[CAFR-Contacts-News] Information Request about Operating Leases

[HAMILTON Robert W * DAS]

Hello CAFR Contacts,

As discussed during the SARS Year-end Close Training on June 14, the Legislative Fiscal Office, Oregon State Treasurer's Office, and DAS Capital Finance & Planning have requested that SARS coordinate an information request relating to operating leases, in anticipation of the implementation GASB Statement No. 87 Leases, which is effective July 1, 2020.

Here is the request: For each operating lease which has a remaining non-cancelable period of more than 20 years, does it have a fiscal funding clause?

Your response must be one of the following:


1.     All of our operating leases with remaining non-cancelable periods of more than 20 years have a fiscal funding clause; or

2.     All of our operating leases with remaining non-cancelable periods of more than 20 years have a fiscal funding clause except for:

*         [Provide a brief explanation for each lease that doesn't meet the criteria, include the total dollar amount of the remaining commitment]; or

3.     Our agency has no operating leases with remaining non-cancelable periods of more than 20 years.

A fiscal funding clause allows that state to cancel the lease if the state does not appropriate the funds necessary to make the required lease payments.  Under current guidance, the existence of a fiscal funding clause, in and of itself, does not result in the lease being considered cancelable (OAM 15.60.30 paragraph 108.e<https://www.oregon.gov/das/Financial/Acctng/Documents/15.60.30.pdf> and 15.80.00 paragraph 106<https://www.oregon.gov/das/Financial/Acctng/Documents/15.80.00.pdf>).

Given that agencies are currently reviewing their operating leases as part of their agency disclosures for the CAFR, we're hoping that agencies will also be able to review those leases for the fiscal funding clause.  SARS will be conducting a reasonableness check on agency responses, using agency disclosures or audited financial statements.  For example, if Agency Disclosure 12a is completed for FY 2018, and it contains information beyond 2038, we would expect the agency's response to be either #1 or #2 above, however, if there is no information beyond 2038, or Agency Disclosure 12a is not completed, we would expect the agency response to be #3.

Agencies that comprise the primary government for the state's CAFR are required to respond to this information request.  Therefore, if your agency is eligible for the Gold Star Award every year, a response is required, unless your agency is a discretely presented component unit of the state.  However, to be clear, this request is not related to the Gold Star Award.

A response is required by Friday, February 15, 2019.  Please send your response to me as SARS will in turn provide the information to Legislative Fiscal Office, Oregon State Treasurer's Office, and DAS Capital Finance & Planning.

If you have any questions, please let me know.

Thank you,

Rob

Robert W. Hamilton, CPA
Statewide Accounting and Reporting Services Manager
Chief Financial Office
Department of Administrative Services
Phone:  (503) 373-0299
http://www.oregon.gov/DAS/financial/acctng

Data Classification: Level 1 - Published

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