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Directive:

DINAP BULLETIN 84-43


Status: Cancelled

Subject:
Interest Costs Under Lease-Purchase Agreements

Purpose:
To provide information on the Department of Labor's Off ice of the Inspector General's position on interest costs under lease-purchase and other capital lease arrangements.

To

All Native American Grantees

From

PAUL A. MAYRAND HERBERT FELLMAN Director Chief Office of Special Targeted Division of Indian and Programs Native American Programs

Date

February 05, 1985

Expiration Date

Continuing.

Rescissions:    None.
Text :
References. 4 CFR 1-15.7. Background. In the past, OIG auditors have questioned the interest costs associated with lease purchase and other capital lease arrangements. In response to certain inquiries, OIG reviewed its policy concerning such interest costs and consulted with the Office of Management and Budget (OMB). The current policy concerning such interest costs is stated below. Policy. Interest costs (either explicit or implicit) associated with lease-purchase and other capital lease arrangements are not allowable except for interest costs associated with certain buildings as noted in OMB Circular A-87, Attachment B, paragraph C2a. OMB has stated that: "With respect to other leases which create a material equity in the leased property, interest is not an allowable cost. For these leases, rental costs are allowable only up to the amount that would be allowed had the organization purchased the property on the date the lease agreement was executed; e.g., depreciation or use allowances, maintenance, taxes, insurance, but excluding interest expenses and other unallowable costs." Action. Grantees should review the principles in OMB Circulars A-87 or A-122 as codified at 41 CFR 1-15.7 and adhere to them in the operation of their JTPA programs. Questions. Address questions concerning past disallowed interest costs to your audit resolution contact person.

Attachments :
For a copy of attachment(s), please contact Brenda Tollerson at (202) 219-8502.




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