed Assets if they have untagged equipment with a value of $5,000.00 or more.

During the decaling process, data such as serial number and location (building and room) is gathered to complete the fixed asset record and recorded on the Sunflower Systems input document. This information is not typically found on the supporting purchasing documentation.  ASTM Standard E 2631, Standard Practice for Physical Placement of an Entity-Controlled Supplemental Identification Label, is followed with the decaling process.

Following the decaling of equipment, transactions are entered into Sunflower Systems to record university fixed assets and related data. Edits are verified to ensure the accuracy and integrity of the data that was entered.

.630 New Asset Report

To ensure the new assets are recorded in the correct responsible department and with accurate descriptions and locations, a monthly asset report is sent to any department that has received new assets tagged within the prior month according to Fixed Assets' records.  This report is sent to the departmental Fixed Assets Coordinator, who is asked to review the report for any inaccuracies and respond as having received the report and reviewed it.  Any errors noted are corrected through miscellaneous change entries in Sunflower Systems.

.700 Equipment Transfers & Disposals

At some point, a department or office may no longer need a piece of equipment currently in their possession. If the equipment has a white decal with red lettering (numerical sequence beginning with "8" or "9") the department should contact Fixed Assets for transfer or disposal instructions. Equipment with a white decal and black lettering (numerical sequence beginning with "1"), as well as equipment without decals, may be transferred or disposed of as listed in the following two sub-sections.

.710 Transfers

  • To Another Building within the Same Department:
    For Decaled Equipment - Complete an Equipment Inventory Change Request (EICR) form and send to Fixed Assets.
  • To Another Department:
    For Decaled Equipment - Complete an Equipment Inventory Change Request (EICR) form, including receiving department section and send to Fixed Assets.
  • To Surplus Property:
    See Section .900

.720 Disposals

  • Trade-In - Departments may use like equipment as trade-ins. An EICR form must be completed for decaled equipment and forwarded to Fixed Assets. The PO or PCO supporting the purchase must be referenced on the EICR form.
  • Cannibalization for Parts-Equipment that is broken/non-functional and not cost beneficial to repair may be cannibalized for the purpose of repairing like assets.  An EICR form must be completed to report the cannibalization to Fixed Assets.
  • Loss or theft - All property lost or stolen must be reported immediately to the University Police. Also, the Office of Risk Management must be notified for insurance purposes (refer to Section 3040, subsection .500 of this manual). An EICR form must be completed for decaled property so that inventory records can be updated.
  • Casualty Loss - Property destroyed by fire or other catastrophic circumstances must be reported to Fixed Assets through submission of an EICR form. Contact the Office of Risk Management for insurance purposes.
  • Return to Vendor - Equipment returned to the vendor and either exchanged or refunded must be reported to Fixed Assets through submission of an EICR form.

PLEASE NOTE: The JMU Surplus Property Coordinator regulates any disposal of property (other than those listed previously) including transfers to state agencies or other institutions of higher education.

.800 Physical Inventory

.810 General

In order to comply with federal, state, and university and ASTM International guidelines for maintaining accurate fixed asset records, all university departments are required to conduct a physical inventory of equipment under their control on an annual basis. A physical inventory involves the verification of all equipment within a department by actual observation and count. Departments are encouraged to maintain up-to-date equipment records in order to assist in their annual physical inventory process.  To conduct annual physical inventory verifications for departments, a scanned verification is performed by Fixed Assets staff members using barcode readers to scan asset ID decals.  Fixed Assets Coordinators assist with the scanned verification.

The Sunflower Systems Inventory Report is used to help with the annual physical inventory. The Sunflower Systems Inventory Report is emailed to the department's Fixed Assets Coordinator with a memo which provides instructions on the inventory process.

.820 Detailed Description of Sunflower Systems Inventory Report

Tag Number: Property of JMU ID number (barcode decal) affixed to the equipment
Official Name: Type of asset (examples: desktop computer, pickup truck, equipment)
Manufacturer: Company that manufactures the asset
Model: Number or name assigned by the manufacturer to the equipment
Description: Additional descriptive information regarding the asset
Serial Number: Distinguishing number given to each model of equipment
ESN: PC Services assigned identifier for computer related assets
Total Cost: Original purchase price, including installation
Department Code: Identifier code assigned by Fixed Assets to each JMU Department
Condition:
  • Idle – Code signifies asset is in storage or is surplus and not in use.
  • Missing 1 – Code signifies first inventory cycle the department could not locate asset.
  • Missing 2 – Code signifies second inventory cycle the department could not locate an asset.
  • Found – Code signifies missing asset found during last inventory cycle.
  • Used – Code signifies asset purchased in used condition.
Acquisition Date: Date JMU received the asset and/or date asset is placed into service.
Site: Zone the building is assigned to by Facilities Management (same as for work requests in AiM)
Building: Official building number assigned by Space Management and the abbreviated building name.
Room: Room number most closely associated with the asset location on the JMU building floor plans.

 

.830 Scanned Method of Physical Inventory Verification using Sunflower Systems Inventory Report

General Instructions

  • A Fixed Assets Inventory Specialist contacts the Fixed Assets Coordinator to schedule an appointment for the verification.
  • ALL equipment must be available for scanning at the arranged date and time. The Fixed Assets Coordinator for the department is responsible for:
    • Announcing to the department’s faculty and staff the date/time that Fixed Assets staff will be in the department to conduct the physical verification of fixed assets.
    • Coordinating with faculty and staff prior to the appointment date/time for any laptops or equipment normally used away from the office to be available for scanning.
    • Coordinating with faculty and staff to have equipment normally stored in closets, drawers, boxes or locked cabinets accessible at the appointment date/time.
    • Contacting Fixed Assets prior to the appointment date/time of any issues or problems regarding non-availability of an asset for scanning.
    • Assisting the Fixed Assets staff during the appointment in locating assets on the department inventory.
  • A Scanned Equipment Certification form is completed by the Fixed Assets Inventory Specialist and the Fixed Assets Coordinator at the time of the inventory verification.

.840 Inventory Memos and Missing Assets

After uploading and completing a scanned inventory verification in Sunflower Systems, a memo is sent to the Department Head confirming the inventory results and noting any missing assets. A copy of the Scanned Equipment Certification is provided to the Department Head for his/her records. If a missing asset(s) is noted with the inventory verification, a spreadsheet inventory of the missing asset(s) is provided with the memo.

Assets noted as missing for the first time are given the condition, Missing 1, in Sunflower Systems and show as such in the spreadsheet. The Department Head is asked in the memo to send a follow-up memo addressing the attempts to locate the missing asset(s).

Assets noted as missing for the second inventory cycle in a row are given the condition, Missing 2, in Sunflower Systems and show as such in the spreadsheet. The Department Head is asked in the memo to send a follow-up memo addressing further attempts made to locate the missing asset(s) since the prior inventory verification. The Department Head may also request in the follow-up memo to have any assets with a condition of Missing 2 removed from his/her inventory.

If a missing asset was purchased with Equipment Trust Fund monies and ownership has not passed to the university, the department is required to replace the ETF assets listed on the spreadsheet using departmental funds (refer to Section .500). In the memo, the Department Head is made aware of this policy and is provided with the net value of the equipment in the spreadsheet. This net value is the minimum amount that must be spent on a comparable equipment replacement. The Department Head must state in his/her follow-up memo when the replacement will be purchased and provide a purchase order number to Fixed Assets, once the order is placed.

A due date of two weeks is given to the Department Head for follow-up memos to be submitted to the Manager of Fixed Assets and emailed memos are acceptable. Once a follow-up memo is received, the Department Head receives a response, including approval of a request to remove Missing 2 assets from the inventory. Copies of all memos and correspondence are filed in the current year departmental inventory files maintained by the Inventory Specialists.

.900 Surplus Property

All University property that is determined to be excess, unwanted, or can no longer be utilized by a department is eligible for direct transfer to other campus departments or must be transferred to Surplus Property. The Surplus Property Coordinator redistributes and disposes of surplus property in compliance with state policies and procedures.

.910 Transferring Items to Surplus Property

The following subsections provide procedures for transferring items to Surplus Property.

.911 Items Other than Computer Equipment and Vehicles

  • Notify the Surplus Property Coordinator at extension 86931 or via e-mail to provide information regarding the types of items and volume for transfer.
  • Complete an EICR form listing all items for transfer to Surplus Property.  All items to be surplused must be recorded on an EICR form, regardless if they have an ID decal or not.  The EICR form must be approved by the Department Head.  Please Note: Grant and Equipment Trust Fund (ETF) equipment require pre-approval from an Inventory Specialist before they are eligible surplus items.
  • Submit a work request to Facilities Management in AIM for items that are too heavy or cumbersome for one person to handle. The Surplus Property Coordinator will assist in making that determination. The Surplus Property Coordinator will pick up small items from your department within seven working days.

.912 Computer equipment to PC Services (Includes CPU’s, laptops, tablets, servers, monitors, keyboards, printers, and scanners)

  • Group surplus computing equipment in a central location (if possible) for PC Services to pick up.
  • Have the department's Fixed Assets Coordinator fill out an EICR form.  Note: Please record JMU decal numbers & ESN #’s on the form.  Check the box in Section III and record "PC Services" as the Department Name.  The EICR form must be approved by the Department Head.
  • Email a scanned copy of the EICR form to fixedassets@jmu.edu or mail the original to Fixed Assets @ MSC 5704.  Keep a copy of the EICR form for departmental records.  An Inventory Specialist will approve the EICR form and forward it to PC Services to schedule a pick-up of the surplus computer equipment.
  • Keep the EICR form with the equipment for pick up.
  • PC Services staff will bring a copy of the approved EICR form when they pick up the surplus computer equipment and sign in Section III on the Received By line and record the date.  This EICR form is then given to the department and a copy is made for the PC Services staff member.
  • Mail the approved EICR form with PC Services' receiving signature to Fixed Assets @ MSC 5704 to ensure that JMU decal numbers are removed from your inventory.
  • Please Note: Grant/Equipment Trust Fund (ETF) computer equipment require pre-approval from Fixed Assets before they are eligible surplus items.

.913 University vehicles from the Facilities Management motor pool to Surplus Property

  • Transportation Manager of Facilities Management submits an EICR form to Surplus noting the vehicle's JMU decal number and description (make, model, FM vehicle number assigned, and VIN).  Attached to the EICR form is a JMU Vehicle Condition Report, completed for each vehicle being surplused. This report is completed by the Facilities Management Garage Supervisor and provides the details Surplus Property needs in order to sell the vehicle.
  • The Surplus Property Coordinator will inspect each surplused vehicle and complete section II of the EICR form, showing receipt.
  • The following should be completed by the Transportation staff prior to any vehicle’s transfer to Surplus Property:
  • Remove toolboxes, accessories, etc. to be retained
  • Remove "James Madison University" logos and vehicle numbers
  • Surplus vehicle keys should be kept at the USB Garage for availability when surplus vehicles are picked up for auction.

.920 Transfer and disposition of surplus property

Once items have been transferred to Surplus Property, they are processed in the following ways, in order of priority:

.921 Transfers to University departments at no cost

To better serve departmental needs, the Surplus Property Coordinator will maintain a "wish list" and notify requestors when eligible items are received and available for transfer. At times Surplus Property will initiate contact with certain departments that are more likely to need specific types of items.

Departments should follow the procedures listed below to obtain Surplus Property items:

  • Review the Current Inventory Listing of available items for transfer on the Surplus Property website or contact the Surplus Property Coordinator directly to inquire about availability of items.
  • Visit the Surplus Warehouse during Open Warehouse hours (Wednesday afternoons from 1:30 - 4:30 p.m.) or schedule an appointment to visit the warehouse at a more convenient time.
  • Select items suitable for your department. The Surplus Property Coordinator will assist with tagging selected items and completing a "no cost" Departmental Request Form for your department. Please note: Items with JMU decals will be added to your inventory.
  • Submit a work request to Facilities Management in AIM for items that are too heavy or cumbersome for one person to handle. The Surplus Property Coordinator will assist in making that determination. The Surplus Property Coordinator will deliver small items to your department within seven working days.

.922 Transfers of Surplus Property to Other State Agencies

Transfers occur at the request of an agency, through Surplus Property contacting a network of agencies, or DGS State Surplus contacting JMU with an agency's need. Surplus Property, as the releasing party, completes a State Agency Transfer form for all decaled and un-decaled items transferred to another agency.

.923 Other Disposition Methods

  1. Offered to political subdivisions at fair market value
  2. Sold to the general public through public auction online (GovDeals.com)or a pre-price sale held at the Surplus Warehouse.
  3. Donated at a State Surplus-approved non-profit organization
  4. Scrapped or recycled

.1000 Form Preparation and Submission

.1010 Equipment Inventory Change Request(EICR)Form

.1011 Required

The University requires completion of this form when a department transfers equipment to another department, transfers equipment to Surplus Property, moves equipment to a different building, or disposes of property as referenced in .700 "Equipment Transfers & Disposals". The EICR form represents the main communication tool between departments and Fixed Assets regarding the transfer or disposal of property.

.1012 Where to Obtain A Blank Form

An electronic blank form is available online.

.1013 Number of Copies

Complete original form and make one copy.

.1014 Where to Send Completed Form

Send original completed form to the Office of Fixed Assets and Surplus Property, MSC 5704, and retain one copy for departmental files as the Releasing department.

.1015 Form Completion Instructions

  SECTION I:
  Department Name: The name of the department releasing the equipment for transfer, surplus, or disposal.
  Prepared By: The Fixed Assets Coordinator’s name.
  Date: The date the department completes the form.
  Email and Extension: The email and telephone number for the Fixed Assets Coordinator.
  Authorized By: The department head or approving authority’s signature.
  Name and Title: The department head's printed name and title.
  JMU Decal ID Number: Number from the barcode label affixed to the equipment that identifies asset as property of JMU. If no decal is found, please fill in as "none".
  Description: Include name of item, manufacturer, model number, serial number, and ESN (if computer equipment). Also, indicate if equipment is currently in working condition.
  SECTION II:
  To Surplus Property Warehouse: Releasing department checks the box, and the Surplus Property Coordinator completes the information upon receipt of surplus items.
  SECTION III:
  To Another JMU Department: Releasing department checks the box and fills in name of department receiving the equipment. Receiving department completes remaining information.  Note:  Receiving department should be provided a copy of the EICR form before the original is sent to Fixed Assets.
  SECTION IV:
  To a Different Building (within same Dept.): Releasing/Owning department checks the box and indicates different building and room location of equipment.
  SECTION V:
  Disposal: Releasing department checks the appropriate boxes and follows procedures as written in section .720"
6010 Leases Asset Control and Management (6000)

.100 General

This section provides requirements, responsibilities and procedures to lease property for James Madison University. Property leases include leases of real property, such as buildings, office and classroom space, storage space, and land. Property leases also include equipment leases, rentals and installment purchases. Capital Project request guidelines incorporate capital leases for the acquisition of land and buildings into the Capital Process. University departments should request real property leases, rentals, and installment purchases, whatever the type of funding source, through Real Property/Space Management. Departments should request equipment leases, rentals and installment purchases, whatever the type of funding source, through the Office of Procurement Services.

.200 Definitions

Listed in this subsection are general definitions of key terms associated with leases.

Bargain Purchase Option A provision allowing the lessee, at his option, to purchase the leased property for a price that is sufficiently lower than the expected fair value of the property at the date the option becomes exercisable, that exercise of the option appears, at the inception of the lease, to be reasonably assured.
Buildings All real estate, excluding land, used for shelter, dwelling, and other similar agency purposes. The Statewide definition is any "roofed structure for permanent or temporary shelter of persons, animals, vegetation, or equipment."
Capital Lease The classification used for any lease that meets one or more of the following criteria:
  • The lease transfers ownership of the property to the lessee by the end of the lease term;
  • The lease contains a bargain purchase option;
  • The lease term is equal to 75 percent or more of the remaining estimated economic life of the leased property, unless the beginning of the lease term falls within the last 25 percent of the total economic life of the leased property, and/or;
  • The present value, at the beginning of the lease term, of the minimum lease payments (reduced for executory costs and profit thereon) equals or exceeds 90 percent of the fair value of the leased property to the lessor, at the inception of the lease, less any related investment tax credit retained by lessor and the lessor expects to realize. This criterion does not apply if the beginning of the lease term falls within the last 25 percent of the total economic life of the leased property.

From the lessor’s standpoint, a capital lease is also known as a Direct-Financing or Sales-Type lease.

Easement A right, afforded to an individual or business, to use another’s real property, such as a right of way.
Equipment Agency property of any kind that meets the following criteria:
  • It is complete in itself;
  • It does not lose its identity or become a component of the building where it resides;
  • It is of durable nature with an expected service life of more than one year.
Estimated Remaining Economic Life of Leased Property The estimated remaining period during which one or more users, with normal repairs and maintenance, expect that the property was economically usable. The lessee must use the property for the purpose intended at the inception of the lease, with limitation by the lease term.
Executory Costs Costs such as utilities, insurance, maintenance, and taxes included in the periodic payment, but not for the "leasing" or rental expense of the property. Such costs paid separately to the lessor or to another party, are not executory costs. These costs may increase, decrease or remain constant. The lessee may estimate these costs or obtain them from the lessor.
Expense Lease A lease where the agency is the lessee and pays rent to another party.
Full Service Lease A lease in which the landlord pays all operating and maintenance expenses usually including utilities, janitorial services, security and refuse removal (includes executory costs).
Initial Direct Costs Those costs incurred by the lessor that are directly associated with negotiating and consummating completed leasing transactions. Such costs include, but are not necessarily limited to commissions, legal fees, cost of credit investigations, and cost of preparing and processing documents for new leases acquired. In addition, initial direct costs will not include that portion of a sales person’s compensation, other than commissions, and the compensation of other activities described above for leases not consummated. Initial Direct Costs should not include any portion of supervisory and administrative expenses or other indirect expenses, such as rent and facilities costs.
Inception Date/Beginning Date The legal inception date is the date the lease agreement commitment begins. The legal inception date may distinguish this from the date that payment begins (beginning date), or the fiscal inception date.
Installment Purchase Any asset, purchased by an installment payment plan and title to the asset passes upon signature, is considered an installment purchase. (Installment purchases must have approval of the State Treasury Board. The Office of Fixed Asset Accounting will obtain the State Treasury Board’s approval.)
Land Non-expendable, real property whose title a state agency holds.
Lease An agreement between two parties expressing the right to use property, plant, or equipment for a stated period. The two parties are the "lessor" and the "lessee." A lessor is the party who has title to the "leased property" and is giving the right to use the property to another party. A lessee is the party using the property.
Lease Purchase A lease that contains a provision giving the lessee the right to purchase the asset during or at the end of the term of the lease. State Agencies generally cannot enter lease purchase agreements.
Lessee The party using the "leased" property.
Lessor The party giving the right to use the "leased" property to another party.
Minimum Lease Payments The lessee’s minimum lease payments are the payments the lessee is obligated to make or that the lessor can require, and the payment required by any bargain purchase option.

The lessor’s minimum lease payments include all payments from the lessee as above, and any guarantee of the residual value or rental payments beyond the lease term by a third party, unrelated either to the lessee or lessor. A bargain purchase option should only include the minimum rental payments and bargain purchase option dollar amounts. Otherwise, minimum lease payments include the following:

  • Minimum rental payments over the lease term.
  • Amount due for any guarantee of residual value by the lessee.
  • Any payment for failure to renew or extend the lease.
Minimum Rental Payments Those payments incurred that relate to the fixed obligation, in a leasing transaction, to make periodic rental payments. These payments do not include such items as contingent rentals, bargain purchase option amounts, and the like.
Operating Lease The classification of a lease that does not meet any of the four (4) criteria for a capital lease. Refer to the definition of a "Capital Lease" in this subsection.
Present Value The present value is the equivalent value now of a series of future payments discounted back to the present date at a specific rate of interest.
Rent/Rental To obtain occupancy or use of another’s property, on a fixed or temporary basis, in return for regular payments. Payment, usually of an amount fixed by contract, made by one person or agency at specified intervals in return for the right to occupy or use the property of another. A rental arrangement is usually for up to twelve (12) months. A period of more than twelve (12) months is usually a lease arrangement.
Sublease A lease of property granted by a lessee. To sublet or rent under a sublease agreement between a lessee and a third party, i.e., property owned by a lessor, who rents to a lessee, who subleases to a third party.
Temporary Lease A lease with a known and fixed term of six (6) months or less.
Transfer of Ownership When title (ownership) to the property passes from the lessor to the lessee.

 

.300 Economic Analysis

The University must determine if the terms of a lease or installment purchase are favorable to the Commonwealth. One method for making this determination is the preparation of an economic analysis. The Office of Financial Reporting prepares economic analyses for equipment leases and purchases, when deemed appropriate. Materiality of the potential acquisition and the cost benefit of preparing the analysis are factors in determining appropriateness. Real Property/Space Management prepares economic analyses for property eases.

When an economic analysis shows unfavorable lease terms (due to expected technological advances or when a vendor refuses to transfer title) the agency head or designee must approve acceptance of the lease.

Equipment financed by the Higher Education Equipment Trust Fund administered by the Virginia College Building Authority (VCBA) or the Treasury Board’s Financing Program does not require an economic analysis.

.400 State Requirements

.410 Real Property

Acquisition or lease of real property by any state agency is subject to requirement of the Code of Virginia. Section 2.1-504.2 of the Code states in part:

"Not withstanding any provision of law to the contrary no state department, agency or institution shall acquire real property by gift, lease, purchase or any other means whatsoever, without the approval of the Governor . . . The Department of General Services shall review every proposed acquisition of real property by gift, lease, purchase or any other means whatsoever by any department, agency or institution of this Commonwealth. Upon the completion of its review, the Department shall recommend either approval or disapproval of such transaction to the Governor. . ."

"James Madison University Delegated Authority Capital Projects and Lease Activities" (the "manual"), as structured upon Commonwealth of Virginia Division Real Estate Services Real Property Management Manual, provides the policies and procedures for acquiring real property by lease. Administration of the manual and review and recommendation for approval of leased property as set forth in the manual, is performed by the Real Property and Space Management office of James Madison University (JMU). All JMU departments, shall follow the procedures set forth in the manual for the acquisition of new space by lease or for renewal of existing leases. Internal auditors of state departments, agencies and institutions, where available, shall periodically review conformance with the manual. Compliance will also be monitored by the Commonwealth of Virginia Division of Real Estate Services (DRES), the State Internal Auditor and the Auditor of Public Accounts.

.420 Equipment - Installment Purchases, Leases and Rentals

The University must follow the Treasury Board Equipment Financing Program, administered by the State Department of Treasury, when considering an Installment or Lease purchase for $10,000 or greater and when it is from other than an established State contract.

Computer equipment leases must comply with all applicable guidelines issued by the Office of Information Technology.

.500 Responsibilities

.510 Real Property

.511 Department

  • Contacts the Real Property/Space Management to define space needs and request space.
  • Coordinates all activities to obtain and use either University or Non-University space with the Real Property/Space Management.
  • Completes forms and provides information as requested by the, Real Property Administrator, Space Management Coordinator.
  • Confirms that sufficient funds are available within the departmental budget to cover the cost of the lease.
  • Sends JMU Purchase Requisitions and attachments to the Office of Real Property/Space Management.
  • Provides information, as requested, for recording and reporting lease assets, to the Office of Financial Reporting.

.512 Real Property/Space Management

  • Determines availability of and assigns University space for the University.
  • Follows policies and procedures set forth in the " James Madison University Delegated Authority Capital Projects and Lease Activities" Manual to acquire new leases or renew existing leases.
  • Coordinates all activities for University departments to acquire real property leases with Request of Proposal offerers and landlords.
  • Determines availability of funds, not included in a current fiscal year departmental budget, to cover lease costs.
  • Ensures that all real property lease contracts meet the requirements of the Office of the Attorney General.
  • Advises the Office of Financial Reporting of plans to acquire capital leases. Provides documentation if requested.
  • Distributes copies of new leases in effect and pertinent information on leased properties to Financial Reporting, Budget, Facilities Management, Institutional Research and Public Safety. 

.513 Finance

  • Analyzes documentation and determines that a lease is an operating or a capital lease.
  • Ensures that the University records all property lease asset data in University and State Systems for reporting and insurance purposes.
  • Ensures that all lease data and activity is fully and properly disclosed in University’s financial statements according to "Generally Accepted Accounting Principles," (GAAP). Provides the same information to the State Comptroller to include in the Commonwealth of Virginia Financial Statements.

.520 Equipment - Installment Purchases, Leases and Rentals

.521 Department

  • Contacts the Office of Fixed Asset Accounting when planning to enter into an equipment installment purchase or lease.
  • Provides information and/or completes forms as requested by the Office of Procurement Services.
  • Provides copies of contracts/purchase orders and any other pertinent documentation to the Office of Fixed Asset Accounting to record and report installment purchases, leases and rental agreements.
  • Completes and returns lease confirmation requests distributed by the Office of Fixed Assets Accounting (generally once a year).

.522 Finance

  • Coordinates all activities with University Departments to acquire equipment leases, and installment purchases.
  • Determines the need for an economic analysis of potential leases and installment purchases and prepares the analysis if deemed appropriate.
  • Reviews lease documentation and determine that the lease is an operating or capital lease.
  • Administers the Treasury Board Equipment Financing Program for the University.
  • Ensures that lease contracts meet the requirements of the Office of the Attorney General.
  • Ensures that computer equipment leases comply with all applicable guidelines issued by the Department of Information Technology.
  • Ensures proper classification and recording of all equipment leases in the Financial Information System (FIS), Commonwealth Accounting and Reporting System (CARS), and the Fixed Asset Accounting and Control System (FAACS).
  • Ensures full and proper disclosure of all equipment lease activity in University Financial Statements according to "Generally Accepted Accounting Principles," (GAAP). Provides the same information to the State Comptroller to include in Commonwealth of Virginia Financial Statements.
  • Ensures that all lease agreements fully disclose: the fair market value of the leased asset at the inception of the lease; executory costs; residual value of the leased asset; amount of the lease payments; frequency of lease payments; the lease term; renewal terms, conditions, options, penalties, or bargains, and options (bargain purchases, etc.) which transfer the ownership of the asset to James Madison University during, or at the end of, the lease.

.600 Processing Procedures

.610 Real Property

.611 Department

  • Contacts Real Property/Space Management to define space needs and request the use of University or non-University space.
  • When University space is not available, completes a JMU Purchase Requisition, Space Questionnaire and Notice of Lease Intent form. (Real Property will send blank copies of the Questionnaire and Notice of Lease Intent forms to the department.)
  • Attaches completed Space Questionnaire and Notice of Lease Intent forms to the Purchase Requisition form. Sends the requisition and attachments to the Office of Financial Reporting.
  • Provides information for, or completes draft copies of the Lease Justification and Request for Proposal forms.
  • Compares encumbrance and payment transactions posted to the FIS departmental printouts to departmental records. Notifies the Office of Financial Reporting of any differences.

.612 Real Property/Space Management

  • Determines that University space is or is not available and advises the department of availability or non-availability.
  • When University space is available advises the department of the location and requirements to use the space.
  • Advises department to prepare a JMU Purchase Requisition form for leasing Non University owned
  • space. Sends a Space Questionnaire form and Intent to Lease form to the department for completion. Provides the fair market value price for Harrisonburg, Virginia to the department.
  • Advises Budget Office and Financial Reporting of proposed lease costs for the intended fiscal period.
  • Reviews Space Questionnaire and Intent to Lease forms. Requests additional information from the requesting department and/or other University offices and departments as needed.
  • Prepares Lease Justification, Space Categorization and Request for Proposals for Lease of Space forms.
  • Completes a formal inquiry to the Office of the Attorney General (if applicable as determined by Real Property) to determine the acceptability of lease contracts.
  • Prepares an economic analysis of a prospective lease, from proposals offered, to determine if the terms of the lease are favorable.
  • Negotiates terms and costs of the lease.
  • Completes lease documents for the University and distributes fully executed documents to the JMU offices of Financial Reporting, Accounts Payable, the requesting department, the Landlord and the Division of Real Estate Services.
  • Maintains and monitors lease files for the University.
  • Reviews and forwards Lease Input Document to the Division of Engineering and Buildings, Real Property Management.
  • Prepares payment vouchers (monthly) for properties leased by the University and forwards to the Office of Accounts Payable.
  • Prepares capital outlay forms and documentation required for capital leases.
  • Advises the Office of Financial Reporting of plans to acquire capital leases. Provides copies of forms and documentation if requested.
  • Completes SCHEV On-Line and Deleted Space survey and includes leased properties.

.613 Financial Reporting

  • Receives a copy of the Lease Justification form from Real Property/Space Management. AVP Financial Services reviews and approves the lease justification, requests additional information as needed and determines that the agreement to acquire property is truly a lease. Determines that the lease is either an operating or a capital lease.
  • Notifies Real Property if a lease request is a capital lease.
  • Reviews and updates the Statement of Values received from the Division of Risk Management to ensure adequate insurance coverage. Returns completed forms to the Division of Risk Management.

.614 Accounts Payable

Receives payment documents for lease payments, verifies amounts and dates of payments according to the lease document and/or a certified correct invoice.

Processes monthly or annual lease payments.

.620 Equipment - Installment Purchases, Leases and Rentals

.621 Department

  • Prepares Purchase Requisition forms for equipment installment purchases, leases and rentals. Forwards completed forms to the Office of Procurement.
  • Completes and distributes the Leased/Rented Equipment Installation Form. (This form also serves as a receiving report.)
  • Completes Accounting Vouchers or other payment documents, if required by the Office of Accounts Payable, for monthly payments.
  • Confirms lease payments for the fiscal year as requested by the Office of Fixed Assets.

.622 Fixed Asset Accounting

  • Prepares economic analyses for prospective equipment installment purchases, leases or rental agreements as deemed appropriate.
  • Obtains Treasury Board approval to finance items costing $10,000 or greater, not financed through the Treasury Board.
  • Completes and sends forms to the Department of Accounts to update FAACS.
  • Determines if leases are Capital or Operating leases.
  • Confirms lease payments made during the fiscal year with departments.
  • Enters lease commitments into the FIS to encumber funds.
  • Records capital leases in the FIS.
  • Includes disclosure of operating leases in the Financial Statements.
  • Prepares documents necessary to finance equipment through the State Treasury Board financing program.
  • Verifies payments against terms documented in the executed lease or rental agreement.

.623 Accounts Payable

  • Receives payment documents for lease, rental and installment payments, verifies amounts and dates of lease payments to the approved payment schedule.
  • Refers to the Leased/Rented Equipment Installation Form to determine the starting date of the lease and receipt of the leased items.
  • Processes documents for lease payments.

.624 Procurement Services

  • Receives and processes approved Purchase Requisition forms for equipment installment purchases, leases and rentals.
  • Provides information as requested, to prepare the economic analysis, to the Office of Financial Reporting.
  • Provides information to the Office of Financial Reporting to determine if a lease is a capital or operating lease.
  • Retains written justification for leasing an item when the economic analysis results suggest an outright purchase or an installment purchase. (For example, a rapid change in technology or the vendor will not pass title.)
  • Determines the method of procurement, prepares the purchase order and obtains the item.
  • Provides the terms, payment schedule and executory cost of leases to the Office of Financial Reporting and the Office of Accounts Payable.
  • Sends a Lease/Rented Equipment Installation Form and a copy of the purchase order to the department originating the Purchase Requisition form.

.700 Form Preparation and Submission

.710 Leased/Rented Equipment Installation Form

.711 Required

The University requires this form when a department receives and accepts leased/rented equipment. The form establishes the receiving date for the Office of Accounts Payable.

.712 Where to Obtain Blank Form

An electronic blank form is available online.

.713 Number of Copies

Complete four forms.

.714 Where to Send Completed Form

Send one completed form to the Office of Fixed Asset Accounting, One to the Office of Accounts Payable; and one to the Office of Procurement Services. Retain one copy in Departmental files.

.715 Form Preparation Instructions

Following are instructions for the preparation of the Leased/Rented Equipment Installation Form.

  Date: The date the department completes the form.
  Department Name: The name of the department receiving the leased/rented equipment.
  Department's Organization No.: The five-digit organization number assigned to the department.
  Account No.: The account code for the item of equipment being leased or rented.
  Purchase Order No.: The number of the purchase order issued for the leased/rented equipment.
  Vendor's Name: The name of the vendor providing the leased or rented equipment.
  Equipment Manufacturer: The name of the company that manufactured the equipment.
  Equipment Model Number: The model number of the leased/rented equipment item.
  Equipment Serial Number: The serial number of the leased/rented equipment item.
  Monthly Lease/Rent Payment Amount: The amount of the monthly lease/rent payment. DO NOT include costs associated with overages for copy machines, maintenance agreement or incidental costs.
  Installation Date: The date the department receives and accepts the leased or rented equipment.
  Lease Period: Enter an "X"  in the box indicating the number of months that the lease is in effect.
  Contact Person (Signature): The name of the departmental contact for the lease.
  Telephone No.: The telephone number for the contact person.
  Print Name: The name of the contact person.
  Title: The title of the contact person.