COMPTROLLER'S MEMORANDUM NO. 13 (1985-86)
SUBJECT: INSTALLMENT SALE AND PURCHASE CONTRACTS AND LEASE AGREEMENTS
Agencies that have advertised for bids, accepted bids, or otherwise selected a vendor for the installment purchase of any commodity on the date of this memorandum may use Form PUR 7057 (Revised 3/1/84) to complete the contract. All installment purchases, other than the above, must be completed on Form PUR 7057, Revised 10/28/85.
It should be noted that several substantive changes have been made to the following sections of the contract:
In addition, Comptroller's Memorandums No. 5 (1985-86) and No. 18 (1984-85) provide further information and set forth requirements relating to Installment Purchases of Commodities and Information Technology Resources.
It is our observation that the most common problems experienced by agencies submitting Installment Purchase Agreements have been noncompliance with Section 287.063 (2) (b) 3, Florida Statutes, pertaining to certification of Operating Capital Outlay funds; Section 13A-1.02 (14), Florida Administrative Code, concerning the amortization schedule; and Section 287.012 (3), Florida Statutes, relating to documentation of interest bids. Your compliance with these provisions will assist our staff in the review of contracts submitted for approval.
We have received numerous requests from agencies for approval to lease equipment under agreements which under criteria established by the Financial Accounting Standards Board (FASB) is classified as a capital lease. FASB Statement 13, Accounting for Leases, established criteria to determine if the transaction (lease) actually "transfers substantially all the benefits and risks inherent in the ownership of the property." These criteria are:
The last two criteria are not applicable when the beginning of the lease falls within the last 25 percent of the total estimated useful life of the property. If at its inception a lease meets one or more of the four criteria, the lease should be classified as a transfer of ownership. Such a lease will not normally be approved by this office as economically prudent and cost effective unless the agency submits documentation indicating unusual circumstances which would justify entering into a capital lease.
An evaluation of copiers on the State contract should be performed using copiers in the same type and class. To establish the rent and other minimum lease payments for a copier available by lease, the maintenance charge for the machine listed as the purchase option is subtracted from the lease payment computed at the anticipated copier usage rate. The remainder, which is the effective rent, is used to determine the present value of the lease. This same method should be used to perform evaluations of other types of equipment.
We do not ordinarily approve short-term leases to fulfill long-term requirements. In nearly all cases, it is more cost-effective and economically prudent to lease equipment for a term that approximates the expected need for the equipment.
Attached are checklists which should be completed and submitted to this office by agencies requesting approval to lease or installment purchase equipment. Use of the checklists will assist agencies in making certain that their requests include all the necessary information and will also assist us in reviewing the requests, thereby resulting in a quicker response to the requesting agency.
Please contact the Bureau of Accounting at 410-9951, Suncom 210-9951, if you have questions concerning this matter.
THIS MEMORANDUM ALSO INCLUDED AN ATTACHMENT WHICH CANNOT BE TRANSMITTED. IF YOU WOULD LIKE TO OBTAIN THIS DOCUMENT, PLEASE CALL MARK HAMMETT OR PLEASANT VAUSE AT 488-1951.