U.T. System Equipment Financing

Program Procedures

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1. At the April 14, 1994 meeting of the Board of Regents, the Board approved the use of Revenue Financing System debt as an alternative to vendor lease purchase financing. The Board amended the Guidelines Governing Administration of the Revenue Financing System to include the following:

 

"Equipment purchases authorized by the U. T. Board of Regents to be funded through the Revenue Financing System will be approved in aggregate amount by institution at the beginning of each fiscal year. The minimum aggregate amount is $100,000 per institution and allows for several smaller equipment purchases to be commingled to achieve the minimum amount. Each piece of equipment must have a useful life of not less than 3 years. The equipment will be purchased from the vendor by the institution and Revenue Finance System debt will be issued on the first business day of each November, February, May, and August to reimburse the institution for the equipment purchases. The debt will be amortized each February 15 and August 15 with full amortization not to exceed ten years."

 

2. In order to obtain approval for the issuance of Revenue Financing System debt, each institution must, by June 1 of each fiscal year, determine equipments needs for the following year. The Board of Regents will approve the aggregate amount of capital equipment to be financed through the U.T. System Equipment Financing Program at their August meeting. The Office of Finance will then submit the aggregate equipment financing amount by institution to the Texas Bond Review Board at the beginning of each fiscal year.

 

3. Each institution will need to determine the method of equipment purchase financing that is most appropriate.

 

a. Vendor lease purchase - may offer terms not available under the U.T. System Equipment Financing Program. Any contract in excess of $250,000 or 5 years must be approved by the Texas Bond Review Board prior to entering into the arrangement.

 

b. U.T. System Equipment Financing Program -The minimum amount of equipment to be financed for any individual institution is $100,000 per funding and the equipment must have a useful life equal to or greater than three years. Smaller equipment purchases may be bundled together to reach the minimum of $100,000. The attached form, "Request for Reimbursement" should be submitted to the Office of Finance after the equipment is purchased. The request must be received by the Office of Finance not less than 10 days prior to the Funding Date. On the Funding Date, proceeds will be deposited into the institution’s account at Dreyfus. Commercial paper notes will be issued on Funding Dates which are the first business day of November, February, May, and August. Contemporaneous with the sale of the Notes, the business officer of the institution will be required to execute a financing agreement with the Office of Finance. The agreement will specify the terms for repayment of the debt with no repayment to extend beyond ten years. For smaller equipment purchases bundled together, all of the equipment in the bundle would carry the same amortization schedule.

 

4. Determine the source of payment for equipment. If vendor lease purchasing is to be used, payment arrangements are to be determined by the institution. If the U.T. System Equipment Financing System is to be used, then the sources for repayment of the debt must be identified as General Revenue, Local Funds, or Institutional Funds. Regardless of the source of funds to be used to repay the debt, each institution will be required to fund a 30 day interest reserve from their institutional funds while commercial paper is outstanding.

 

a. General Revenue - For commercial paper, interest will be paid monthly from institutional funds. The institution will be notified monthly of the 30 day interest reserve and institutional funds will need to be wire transferred on the designated date. This interest reserve account must be funded at the beginning of each month to ensure that funds will be available to pay the interest expense on the commercial paper during the month. At the end of each month, the Office of Finance will send notification of the amount of interest that was paid during the month and the institution will be responsible for submitting the voucher for reimbursement from General Revenue. In addition to the interest payment, principal payments will occur each February 15 and August 15 from institutional funds with reimbursement from General Revenue. If the commercial paper is converted to fixed rate debt, the monthly debt service payment dates will cease and only semi-annual payments will be required.

 

b. Local Funds - The above procedure will also be used when local funds are the source of debt repayment. The only change is that a voucher to reimburse funds will be from the institution's local funds at the State Treasury rather than from General Revenue.

 

c. Institutional Funds - The above procedure will also be used when institutional funds are the source of debt repayment with the exception that the since the source of payment is institutional funds no further vouchering will be necessary.

 

If the commercial paper is converted to fixed rate debt, the institution will be notified not less than 15 days of the amount to be wire transferred on the bond due dates.

 

 

 

 

A Request for Reimbursement form may be found here.

 

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