Lessee/Supplier Contract Process

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Contract Types – Lessee/Supplier Contracts

Use the Supplier Lease Contract Type form to help determine the correct contract type to use.

Fixed Payments Contracts

The lease portion amount remains the same throughout the life of the agreement. The usage/maintenance amount may change each month, but the base lease/rent amount is the same.

Type Description

Operating ROU Asset Lease–Fixed Payment

Used when agreement gives lessee the right to occupy, operate or hold a leased asset during a specific time period. The asset is returned to the lessor at the end of the agreement.

Finance Purchase Lease –Fixed Payment

Variable Payment Contracts

Used to acquire an asset by paying over its full term. At the conclusion of agreement, the County owns, or has the option to purchase the asset.

The base payment amount varies because of a change in factors or circumstances occurring after the commencement date or when multiple prepayments (i.e., first and last month’s payments) were made. Leases with free rent periods also fall in this category.

Type Description

Operating ROU Asset Lease–Variable Payment

Used when agreement gives lessee the right to occupy, operate or hold a leased asset during a specific time period. The asset is returned to the lessor at the end of the agreement.

Financed Purchase Lease – Variable Payment

Contract Status

Used to acquire an asset by paying over its full term. At the conclusion of agreement, the County owns, or has the option to purchase the asset.

Unlike non-lease contracts, lease contracts can only have one of two statuses after being fully executed: Approved or Canceled.

Validations

Critical:

• Expense Recognition Method must be Number of Days for Lease Contracts.

• Fund is invalid for Lease Contract Line

• Governmental and Proprietary Funds cannot be used together on Lease Contract.

• Intercompany is not allowed on Lease Contract.

• Lease Contracts should only be created if the ROU Asset amount is greater than $75,000

• Lease Spend Category can only be used if Contract Type is for a Lease Contract.

• Location is required for Lease Contract Lines.

• Quantity on Lease Contract Lines cannot be greater than 1. Add additional lines if necessary.

• Tax Applicability for Lease contract line must be Nontaxable.

• Company cannot be used on Lease Type contracts.

Warning:

• As the PC Department Accounting Manager, approving this Supplier Contract with a Short-Term Lease Spend Category indicates the agreement should not be entered as a Lease Contract.

• Lease Contracts greater than 5 years should have Council Ordinance Number. Please add to Additional Data if applicable

• Short Term Lease Spend Categories should only be used on Supplier Contract if the lease agreement is for 12 months or less or meets a lease contract setup exclusion/exception. Otherwise, a Lease Contract must be created.

• Unit Residual Value is blank for Financial Lease Contract. Value should only be $0 if Asset will have no Residual Value after useful life. Please review and update if needed.

• Unit Residual Value should only be used for ROU Lease Contract if a guaranteed final payment is required as stated in the contract.

• Lease Contract should only be created for Equipment if term is 5 years AND a minimum of $10,000 per year.

HOW TO: Operating Right of Use Asset Lease – Fixed Payment

Create Contract

1. Using Workday, enter Create Supplier Contract in Search box and select the task Contract Information:

2. Enter Company 3. Enter Supplier 4. Select Contract Type from the drop-down menu a. Operating ROU Asset Lease – Fixed Payment 5. Choose Create Blank Supplier Contract or Copy Details from an Existing Contract a. ROU Asset Depreciation Expense must be selected a. Enter the Total Contract Amount from the Negotiator’s Checklist Lease Details

14. Term a. Derived from Start Date and End Date entered 15. Enter the Payment Frequency 16. Enter the Interest Rate 17. Enter the Fixed Payment Amount 18. Enter the Initial Indirect Cost, if applicable 19. Enter the Lessor Incentive, if applicable a. NOTE: Entering an amount in the Lessor Incentive field prior to entering payment information will result in an error. Once the payment information is entered, then enter the lessor incentive. The error will go away so long as the value of the asset is greater than the value of the Lessor Incentive.

20. Accounting Method a. Derived from Accounting Method selected on prior screen

21. Check the Prepaid Lease Payment checkbox, if applicable a. Prepaid Lease Payment Date must be on or before the contract start date. 22. Automatically Generate Supplier Invoice Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract. Cannot be changed.

23. Automatically Generate Expense Recognition Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract. Cannot be changed.

24. Enter the Expense Recognition Method a. Must be Number of Days

Supplier Invoice Defaults

25. Remit-To Connection, update if necessary

26. Payment Terms, update if necessary a. Can be changed to another payment option available to a particular Supplier. b. Payment types must be added to a Supplier Profile before they can be used

27. Enter Supplier Invoice Reference Number

Contract Overview

28. Enter contract information/summary in Contract Overview

Goods Lines

29. Enter unique Line Number

30. Enter brief Description

31. Enter Spend Category a. Available Spend Categories: i. Lease - Buildings [66.000200] ii. Lease - Equipment [66.000400] iii. Lease- Infrastructure [66.000300] iv. Lease – Land [66.000100]

32. Enter Tax Applicability a. Must be Nontaxable

33. Tax Code a. Must remain blank

34. Enter Percentage, if necessary a. If multiple Goods Lines are entered, provide a Percentage between 1 and 99 on each line, all lines totaled must equal 100% b. Percentages must be a whole number. Decimals are not allowed.

35. Quantity a. Must remain “1”

36. Enter Unit of Measure a. Choose “Each”

37. Unit Residual Value a. Should remain “0” unless Financed Purchase Lease

38. Unit Cost a. Derived from Quantity and Unit of Measure

39. Extended Amount a. Derived from Quantity and Unit Cost

40. Enter Worktags a. Required: Cost Center, Fund, Business Unit and Additional Worktag: Location i. See FIN0580 (Business Unit Set Up) to locate the correct Business Unit for function, must be a 591xxPx ii. Optional: Project, Program iii. Grant worktags are not supported

Attachments

41. Add Attachments, including but not limited to: a. Contract b. Negotiator’s Checklist c. Contract Summary d. Implicit Rate Worksheet, if applicable e. Incremental Borrowing Rate document, if applicable f. Insurance, if applicable g. Supplier Contract Lease Type, if completed h. Evidence of Council approval, if required i. Any other supporting documentation

If there is not a Worktag for your Location, please email WORKDAYFINANCIALS.

Additional Data (if applicable, click “Save for Later” to enter information)

42. Enter Termination Penalty amount, if applicable a. From Related Actions on Supplier Contract, select Additional Data>Edit b. Custom Object field, enter Termination Penalty, Click OK c. Enter Termination Penalty amount, Currency USD

43. Click OK, Click Done

Submit Contract

44. Click Submit a. Note if additional data entered, from Related Actions on Supplier Contract, select Supplier Contract>Edit. Then Click Submit

HOW TO: Financed Purchase Lease – Fixed Payment

Create Contract

1. Access the Create Supplier Contract Task Contract Information

2. Enter Company 3. Enter Supplier

4. Select Contract Type from the drop-down menu a. Financed Purchase Lease – Fixed Payment

5. Choose Create Blank Supplier Contract or Copy Details from an Existing Contract 6. Click OK 7. Enter the Contract Name 8. Enter the Contract Reference (optional)

Amounts 9. Enter the Start Date 10. Leave the Contract Signed Date blank 11. Enter the End Date 12. Enter the Total Contract Amount a. Enter the Total Contract Amount from the Negotiator’s Checklist Lease Details

13. Term a. Derived from Start Date and End Date entered 14. Enter the Payment Frequency 15. Enter the Interest Rate

16. Enter the Fixed Payment Amount 17. Enter the Initial Indirect Cost, if applicable 18. Enter the Lessor Incentive, if applicable a. NOTE: Entering an amount in the Lessor Incentive field prior to entering payment information will result in an error. Once the payment information is entered, the error will go away so long as the value of the asset is greater than the value of the Lessor Incentive.

19. Check the Prepaid Lease Payment checkbox, if applicable a. Prepaid Lease Payment Date must be on or before the contract start date.

20. Automatically Generate Supplier Invoice Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract. Cannot be changed.

21. Automatically Generate Expense Recognition Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract. Cannot be changed.

22. Enter the Expense Recognition Method a. Must be Number of Days

Supplier Invoice Defaults

23. Remit-To Connection, update if necessary

24. Payment Terms, update if necessary a. Can be changed to another payment option available to a particular Supplier. b. Payment types must be added to a Supplier Profile before they can be used

25. Enter Supplier Invoice Reference Number

Contract Overview

26. Enter contract information/summary in Contract Overview

Goods Lines

27. Enter unique Line Number

28. Enter brief Description

29. Enter Spend Category a. Available Spend Categories: i. Lease - Buildings [66.000200] ii. Lease - Equipment [66.000400] iii. Lease - Infrastructure [66.000300] iv. Lease – Land [66.000100]

30. Enter Tax Applicability a. Must be Nontaxable

31. Tax Code a. Must remain blank

32. Enter Percentage, if necessary a. If multiple Goods Lines are entered, provide a Percentage between 1 and 99 on each line, all lines totaled must equal 100% b. Percentages must be a whole number. Decimals are not allowed.

33. Quantity a. Must remain “1”

34. Enter Unit of Measure a. Choose “Each”

35. Unit Residual Value, if applicable a. Should remain “0” unless Financed Purchase Lease

36. Unit Cost a. Derived from Quantity and Unit of Measure

37. Extended Amount a. Derived from Quantity and Unit Cost

38. Enter Worktags a. Required: Cost Center, Fund, Business Unit and Additional Worktag: Location i. See FIN0580 (Business Unit Set Up) to locate the correct Business Unit for function, must be a 591xxPx b. Optional: Project, Program c. Grant worktags are not supported

Attachments

39. Add Attachments, including but not limited to: a. Contract b. Negotiator’s Checklist c. Contract Summary d. Implicit Rate Worksheet, if applicable e. Incremental Borrowing Rate document, if applicable f. Insurance, if applicable g. Supplier Contract Lease Type, if completed h. Evidence of Council approval, if required i. Any other supporting documentation

If there is not a Worktag for your Location, please email WORKDAYFINANCIALS.

Additional Data (if applicable, click “Save for Later” to enter information)

40. Enter Termination Penalty amount, if applicable a. From Related Actions on Supplier Contract, select Additional Data>Edit b. Custom Object field, enter Termination Penalty, Click OK c. Enter Termination Penalty amount, Currency USD d. Click OK, Click Done

Submit Contract

41. Click Submit a. Note if additional data entered, from Related Actions on Supplier Contract, select Supplier Contract>Edit. Then Click Submit

HOW TO: Operating Right of Use Asset Lease -Variable Payment

Create Contract

1. Access the Create Supplier Contract Task Contract Information

2. Enter Company

3. Enter Supplier

4. Select Contract Type from the drop-down menu a. Operating ROU Asset Lease – Variable Payment

5. Choose Create Blank Supplier Contract or Copy Details from an Existing Contract 6. Select the Accounting Method a. ROU Asset Depreciation Expense must be selected 7. Select the Payment Frequency

Enter the Start Date 9. Enter the End Date 10. Check Prepaid Lease Amount, if applicable

11. Enter First Payment Installment Date, if applicable a. Includes any rent-free installment dates b. Must be between the Contract Start Date and Contract End Date c. Don’t include any prepaid lease payments made on or before the contract start date.

12. Additional Payment, DO NOT CLICK ON THIS BOX

13. Click OK

14. Enter the Contract Name

15. Enter the Contract Reference (optional) Terms And Amounts

16. Leave the Contract Signed Date blank

17. Enter the Total Contract Amount a. Enter the Total Contract Amount from the Negotiator’s Checklist Lease Details

18. Term a. Derived from Start Date and End Date entered on prior screen 19. Payment Frequency a. Derived from previous entry 20. Enter the Interest Rate

21. Enter the Initial Indirect Cost, if applicable

22. Enter the Lessor Incentive, if applicable a. NOTE: Entering an amount in the Lessor Incentive field prior to entering payment information will result in an error. Once the payment information is entered, the error will go away so long as the value of the asset is greater than the value of the Lessor Incentive.

23. Accounting Method a. Derived from Accounting Method selected on prior screen 24. Prepaid Lease Payment checkbox a. Derived from entry on previous screen

25. Automatically Generate Supplier Invoice Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract. Cannot be changed.

26. Automatically Generate Expense Recognition Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract. Cannot be changed.

27. Enter the Expense Recognition Method a. Must be Number of Days

Supplier Invoice Defaults

28. Remit-To Connection, update if necessary

29. Payment Terms, update if necessary a. Can be changed to another payment option available to a particular Supplier. b. Payment types must be added to a Supplier Profile before they can be used

30. Enter Supplier Invoice Reference Number a. Prints on payment

Contract Overview

31. Enter contract information/summary in Contract Overview

Payment Information

32. Enter the Payment Date and Amount for each payment a. If Prepaid was selected, those payments must also be entered

Goods Lines

33. Enter unique Line Number

34. Enter brief Description

35. Enter Spend Category a. Available Spend Categories: i. Lease - Buildings [66.000200] ii. Lease - Equipment [66.000400] iii. Lease- Infrastructure [66.000300] iv. Lease – Land [66.000100]

36. Enter Tax Applicability a. Must be Nontaxable

37. Tax Code a. Must remain blank

38. Enter Percentage, if necessary a. If multiple Goods Lines are entered, provide a Percentage between 1 and 99 on each line, all lines totaled must equal 100% b. Percentages must be a whole number. Decimals are not allowed.

39. Quantity a. Must remain “1”

40. Enter Unit of Measure a. Choose “Each”

41. Unit Residual Value, if applicable a. Should remain “0” unless Financed Purchase Lease

42. Unit Cost a. Derived from Quantity and Unit of Measure

43. Extended Amount a. Derived from Quantity and Unit Cost

44. Enter Worktags a. Required: Cost Center, Fund, Business Unit and Additional Worktag: Location i. See FIN0580 (Business Unit Set Up) to locate the correct Business Unit for function, must be a 591xxPx b. Optional: Project, Program c. Grant worktags are not supported

Attachments

45. Add Attachments, including but not limited to: a. Contract b. Negotiator’s Checklist c. Contract Summary d. Implicit Rate Worksheet, if applicable e. Incremental Borrowing Rate document, if applicable f. Insurance, if applicable g. Supplier Contract Lease Type, if completed h. Evidence of Council approval, if required i. Any other supporting documentation

Additional Data (if applicable, click “Save for Later” to enter information)

46. Enter Termination Penalty amount, if applicable a. From Related Actions on Supplier Contract, select Additional Data>Edit b. Custom Object field, enter Termination Penalty, Click OK c. Enter Termination Penalty amount, Currency USD d. Click OK, Click Done

Submit Contract

47. Click Submit a. Note if additional data entered, from Related Actions on Supplier Contract, select Supplier Contract>Edit. Then Click Submit

HOW TO: Financed Purchase Lease – Variable Payment

Create Contract

1. Access the Create Supplier Contract task Contract Information:

2. Enter Company

3. Enter Supplier

4. Select Contract Type from the drop-down menu a. Select Financed Purchase Lease – Variable Payment

5. Choose Create Blank Supplier Contract or Copy Details from an Existing Contract 6. Select the Payment Frequency 7. Enter the Start Date 8. Enter the End Date 9. Check Prepaid Lease Amount, if applicable

10. Enter First Payment Installment Date, if Prepaid Lease Amount was checked a. Includes any rent-free installment dates b. Must be between the Contract Start Date and Contract End Date c. Don’t include any prepaid lease payments made on or before the contract start date.

11. Check Additional Payment, DO NOT CLICK ON THIS BOX

12. Click OK

13. Enter the Contract Name

14. Enter the Contract Reference (optional)

Terms And Amounts

15. Leave the Contract Signed Date blank

16. Enter the Total Contract Amount a. Enter the Total Contract Amount from the Negotiator’s Checklist Lease Details

17. Term a. Derived from Start Date and End Date entered on prior screen 18. Payment Frequency a. Derived from previous entry 19. Enter the Interest Rate

20. Enter the Initial Indirect Cost, if applicable

21. Enter the Lessor Incentive, if applicable a. NOTE: Entering an amount in the Lessor Incentive field prior to entering payment information will result in an error. Once the payment information is entered, the error will go away so long as the value of the asset is greater than the value of the Lessor Incentive.

22. Prepaid Lease Payment checkbox a. Derived from entry on previous screen

23. Automatically Generate Supplier Invoice Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract. Cannot be changed.

24. Automatically Generate Expense Recognition Schedule and Installments a. Auto checked so schedules are created/approved with Supplier Contract. Cannot be changed.

25. Enter the Expense Recognition Method a. Must be Number of Days

Supplier Invoice Defaults

26. Remit-To Connection, update if necessary

27. Payment Terms, update if necessary a. Can be changed to another payment option available to a particular Supplier. b. Payment types must be added to a Supplier Profile before they can be used

28. Enter Supplier Invoice Reference Number a. Prints on payment Contract Overview

29. Enter contract information/summary in Contract Overview Payment Information

30. Enter the Payment Date and Amount for each payment a. If Prepaid was selected, those payments must also be entered Goods Lines

31. Enter unique Line Number

32. Enter brief Description

33. Enter Spend Category a. Available Spend Categories: i. Lease - Buildings [66.000200] ii. Lease - Equipment [66.000400] iii. Lease- Infrastructure [66.000300] iv. Lease – Land [66.000100]

34. Enter Tax Applicability a. Must be Nontaxable 35. Tax Code a. Must remain blank

36. Enter Percentage, if necessary a. If multiple Goods Lines are entered, provide a Percentage between 1 and 99 on each line, all lines totaled must equal 100% b. Percentages must be a whole number. Decimals are not allowed.

37. Quantity a. Must remain “1”

38. Enter Unit of Measure a. Choose “Each” 39. Unit Residual Value, if applicable a. Should remain “0” unless Financed Purchase Lease 40. Unit Cost a. Derived from Quantity and Unit of Measure 41. Extended Amount a. Derived from Quantity and Unit Cost 42. Enter Worktags a. Required: Cost Center, Fund, Business Unit and Additional Worktag: Location i. See FIN0580 (Business Unit Set Up) to locate the correct Business unit for function, must be a 591xxPx b. Optional: Project, Program c. Grant worktags are not supported

Attachments

43. Add Attachments, including but not limited to: a. Contract b. Negotiator’s Checklist c. Contract Summary d. Implicit Rate Worksheet, if applicable e. Incremental Borrowing Rate document, if applicable f. Insurance, if applicable g. Supplier Contract Lease Type, if completed h. Evidence of Council approval, if required i. Any other supporting documentation

If there is not a Worktag for your Location, please email WORKDAYFINANCIALS.

Additional Data (if applicable, click “Save for Later” to enter information)

44. Enter Termination Penalty amount, if applicable a. From Related Actions on Supplier Contract, select Additional Data>Edit b. Custom Object field, enter Termination Penalty, Click OK c. Enter Termination Penalty amount, Currency USD d. Click OK, Click Done

Submit Contract

45. Click Submit a. Note if additional data entered, from Related Actions on Supplier Contract, select Supplier Contract>Edit. Then Click Submit

Receipts

A lease contract must be fully received in order to initiate the creation of an Asset. There is an automated process that will create receipts for Lease Contracts in Approved status. The process runs every day at 9pm.

Alternately, you may also manually create a receipt from the related actions of the contract or the Create Receipt task.

Receipts cannot be created if the Supplier Contract is future dated or if the Supplier Contract’s Initial Recognition of Lease Operation Journal is not in Posted Status. A lease contract cannot be partially received.

Lease Amendments

An amendment can be created when the three conditions below have been met:

1. The contract is in ‘Approved’ status.

2. All lines have been fully receipted.

3. All Assets have been registered and Assign Accounting completed. There are two amendment types for Lease contracts:

Type Description

Payment Change

Use this Amendment Type for a change in the Fixed/Variable Payment Contracts or the lessors explicitly stated Interest Rate.

(An amendment is required solely for a change in index or rate used to determine variable payments if the change does not impact the liability amount significantly. For example, a consumer price index or incremental borrowing rate change would not require an amendment. An ad hoc line would be added to the supplier invoice when created to account for difference.)

Lease Extension

As the name suggests, use this amendment type when extending a lease.

Please email PCAccounting@piercecountywa.gov with “SC-xxxxx and ASSET-xxxxxx amendment” in the subject header if there is a change in 1.) Residual Value Guarantee or 2.) Purchase Options.

The following fields can be modified:

Payment Change Lease Extension Required

• Fixed/Variable Payment Amount

• Total Contract Amount Optional:

• Contract Name

• Interest Rate

• Remit-To Connection

• Override Payment Type

• Contract Overview

• Attachments

Required

• Payment Information

• Payment Amount

• Total Contract Amount Optional

• Contract Name

• Interest Rate

• Remit-To Connection

• Override Payment Type

• Contract Overview

• Attachments

Contract Review

After a contract amendment has been submitted, a draft schedule is created to assist in the review process. To view the schedule, hover your mouse next to the schedule name and click on the icon. A new window with the draft schedule will open.

Lease Amendment Versions

Upon completion of an amendment, you can view the Amendment Versions on the Lease Amendment Versions tab of the contract.

Things to note:

• You cannot enter two amendments that have a signed date in the same fiscal period.

• Consumer Price Index (CPI) Payment changes must be manually updated on Supplier Invoices by adding an ad hoc line to the created Supplier Invoice from the installment schedule.

• After submittal, Worktags cannot be updated.

Validations

Critical

• Fund is invalid for Lease Contract Line.

• Lease Spend Category can only be used if Contract Type is for a Lease Contract.

• Location is required for Lease Contract Lines.

Warnings

• As the PC Department Accounting Manager, approving this Supplier Contract with a Short Term Lease Spend Category indicates the agreement should not be entered as a Lease Contract.

• Lease Contracts greater than 5 years should have Council Ordinance Number. Please add to Additional Data if applicable.

HOW TO: Create Supplier Contract Amendment to Extend a Lease

Process Steps:

1. Open Supplier Contract

2. From Related Actions select Create Lease Amendment

3. Select Amendment Type: Lease Extension

4. Enter Amendment Signed Date a. This date will be the Accounting Date for the Operational Journal i. Must be in open period. ii. Cannot be dated in the same Fiscal Period as the Supplier Contract Start Date iii. Cannot be dated before a previous lease amendment iv. Cannot be in the same period as a previous lease amendment v. Cannot be future dated

5. Enter Lease Liability Reassessment Date a. This date defaults to the first of the month or first date of the period of the Amendment Signed Date.

6. Enter Payment Effective Date

7. Enter Contract End Date a. Date should be the last day of the extension period b. If End Date is entered for mid period, a warning will trigger when Contract Amendment is submitted: Cancel and recreate the contract. If you want to include a partial payment period, select a contract type that uses variable payment frequency. A partial payment period on a fixed payment frequency generates an extra installment at the full fixed payment amount.

8. Enter Amendment Description

9. Enter Amendment Number

10. Click OK then Done

11. For Variable Payment Contracts a. Lease Details i. Update the Interest Rate, if necessary b. On the Payment Information Tab: i. Enter the Payment Dates and Amount for each installment c. Update the Total Contract Amount

12. For Fixed Payment Contracts a. Lease Details i. Update the Fixed Payment Amount, if necessary ii. Update the Interest Rate, if necessary b. Header i. Update the Total Contract Amount

1. Amount must be equal to or greater that the Total Lease Payments amount

13. Upload Attachments

14. Click Submit