ORIGINATING NO.: 04-09-ADM/OMB

AGENCY: DIVISION OF ADMINISTRATION OFFICE OF MANAGEMENT AND BUDGET

EFFECTIVE DATE: 10-27-03

EXPIRATION DATE: INDEFINITE

SUPERSEDES: 98-06-DPP/OMB

SUBJECT: LINE OF CREDIT (LOC) PROGRAM

ATTENTION: DIRECTORS OF ADMINISTRATION & CHIEF FISCAL OFFICERS

FOR INFORMATION CONTACT: GEORGE McELROY, DIVISION OF ADMINISTRATION

PHONE: (609) 984-6271

PURPOSE

The Department of the Treasury's Line of Credit (LOC) Program is designed to assist agencies in acquiring major items of equipment in the most cost effective manner. The lease purchase of equipment allows for a more flexible budget with the cost of equipment spread over several years. The LOC provides for items of equipment to be financed over a three-year term. The LOC also provides the State with the ability to refinance existing higher interest rate leases where economic advantages exist.

POLICY

It has been determined that acquisitions under this program are cost effective when the purchase price of the items of equipment exceeds $25,000. Any set of like items that do not exceed $25,000 will not be considered.

Examples of assets normally financed through the LOC Program are:

Police Vehicles
Administrative Vehicles
Medium/Heavy Trucks
Public Works Vehicles
Office Furniture
Telecommunications Equipment
Energy Management Systems
Mainframes, Mini-computers and Networks
Personal Computers and Printers
Pre-packaged "Off the shelf" Software
Office Copiers
Specialized Equipment

Agency requests to participate in this program are reviewed by several different entities within the Department of the Treasury. These include but are not limited to the Division of Administration (ADM), the Division of Purchase and Property (DPP), Office of Information Technology (OIT), the Office of Public Finance, the Office of Management and Budget (OMB) and the Division of Property Management and Construction (DPMC). Approval to proceed depends upon several key factors:

1. Ability of the agency to pay annual lease purchase and interest costs.
   
   
2. Technical Review.
   
   
3. Financial Management Review.
   
   
4. Programmatic Needs Analysis.
   
   
5. Availability LOC balances.

ONGOING PROJECT REVIEW PROCESS

As needs arise, agencies may request major items of equipment to be included under the LOC by providing in writing to the Division of ADM the programmatic justification, the allocation by organization, the total estimated cost of the equipment or systems broken into detail, which should include a copy of a contract vendor's price quotation and any necessary additional backup documentation, the estimated annual payment, and the source of funding (NJCFS account number). If the project is to be bid, a complete copy of the specification would be required and if the agency is seeking a waiver of advertising, a copy of the waiver should be included in the transmittal. The estimated annual payment shall be based on the prevailing interest rate at the time of the request and shall be provided by the Division of ADM. Any technical approvals which may be required (i.e. OIT - computers/telecommunications, Central Motor Pool - vehicles, DPMC - furniture) must be received and incorporated into the Agencies' request to the Division of ADM.

The Division of ADM will prepare a memorandum to the Director of OMB for approval of funding and programmatic justification and attach the departmental request. OMB will review all funding requests, and transmit a response of approval/disapproval to the Division of ADM. This response will then be conveyed by the Division of ADM to the Requesting Agency.

Agencies must show payments for LOC purchases in their annual budget request in the Additions, Improvements and Equipment object on the IBN3110R (as described in the Agency Budget instructions). The annual budget request should include existing payments as well as estimated payments for approved items.

ACQUISITION OF EQUIPMENT

The Division of ADM will issue all orders or Letters of Award for equipment either using annual term contracts, bids or waivers. Prior to the Division of ADM completing an award letter, it must first seek OMB's approval, so each project proposal presented for award must receive this secondary review/approval. Departments will be notified when contract awards are issued.

DELIVERY OF EQUIPMENT

Upon delivery of equipment to the designated agency, the authorized receiving authority for that agency must follow the Division of ADM procedure on Attachment.

PAYMENT TO THE VENDOR

The Division of ADM shall also prepare a "Payment Certificate" or Equipment Schedule and forward this document to the designated Lessor, who shall make the necessary payment to the contract vendor.

ANNUAL LEASE PAYMENTS

The Department of the Treasury has established a Central Inter-departmental Account for the processing of all lease and interest payments. Each agency will be billed via Intra-Governmental Payment Voucher (UA) at the beginning of the fiscal year for their payments and during the year if any additional LOC draw downs are requested.

Interest begins accruing to the agency under the LOC at the time payment is made to the vendor for product received. Any vendor payments made prior to March 1 will be booked for the June 15 debt service payment, while any vendor payment made prior to September 1 will be booked for the December 15 debt service payment.

Charles Chianese
Associate Deputy State Treasurer &
Director and Chief Financial Officer
Division of Administration

Charlene M. Holzbaur
Director
Office of Management and Budget

ATTACHMENT

PROCUREMENTS

1. All LOC procurement requests must be submitted in writing to the LOC Administrator, Division of ADM for verification of availability of LOC funds. The purchase of items of equipment through the LOC requires that all standard purchasing rules and regulations be followed. Items requiring advertised bidding or waivers of advertising must be submitted with all specifications and documentation accompanied with the written request.

   Items purchased through term contracts should include a list of item(s) and pricing submitted by vendors, as well as all necessary backup documentation. All vendor prices will be verified by DPP.

   Items purchased through a waiver of advertising should include a copy of the waiver with all of the attached terms and conditions and the vendor's price quote.
   
   

2. Examples of items that cannot be bought or paid through the LOC are as follows:
   1. Maintenance charges for equipment and computer hardware.
      
      
   2. Programming charges
      
      
   3. System conversion charges
      
      
   4. Design and Development charges for software, hardware, local area networks, etc.
      
      
   5. Service charges
      
      
   6. Professional services fees
      
      
   7. Training
      
      
   8. Consultant fees
      
      
   9. Assets with an economic life of less than three years

   The above items may be procured and paid through standard State purchasing and payment procedures.

3. All furniture procurement requests must comply with GSA Circular No. PC-37, i.e., Governor's Office approvals, fire code and space regulations.
   
   
4. LOC procurement requests for information technology or telecommunications hardware, software and related equipment must be accompanied with OIT approvals. Such requests are to be submitted to OIT in the form of a Letter of Transmittal from the requesting agency with a justification, which includes a detailed Statement of Work as well as required pricing and funding information to assure a timely review by OIT. Once this approval is received from OIT, it should be incorporated into your funding request proposal to the LOC Administrator.

5. Purchase price of equipment cannot exceed the dollar amount authorized for agencies in the LOC based upon the OMB approval/disapproval letter.

6. Copies of all procurement documents processed through the LOC will be forwarded to the respective agencies.

PAYMENTS

Delivery, Acceptance and Payment of Equipment through the LOC.

1. All equipment delivered should be inspected for compliance with contract specifications and requirements.
   
   
2. Goods should be accompanied with vendor's invoice (not State Payment Voucher) itemizing goods and unit prices. Invoice must be sent to agency receiving equipment.
   
   
3. Original invoice must be sent to LOC Administrator, Division of ADM, accompanied with letter requesting payment processing and also stating that each item of equipment meets contract requirements and is functioning properly.
   
   
4. Agencies should not have vendors contact the Division of ADM directly on payments.

Receipt of letter and vendor invoice at the Division of ADM will generate the Payment Certificate (Equipment Schedule).

IMPORTANT

1. Be sure equipment meets requirements and is functioning properly prior to requesting payment processing.
   
   
2. If discount terms are applicable, please provide advance notice to the Division of ADM to expedite payment. Discount terms are applicable as follows:
   
   
   1. Discount period commences on the next business day after the agency receives a correct invoice from the vendor for products accepted by the agency which meet the terms, conditions and specifications of the contract. If invoice is received prior to delivery, the discount period begins on the day of acceptance of the goods.