# Presentation: 910832

## ACQUISITIONS & GRANTS OFFICE

**Personal Property **
**Lease Determination Worksheet Training**

## This training presents the Acquisitions and Grants Office’s (AGO) policy and procedures related to Leases and the Lease Determination Worksheet.

This is not the policy and procedures of Ernst & Young, LLP.

- This is not the policy and procedures of Ernst & Young, LLP.

## Objectives

- To obtain a better understanding of leases including:
- Terminology;
- Applicable laws and regulations; and
- Classification.
- To obtain a working knowledge of the lease determination worksheet, including:
- Part A and Part B; and
- Related appendices.

## Why are we here?

- Leases are an integral part of NOAA’s financial statements.
- Therefore, leases are subject to the Chief Financial Officer’s (CFO) Act and audit.
- Completion of the worksheet is necessary to comply with regulations
- Office of Management and Budget (OMB)
- Federal Accounting Standards Advisory Board (FASAB)
- CFO Act

**Notes:**
Helen Hercombe memo

Executive Branch agencies must generally prepare and submit audited financial statements to the OMB.  The CFO Act, as amended by the Government Management Reform Act of 1994 (GMRA) (Pub. L. No. 103 – 356), requires the major 24 agencies of the Federal Government to prepare and submit audited financial statements. 

Explain audit process
	Department of Commerce requires an audit; NOAA has significant portion of DoC’s property

## Definition

- Lease:
- An agreement conveying the right to use property, plant, or equipment usually for a stated period of time. (FASB 13, paragraph 1)
- Also includes:
- Licenses
- Permits
- Memorandums of Understanding (MOUs)
- Interagency service agreements

## Two Different Regulations

- Budget:
- Concerned with scoring.
- OMB Circular No. A-11, Appendix B, *Scoring Lease-Purchases and Leases of Capital Assets*
- Accounting:
- Concerned with correctly reflecting the asset on financial statements.
- SFFAS 6, *Accounting for Property, Plant, and Equipment *(FASAB)
- FAS 13, *Accounting for Leases*, and related amendments (FASB)

**Notes:**
Scoring = financially planning for leases

FASAB = federal government
FASB = commercial
FASB is used because lack of guidance in the federal guidance (according to hierarchy of guidance)
SFFAS = Statement of Federal Financial Accounting Standards
FAS = Financial Accounting Standard

## Lease Scoring

- Budget Authority – the authority provided by law to incur financial obligations that will result in outlays
- Outlays - a payment to liquidate an obligation; measure of Government spending.

**Notes:**
OMB Circular A-11, Section 20

## Funding

- Anti-Deficiency Act:
- Requires adequate budget authority before entering into a _contract or other obligation_ for payment.
- OMB:
- Requires full funding or budget authority for _an useful segment or an entire project_, which could be several contracts.

**Notes:**
Anti-deficiency Act (ADA) = Title 31, United States Code, Section 1517
Prohibits federal employees from entering into contracts that will exceed enacted appropriations or from purchasing services and/or merchandise before appropriations are enacted

## Budgeting for Leases

- Operating Lease:
- Ownership of the asset remains with owner (Lessor).
- The lease does not contain a bargain-price purchase option.
- Term of lease doesn’t exceed 75% of economic life of asset.
- The PV of minimum lease payments does not exceed 90% of asset’s “fair market value” (see A-11 definition) at inception of the lease.
- _General purpose asset (not built for Government-specific purpose)._
- _Private sector market for asset._

**Notes:**
Two criteria in blue and underlined are the two additional criteria compared to the accounting criteria

## Budgeting for Leases (cont.)

- Lease-purchase: Lease that transfers ownership.
- Without substantial private risk.
- With substantial private risk.
- Capital Lease: Any lease other than a lease-purchase that does not meet the criteria of an operating lease.
- OMB does not mention anything about skipping criteria if the lease is in the last 25% of the useful life.
- No specifics related to the type of property leased.

**Notes:**
Substantial private risk =absence of substantial government risk; risk is defined in terms of how governmental in nature the project is (e.g. if the project is less governmental in nature, the private sector risk is considered to be higher)

Lease-Purchase = if doesn’t meet either of the first two criteria; in other words, if transfers ownership or has bargain option price

## Accounting for Leases	

- Criteria for Capital Leases:
- Transfers ownership of the property at the end of the lease.
- Option to purchase property at a bargain price.
- Lease term is equal to or greater than 75% of estimated economic life.
- Present value of minimum lease payments, excluding executory costs, equals or exceeds 90% of fair value of the property.

**Notes:**
Only four criteria

## Accounting for Leases (cont.)

- Operating Leases:
- Does not assume the risks of ownership of the property.
- Does not meet any of the four criteria for a capital lease.
- If the lease is in the last 25% of its useful life, then criteria 3 & 4 (from the previous slide) do not apply.

**Notes:**
Budget (OMB A-11) does not care what you are leasing (personal vs real property) and does not establish any thresholds for budgeting.

Accounting = different criteria for various types of property

## Types of Leases

|  | Budget | Accounting |  |
| --- | --- | --- | --- |
| Type of Lease: | OMB | FASAB | FASB |
| Capital Lease | Yes | Yes | Yes |
| Lease-Purchase | Yes | No | No |
| Operating Lease | Yes | Yes | Yes |
| Capital and Operating Leases: A Research Report (FASAB – Oct. 2003) |  |  |  |

**Notes:**
FASAB (government) & FASB (commercial) = accounting (FASAB is vague on some areas; so per the accounting hierarchy, we can go to FASB for additional guidance)
OMB = budget

## NOAA Regulations

- Capitalization threshold
- $200,000
- Depreciable useful life
- 2 years
- Types of Leases
- Operating
- Capital, but not capitalizable
- Capital and capitalizable

## Differences

- Number of criteria to determine lease type
- Types of leases
- Interest Rates:
- Date
- Treasury or Contractor
- Bargain Purchase Option

**Notes:**
Budgeting = Treasury rate as of lease award (date lease was signed). 
Accounting = Treasury or contractor rate (whichever is lower) as of lease start date or beneficial occupancy date (whichever is later). 

Budgeting = If a bargain purchase option exists, it will be presumed to be exercised. 
Accounting = Option must be sufficiently lower than the expected FMV of the property at the date the option becomes excercisable.  Determine reasonable assurance at inception date that the option will be exercised. 

## Lease Determination Worksheet

- Necessary to address the regulations and the CFO Act.
- Two parts to the worksheet to address each regulation.
- Part A addresses budgeting.
- Part B addresses accounting.
- Each part is divided into sections (e.g. A.1, A.1, B.1, B.2)
- Each section addresses a specific topic or criteria (e.g. economic life, net present value, etc.)

## Worksheet (cont.)

- Completed by Requisitioner or COTR
- Reviewed by AGO Headquarters
- Needs to be completed when total lease payments over the life of the lease (including option years) is greater than $200,000.
- Lease Handbook provides detail instructions on completing the worksheet.

**Notes:**
COTR = Contracting Officer Technical Representative

Lease Handbook = detail instructions on how to complete the Lease Determination Worksheet with examples; also includes policy and definitions

Separate worksheet for Real Property

## Worksheet (cont.)

- Part A (Budget) of the worksheet is to be completed:
- Pre-award
- Could be several times during the process, but definitely during the final negotiations
- At time of award
- Post award, if change to financial structure of lease occurs (i.e. change in lease term, change in payment stream)

## Worksheet (cont.)

- Part B (Accounting) of the worksheet is to be completed:
- Pre-award
- During the final negotiations
- At time of award
- Post award, if change to financial structure of lease occurs

## Worksheet (cont.)

- Excel spreadsheet
- Separate tabs for each part and appendix
- Ability to link data
- Formulas are already in the spreadsheet, as applicable
- Yellow highlights denote cells to be filled in

## Information Needed

- Lease begin date
- Date contract/lease signed by Government
- Lease end date
- Number of option years
- Economic useful life
- Improvements/ upgrades

- Lease payment stream
- Interest rate
- Fair market value
- Transfer of ownership?
- Bargain Purchase option?

## LDW – Part ALease Information

- Requisition Number
- Solicitation Number
- Description of Leased Property
- Including manufacturer and model number
- Including Line/Staff/Corporate Office

**Notes:**
Description of Leased Property = detailed description

## LDW – Part ALease Information (cont.)

- Revision
- Provide explanation if revisions
- New information (i.e. modification to lease)
- Error in previous worksheet
- Date of revision

**Notes:**
Date of revision is to provide clarification (easy to identify latest and greatest)

## LDW – Section A.1General Information

- Real versus Personal Property
- Leases with another Federal agency
- Reasonable assertion of effort

**Notes:**
Towers are they real or personal property?  If the towers are prefabricated and can be reasonably disassembled and relocated, then they are considered personal property (i.e. NEXRAD towers).  However, if they are relatively permanent in nature, then they are real property because they represent improvements to land.

Foundation = real property

trailers

## LDW – Section A.2Economic Useful Life

- Multiple Assets within lease
- Sum of present values of lease payments for each asset discounted back to the date that the asset is delivered
- Recommend individual worksheet for each asset if they are different pieces of property and have different delivery dates

## LDW – Section A.2Useful Life (cont.)

- Dates
- Lease beginning date or date of first payment
- Date contract/lease signed
- Lease end date, including all option periods
- Base term
- Option years, including increments
- Total lease term

**Notes:**
Date that the lease will be signed = date that determines the interest rate used to calculated the net present value of the lease payments

Month-to-month lease = assume 5 years; Per A-11 budget authority is available to liquidate obligations (outlays) for only five years after authority expires (one year or multi-year authority)

## LDW – Section A.2Useful Life (cont.)

- Age of asset
- NOAA’s suggested economic useful life
- Renovations/upgrades
- Years that renovations/upgrades extend the useful life.
- Estimated remaining economic useful life
- One of the six lease criteria

## LDW – Section A.3Present Value Calculation

- Payment Periods
- Annually, quarterly, monthly
- Annuity Due/Ordinary Annuity
- Payment at the beginning or the end of the period
- Payment Amounts
- Executory costs (taxes, maintenance, and insurance)
- Appendix A (example on next slide)

## LDW – Section A.3PV Calculation (cont.)

- Appendix A – Payment Stream

| Requisition Number: |  | 0 |  |  |
| --- | --- | --- | --- | --- |
| Solicitation Number: |  | 0 |  |  |
|   |   |   |   |   |
| Month-Year | Payment # | Total Lease Payment | Operating Costs | Net Lease Payments |
|   |   |   |   |   |
|   | 1 |   |   |                 -    |
|   | 2 |   |   |                 -    |
|   | 3 |   |   |                 -    |
|   | 4 |   |   |                 -    |
|   | 5 |   |   |                 -    |
|   | 6 |   |   |                 -    |
|   | 7 |   |   |                 -    |
|   | 8 |   |   |                 -    |
|   | 9 |   |   |                 -    |
|   | 10 |   |   |                 -    |
|   | 11 |   |   |                 -    |
|   | 12 |   |   |                 -    |

- Yellow cells denote fill-able cells.

- Linked to the actual worksheet (Part A)

- White cells usually contain formulas and are password protected.

## LDW – Section A.3PV Calculation (cont.)

- Interest Rate (_[www.whitehouse.gov/omb](http://www.whitehouse.gov/omb)_)
- Date lease signed
- Appendix B
- FMV
- Usually quote, GSA schedule or catalog price
- Appendix C
- Blank spreadsheet
- Use if need to add several costs together to determine the FMV

## LDW – Section A.3PV Calculation (cont.)

- Appendix B – Interest Rate (prior to entry of rates)

| Requisition Number: |  |  | 0 |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Purchase Order/Contract #: |  |  | 0 |  |  |  |  |
|   |   |   |   |   |   |   |   |
| Linear Interpolation of Discount Rate |  |  |  |  |  |  |  |
| http://www.whitehouse.gov/omb/circulars/a094/dischist-2006.pdf |  |  |  |  |  |  |  |
|   |   |   |   |   |   |   |   |
| Year | Rate |   | Year |   |   |   |   |
| 1 |   |   |   |   |   |   |   |
| 2 |   |   |   |   |   |   |   |
| 3 |   |   |   |   |   |   |   |
| 4 | 0.000% |   |   |   |   |   |   |
| 5 |   |   |   |   |   |   |   |
| 6 | 0.000% |   |   |   |   |   |   |
| 7 |   |   |   |   |   |   |   |
| 8 | 0.000% |   |   |   |   |   |   |
| 9 | 0.000% |   |   |   |   |   |   |
| 10 |   |   |   |   |   |   |   |
| 11 | 0.000% |   |   |   |   |   |   |

- Linked to the actual worksheet (Part A)

- Yellow cells denote fill-able cells.

- White cells are usually formulas and are password protected.

## LDW – Section A.3PV Calculation (cont.)

- Appendix B – Interest Rate (after entry of rates)

| Requisition Number: |  |  | 0 |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Purchase Order/Contract #: |  |  | 0 |  |  |  |  |
|   |   |   |   |   |   |   |   |
| Linear Interpolation of Discount Rate |  |  |  |  |  |  |  |
| http://www.whitehouse.gov/omb/circulars/a094/dischist-2006.pdf |  |  |  |  |  |  |  |
|   |   |   |   |   |   |   |   |
| Year | Rate |   | Year | 2006 |   |   |   |
| 1 |   |   |   |   |   |   |   |
| 2 |   |   |   |   |   |   |   |
| 3 | 4.700% |   |   |   |   |   |   |
| 4 | 4.750% |   |   |   |   |   |   |
| 5 | 4.800% |   |   |   |   |   |   |
| 6 | 4.850% |   |   |   |   |   |   |
| 7 | 4.900% |   |   |   |   |   |   |
| 8 | 4.933% |   |   |   |   |   |   |
| 9 | 4.967% |   |   |   |   |   |   |
| 10 | 5.000% |   |   |   |   |   |   |
| 11 | 5.030% |   |   |   |   |   |   |

- Linked to the actual worksheet (Part A)

- Formula calculates the average interest rates for in-between years based on the rates input from OMB Circular A-94.

## LDW – Section A.3PV Calculation (cont.)

- Net present value
- Value of the lease payments in terms of today’s money
- How much would it cost NOAA if NOAA had bought the property instead of leased it

**Notes:**
What is NPV (in laymen’s terms)?

## LDW – Section A.3PV Calculation (cont.)

- Calculation of present value
- Appendix D
- Ability to link to payment stream
- Hints:
- Remaining balance should equal zero for the last payment
- Net present value (NPV) should equal the total of the principal payments
- One of the six lease criteria

## LDW – Section A.3PV Calculation (cont.)

- Appendix D - Top Section
- Linked to the worksheet.
- No input necessary.

- Linked to the actual worksheet (Part A)

## LDW – Section A.3PV Calculation (cont.)

- Appendix D – Middle section
- Insert formula to calculate total by fiscal year:
- principal, interest, total net lease payments, executory costs, and total lease payments

- Yellow cells denote fill-able cells.

- White cells are usually formulas and are password protected.

## LDW – Section A.3PV Calculation (cont.)

- Appendix D – Bottom Section
- Calculation of net present value
- Based on lease payments included in Appendix A

- Yellow cells denote fill-able cells.

- White cells are usually formulas and are password protected.

## LDW – Section A.4Capital or Operating

- Lease Criteria
- Transfer ownership
- Bargain purchase option
- Special purpose
- Built on government land
- Unique specification of NOAA
- Private Sector market
- Economic useful life (Section A.2)
- Present value (Section A.3)

**Notes:**
Using answers from Sections A.1 – A.3 to determine type of lease, which is documented in this section

## LDW – Section A.5Lease-Purchase

- Determine whether lease-purchase is with or without substantial risk
- Substantial Risk:
- Defined in terms of how governmental in nature is the project
- Less governmental in nature, higher private sector risk
- Five questions to determine if lease-purchase is with or without substantial risk

**Notes:**
Should be rare that this section is completed by NOAA

## LDW – Section A.6-9Budget Authority & Outlays

- Now determined what type of lease, remaining sections of the worksheet determine the budget authority and outlays for each type of lease

**Notes:**
Budget Authority – the authority provided by law to incur financial obligations that will result in outlays
Outlays - a payment to liquidate an obligation; measure of Government spending.

## LDW – Section A.6Lease-Purchase w/ Risk

- Up-front budget authority = amount equal to asset cost (net present value); annual = amount equal to imputed interest costs
- Outlays = Scored over lease term in an amount equal to the annual lease payments.

**Notes:**
Budget Authority – the authority provided by law to incur financial obligations that will result in outlays
Outlays - a payment to liquidate an obligation; measure of Government spending.

## LDW – Section A.7Lease-Purchase w/o Risk

- Contact NOAA AGO Headquarters if need to complete this section
- Very complicated

**Notes:**
Budget Authority – the authority provided by law to incur financial obligations that will result in outlays
Outlays - a payment to liquidate an obligation; measure of Government spending.

## LDW – Section A.8Operating Lease

- Cancellation clause
- Fiscal fund clause
- Up-front budget authority = amount equal to total payments under the full term of the lease or amount sufficient to cover first year lease payments plus cancellation costs
- Outlays = Scored over lease term in an amount equal to the annual lease payments.

**Notes:**
Budget Authority – the authority provided by law to incur financial obligations that will result in outlays
Outlays - a payment to liquidate an obligation; measure of Government spending.

## LDW – Section A.9Capital Lease

- Up-front budget authority = amount equal to asset cost (net present value); annual = amount equal to imputed interest costs
- Outlays = Scored over lease term in an amount equal to the annual lease payments.

**Notes:**
Budget Authority – the authority provided by law to incur financial obligations that will result in outlays
Outlays - a payment to liquidate an obligation; measure of Government spending.

## Budget Authorityand Outlays

| Transaction | Budget Authority | Outlays |
| --- | --- | --- |
| Lease-purchase without substantial risk | Up front – amount equal to asset cost; 
annual – amount equal to imputed interest costs  | Amount equal to asset cost scored over the construction period in proportion to the distribution of the contractor’s costs; amount equal to imputed interest costs recorded on an annual basis over lease term. |
| Lease-purchase with substantial risk | Up front – amount equal to asset cost; 
annual – amount equal to imputed interest costs | Scored over lease term in an amount equal to the annual lease payments. |

## Budget Authorityand Outlays (cont.)

| Transaction | Budget Authority | Outlays |
| --- | --- | --- |
| Capital lease | Up front – amount equal to asset cost; 
annual – amount equal to imputed interest costs | Scored over lease term in an amount equal to the annual lease payments. |
| Operating lease
 | Up-front – amount equal to total payments under the full term of the lease or amount sufficient to cover first year lease payments plus cancellation costs  | Scored over lease term in an amount equal to the annual lease payments. |

## LDW – Section A.10Summary of Lease Types

| Lease Criteria | Lease Purchase | Capital Lease | Operating Lease |
| --- | --- | --- | --- |
| Transfer Ownership | Meets one of these two criteria | No | Meets none of the six criteria |
| Bargain Purchase |  | No |  |
| Special Purpose | Yes or No | Meets one of these four criteria |  |
| Private Sector Market |  |  |  |
| Economic Useful Life |  |  |  |
| Present Value |  |  |  |

**Notes:**
Double check conclusions

## LDW – Section A.11Submission to OMB

- Requirement to submit to OMB certain types of leasing and non-routine financing proposals for review of the scoring impact.
- Answer 14 questions

## LDW – Section A.12Final Determination

- Conclusion
- Signed and dated by:
- Preparer
- Headquarters Review
- Program Office Review
- Line Office Budget
- Contracting Officer
- Head Contracting Officer

## LDW – Part BOverview

- Linked to data input in Part A
- Requisition number
- Purchase order/contract number
- Description of leased property
- Explanation for revisions

## LDW – Section B.1General Information

- Indeterminable lease term
- Fiscal funding clause

## LDW – Section B.2Economic Useful Life

- Dates
- Lease beginning date or date of first payment
- Date contract/lease signed
- Lease end date, including all option periods
- Base term
- Option years, including increments
- Total lease term

**Notes:**
Date that the lease begins = date that determines the interest rate used to calculated the net present value of the lease payments  (under budget, it was the date that the lease was signed)

Month-to-month lease = assume 5 years; Per A-11 budget authority is available to liquidate obligations (outlays) for only five years after authority expires (one year or multi-year authority)

## LDW – Section B.2Useful Life (cont.)

- Age of asset
- NOAA’s suggested economic useful life
- Renovations/upgrades
- Years that renovations/upgrades extend the useful life.
- Estimated remaining economic useful life
- Beginning of term in last 25% of useful life
- One of the four lease criteria

## LDW – Section B.3Present Value Calculation

- Payment Periods
- Annually, quarterly, monthly
- Annuity Due/Ordinary Annuity
- Payment at the beginning or the end of the period
- Payment Amounts
- Executory costs (taxes, maintenance, and insurance)
- Appendix E (similar to Appendix A)

## LDW – Section B.3PV Calculation (cont.)

- Appendix E – Payment Stream

| Requisition Number: |  | 0 |  |  |
| --- | --- | --- | --- | --- |
| Solicitation Number: |  | 0 |  |  |
|   |   |   |   |   |
| Month-Year | Payment # | Total Lease Payment | Operating Costs | Net Lease Payments |
|   |   |   |   |   |
|   | 1 |   |   |                 -    |
|   | 2 |   |   |                 -    |
|   | 3 |   |   |                 -    |
|   | 4 |   |   |                 -    |
|   | 5 |   |   |                 -    |
|   | 6 |   |   |                 -    |
|   | 7 |   |   |                 -    |
|   | 8 |   |   |                 -    |
|   | 9 |   |   |                 -    |
|   | 10 |   |   |                 -    |
|   | 11 |   |   |                 -    |
|   | 12 |   |   |                 -    |

- Yellow cells denote fill-able cells.

- Linked to the actual worksheet (Part B)

- White cells usually contain formulas and are password protected.

## LDW – Section B.3PV Calculation (cont.)

- Interest Rate
- Lower of Treasury (_[www.whitehouse.gov/omb](http://www.whitehouse.gov/omb)_) or Contractor’s interest rate
- Date lease begins or acceptance date
- Appendix F (similar to Appendix B)
- FMV
- Usually quote, GSA schedule or catalog price
- Appendix G (similar to Appendix C)
- Blank spreadsheet
- Use if need to add several costs together to determine the FMV

## LDW – Section B.3PV Calculation (cont.)

- Appendix F – Interest Rate (prior to entry of rates)

| Requisition Number: |  |  | 0 |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Purchase Order/Contract #: |  |  | 0 |  |  |  |  |
|   |   |   |   |   |   |   |   |
| Linear Interpolation of Discount Rate |  |  |  |  |  |  |  |
| http://www.whitehouse.gov/omb/circulars/a094/dischist-2006.pdf |  |  |  |  |  |  |  |
|   |   |   |   |   |   |   |   |
| Year | Rate |   | Year |   |   |   |   |
| 1 |   |   |   |   |   |   |   |
| 2 |   |   |   |   |   |   |   |
| 3 |   |   |   |   |   |   |   |
| 4 | 0.000% |   |   |   |   |   |   |
| 5 |   |   |   |   |   |   |   |
| 6 | 0.000% |   |   |   |   |   |   |
| 7 |   |   |   |   |   |   |   |
| 8 | 0.000% |   |   |   |   |   |   |
| 9 | 0.000% |   |   |   |   |   |   |
| 10 |   |   |   |   |   |   |   |
| 11 | 0.000% |   |   |   |   |   |   |

- Linked to the actual worksheet (Part B)

- Yellow cells denote fill-able cells.

- White cells are usually formulas and are password protected.

## LDW – Section B.3PV Calculation (cont.)

- Appendix F – Interest Rate (after entry of rates)

| Requisition Number: |  |  | 0 |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Purchase Order/Contract #: |  |  | 0 |  |  |  |  |
|   |   |   |   |   |   |   |   |
| Linear Interpolation of Discount Rate |  |  |  |  |  |  |  |
| http://www.whitehouse.gov/omb/circulars/a094/dischist-2006.pdf |  |  |  |  |  |  |  |
|   |   |   |   |   |   |   |   |
| Year | Rate |   | Year | 2006 |   |   |   |
| 1 |   |   |   |   |   |   |   |
| 2 |   |   |   |   |   |   |   |
| 3 | 4.700% |   |   |   |   |   |   |
| 4 | 4.750% |   |   |   |   |   |   |
| 5 | 4.800% |   |   |   |   |   |   |
| 6 | 4.850% |   |   |   |   |   |   |
| 7 | 4.900% |   |   |   |   |   |   |
| 8 | 4.933% |   |   |   |   |   |   |
| 9 | 4.967% |   |   |   |   |   |   |
| 10 | 5.000% |   |   |   |   |   |   |
| 11 | 5.030% |   |   |   |   |   |   |

- Linked to the actual worksheet (Part B)

- Formula calculates the average interest rates for in-between years based on the rates input from OMB Circular A-94.

## LDW – Section B.3PV Calculation (cont.)

- Calculation of present value
- Appendix H (similar to Appendix D)
- Hints:
- Remaining balance should equal zero for the last payment
- Net present value (NPV) should equal the total of the principal payments
- One of the four lease criteria

**Notes:**
What is NPV (in laymen’s terms)?

## LDW – Section B.3PV Calculation (cont.)

- Appendix H - Top Section
- Linked to the worksheet.
- No input necessary.

- Linked to the actual worksheet (Part B)

## LDW – Section B.3PV Calculation (cont.)

- Appendix H – Middle section
- Insert formula to calculate total by fiscal year:
- principal, interest, total net lease payments, executory costs, and total lease payments

- Yellow cells denote fill-able cells.

- White cells are usually formulas and are password protected.

## LDW – Section B.3PV Calculation (cont.)

- Appendix H – Bottom Section
- Calculation of net present value
- Based on lease payments included in Appendix E

- Yellow cells denote fill-able cells.

- White cells are usually formulas and are password protected.

## LDW – Section B.4Capital or Operating

- Lease Criteria
- Transfer ownership
- Bargain purchase option
- Economic useful life (Section B.2)
- Present value (Section B.3)

**Notes:**
Using answers from Sections A.1 – A.3 to determine type of lease, which is documented in this section

## LDW – Section B.5 NOAA Capitalization

- If capital:
- Useful life is remaining economic useful life
- Transfer ownership
- Bargain purchase option
- Useful life is lease term
- Economic useful life (Section B.2)
- Present value (Section B.3)
- Capital but not-capitalizable
- Less than or equal to two years
- Cost less than $200,000
- Major class of asset

## LDW – Section B.6 Future Payments

- Schedule
- Link to table from Appendix H
- Funded versus unfunded (budget)

## LDW – Section B.7 Summary

| Deprec. Useful Life | Acquisition Cost | FASAB Cap. Req. | NOAA Cap. Req. | Lease Type | Reporting Requirements |
| --- | --- | --- | --- | --- | --- |
| N/A | < $200,000 | No | No | Operating | N/A |
| N/A | > or = $200,000 | No | Yes | Operating | Total future min. lease payments |
| < 2 years | < $200,000 | Yes | No | Capital, but not capitalized | N/A |
| > or = 
2 years | < $200,000 | Yes | No | Capital, but not capitalized | N/A |
| < 2 years | > or = $200,000 | Yes | No | Capital, but not capitalized | N/A |
| > or =
2 years | > or = $200,000 | Yes | Yes | Capital and 
capitalized | Payments, Cost, Deprec., etc. |

**Notes:**
Double check conclusion

## LDW – Section B.8Final Determination

- Conclusion
- Signed and dated by:
- Preparer
- Headquarters Review
- Program Office Review
- Line Office Budget
- Contracting Officer
- Head Contracting Officer
- Distribution

## Supporting Documentation

- Document!  Document!  Document!
- Verbal information is okay
- Document name, title, company, date of conversation, and telephone number
- Document on LDW where in lease (page number or paragraph obtained information from, if not straightforward)

**Notes:**
Auditors want to see documentation

## Modifications

- Any remaining budgetary resources prior to modification should be used to offset cost of new contract
- No remaining budgetary resources if not scored up front at the time the lease was signed (capital lease or lease purchase)
- Budget authority = difference in the NPV of the new contract and the remaining term of the original contract
- Both present values should be calculated using Treasury rates at time the contract is amended

## Actual Worksheet

- Let’s Review!!
- Part A
- Appendix A – D
- Part B
- Appendix E – H

**Notes:**
Excel tips

Linking ability

## Miscellaneous

- If you have questions or are uncertain about anything, contact AGO Headquarters.
- Patricia Coleman (_[e.patricia.coleman@noaa.gov](mailto:e.patricia.coleman@noaa.gov)_)
- Temujene Makua (_[temujene.h.makua@noaa.gov](mailto:temujene.h.makua@noaa.gov)_)
- Richard Parkerson (if Patricia and Temujene are unavailable)
- 	(_richard.parkerson@noaa.gov_)

## Where to Get Worksheet & Handbook

- AGO website – _[http://www.ago.noaa.gov/](http://www.ago.noaa.gov/)_
- Click “Acquisition” on left side.
- Click “Policies” on left side.
- Scroll down to:
- Personal Property Lease Handbook
- Personal Property Lease Determination Worksheet

**Notes:**
Research report = excellent resource

## Where to Get More Information

- OMB website, specifically OMB A-11
- FASAB website
- FASAB SFFAS No. 6
- Research report on Capital and Operating Leases (October 2003)
- FASB website, specifically FAS 13
- AGO – contacts on previous page
- Ernst & Young – Heather Potter
- 				(_Heather.Potter@ey.com_)

**Notes:**
Research report = excellent resource

## Questions/Comments