Leasing - Procedures

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1. Purpose and Objectives

The purpose of these procedures is to provide general guidance and direction in relation to leases and their administration.

2. Definitions, Terms, Acronyms

Lease - an agreement whereby the lessor (owner) conveys to the lessee (user of asset/s) in return for a payment or series of payments the right to use an asset for an agreed period of time.

Finance Lease - a lease that transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. Title may or may not eventually be transferred.

Lease Custodian - the organisational unit officer responsible for the ongoing management of goods under lease on a day-to-day basis.

Operating Lease - a lease other than a finance lease.

Cost Premium - the amount by which the net present value of a proposed lease exceeds the outright purchase price (expressed as a percentage).

Master Lessor - the University’s agreed primary lease provider.

Outright Purchase Price - the amount (excluding GST) that would be required to purchase the goods in an arm’s length transaction between knowledgeable, willing parties.

Minimum Lease Threshold - the minimum outright cost of plant and equipment, under a single proposal, that the University will consider for a leasing arrangement.

Minimum Lease Payments - payments over the lease term that the lessee is or can be required to make.

Lease Term - the non-cancellable period for which the lessee has contracted to lease the asset/s.

Plant and Equipment - items held for use in the production or supply of goods or services or for administrative purposes.  Examples include – desktop PCs, laptops/notebooks, printers, photocopiers and multi-function devices.

Buy-Out/Balloon Payment - any payment made by the University to the lessor that would, in substance, result in a transfer of ownership of the asset/s to the University.

3. Procedures Scope/Coverage

These procedures apply to all plant and equipment leases, whether proposed or already in effect, entered into by The University of Queensland.

Excluded from these procedures are:

Leases associated with Salary Packaging i.e.

a) Motor vehicle leases

b) Leases of that may form part of a personal employment or salary arrangement (e.g. laptops, mobile phones)

Refer to Human Resources Division

Property/Office leases

Refer to Estate Planning Section, Properties and Facilities Division.

4. Procedures Statement

The University may enter into a leasing arrangement where it can be established that leasing, as opposed to purchasing outright, would result in the greater economic benefit.

These procedures have been established in accordance with guidelines prescribed by Queensland Treasury’s "Leasing in the Queensland Public Sector – Policy Guidelines" and are pursuant to the provisions of the Statutory Bodies Financial Arrangements Act 1982 and Accounting Standard AASB 117 Leases.

5. Leasing Thresholds

5.1 Item/s with outright purchase cost of less than $500,000

The University will not enter in to a lease arrangement where the aggregate purchase cost of items is less than $500,000. This is referred to as the Minimum Lease Threshold (MLT).

Items costing less than $500,000 must be purchased outright in accordance with PPL 9.40.05 Purchasing.

Cross-faculty lease proposals, whereby multiple faculties pool assets so as to negate the MLT, will not be considered.

Notwithstanding other sections in these procedures, the Chief Financial Officer may, at his/her absolute discretion, approve a lease where the MTL has not been met where exceptional circumstances arise.

5.2 Item/s with outright purchase cost of more than $500,000

The University may enter in to a lease arrangement where:

  • the aggregate purchase cost of items under a proposal is greater than $500,000; and
  • it can be established that the proposed lease is cost effective and results in an economic benefit to the University.

6. Leasing Compliance

6.1 Lease approvals

6.1.1 Operating lease approval

All University operating leases must be approved by the Chief Financial Officer.

All operating leases must be approved by the lease custodian’s respective Head of organisational unit prior to obtaining Chief Financial Officer approval.

Before entering into an operating lease agreement, the Treasury Accountant will present the Chief Financial Officer with a formal lease application which:

  • evaluates the financial costs of the lease; and
  • evaluates the potential risks of the lease.

The University will not enter into a lease where the cost premium is greater than 5%.

Operating leases with a cost premium greater than 5% or a net present value in excess of $2 million must be:

  • endorsed by the Chief Financial Officer; and
  • approved by the Treasurer of Queensland.

The University will not enter lease agreements that include:

  • provisions for buy-out or balloon payments; or
  • predetermined options to extend the lease beyond the lease term.

6.1.2 Finance lease approval

Finance leases are, as a matter of general course, not permitted.

The Chief Financial Officer may, at his/her absolute discretion, endorse a finance lease arrangement and present grounds for approval to the Treasurer of Queensland.

All finance leases must be:

  • endorsed by the Chief Financial Officer; and
  • approved by the Treasurer of Queensland.

6.2 Master lease facility

The University may appoint a master lessor.

The appointment of a master lessor must be approved by The University of Queensland Senate Committee.

While not subject to a minimum credit rating, the master lessor must be a reputable company or financial institution.

The master lease facility must not exceed $30 million. Changes to this amount are subject to approval by The University of Queensland Senate Committee.

The maximum amount which the University will have on lease is $50 million.

If the University has a master lease facility in place, the University will engage the master lessor for all ongoing lease agreements. The Chief Financial Officer may approve a departure from this requirement where valid reasoning is presented.

6.3 Lease Custodians

The lease custodian is responsible for the initial lease proposal and the ongoing administration and management of leased goods.

It is the responsibility of the lease custodian to ensure, where applicable, compliance with these procedures.

Prior to commencement of a lease, the lease custodian will submit a formal lease proposal in the format prescribed by the Treasury Unit within FBS.

A minimum of three (3) competitive quotes are to be sourced for each lease proposal. Quotes are to accompany the formal lease proposal.

6.4 Existing and expired leases

The lease custodian must ensure assets are promptly returned at the end of the lease term. Where goods are not returned at the end of the lease period, additional financial costs may result.

Lease extensions beyond the minimum lease period must be approved by the Chief Financial Officer.

Lease buy-outs and balloon payments are prohibited under Queensland Public Sector guidelines. The Chief Financial Officer may, at their discretion, endorse such payments where exceptional circumstances exist and refer the proposal to the Treasurer of Queensland for approval.

6.5 General administration and financial management

The lease custodian must notify the Treasury Unit within FBS of any changes made to an existing lease. Changes may include, but are not limited to, a partial return of leased goods to the lessor; lost, stolen or damaged goods; lease termination before the end of the lease term; any other change that would have the result as to alter the composition of the initial lease proposal.

Assets acquired through a finance lease shall be recorded and reported as an asset in accordance with the Australian Accounting Standard AASB 117.

Assets leased under an operating lease are not to be recognised in the University’s fixed asset register.

For insurance coverage purposes, all organisational units that lease equipment must provide details to the Insurance Office.

The lease custodian will maintain a register of all goods under lease. The register will note the location of each leased item. The register must be readily provided to the Treasury Unit within FBS upon request.

Ongoing lease payments are to be expensed to the organisational unit nominated by the lease custodian at the commencement of each lease.

All leases are to be entered into in the name of “The University of Queensland”. Individual officers or organisational units will not be named as lease holders (i.e. lessees).

Chief Financial Officer Mr Andrew Flannery
Chief Financial Officer Mr Andrew Flannery