.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 financed purchases 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."
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
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.
Financed Purchase
 The classification used for any contract that meets one or more of the following criteria:
  • Transfers ownership of the underlying asset to the lessee by the end of the contract term;
  • Does not contain termination options (but may contain fiscal funding or cancellation clauses that are not reasonably certain to be exercised.
From the lessor’s standpoint, a financed purchase is also known as a Direct-Financing or Sales-Type agreement.
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 Assets and Surplus Property 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.
Long-Term Lease A lease agreement greater than 12 months in duration (including any options to renew and/or cancellation periods) with payment streams totaling $50,000 or more over the life of the lease (including any options to renew).
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.
Short-Term Lease A lease agreement less than 12 months in duration (including any options to renew and/or cancellation periods) and/or with a total value less than $50,000 that also does not meet any of the criteria for a financed purchase. Refer to the definitions of a “Long-Term Lease” and a “Financed Purchase” 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.
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 leases.

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 in accordance with The Commonwealth of Virginia Division of Real Estate Services (DRES), provides the policies and procedures for acquiring real property by Lease as updated on the DRES site, https://dgs.virginia.gov/division-of-real-estate-and-facilities-management/.   Administration, review and recommendation for approval of leased property is performed by the Office of Real Property and Space Management at James Madison University. All JMU departments shall work through the  Office of Real Property and Space Management 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 DRES policies and procedures. Compliance will also be monitored by 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.

.430 GASB 87 Reporting

TheAs a state agency, the University is subject to accounting standards issued by the Governmental Accounting Standards Board (GASB). GASB Statement No. 87 – Leases became effective for fiscal year 2022. This accounting standard changed the previous accounting for leases from categorization as either operating or capital, to creating receivables/liabilities/intangible assets (as appropriate) for all material leases greater than 12 months in duration (including all options to renew and any potential cancellation periods). In addition, leases previously considered “capital” due to the financed-purchase nature of the underlying agreement are henceforth referred to as “financed purchases.” Their identification as financed-purchase agreements rather than capital leases is substantially the same (see the definition of “financed purchase” in subsection .200 “Definitions”).

The Office of Financial Reporting is responsible for determining whether a lease is a short-term  lease, long-term lease or financed purchase. Financial Reporting is also responsible for accumulating and reporting lease data and calculations in the University Financial Statements according to "Generally Accepted Accounting Principles," (GAAP) and provides the same information to the State Comptroller for inclusion in the Commonwealth of Virginia’s Annual Comprehensive Financial Report (ACFR).

Upon implementation of the GASB 87 accounting standard, the University adopted a materiality threshold in accordance with policies and procedures set forth within the Commonwealth Accounting Policies and Procedures (CAPP) Manual. CAPP topic 31210 – Leases – Economic Analysis, states:

“For statewide reporting, DOA has established a reporting threshold of $50,000 for short-term leases. Therefore, by default, any lease that has a lease asset value of less than $50,000 will be classified as a short-term lease […].”

The University will therefore also use the $50,000 statewide threshold when determining whether a lease qualifies for consideration as a long-term lease under GASB 87.

In addition to real property and equipment, significant contracts with third-party vendors are also regularly reviewed for either explicit or embedded lease activity. Financial Reporting works directly with the Office of Procurement Services and the Office of Business Services on these reviews.

.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. 
  • Ensures that the University records all property lease asset data in University and State Systems for insurance purposes.

.513 Finance

  • Analyzes documentation and determines that a lease is a short-term lease, long-term lease or financed purchase.
  • Ensures that the University records all property lease asset data in University and State Systems for reporting 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 Procurement Services and the Office of Fixed Assets and Surplus Property 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 Assets and Surplus Property to record and report installment purchases, leases and rental agreements.
  • Completes and returns lease confirmation requests distributed by the Office of Fixed Assets and Surplus Property (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 a short-term lease, long-term lease or financed purchase.
  • 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) and the, Commonwealth Accounting and Reporting System (Cardinal).
  • 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 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 Financial Reporting for review (which then forwards to the Office of Accounts Payable for payment).
  • Prepares capital outlay forms and documentation required for financed purchases.
  • Advises the Office of Financial Reporting of plans to acquire financed purchases. 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 finalized Lease from Real Property/Space Management and requests additional information as needed. Determines that the lease is either a short-term lease, long-term lease or financed purchase.
  • Notifies Real Property if a lease request is a financed purchase.
  • Receives payment documents for lease payments, verifies amounts and dates of payments according to the lease document and/or a certified correct invoice.

.614 Accounts Payable

Processes monthly or annual lease payments.

.620 Equipment - Installment Purchases, Leases and Rentals

.621 Department

  • Prepares eVA Purchase Requisition for equipment installment purchases, leases and rentals.
  • Completes and distributes the Leased/Rented Equipment Installation Form.
  • 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 Financial Reporting.

.622 Fixed Assets and Surplus Property

  • Conducts analysis 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 on a state contract, and/or not financed through the Treasury Board.
  • 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 Financial Reporting

  • Determines if leases are short-term leases, long-term leases or financed purchases.
  • Confirms lease payments made during the fiscal year with departments.
  • Verifies payments against terms documented in the executed lease or rental agreement.
  • Receives payment documents for lease, rental and installment payments, verifies amounts and dates of lease payments to the approved payment schedule.
  • Records long-term leases and/or financed purchases in the FIS.
  • Includes disclosures of short-term leases, long-term leases, or finance purchases in the Financial Statements.

.624 Accounts Payable

  • Processes documents for lease payments.

.625 Procurement Services

  • Receives eVA Purchase Requisitions for equipment installment purchases, leases and rentals.
  • Provides information as requested for analysis to the Office of Financial Reporting.
  • Provides information as requested to the Office of Financial Reporting to determine if a lease is a short-term lease, long-term lease, or financed purchase.
  • Determines the method of procurement, prepares the eVA purchase order and obtains the item.
  • Provides the terms, payment schedule and executory cost of leases to the Office of Financial Reporting.

.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 Assets and Surplus Property, One to the Office of Financial Reporting; 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 six-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.

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JMU Office of Finance
Massanutten Hall
MSC 5719
1031 South Main Street
Harrisonburg, Virginia 22807
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