For accounting purposes, leases are contracts between a lessee and a lessor to pay for the use of an asset greater than $5,000 with a lease term greater than one year. An equipment lease is an agreement to rent, borrow or use the equipment (identified asset). The asset could be equipment such as a medical device, vehicle or copier. Generally, the process starts with the department determining the type of lease being entered, identification of funding source and completing the preapproval process before submitting a requisition in iProcurement. For university policy on equipment leases, refer to Administrative Guide Policy: 5.2.2.
Before submitting a requisition, departments must complete the following requirements:
Follow the capital planning process for leases that meet or exceed the $200,000 threshold.
Capital Planning Process Threshold
Approval for equipment leases that are $200,000 or more can be requested as part of the Capital Planning Process, which is managed by the vice president for land, buildings and real estate (LBRE) and occurs in conjunction with the university’s annual budgeting process.
Submit an Equipment Lease versus Purchase Analysis form to the Office of the Treasurer (OOT) for leases that meet or exceed $200,000. The Equipment Lease versus Purchase Analysis Form must accompany the requisition.
- Leases that are $200,000 or more that are not requested during the Capital Planning Process may require review and approval by the university’s Chief Financial Officer (CFO). OOT will coordinate this process.
Identify the funding source(s) for the contracted term of the lease prior to submitting a requisition to Procurement Services.
Clearly define the intention of the lease and determine renewal options that are reasonably certain to be exercised, including:
- What is the lease term?
- Does the lease include the option to extend or renew?
- If yes, is the intention to extend or renew?
- If yes, how many months to be extended?
- Who is the department contact for questions regarding this lease?
All equipment leases require a requisition to Procurement Services with the correct expenditure type(s) for the base rent for the total contracted cash payments over the term of the lease.
Departments must select and approve the correct PTA and expenditure types for equipment leases when submitting a lease requisition:
- Expenditures: Choose from the expenditure types from the table below.
- Base Rent: Add only the base rent for the term of the lease; do not include non-lease components (examples include repair and maintenance costs, variable charges such as – per-click or per-use charges, consumables and other supplies). To enter non-lease components, a separate requisition should be created under the same purchase order with the appropriate expenditure type.
- Excluded Items: These items are excluded and not classified as leases: linen services, water/coffee services and indoor plant services.
|52910||LEASED EQUIP > 1 YEAR; <5K||Leased equipment with a term greater than one year with less than $5,000 committed.|
|52921||LEASE GENRL PURPOSE EQUIP >5K||Leases of general use equipment with a term greater than one year (or less than one year with an option and intent to renew beyond one year) with over $5,000 committed. Includes copiers, vehicles, technology, among others.|
|52951||LEASE SPECIAL PURP EQUIP >5K||Includes laboratory or technical items related to research, medical, instructional or other technical activities. Applies to leases with a term greater than one year (or less than one year with an option and intent to renew beyond one year) with over $5,000 committed.|
|52981||LEASED EQUIP 1 MO TO 1 YEAR||Lease of equipment with a term greater than one month but less than one year with no intent to renew, regardless of commitment amount.|
When there are changes to the terms of a lease (i.e., additional equipment, duration of the lease, total cost of lease, other changes), submit a request to Amend / Change a contract for the lease agreement using the SmartMart Contracts system in Procurement.
The oversight of Stanford’s leases is a shared responsibility among a number of different units including:
Schools, units and departments should be familiar with the Administrative Guide Policy 5.2.2: Equipment Leases and have a general understanding of what a lease is and the basic types of leases. Departments are responsible for negotiating the business terms for their leases.
- Financial Management Services (FMS)
FMS comprises a number of units, including Financial Reporting (FAIR or FR), Procurement Services (Procurement), the Office of the Treasurer (OOT) and Capital Accounting. These units collaborate to review and approve lease transactions submitted in the university’s financial system, compile financial statement disclosures, ensure compliance with university policies and assess the impact of finance leases on the university’s debt capacity.
- Property Management Office (PMO)
The PMO is responsible for the review and approval of equipment lease requisitions during the routing approval process. The PMO is also responsible for the review, approval and tracking data entries in the Property Manager module for equipment leases.