OSU PRO 205: Operating Lease

Purpose

To identify the responsibilities associated with leased or rented equipment.

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Background Information

An operating lease allows the acquisition and use of equipment in a quickly changing technological area while avoiding ownership of equipment that may become obsolete.  

For Service Centers and Auxiliaries, operating leases permit the use of equipment without the obligation to own and fund reserves and steady the operational cash flow and associated expense reports.

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Definition

Lease

An agreement for the right to use property for a specified period at a specified cost.  Title remains with the lessor.  At no time does the lessee build equity in the property.

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Policy

All lease agreements must be approved by the OSU Contracts Office.  The lease agreement should specify whether or not OSU is responsible for insuring the equipment.  OSU assumes no responsibility for leased or rented equipment unless a responsibility is specifically stated in the contract or written agreement.  Only then does OSU insure the equipment against theft or damage.   Property control, security, and administration of the equipment are the lessor’s responsibility.

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Procedure

Responsible Party	Action
Department	Draft a lease agreement and forward official document to the Contracts Office for approval. Submit copy of approved lease agreement to Business Affairs. If lease requires OSU to insure equipment and the asset will be held less than 90 days, a copy of the agreement should be forwarded to OSU Risk Management.  (Item will be covered under supplemental insurance.) If lease requires OSU to insure equipment and the asset will be held more than 90 days, the asset must be added to inventory.  A copy of the agreement should be forwarded to Property Management along with a Fixed Asset Data Entry form.  See PRO-Ex3: Fixed Asset Data Entry (FADE) form. Lease payments are coded "equipment-rentals and leases" (see PRO-Ex10: Account Codes).
Purchasing	Add leased equipment to the university asset records at its replacement value for tracking and insurance purposes.
Department	When lease ends and equipment is returned, the department will submit a PDR to remove the equipment from inventory.

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