Financial Records System Manual

Chapter 10 - When and How to Encumber Expenditure Documents
DEFINITION
Departments, that wish to maintain an up-to-date status of their remaining available funds, may want to utilize the encumbering feature of the FRS. An encumbrance is the formal recognition of expenditure commitments, such as, the recording of dollar amounts represented by the purchase document. These commitments may be in the form of contractual agreements with employees, purchase requisitions, intramural orders or any other purchase document. Encumbrances differ from expenditures in that no transfer of funds has taken place. Funds are normally transferred only after the receipt of and payment for goods and services.
PROCEDURE
Encumbrances may take place immediately upon the preparation of the purchase document. Depending on the type of purchase, encumbrances may occur either automatically or manually. Salaries, fringe benefits, purchase requisitions/purchase orders, and indirect costs are automatically encumbered by the FRS. Other purchase documents must be encumbered manually using the interactive capabilities of the system or by completing a Departmental Encumbrance Entry form. A department may also encumber planned expenditures. Planned expenditures are purchases that will occur some time in the future but purchase documents have not yet been prepared.
Both automatic and manual encumbrances are automatically disencumbered if the "first reference number" preceded by the proper document alpha code matches the reference number of the actual payment document. A listing of document alpha prefixes follows at the end of this chapter. Care must be taken when entering manual encumbrances to ensure that the document number from pre-numbered documents is entered for the "first reference number". For all encumbered documents, the ten digit account number entered for the encumbrance must match the account number entered for the payment if disencumbering is to occur automatically.
The "First Reference Number" for planned expenditures is an alpha prefix of "X", the four digits of your department number and a two digit sequence number determined by the department. Keep in mind that "X" alpha prefix encumbrances must be manually disencumbered.
Direct encumbrances ("D" alpha prefix) are used for purchases from service centers that process billings directly to the FRS. Examples of direct charges are: Telecommunications, Copy Center and Computer Services. Direct encumbrances must be entered into FRS manually by the department purchasing the goods or services. If the proper "D" alpha prefix is entered, disencumbering will take place automatically.
Encumbrances not entered automatically by the FRS may be entered by using interactive screen number 11, or a Departmental Encumbrance Entry form. Original encumbrances may be entered into the FRS with a transaction code of either 50 or 59. A transaction code 50 will encumber even if sufficient budget balance is not available. Transaction code 59 will encumber only when sufficient budget balance is available. The ten digit account, alpha prefix, first reference number, date and transaction description should then be entered. A "D" entered for the D/C code will increase the encumbered amount while a "C" will decrease the encumbered amount. A "D" is used for new encumbrances.
ENCUMBRANCE CORRECTIONS
There may be times when a correction needs to be input for previously encumbered documents. Corrections, like original encumbrances, are entered on interactive screen 11 or a Departmental Encumbrance Entry form. Corrections may be necessary for the following reasons:
  • The payment ten digit account number did not match the encumbered account number.
  • The first reference number used for payment did not match the number used on the encumbrance.
  • The purchase document has been canceled or modified.
  • The encumbrance amount has changed.
With the exception of amount changes, corrections will require the deletion of the original encumbrance and, if applicable, the establishment of a new encumbrance. To delete an encumbrance, sthe original information is entered on the screen or form along with a "C" for the D/C code. The full amount of the original encumbrance or a blank amount field should be entered. A new encumbrance is then entered in accordance with instructions provided above. If only the amount has changed, the original encumbrance information should be entered on the screen or form except that only the increase or decrease in the amount is entered. The D/C code would be a "D" if the change is an increase and a "C" if the change is a decrease.
A transaction code of 055 will overlay the current amount. An encumbrance entered with a transaction code of 055 will change the existing encumbrance amount to the amount of the current transaction.
YEAR-END TREATMENT
Depending on the fund group, encumbrances may either be brought forward at year-end or dropped. Year-end closing instructions published prior to year-end will specify the appropriate treatment for each fund group.
WHEN TO ENCUMBER
Managers should weigh the value of encumbering every purchase document against the effort and cost involved. Types of documents, dollar levels and time of year should be considered in deciding the scope of encumbering.
ALPHA PREFIXES
The following is a listing of the alpha prefixes utilized for encumbering in the FRS:
A = Departmental Purchase Orders
B = Bookstore PO
D = Direct Charge
F = Food Service Open PO
J = Journal Entry
L = Cash Receipt/Deposit (TC=30)
M = Intramural Order (IMO)
P = Purchase Order
Q = Purchase Requisition (PR)
T = Travel Documents
W = Work Order (for use by authorized departments only)
X = Planned Expenditures
Y = Budget changes
Z = Social Security Number - SSN (for Payroll only)
The following are Direct Encumbrance document identification:
SERVICEORIGINAL DOCUMENT NO.REQUIRED SUBCODE
TelecommunicationsD0010004290
Equipment CostsD0011004250
Gas CylindersP0101014230
College of Natural ResourcesD14**
NREL ServicesD14994010
Veterinary Teaching Hospital ChargesD001620401x
Monthly Vehicle RentalD41004400
Utilities Expense (not heat & trash)D42007810
Heating Plant ExpenditureD43007850
Trash HaulingD44004600
Copy Center ServicesD50004090
Sponsored Research Services50104090
Computer ServicesD60004130
Computer Center Maintenance ServicesD6010 or D00601038xx or 4050
Forest Service ChargesD60704710
Modem Pool ChargesD0061003810
Continuing Education ChargesD7000
Public Relations ChargesD70154090
Indirect CostsD0075009500
Instructional ServicesD80004010
SCREEN 011 ENCUMBRANCE TRANSACTION INPUT
Screen 11 is used to input encumbrance transactions. A batch MUST be opened (screen 30) prior to using this screen. There are no fund or subcode range restrictions. Departmental Purchase Orders (DPO), Intramural Orders (IMO), Purchase Orders, Travel Documents and Salary Payroll are the only expenses that are centrally encumbered in FRS. Phone, Mail, Copy Center, and Hourly Payroll are not encumbered in FRS. Departments have the option to encumber these expenses.
  1. Position the cursor after SCREEN and type 011. Press the ENTER key.
  2. TAB to the ACCOUNT field and input the 10 digit account to be encumbered.
  3. TAB to the DIGIT 3 OF TC field and input
    0 Regular Encumbrance
    1 or 2 Encumbrance Adjustment
    5 Encumbrance Overlay
  4. TAB to the P.O. NO field and type the 7 character document reference.
  5. Optional - TAB to the DATE field and type the date as MMDD. If left blank, the system will input today's date.
  6. TAB to the DESCRIPTION field and type up to 20 characters to describe the type of entry being input. (Vendor Name for PO's and DPO's).
  7. TAB to the AMOUNT field and type in the dollar amount. To delete an encumbrance in full, enter 0 in the AMOUNT field and C in the DEBIT OR CREDIT field.
  8. TAB to the DEBIT OR CREDIT field and type a D for debit (increase) or a C for credit (decrease). If left blank, the system assumes you are inputting a debit.
  9. Optional - TAB to the REF NO 2 field and type up to 7 alpha-numeric characters to further describe the transaction.
If the system accepts the transaction, the amount field will be erased, all other fields will remain on the screen. The TRANSACTIONS PROCESSED and AMOUNT PROCESSED fields will be update. When inputting subsequent entries any correct data that is displayed on the screen does not need to be rekeyed. Only data that is changing needs to be keyed.