Lower Level of the Orr Center
Prior to the execution of leases entered into on behalf of University of Southern Indiana (USI), lease agreements must be reviewed and approved by the appropriate USI personnel to ensure they comply with the requirements of Governmental Accounting Standards Board Statement No. 87 and to assist departments with lease vs buy decisions.
This procedure applies to all lease agreements entered into on behalf of USI with a term greater than 12 months effective on or after July 1, 2021. It also applies to service agreements or other contracts that convey control of the right to use another entity’s asset in exchange for the payment of consideration.
Addenda to and extensions of existing leases qualify as new leases for purposes of this procedure.
Excluded from this Procedure
Guidelines for Entering into a Lease Where USI is the Lessee
Procurement Services has authority for reviewing and approving leases on behalf of USI similar to the other purchasing agreements for USI.
Procurement Services must be notified by the Financial Manager of the lease owning department of any draft contracts that appear to contain leases with a term greater than 12 months as soon as they are identified. As noted above, leases may be embedded within service agreements or other contracts. Please refer to the Embedded Lease Questionnaire for assistance determining if an agreement includes an embedded lease,
Early notification allows proper review and authorization. A Lease Questionnaire and a Lease vs Buy Analysis must be completed by the Financial Manager (or designee) to include with the draft lease agreement to send to Procurement Services. The designated Procurement employee will review the lease agreement and other required lease documentation to ensure that USI is committed to operating in an efficient and effective manner that best meets USI’s needs and ensures that the stewardship role of its physical assets and financial resources is integral to its decision-making processes. Additionally, Risk Management will review the lease agreement to confirm USI’s General Liability insurance policy covers the agreement or if a different policy would apply or need to be acquired based specifically on insurance requirements. Other items Risk Management will be reviewing are indemnification requirements, state law, and any other items that would be risk management concerns for USI.
When leasing is confirmed to be the best option for USI, the associated lease documentation should be entered in BuyUSI as outlined below.
Department Process for BuyUSI Lease Transaction (leases with a term of greater than 12 months)
Guidelines for Entering into a Lease where USI is the Lessor
Leases are required when USI property is used and controlled by a non-University entity on an on-going basis, typically, for a period of more than ninety (90) days.
Department Process for Leasing University Property to Individuals or Entities
For leases that contain renewal options, the lease terms should be acknowledged with a renewal letter signed by the Vice President for Finance and Administration (or designee) and the lessee at the beginning of each renewal term. A copy of any lease modifications and signed renewal letters should be sent to Risk Management and the Business Office Accounting Contact.
Any lease agreement which does not comply with the terms of this Lease Policy shall not be binding upon USI unless ratified by the Vice President for Finance and Administration.
Lease - A legal contract by which one party gives to another the use and possession of real or personal property for a specified time in exchange for periodic payments.
Lessee - The party who leases personal or real property from a lessor.
Lessor - The owner or owner's representative of the personal or real property that is leased to a lessee.
Inception Date - Effective date of the lease (the date the lessee has the right to occupy and/or use the property).
Non-cancelable - Terms of the lease make the possibility of cancellation by the lessee remote.
Lease Term - The period during which USI has a non-cancelable right from the inception date to use an underlying asset plus the following periods, if applicable:
Evergreen Lease - Leases that automatically renew on a day-to-day, week-to-week, month-to-month, or year-to-year basis.
Embedded Leases - A lease agreement that exists within a contract and can occur within service, construction, advertising, and transportation agreements. (For example, a service agreement for a copier that has a service component based on the number of copies and a lease component for the copier.
Effective date: 7/1/2021