This topic discusses encumbrance tracking in Costpoint, in general terms. Specifics on the setup and processing of encumbrances are also discussed.
Encumbrance accounting is used primarily by non-profit organizations to track the expenditure of funds as they are appropriated, or encumbered. These organizations frequently deal with agencies that grant limited amounts of funds. As the organization reaches the limit of these funds, they make requests to the agency for additional funding. Therefore, the organization needs to track expenditures and, if the fund limit is exceeded, they must not post transactions until additional funds are requested and approved.
You can use encumbrance tracking in Costpoint Budgeting and ETC to track expenditures, for both posted and unposted transactions, on an individual project basis. You can enter budget ceilings at the account level. After you enter the transactions, over-budget amounts are computed and printed on a report before the transactions are posted. You have five options for handling the over-budget transactions:
Increase the ceiling amount for the project/account.
Set up new budget revisions, designate them as Current, and enter new budget accounts and amounts.
Change the project/account charge point combination on the transactions.
Manually remove the over-budget flag from the transactions.
Hold the transactions from posting until additional funds have been granted.
You can enter different budget versions, or "revisions," for a given project. Enter these revisions in the Maintain Project Budget Line Item Revisions screen (Projects » Budgeting and ETC » Encumbrance Tracking) with each revision identified by a particular code. This code is then referenced in the other Encumbrance Tracking screens.
You can set up revisions at any level of the project. You can also set them up at more than one level of the project. For each project, you can designate only one revision as Current, which means that the system will use this revision when computing over-budget amounts for a selected year.
After entering the budget revision, enter the specific accounts and their amounts that will be evaluated for over-budget transactions in the Maintain Project Line Item Budgets screen. You can enter either summary or detail account ceilings; however, you cannot enter a ceiling for both the summary and detail levels of the same account branch. In other words, you can enter a ceiling at only one level of the account. In addition, you must place the ceiling at or above the charging account level in order for it to be evaluated. The amount is the ceiling for this project/account combination for all organizations.
Keep in mind that encumbrance tracking is a separate function from budgeting. If you want to track project budgets, enter them in the screens in the Period Budgets or Total Budgets menus.
You will compute over-budget transactions after entering the transactions but before posting them. This will alert you to the transactions that have exceeded the budget ceiling. You can then increase the ceilings, edit the project/account combinations to different charge points, hold the transactions from being posted, or post them to their original charge point.
You can compute the over-budget transactions as many times as required in a given period. The process evaluates the primary sources of transaction entry: A/P vouchers, travel vouchers, timesheets, journal entries, and requisitions. It does not consider unit transactions, service center allocations, fixed asset entries, or cash receipts. The evaluation is performed only on the direct cost amounts; indirect costs that can be applied to direct costs are not included. In addition, the process ignores transactions that have already been placed On Hold. It cannot evaluate transactions for a given fiscal year, period, or subperiod, because once an obligation exists, it must always be considered. Transactions are considered in their entirety; partial transactions are not evaluated. For example, once a timesheet has been disallowed, the individual line items are not considered.
Over-budget amounts are printed automatically on an exceptions report. You control the order in which transactions are evaluated and printed on the exceptions report. The order is always ascending and begins with the project, then the account. Within each project/account combination, you can evaluate and sort by date, then journal type; or journal type, then date. The journal type can be further evaluated and sorted by each of the four transaction types. Amount is always the last criterion.
The over-budget calculation evaluates only projects that are active. To enhance the processing speed of the program, you should flag inactive projects as soon as possible. The process does not evaluate projects that have no records in the Maintain Project Line Item Budgets screen (Projects » Budgeting and ETC » Encumbrance Tracking) or the Maintain Project Budget Line Item Revisions screen (Projects » Budgeting and ETC » Encumbrance Tracking).
The Calculate Over Budget Transactions process (Projects » Budgeting and ETC » Encumbrance Tracking) builds a common encumbrance table called Z_PJPOBT_RPT. The system compares incurred amounts to budget amounts on an inception-to-date basis. The process uses amounts from PSR_PY_SUM and GL_POST_SUM, for prior and current year posted transactions, respectively, and the various unposted transaction edit files such as VCHR_HDR, JE_HDR, TVL_ADV_HDR, TVL_EXP_HDR, CO_EXP_HDR, TS_HDR, and RQ_HDR.
When computing the over-budget transactions, you have the option of designating them as Over Budget. This marks the transactions with a flag in the header subtask of the screen of original entry and prevents them from being posted. In order to post the transactions, you must increase the ceiling or change the charge point. You can then re-run the compute process to remove the flags on any transactions that are no longer over budget. You can also remove the flag manually.
During the period-close process, any transactions that are still on Over Budget status are moved to the next subperiod that is open for those types of transactions. In other words, if a given Over Budget transaction is an A/P voucher and you are closing period five, the transaction is moved to period six, subperiod one, provided that A/P transactions are open for that subperiod. If that subperiod is not open for A/P vouchers, subperiod two will be checked, and so on. You cannot close the fiscal year with any transactions in an Over Budget status. If the period you are closing is the final period of the fiscal year, you must leave the period open until the transactions are posted.
Because of the nature of this feature, we recommend that access to the screens in the Encumbrance Tracking menu be limited to as few employees as feasible.
Set up an encumbrance revision for the project in the Maintain Project Budget Line Item Revisions screen (Projects » Budgeting and ETC » Encumbrance Tracking).
Enter the accounts and their ceiling amounts in the Maintain Project Line Item Budgets screen (Projects » Budgeting and ETC » Encumbrance Tracking).
Enter timesheets, A/P vouchers, travel vouchers, cash receipts, journal entries, and requisitions. Proof the data entry by printing edit reports.
Run the Calculate Over Budget Transactions screen (Projects » Budgeting and ETC » Encumbrance Tracking). This generates an exceptions report listing the transactions and amounts that have been disallowed. You can have disallowed transactions automatically marked with an Over Budget flag in the header subtask of each transaction in the screen of original entry. You can also mark this flag manually. If you have chosen not to flag the Over Budget transactions, the exceptions report will still print, but the transactions will be posted unless you flag them manually.
Increase the ceiling amount for any project/account amounts for which you have received additional funding, or add a new encumbrance budget revision, mark it as Current, and add new project/account ceiling amounts for this revision. You can also edit the charge point to a different project/account combination or to a suspense account. Do not manually remove the Over Budget flag for any transactions that you are going to include in the re-run of the Calculate Over Budget Transactions process. If no other actions have been taken on these transactions, Costpoint will re-flag them.
Re-run the Calculate Over Budget Transactions process to clear any transactions that are no longer Over Budget. The Over Budget flags in the transaction headers will be automatically cleared. You can also clear the flags manually at this point.
Post the transactions. Any transactions marked as Over Budget will not be posted.
If you execute the period close process, Over Budget transactions will automatically be moved to the next open subperiod, where they can be re-evaluated. If the period you are closing is the final period of the fiscal year, you must post all Over Budget transactions; you cannot close the year with unrecognized obligations.