COMPTROLLER'S MEMORANDUM NO. 10 (1992-93)
SUBJECT: FINANCING OF INFORMATION TECHNOLOGY
Section 282.303 (8), Florida Statutes, defines data processing software to include numerous categories of programs and routines, of which operating system software is one. Our office has generally allowed the financing of operating system software, but discouraged the financing of other categories of software. For purpose of clarification, we will categorize operating system software based on the following definition:
Operating system software consists of the software that controls the execution of computer programs and that may provide scheduling, debugging, input/output control, accounting, compilation, storage assignment, data management, and related services.
The deferred payment purchase agreements currently available to agencies contain the following requirements regarding title to items financed:
(a) Contract for Installment Sale and Purchase, Form PUR 7057 - "Title and ownership of each Commercial Unit of Equipment and any and all replacements, substitutions and repairs thereto, shall pass to Buyer upon acceptance of the installation as certified in Exhibit C (Receipt Certificate), attached and made a part hereof."; and, (b) Program Interagency Sublease, relating to the Florida Master Equipment Lease Purchase Program, Series 1991 - "The Florida Governmental Leasing Corporation, as Lessor under the Master Lease, shall retain title to the Equipment during the term hereof, and all interest of the Sublessee Agency in and to the Equipment shall be subject and subordinate to the title of the Lessor therein and the rights of Trustee, as assignee of the lessor, and the rights of the Comptroller as sublessor under the Master Lease."
In order to ensure compliance with the terms of the agreements and our policy on the financing of software, effective July 1, 1993, our approval of deferred payment purchases of software will only be granted under the following conditions:
A copy of the proposed software procurement agreement should be submitted to our office along with the request for approval for deferred payment purchase.
Our current policy generally provides that equipment may be financed for the lesser of five years or the useful life of the equipment. For purposes of clarification, effective July 1, 1993, the term "useful life" shall have the following meaning:
Normal life of an asset, determined by its usefulness to its owner.
In using this definition to determine the appropriate financing period, a piece of equipment will not be financed for a period longer than it is expected to be used by the specific agency requesting the deferred payment purchase. For example, if reasonable expectations area that a piece of equipment will need to be replaced within two years due to expected growth, the equipment shall not be financed for a period longer than two years, notwithstanding the manufacturer's determined life of the equipment.
Trade-ins and Outright Sales of Financed Equipment
Section 273.04, Florida Statutes, provides in part, that whenever acquiring property, the custodian may pay the purchase price in full or may exchange property with the seller as a trade-in after first offering such exchange property for sale to the Bureau of Surplus Property. If, whenever acquiring property, the custodian may best serve the interests of the State by outright sale of property rather than by exchange as a trade-in, he may make the sale in the manner prescribed in the Section 273.04, Florida Statutes, for the disposal of surplus property and the receipts from the sale are appropriated and may be applied to the cost of the property acquired.
Effective immediately, agencies acquiring equipment which involves the outright sale or trade-in of financed equipment shall be bound by the following policies:
In the event an agency purchases through a deferred payment method an upgrade of an existing mainframe to provide increased capabilities, which upgrade is accomplished by altering the existing mainframe, the following policies shall be controlling effective immediately.
Allocation of Costs Paid for Information Technology Resources
In many instances, vendors provide lump-sum pricing on acquisitions which include a variety of products (mainframes, software, peripherals, etc.) Additionally, in many acquisitions such as these, the vendor offers a lump-sum discount which is not specifically tied to the items being acquired. Some vendors provide in their pricing structure, the award of credits which can be used for acquiring other products and services. In the event such acquisitions are to be made using deferred payment purchasing, the prices quoted by the vendor shall be allocated to specific items being acquired as follows:
Questions regarding the deferred payment purchasing of information technology resources should be directed to the Bureau of Special Programs at 488-1951, Suncom 278-1951.