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Policy Board of Education of Caroline County Title: Long-Term Obligations Reference: I.10.80 A. Purpose Establish a policy for the financing and monitoring of all long-term obligations within Caroline County Public Schools. B. Policy Statement Caroline County Public Schools is a public organization that has the need to sometimes enter into long-term obligations in order to acquire assets and major repairs associated with those assets. This policy establishes the authority and responsibility governing the financing and monitoring of those long-term obligations. C. Rationale The Board of Education is responsible to ensure that assets are well maintained and in compliance with local, state and federal regulations. Certain one-time costs associated with acquiring and maintaining these assets sometimes exceeds the capacity of the annual operating budget and thus a long-term obligation is the best solution. Long-term obligation procedures shall be developed that provide the most cost effective and efficient means possible to support the goals and objectives of the Board and to ensure that expenditures are within appropriated budgeted amounts. D. Definitions 1. Long-term obligation: Financing of capital expenditures. 2. Financing: An operating or capital lease entered into with a third party financing entity. 3. Operating Lease: The rental of an asset with a term of more than one year where the payments are chargeable as rental or lease expenditures. 4. Capital Lease: A lease that transfers substantially all the benefits and risks inherent in the ownership of the property to the Board. A capital lease must meet one or more of the following criteria: • • By the end of the lease term, ownership of the leased property is transferred to the Board. The lease contains a bargain purchase option. • The lease term is equal to 75 percent or more of the estimated useful life of the leased property. 5. Non-Appropriation Clause: The lease must contain language indicating that continuation of the lease is subject to sufficient annual appropriation by the County and State. E. Implementation Guidelines: 1. The Superintendent, or his/her designee, will seek to obtain financing only when necessary. 2. The process for identifying the timing and amount of the financing will be as efficient as possible. 3. A request for quotes (RFQ) or request for proposals (RFP) shall be issued in order to obtain the most favorable interest rate and other related costs. 4. All long-term obligations must be approved by the Board prior to execution. F. Policy Effective Date: January 4, 2011 G. Policy Adopted Date: January 4, 2011 2