APPENDIX B—SCORING LEASE-PURCHASES AND LEASES OF CAPITAL ASSETS

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES

AND LEASES OF CAPITAL ASSETS

OMB Circular No. A–11 (2024) Page 1 of Appendix B

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES AND LEASES OF

CAPITAL ASSETS

This Appendix provides instructions on the budgetary treatment of lease-purchases and leases of capital

assets consistent with the scorekeeping rule developed by the executive and legislative branches originally

in connection with the Budget Enforcement Act of 1990 (BEA) (see Appendix A). The scorekeeping rule

focuses on leases and lease-purchases specifically authorized by law. However, these requirements apply

to all lease-purchase arrangements and capital leases, including those arrangements that agencies may enter

into under existing general legal authorities and arrangements that are financed through the Federal

Financing Bank, except as noted below.

These requirements do not apply to leases between Federal agencies if the lessor recorded the full cost of

the asset when it was acquired. In addition, the costs of Energy Savings Performance Contracts may be

scored on an annual basis, consistent with the guidance provided in OMB Memorandum M-98-13, Federal

Use of Energy Savings Performance Contracting and OMB Memorandum M-12-21, Addendum to OMB

Memorandum M-98-13 on Federal Use of Energy Savings Performance Contracts and Utility Energy

Service Contracts.

Agencies are required to submit to their OMB representatives the following types of leasing and other non-

routine financing proposals for review of the scoring impact:

 Any proposed lease of a capital asset where total Government payments over the full term of the

lease would exceed $50 million. It should be assumed that options to renew will be exercised.

 All financing proposals that are non-routine in nature and involve unique or unusual concepts or

characteristics such as those listed below:

 All enhanced-use lease (outlease)-leaseback mechanisms;

 Establishment of public-private partnerships or limited liability corporations;

 Issuance of debt by a third party that includes an explicit "full faith and credit" guarantee of debt

repayment by the Government or an implicit guarantee of repayment from Federal funds that

removes a substantial amount of the investor's risk;

 Special purpose assets for which there is no real private sector market;

 Any leases executed by GSA with an annual cost that exceeds the prospectus threshold

associated with 40 U.S.C. 3307:

 2025—$3,926,211

 2026—$3,961,412

 2027—$3,961,412

 Projects constructed or located on Government land;

 Contracts that require the contractor to acquire, construct, or renovate assets valued over $50

million;

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES

AND LEASES OF CAPITAL ASSETS

Page 2 of Appendix B OMB Circular No. A–11 (2024)

 Share in savings proposals that result in the acquisition of real property;

 Proposals that raise issues about the governmental/non-governmental status of the asset or the

entity that holds the title to the asset;

 Any financing proposal for which a statute requires OMB approval of the scoring (or of the

proposal) or compliance with Circular No. A–11. Where compliance with Circular No. A–11

or other specified scoring rules is required by statute, the agency submission must be

accompanied by a memorandum from the agency General Counsel explaining how the statutory

criteria are satisfied;

 Arrangements that convey special tax status to the project by virtue of the Government's

participation; and

 Leasing arrangements that involve options that can be conveyed to a third party in exchange for

future considerations.

Additionally, agencies are required to submit to OMB any proposed arrangements requested by their

Resource Management Office.

Agencies should submit these proposals to OMB during the conceptual, developmental stage. Subsequent

changes that could substantially change the scope of the proposal or affect the scoring impact (e.g., change

from an operating lease to a lease-purchase) must be resubmitted to OMB.

1. Basic requirements

(a) General.

When an agency is authorized to enter into a lease-purchase or capital lease contract, budget authority will

be scored in the year in which the authority is first made available in the amount of the net present value of

the Government's total estimated legal obligations over the life of the contract, as described in section 2(b)

below. Outlays for lease-purchases in which the Federal Government assumes substantial risk will be

spread across the period during which the contractor constructs, manufactures, or purchases the asset.

Outlays for a capital lease or a lease-purchase in which the private sector retains substantial risk will be

spread across the lease term. The scorekeeping requirements are summarized below.

For operating leases, budget authority is required to be obligated up front in the amount necessary to cover

the Government's legal obligations, consistent with the requirements of the Antideficiency Act. This will

include the estimated total payments expected to arise under the full term of the contract or, if the contract

includes a cancellation clause, an amount sufficient to cover the lease and other contractually required

payments for the first year plus an amount sufficient to cover the costs associated with cancellation of the

contract. For each subsequent year, sufficient budget authority is required to be obligated to cover the

annual lease payment for that year plus any additional cancellation costs. For operating leases funded by

the General Services Administration's Federal Buildings Fund (which is self-insuring under existing

authority), only the amount of budget authority needed to cover the annual lease payment is required to be

obligated.

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES

AND LEASES OF CAPITAL ASSETS

OMB Circular No. A–11 (2024) Page 3 of Appendix B

(b) Making annual lease payments after the BA expires.

Unless otherwise specified by law, budget authority is available for liquidating obligations (i.e., outlays)

for only five fiscal years after the authority expires. For leases financed by annual or multi-year budget

authority, agencies should ensure that the appropriations language allows the budget authority to remain

available for lease and other contractually required payments over the full term of the lease. If this period

is expected to be longer than five fiscal years after the authority expires, the appropriations language should

include the provision described in section 95.8.

When an agency modifies or amends an existing capital lease or lease-purchase contract, any remaining

budgetary resources prior to modification should be used to offset the cost of the new contract. The amount

scored will be the difference in the net present value of the Government's total estimated legal obligations

between the new contract and the remaining term of the original contract. (Both net present values should

be calculated using the Treasury borrowing rates published in the annual update to Appendix C of OMB

Circular No. A–94 at the time the contract is amended (see section 4)). There would be no remaining

budgetary resources if funds equal to the lease and other contractually required payments or the present

value of the lease and other contractually required payments were not scored up front at the time the lease

was signed. In this case, the full cost of the new contract should be scored, consistent with the rules for

scoring lease-purchases and capital leases. Similarly, when an agency modifies or amends an existing

operating lease contract, the impact of the changes needs to be evaluated. If the lease no longer meets the

criteria for an operating lease, the modified lease should be rescored.

(d) Options to renew or purchase.

When the lease agreement contains an option to renew that can be exercised without additional legislation,

it will be presumed that the option will be exercised for purposes of calculating the term of the lease and

scoring budget authority. When the lease agreement contains an option to purchase at less than fair market

value (at the time the option is to be exercised), and the option can be exercised without additional

legislation, it will be presumed that the option will be exercised for purposes of classifying the type of lease

and scoring budget authority.

SUMMARY OF BUDGET REQUIREMENTS

Transaction

Budget Authority

Outlays

Lease-purchase without substantial

private risk

Amount equal to asset cost

recorded up front; amount equal to

imputed interest costs recorded on

an annual basis over lease period.

Amount equal to asset cost scored

over the construction period in

proportion to the distribution of the

contractor's costs; amount equal to

imputed interest costs recorded on

an annual basis over lease term.

Lease-purchase with substantial

private risk

Amount equal to asset cost

recorded up front; amount equal to

imputed interest costs recorded on

an annual basis over lease term.

Scored over lease term in an

amount equal to the annual lease

and other contractually required

payments.

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES

AND LEASES OF CAPITAL ASSETS

Page 4 of Appendix B OMB Circular No. A–11 (2024)

Transaction

Budget Authority

Outlays

Capital lease

Amount equal to asset cost

recorded up front; amount equal to

imputed interest costs recorded on

an annual basis over lease term.

Scored over lease term in an

amount equal to the annual lease

and other contractually required

payments.

Operating lease

Amount equal to total contractually

required payments under the full

term of the lease or amount

sufficient to cover first year lease

and other contractually required

payments plus cancellation costs

recorded up front

Scored over lease term in an

amount equal to the annual lease

and other contractually required

payments.

2. Budget presentation

(a) General.

For the purposes of scorekeeping transactions that involve lease-purchases and capital leases, the costs are

separated into the following components:

 Asset cost (which equals the present value of the lease and other contractually required payments);

and

 Imputed interest cost (which equals the financing cost Treasury would have incurred if it had

financed the project by borrowing).

These concepts are defined more fully in section 3. The amounts can be determined from the amortization

tables developed in accordance with the instructions in section 4. Budget authority and outlays attributable

to asset costs will be classified as investment-type activities (physical assets), and budget authority and

outlays attributable to imputed interest costs will be classified as non-investment activities (see section

84.4).

(b) Budget authority.

 Amounts. The up-front budget authority required for both lease-purchases and capital leases is

called the asset cost. This equals the present value of the minimum lease and other contractually

required payments excluding payments for identifiable annual operating expenses that would be

paid by the Government as owner, such as utilities, minor maintenance, and insurance. Property

taxes will not be considered to be an operating expense and will be included in the calculation of

the up-front budget authority. (See section 3 for the treatment of property taxes for purposes of

distinguishing operating leases from capital leases.) Other contractually required payments include

any and all costs related to the asset being leased in addition to the rent fee applied under the lease.

For example, other contractually required payments would include all costs under triple net or other

unique arrangements. The present value of the lease and other contractually required payments is

discounted as of the date of the first payment (or the beginning of the lease term, whichever is

earlier) using the appropriate interest rate (see section 4 for a more detailed explanation and the

treatment of multiple deliveries).

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES

AND LEASES OF CAPITAL ASSETS

OMB Circular No. A–11 (2024) Page 5 of Appendix B

Additional budget authority equal to Treasury's cost of financing (i.e., the imputed interest cost) plus

any annual operating expenses will be recorded on an annual basis over the lease term.

 Type of authority. When an agency enters into a capital lease or lease-purchase under general

authorities available to the agency, it must do so within the limits of the budgetary resources

available to it and the constraints of the scorekeeping requirements.

If the Congress enacts legislation that enables an agency to enter into a lease-purchase or capital

lease for a specific project without further congressional action (e.g., appropriations action), it will

be assumed that the Congress has provided the budget authority required for the transaction. If the

Congress does not provide the budget authority in the form of an appropriation, then authority to

borrow or contract authority will be recorded as follows:

 Authority to borrow will be recorded if the transaction is a lease-purchase without substantial

private risk, in which case outlays need to be scored up-front in advance of appropriations for

the annual lease payment (or offsetting collections). A portion of the amount subsequently

appropriated (or collected, if the agency receives offsetting collections) will be applied to retire

outstanding agency debt attributable to the lease-purchase. (See sections 2(c) and 2(d) for more

information on how that portion is determined and presented in the Budget.)

 Contract authority will be recorded if the transaction is a lease-purchase with substantial private

risk or a capital lease, in which case outlays will be scored over the lease term and financed by

appropriations for the annual lease payment (or offsetting collections). A portion of the amount

appropriated (or collected, if the agency receives offsetting collections) will be applied to

liquidate contract authority. (See sections 2(c) and 2(d) for more information on how that

portion is determined and presented in the Budget.)

 Timing. When the Congress enacts legislation that specifically enables an agency to enter into a

lease-purchase or capital lease, the budget authority required for the transaction will be recorded

when the authority first becomes available for obligation. Obligations will be recorded when the

lease agreement is signed. When the authority stems from general authority available to the agency,

obligations are recorded, and sufficient budgetary resources must be available, when the lease

agreement is signed.

 Lease-purchases without substantial private risk. Outlays are not equal to the annual lease

payments.

 Outlays are scored over the period during which the contractor constructs, manufactures, or

purchases the asset, in an amount equal to the asset cost. This amount will equal the up-front

budget authority. Amounts of the asset cost in excess of the contractor's actual construction or

manufacturing costs should be distributed in proportion to the distribution of the construction or

manufacturing costs. If the asset already exists, the outlays will be recorded in the year in which

the lease-purchase contract is signed.

 Outlays equal to the imputed interest costs are reported on an annual basis over the lease term.

 Lease-purchases with substantial private risk and capital leases. Outlays are scored annually equal

to the annual lease and other contractually required payments.

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES

AND LEASES OF CAPITAL ASSETS

Page 6 of Appendix B OMB Circular No. A–11 (2024)

 Over the life of the lease agreement, a portion of the outlays (equivalent to the asset cost) will

come from the balances obligated when the lease agreement was signed, and a portion

(equivalent to the imputed interest cost) will come from new budget authority. The appropriate

amounts can be determined from amortization tables developed in accordance with the

instructions in section 4.

(d) Annual appropriations for lease financed by contract authority or borrowing authority.

Lease-purchases and capital leases that are financed by contract authority or borrowing authority will

generally require annual appropriations in an amount equal to the annual lease payment. Since budget

authority equal to the asset cost is scored up front, the portion of the annual appropriation that corresponds

to the amortization of the asset cost is not scored as new budget authority. If it were, total budget authority

would be overstated over the life of the lease. The budget authority that is recorded on an annual basis will

equal the imputed interest cost. The required adjustments are explained below:

 For lease-purchases without substantial private risk that are financed by borrowing authority. An

amount equal to the amortization of the asset cost component of the annual lease payment will be

treated as redemption of debt and deducted from the new budget authority totals. On the program

and financing schedule, this amount will be reported as a negative entry on line 1135 or 1236 (see

section 82.18). If offsetting collections are used to make the annual lease payment in lieu of an

appropriation, the amount will be reported as a negative entry on line 1726 or 1825.

 For capital leases and lease-purchases with substantial private risk that are financed by contract

authority. An amount equal to the amortization of the asset cost component of the annual lease

payment will be treated as liquidating cash and deducted from the new budget authority totals. On

the program and financing schedule, this amount will be reported as a negative entry on line 1137

or 1238 (see section 82.18). (If offsetting collections are used to make the annual lease payment in

lieu of an appropriation, the amount will be reported as a negative entry on line 1727 or 1826.)

(e) Agency debt.

For lease-purchases without substantial private risk, agency borrowing must be recorded to finance the

outlays scored for the construction, manufacture, or purchase of the asset. The agency debt that accumulates

over this period is equal to the asset cost; this debt is subsequently redeemed over the lease payment period

in an amount equal to a portion of the annual lease payment. The appropriate amounts of debt and debt

redemption can be determined from the amortization tables developed in accordance with the instructions

in section 4, Step 5. Interest on agency debt can be determined in accordance with Steps 3, 4, and 5.

If the account has a balance sheet, the amount of such agency debt should be included as a separate item

(and separate from other agency debt) under liabilities and identified as having been incurred to finance

lease-purchases. All other accounts should include the amount of agency debt in the narrative statement

for the account that is published in the Budget Appendix.

3. Definitions and concepts

For the purposes of scoring lease-purchases, capital leases, and operating leases, the following definitions

and concepts apply. Agencies should consult with OMB in cases where enhanced use leases and public-

private partnerships are involved. Public-private partnerships should not be used solely or primarily as a

vehicle for obtaining private financing of Federal construction or renovation projects. Such transactions

should be used only when they are the least expensive method, in present value terms, to finance

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES

AND LEASES OF CAPITAL ASSETS

OMB Circular No. A–11 (2024) Page 7 of Appendix B

construction or repair. Agencies shall consult with OMB in cases where a contract requires a private

contractor to construct, renovate, or acquire a capital asset solely or primarily to provide the service to the

Government to determine the appropriate treatment or obligations.

Lease-purchase means a type of lease in which ownership of the asset is transferred to the Government at

or shortly after the end of the lease term. Such a lease may or may not contain a bargain-price purchase

option.

Capital lease means any lease other than a lease-purchase that does not meet the criteria of an operating

lease.

Operating lease means a lease that meets all the criteria listed below. If the criteria are not met, the lease

will be considered to be a capital lease or a lease-purchase, as appropriate. Multi-year service contracts

(e.g., grounds maintenance) and multi-year purchase contracts for expendable commodities (e.g., aspirin)

are not considered to be operating leases.

 Ownership of the asset remains with the lessor during the term of the lease and is not transferred to

the Government at or shortly after the end of the lease term;

 The lease does not contain a bargain-price purchase option;

 The lease term does not exceed 75 percent of the estimated economic life of the asset;

 The present value of the minimum contractually required payments over the life of the lease does

not exceed 90 percent of the fair market value of the asset at the beginning of the lease term;

 The asset is a general purpose asset rather than being for a special purpose of the Government and

is not built to the unique specification of the Government as lessee; and

 There is a private sector market for the asset.

The following guidelines will be used in distinguishing between operating leases, capital leases, and lease

purchases. They should be used in calculating the term of the lease and the value of the minimum lease and

other contractually required payments:

 Estimate of fair market value. In the case of real property, the fair market value should be based on

current market appraisals. If no asset exists, the fair market value of the proposed asset should be

based on the Government's estimate of the private developer's cost to construct the leased facility.

The estimate should only include the costs the Government would normally pay the private sector

for such a facility. These costs include the total direct and indirect costs of constructing the facility,

including land purchase, design, site improvements, and management costs. Fair market value

should not include the value of features or enhancements that were built or added for the

Government's unique needs or special purposes or features or enhancements that will be paid for by

the Government in lump sum. If the Government proposes to lease only a portion of a facility, then

the estimate of fair market value should be adjusted accordingly to reflect the portion that will be

leased by the Government.

 Special features or enhancements. Assets that have special features or enhancements that were built

or added for the Government's unique needs or special purposes need to be evaluated on a case-by-

case basis to ascertain whether they can be considered to be general purpose assets. If the asset is

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES

AND LEASES OF CAPITAL ASSETS

Page 8 of Appendix B OMB Circular No. A–11 (2024)

considered to be a general purpose asset, then, as a general rule, such special features or

enhancements should be financed up-front, separate from the lease.

 Upfront, lump sum payments. If the terms of a lease contain an upfront, lump sum payment, only

the amounts associated with special features or enhancements to meet the Government's unique

needs or specifications and the amounts associated with agency specific customizations can be

removed from the agency scoring calculation. Any payment in excess of that amount will be

factored into the net present value scoring calculation. The rental stream over the life of the lease

must be adequate to provide functional space.

 Projects on Government land. If the project is constructed or located on Government land, it will

be presumed to be for a special purpose of the Government.

 Renewal and purchase options. If the lease agreement contains an option to renew that can be

exercised without additional legislation, it will be presumed that the option will be exercised. If the

lease agreement contains an option to purchase at less than fair market value (at the time the option

is to be exercised), and the option can be exercised without additional legislation, it will be presumed

that the option will be exercised.

 Cancellation clauses. It will be presumed that the lease will run for the full term of the contract,

and the minimum payments will be calculated on the basis of the lease and other contractually

required payments that will be made over the full term of the lease (including options to renew).

 Lease-backs from public/private partnerships or non-Federal entities. If an agency leases from a

public/private partnership that has substantial private participation, the lease will be treated as a

capital lease. The term "public/private partnership" includes special purpose entities for which the

Government is a beneficiary. Substantial private participation means (1) the non-Federal partner

has a majority ownership share of the partnership and its revenues; (2) the non-Federal partner has

contributed at least 20 percent of the total value of the assets owned by the partnership; and (3) the

Government has not provided indirect guarantees of the project, such as a rental guarantee or a

requirement to pay higher rent if it reduces its use of space. Total value includes the value of assets

contributed by the Government (but not the value of land) and all improvements made to the asset.

Contributions by the non-Federal partner of cash, real assets, and loans for which the non-Federal

partner is responsible for repayment will count towards meeting the 20 percent threshold. Direct

loans from the Government or guarantees by the Government of loans made to the non-Federal

partner or to the partnership will not count towards the 20 percent threshold.

If a public/private partnership fails to meet the test of substantial private participation, the

partnership will be considered governmental for purposes of the budget, and the lease-back will be

scored against the agency that enters into the partnership.

If the Government ground-leases property to a non-Federal entity and at a later date, as the result of

a separate, full and open competition, leases back the improvements, the lease will not be considered

a lease-back from a public/private partnership, as long as the lessor is a totally non-Federal entity.

Such lease-backs will be assessed by applying the criteria in this Appendix and may be treated as

an operating lease only if the transaction meets all the criteria for an operating lease.

In the circumstances where the Government outleased improvements and the Government then

wants to lease a portion of the project at a later date, post completion, the following analysis must

be undertaken:

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES

AND LEASES OF CAPITAL ASSETS

OMB Circular No. A–11 (2024) Page 9 of Appendix B

1. Evaluate the proposed transaction against the substantial private participation definition

above;

2. Is the competition to lease a portion of the project part of a separate, full and open

competition for the lowest cost option; and

3. Evaluate against the operating versus capital lease criteria.

In contrast, an outlease (enhanced-use lease) and leaseback as one transaction (as opposed to the

two transactions discussed above) with full or substantial Federal Government occupancy of a

facility, is a capital lease transaction.

Similarly, if the Government enters into a transaction to dispose of a facility, through any means,

yet seeks to continue Federal use of (e.g., lease back) the same facility or any subsequent

improvements to that facility, it is entering into a capital lease transaction.

 Bargain-price purchase option. A bargain-price purchase option is a provision allowing the

Government to purchase the leased property for a price that is lower than the expected fair market

value of the property at the date the option can be exercised. The purchase price includes the value

of any rebates or income to the agency or Government resulting from its purchase of the asset.

 Property taxes. Property taxes, along with other annual operating expenses, will be excluded from

the lease payments for purposes of comparing the present value of the minimum lease and other

contractually required payments with the fair market value of the asset. (Note: Property taxes will

be included in the calculation of the net present value of the lease and other contractually required

payments for purposes of scoring budget authority under BBEDCA. See section 2(b) above.)

 Interest rates. The present value of the minimum lease and other contractually required payments

will be calculated on the basis of Treasury rates for marketable debt instruments of similar maturity

to the lease term (see section 4).

Risk means the level of private-sector risk. Lease-purchase agreements are scored as with or without

substantial private risk depending on the level of private-sector risk. Substantial private risk means the

absence of substantial Government risk. Risk is defined in terms of how governmental in nature the project

is. That is, if the project is less governmental in nature, the private sector risk is considered to be higher.

The following types of illustrative criteria indicate ways in which the project is less governmental:

 There is no provision of Government financing and no explicit Government guarantee of third-party

financing;

 Risks incident to ownership of the asset (e.g., financial responsibility for destruction or loss of the

asset) remain with the lessor unless the Government was at fault for such losses;

 The asset is a general purpose asset rather than being for a special purpose of the Government and

is not built to the unique specification of the Government as lessee;

 There is a private-sector market for the asset; or

 The project is not constructed on Government land.

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES

AND LEASES OF CAPITAL ASSETS

Page 10 of Appendix B OMB Circular No. A–11 (2024)

Imputed interest cost means the financing costs that Treasury would have incurred if it had sold debt to the

public equal to the total project cost. The difference between the total estimated legal obligations (excluding

obligations for annual operating expenses as described in section 2(b)) and their estimated net present value

represents imputed interest costs. Imputed interest costs will be calculated at Treasury rates for marketable

debt instruments of similar maturity to the lease term on the date the contract is signed. These costs will be

considered mandatory under the BBEDCA and will be shown in the same function as interest on agency

debt, that is, in the function that provided the obligational authority to enter into the contract.

Differential cost of financing means the total annual interest payments on any debt sold to the public less

the interest payments that would have been made on the same amount of debt at the Treasury rate (i.e., less

the imputed interest costs). Simply stated, this corresponds to any interest above Treasury's interest rate.

Asset cost means the present value of the agency's minimum lease and other contractually required

payments discounted from the date of the first payment (or the beginning of the lease term, whichever is

earlier) using the Treasury interest rate for marketable debt instruments of similar maturity to the lease term

on the date the contract is signed and excluding obligations for identifiable annual operating expenses as

described in section 2(b). Asset cost corresponds to the total construction or acquisition costs, plus property

taxes and any interest above Treasury's cost of financing (i.e., the differential cost of financing). See section

4 for more detailed explanation and the treatment of multiple deliveries.

4. Guidance on calculations

A schedule of lease and other contractually required payments or an amortization schedule is required to

calculate budget authority, outlays, and debt for capital leases or lease-purchases. The correct Treasury rate

to use for discounting to present value and for calculating imputed interest costs will be based on the

economic assumptions in the most recent budget, which, for the current year, are published in the annual

update to Appendix C of OMB Circular No. A–94. Revised forecasts of these Treasury interest rates are

released whenever economic assumptions for the budget are updated. Use Treasury rates for marketable

debt instruments of similar maturity to the lease term on the date the contract is signed. Discount from the

date of the first payment (or the beginning of the lease term, whichever is earlier). The term selected for

the Treasury rate should be comparable to the term of the capital lease or lease-purchase.

All assumptions required to perform the lease analysis are subject to OMB approval.

Step 1—Calculate up-front BA.

For lease-purchase without substantial private risk; lease-purchase with substantial private risk; and

capital lease (including lease-back from public/private partnership with substantial private sector

participation): To determine up-front BA (i.e., asset cost), calculate the present value of the lease and other

contractually required payments, discounting from the date of the first payment or the beginning of the

lease term, whichever is earlier, using the appropriate Treasury interest rate as the discount factor and

excluding obligations for identifiable annual operating expenses as described in section 2(b). This BA is

scored when the authority to enter into a contract for the lease-purchase or capital lease first becomes

available for obligation.

However, if the lease contract provides for multiple deliveries of assets, the up-front BA is sum of the

present values of the lease and other contractually required payments for each asset discounted back to the

date that the asset is delivered. For example, if the lease contract provides for the delivery of one machine

in each of the next five years, the lease and other contractually required payments for the machine acquired

in the first year would be discounted back to the first year, while the lease and other contractually required

APPENDIX B—BUDGETARY TREATMENT OF LEASE-PURCHASES

AND LEASES OF CAPITAL ASSETS

OMB Circular No. A–11 (2024) Page 11 of Appendix B

payments for the machine acquired in the fifth year would be discounted back to the fifth year, and the total

BA recorded up front would be the sum of the present values calculated for each of the five deliveries.

Step 2—Calculate outlays over the period during which the contractor constructs, manufactures, or

purchases the asset.

For lease-purchase without substantial private risk: Score outlays in proportion to the distribution of the

contractor's costs. For example, assume a contractor's costs on a $50 million project are estimated to be

$7.5 million the first year, $27.5 million the second year, and $15 million the third year. The analyst should

apply outlay rates of 15 percent, 55 percent, and 30 percent to the BA calculated in Step 1 for the first,

second, and third years, respectively. Total outlays at the end of the construction, manufacture, or purchase

period should equal the BA calculated in Step 1. (Note that total outlays will ordinarily exceed the

contractor's costs.)

For lease-purchase with substantial private risk and capital lease (including lease-back from public/private

partnership with substantial private sector participation): Outlays are not scored during this period. Refer

to Step 4 for outlay scoring.

Step 3—Calculate annual BA for the lease payment period.

For lease-purchase without substantial private risk; lease-purchase with substantial private risk; and

capital lease: Annual BA will equal the imputed interest costs calculated using the same Treasury interest

rate used to discount the lease and other contractually required payments in Step 1. The interest portion of

each periodic payment is the imputed interest cost. In the case of a lease-purchase without substantial

private risk, the interest rate should be applied to debt that is initially equal to the up-front BA calculated

in Step 1 and that is then amortized over the lease term in accordance with Step 5.

Step 4—Calculate outlays over the lease payment period.

For lease-purchase without substantial private risk: Annual outlays are equal to the annual BA (i.e., the

imputed interest costs).

For lease-purchase with substantial private risk and capital lease (including lease-back from public/private

partnership with substantial private sector participation): Annual outlays are equal to the lease and other

contractually required payments.

Step 5—Calculate agency debt (applies only to lease-purchases without substantial private risk).

Agency debt accumulates during the period of construction, manufacture, or purchase of the asset. The

increase in debt each year equals the amount of outlays calculated in Step 2. Agency debt is subsequently

redeemed over the lease payment period according to an amortization schedule. The amount of debt

redemption each year is equal to the lease payment less the imputed interest cost as defined in Step 3. (Debt

redemption is not scored as BA or outlays.) Imputed interest costs are scored as BA and outlays and are

also scored as interest on agency debt.

5. Reporting to OMB and Treasury

Budget execution reports and apportionment requests will reflect budget amounts in accordance with these

requirements. Amounts (e.g., budget authority and outlays) will be reported to Treasury on the same basis