EQUIPMENT FINANCING
Sections
8.11.05 Delegations of Authority
Appendix A - Equipment Installation and Manufacture
Appendix B - Instructions for Purchase vs. Lease Cost Analysis
Appendix C – WCF Invested Equipment
Financing/Allocation Process
8.11.01
PURPOSE
This subchapter states policies for: financing the acquisition of equipment;
determining whether to purchase or lease the equipment; recording costs
for manufacture of equipment; acquiring and financing computer software;
and making loan repayments on Working Capital Fund (WCF) Invested Equipment
(IE). See Subchapter 7.01 for information on equipment accountability and
control.
8.11.02
SCOPE
This subchapter applies to NIST-Gaithersburg and NIST-Boulder.
8.11.03
LEGAL AUTHORITY
NIST can retain net earnings in the WCF to restore prior losses and
to ensure the availability of capital necessary to replace equipment and
inventories. In addition, NIST may retain all building use and depreciation
surcharge fees collected pursuant to OMB Circular A-25. Any
additional earned income resulting from the operation of the WCF must be
paid to the general fund of the Treasury. For more information
see:
Pub. L. 81-583
15 U.S.C. 278b
15 U.S.C. 275c
15 U.S.C. 278d(b)
8.11.04
POLICY
It is NIST policy that equipment needs are normally filled as an
investment of the WCF. Exceptions to this policy are contained in Section
8.11.06. Funds for investment are obtained from the appropriation process,
from monthly repayments on WCF IE loan balances, and from an equipment
replacement surcharge.
8.11.05
DELEGATIONS OF AUTHORITY
Subject to any special approvals outlined in Subchapter 2.03, Procurement,
the following approval procedures apply:
(1) Equipment costing less than $5,000 is approved within the OU.(2) Equipment costing from $5,000 to $100,000 may be approved by the OU Director or this authority may be redelegated to division chiefs, Senior Management Advisors (SMA), and program managers by the OU Director.
(3) Equipment costing $100,000 or more requires the approval of the OU Director.
(4) Equipment costing $500,000 or above and/or any amendment that would increase the original cost of the equipment to equal $500,000 or above requires the approval of the NIST Deputy Director.
8.11.06
DEFINITIONS
a. Acquisition Cost - The full cost incurred to bring a piece
of equipment to a form and location suitable for its intended use,
including all costs related to acquisition, delivery, and major installation
costs (See Appendix A).
b. Computer Software - Software includes the application and operating system programs, procedures, rules, and any associated documentation pertaining to the operation of a computer system or program. “Internal use software” means software that is purchased from commercial vendors “off-the-shelf”, internally developed, or contractor-developed solely to meet the entity’s internal or operation needs. Normally software is an integral part of an overall system(s) having interrelationships between software, hardware, personnel, procedures, controls, and data. Software is classified in the accounting system using object class 31.25 (capitalized) and object class 31.55 (expensed).
c. Equipment - Non-expendable property, such as computers, office, shop, and scientific and technical equipment, which is complete in itself, and is of a durable nature. Equipment can be either capitalized or expensed on the NIST financial statements. All equipment with an acquisition cost of $5,000 or more, or that is part of a system totaling at least $5,000, or equipment classified as personal appeal, is subject to inventory control by the Personal Property Office.
d. Capitalized Equipment has an initial acquisition cost of $25,000 or more and an estimated useful life of two years or more.
(1) Depreciation - Depreciation expense is recorded in the NIST Accounting System and reflected on the NIST financial statements for all capitalized equipment, regardless of source of funding. The purpose of depreciation is to spread the acquisition cost over the useful life of the equipment; NIST calculates depreciation using the straight-line method.e. Expensed Equipment has an initial acquisition cost less than $25,000 or an estimated useful life of less than two years.(2) Useful Life - The estimated number of years the equipment normally functions adequately before it wears out, becomes technologically obsolete, or the project for which the equipment was acquired is completed if the equipment is not likely to be used in other projects. Useful life is used to determine the depreciation expense on capitalized equipment. See Subchapter 7.01 Appendix B, Useful Life - Depreciation, for standard useful lives.
f. WCF IE – The funding source primarily used by NIST to purchase equipment, especially when it benefits both internal and external customers. OUs should generally use IE funding if the cost of the equipment is over $5,000 and the equipment will have a useful life of more than one year. Obligations and accruals for direct purchases are recorded in project types IEDISC or IESPC (in the series 800-805 and 806-809, respectively). Obligations and accruals for manufactured equipment are recorded in project types MANDIS or MANSPC (series 810-844 and 845-849, respectively).
(1) WCF IE Allocations - Permission to purchase or manufacture equipment with Working Capital Funds is granted to OUs by the NIST Director, in the form of a WCF IE allocation (see Appendix C).g. Unfinanced Equipment - Equipment not acquired as an investment of the WCF, generally costs less than $5,000, or otherwise meets the criteria for non-WCF IE provided in Section 8.11.08a. The acquisition cost is charged directly to the project creating the need for the equipment.(2) Loan Repayments and Surcharges - The WCF is repaid for each piece of equipment purchased using WCF IE through monthly loan repayments (object class 61.27, 61.28, and 61.29) and surcharges (object class 61.30) which are generally applied to overhead projects.
8.11.07
RESPONSIBILITIES
a. The Budget Division and Finance Division are responsible for establishing
policies for financing equipment and monitoring spending against authorizations.
b. The Budget Division:
(1) Advises the CFO as to the amount and allocation of Working Capital Funds to be made available for investment in equipment, which are based on the anticipated loan repayments in a given fiscal year, unobligated balances, and new initiatives;c. The Finance Division:(2) Ensures that equipment needs (WCF and non-WCF) associated with new budget initiatives are included in budget submissions;
(3) Reviews estimates to confirm that each OU has adequate long-term funding to repay the WCF for new equipment investments;
(4) Authorizes WCF IE projects (IEDISC, IESPC, MANDIS, MANSPC);
(5) Makes recommendations on special requests for WCF IE allocations; and
(6) Monitors spending against authorization for each WCF IE allocation.
(1) Calculates the maximum amount of Working Capital Funds that can be invested in equipment each year;(2) Administers the loan repayment process; and
(3) Ensures that NIST procedures and policies are in compliance with DoC policies and that NIST financial statements are prepared according to generally accepted accounting principle.
8.11.08
PROCEDURES
a. Financing
(1) WCF IE - Equipment costing at least $5,000 should be acquired as an investment of the WCF unless it meets one of the criteria below for non-WCF IE. This mechanism was established to permit appropriate costing of the equipment over its lifetime and to ensure that adequate replacement funding will be available. Guidelines for financing the acquisition of equipment using Working Capital Funds are provided in Appendix C.
(A) Two or more OUs/divisions may pool their WCF IE allocations to purchase a single piece of equipment for their mutual use. The purchase order must contain all OU/division acquisition projects that are sharing the cost of the asset; this requirement enables the Finance Division to correctly calculate each OU’s/division’s IE loan balance.(2) Unfinanced Equipment - Equipment costing less than $5,000, and other instances, as stated below, may be charged directly to the project(s) creating the need for the equipment.(B) Equipment may be jointly funded by WCF IE and another source of funding. If federal government/ non-federal government/ CRADA sources are used, the consent of the sponsor is required. Loan repayments are recovered only on that portion of the cost funded from the WCF IE. The portion of the total cost funded by a non-WCF source is charged directly to that specific project.
b. Purchase vs. lease determination - Requests for the acquisition of equipment should be carefully evaluated to determine whether it is more economical to purchase or lease.(A) Appropriated or Overhead funds should be used when one of the following conditions is met:(i) The equipment costs less than $5,000.(B) Federal Government/Non-Federal Government/CRADA Projects(ii) Equipment will be consumed, destroyed, contaminated, modified, or lose its original identity so as to render it useless at the completion of the task(s) for which it
was originally purchased and would be declared surplus at that point.(iii) The utility of the equipment is so specific as to be limited to only the technical project for which it is initially purchased.
(iv) The OU/division/group only has appropriated funding.
(v) Books, regardless of price, which are purchased for the permanent collection of the NIST Information Services Division are coded as equipment. This classification as equipment is dictated by guidelines established by the Office of Management and Budget. Books purchased for other than the NIST Information Services Division are coded as Supplies (object class 26.0).
Equipment may be purchased with federal government/non-federal government/CRADA funds in the project(s) creating the need for the equipment rather than as an investment of the WCF, unless the federal government/ non-federal government/CRADA order contains a statement which specifically precludes equipment purchases. Consent of the sponsor is required and it is preferable that special equipment requirements be stated in the federal government/non-federal government/CRADA order.
(C) Expense and Income Projects
(i) Equipment may be charged to Miscellaneous Expense and Income projects (project types MSCFED, MSCSTL, or FDLBCN, series 585-594) without regard to price or useful life provided that the sponsor(s) (government or nongovernment) has given implicit or explicit permission to purchase or manufacture such equipment.(ii) Equipment may not be charged to other Expense and Income projects (project types INTDIV, CALPGV, TSTSTL, TSTFED, SRMOPR, SRMSAL, SRMSDS, PROPME, CALOPR, or CALSDS, series 595-699) that are reimbursed through fees established for conferences, training classes, calibrations, SRMs, or tests. Any exceptions to this policy must be approved by the Budget Division and the Finance Division.
(1) The Federal Property Management Regulations and the General Accounting Office recommend leasing equipment only when there is a cost savings. The determination to lease rather than to purchase must be fully justified.c. Means of Acquiring Equipment(2) To evaluate whether it is more economical to lease or purchase items of significant value, the requesting organizational unit assists the contracting officer in performing a cost comparison for lease vs. purchase. All requisitions for the lease of an asset valued at over $100,000 must be accompanied by a cost analysis and justification which has been reviewed and approved by the Chief Financial Officer (CFO). The worksheet and instructions on the comparative cost analysis spreadsheet that should be used in this analysis is located at http://www-i.nist.gov/admin/dcfo/budget/lease_purchase.html. The following factors should be considered when undertaking a comparative cost analysis:
(A) Length of time that the equipment is to be used, including extent of usage and potential additional use by another federal agency if the equipment becomes excess to the acquiring agency;(3) OMB Circular A-94 applies when the lease-purchase analysis concerns a capital asset or a group of related assets whose total fair market value exceeds $1 million.(B) Financial and other advantages of all types and makes of equipment available;
(C) Leasing costs and purchase options;
(D) Purchase costs of new equipment, including similar equipment or equipment of a different type and make;
(E) Costs of installation and maintenance;
(F) Imminent technological improvements; and
(G) Other pertinent factors.
(1) Purchase - If it is more economical to purchase rather than to lease.d. Computer software acquisition and financing(2) Manufacture of Equipment - The cost to manufacture WCF IE is accumulated in Project Types MANDIS and MANSPC. Research and development costs are not included (see Appendix A, paragraph 2.d.).
(3) Equipment Purchased After Initial Rental - The cost placed on the property records is the purchase order price.
(4) Equipment Purchased With a Trade-In - Prior approval from the Administrative Services Division must be obtained before a trade-in can occur. The cost placed in the property records is the full purchase price including the value of the trade-in.
(1) Purchased computer software is considered to be equipment by OMB guidelines and is assigned object class 31.25 for capitalized ADP Software, 31.23 for Internal Use Software in Development or 31.55 for non-capitalized ADP Software.e. Loan repayments(2) Software may be purchased with an OU's WCF IE allocation only in the following circumstances:
(A) The software is general purpose in nature and applicability and its expected life is two years or more and its cost is $5,000 or more. The property records will be adjusted to include the software cost with the cost of the computer on which it is to be used; and/or(3) Software not meeting the above requirements is charged as a current operating expense to the benefiting project(s).(B) The software is acquired at the same time as computer hardware that is also purchased as WCF IE.
(4) Costs for software developed in-house are either charged as a current operating expense or capitalized under the requirements of Statement of Federal Financial Accounting Standards (SFFAS 10) – “Accounting for Internal Use Software”. Working Capital funds are not used to develop software in-house.
(5) Capitalization - The Finance Division capitalizes software according to the requirements of SFFAS 10.
(1) Special IE Funds – The Budget Division allocates IE funds stemming from new budget initiatives and for projects selected in the annual Innovations in Measurement Science (IMS) competition. Project types used for Special IE projects are IESPC and MANSPC. Repayments are due from OUs to the WCF in equal installments over seven years, beginning the year after obligation.(2) Discretionary IE Funds - Each OU is allocated a line of credit in Discretionary IE funding. An OU’s Discretionary IE loan balance is subtracted from the line of credit to determine the OU’s Discretionary IE availability (i.e. funds available for obligation). As funds are obligated, the OU’s loan balance increases and the IE availability decreases. As funds are repaid, the loan balance decreases and the IE availability increases. Although the funds management and repayment schedule for Discretionary IE remains in the control of the OU, the loan balance can never exceed the line of credit. Project types used for Discretionary IE projects are IEDISC and MANDIS.
(3) During October of each year, the Finance Division will provide a loan repayment planning worksheet to each OU. Information provided on the worksheet will include Special IE (Initiative and IMS) loan balances and mandatory repayment schedules, and Discretionary IE lines of credit and loan balances, with loan repayment amounts left blank. Each OU will return the worksheet to the Finance Division after filling in the loan repayment project codes (ACCS) and the amounts to be repaid on discretionary loan balances. The Finance Division will use the repayment planning worksheets to post the appropriate general ledger entries.
(4) IE Loan Balance Reports are available on the CBS Portal and can be generated by the OUs as needed. These reports are available for IE Discretionary and IE Special (Initiative and IMS) in both Summary and Detail formats. The reports provide Line of Credit and Loan balance information as well as year-to-date loan payments and remaining payments for the fiscal year.
(5) NIST has statutory authority to retain and use earned net income to offset the effects of inflation on equipment and inventories. Since the cost of equipment continues to increase, a surcharge using object class 61.30 is added to the regular loan repayment charge. This surcharge collects the estimated additional cost associated with replacing equipment in the future. See “User Information” on the CFS Home page for the current IS rate.
8.11.09
CONTENT OWNER
161 – Budget Division and 162 – Finance Division
8.11.10
EFFECTIVE DATE
August 11, 2009