Encumbrances are the recognition of commitments that will subsequently become expenditures when goods and services are received. As Idaho Code states, they are reductions against appropriations in anticipation of an object coded expenditure. Encumbrances help manage available appropriation and budget balances.

STARS tracks the fiscal year in which the encumbrance was created, automatically records partial or final liquidations, and allows adjustments to be made to outstanding encumbrances. As payments or adjustments are made to the encumbrance, the available balance is reduced.  STARS online file inquiry screens and miscellaneous expenditure reports provide detailed and summarized information about encumbrances.

The administrator of the Division of Financial Management (DFM) must approve most encumbrances before the encumbrance balance can be rolled from one fiscal year to the next.  Idaho Code 67-3521 explains which encumbrances do not fall under DFM authority. 

Encumbrance Controls

Payments against an encumbrance must be coded with the same Object, funding source, Budget Unit and Fiscal Year that were used to create the encumbrance. The following are some basic guidelines for encumbrance payments:

• If the encumbrance expenditure subobject is in the Capital Outlay - 6000 range, payments can be made using any expenditure subobject in the same range. Encumbrances in the 6000 range cannot have payments against it made using an Operating - 5000 range expenditure subobject.
• An encumbrance cannot be paid with a different Fund than what is on the encumbrance.
• An encumbrance cannot be paid with a different Budget Unit than what is on the encumbrance.
• An encumbrance cannot be paid using a different fiscal year’s appropriation than what is on the encumbrance. The encumbrance can be paid, liquidated or cancelled in another fiscal year, but the appropriation will always be for the fiscal year originally used on the encumbrance.
• Do not liquidate or pay toward an encumbrance with a different Grant and/or Project than was used in creating the encumbrance. If you do, the encumbrance balance will remain on the original Grant/Project and the payment will show under the second Grant/Project. Use the reference document number of the encumbrance when making payments or when liquidating so the encumbrance that STARS can automatically look up the proper fiscal coding.
• If the final bill for the contract or purchase order is less than an encumbrance amount, the agency can finalize the encumbrance when making the last payment which will reduce the STARS encumbrance document to $00.00.
• If the agency realizes that the balance of an encumbrance is not needed, the agency can cancel the remaining balance. The document will stay on the STARS Document File until the balance is $00.00.  During the fiscal year end processing, all such prior year finalized encumbrances are removed from the document file.

The following are some controls and guidelines related to the fiscal year:

• Encumbrances can only be created in the current fiscal year and never in a prior closed fiscal year. 
• The fiscal year of creation stays associated with the encumbrance. If an encumbrance is allowed to roll to the next year, the appropriation is still the prior year appropriation.  Transactions that post to a prior year encumbrance require the BFY to be that prior fiscal year and not the current fiscal year.
• An encumbrance can cross fiscal years with approval from DFM.  If DFM does not approve the encumbrance for the next fiscal year, the encumbrance will be cancelled as part of the year-end processing.
• Adjustments to a prior year encumbrance must be entered and released with the assistance of the State Controller’s Office.

An Encumbrance – Expenditure Example

The following example illustrates the purchase and encumbrance of $600 worth of office equipment.

RECORD THE ENCUMBRANCE

Record an encumbrance using a TC 215.  Appropriation reports would show the following:

The encumbrance amount decreases the available balance due to the legal obligation.

RECORD THE EXPENDITURE

Liquidate the encumbrance by paying the bill using a TC 236.  If the vendor was another state agency and they billed using an interagency bill, pay using TC 241. Appropriation reports would then show the following:

The expenditure amount increased by the $600 and the encumbrance amount decreases by the same amount. Available balance remains the same.  In general, the following apply when using TC 236 or TC 241:

• You must enter the Reference Document Number, Suffix, and BFY of the encumbrance.
• STARS will automatically fill in the fiscal coding from your original encumbrance.
• Enter the encumbrance by the amount of the expenditure.
• When a current year encumbrance is finalized, the remaining encumbrance balance will be reduced zero. The available appropriation balance will be increased by the same amount.
• When a prior year encumbrance is cancelled or finalized, the remaining encumbrance balance will be reduced to zero.  The related prior year appropriation will be reverted and will no longer be available for use.

Record a Current Year Encumbrance

Use the following transaction codes to create an encumbrance.

215 - ENCUMBRANCE NOT PREV PRE-ENCUMBERED

218 - ENCUMBRANCE PREVIOUSLY PRE-ENCUMBERED

TC 215 – ENCUMBRANCE NOT PREV PRE-ENCUMBERED

(Approval level 3)

This transaction code records a new encumbrance. STARS includes encumbrances in the balance totals on appropriation and expenditure-type reports. You must enter the following elements.
 

Liquidate an Encumbrance

Use the following transaction codes to liquidate an encumbrance.

• 235 P-CARD EXPENDITURE PREV ENC, VEN REQ
• 236 EXPENDITURE PREVIOUSLY ENCUMBERED
• 241 PAYMENT OF INTERAGY BILL PREV ENC (DUE TO) Use to pay an interagency bill and liquidate the encumbrance.
• 27C ENCUMBRANCE EXPENDITURE ADJ - POST PMT (VP POST) Use for encumbrance adjustments that post to the vendor payment file.
• 273 ENCUMBRANCE EXP ADJ - POST PMT (NO VP POST - COST DISTR) Use for cost allocation adjustments or other encumbrance adjustments that do not need to post to the vendor payment file. 

TC 236 – EXPENDITURE PREVIOUSLY ENCUMBERED

(Approval level 3)

TC 236 pays the vendor and reduces the balance of the encumbrance. The following fields are required.
 

Data elements to double check or verify:

1. The reference document number is the current document number used when originally creating the encumbrance.
2. The BFY needs to be the BFY from the fiscal year in which the encumbrance was created.
3. If using the F or C modifier on a prior year encumbrance, verify that this really is the final payment or that the encumbrance really should be cancelled.  Amounts on prior year encumbrances that are finalized or cancelled in error require SCO assistance.
4. Verify that the vendor number, name, and address used on the encumbrance creation are still valid.
5. Other fields:

Adjust or Cancel an Encumbrance

Current year encumbrances can be adjusted or cancelled.  Prior year encumbrances can be cancelled or reduced, but not increased. Use the following transaction codes to adjust or cancel a previously created encumbrance.

TC 220 – Adjust an Encumbrance

(Approval level 3)

Use TC 220 to increase and a TC 220R to reduce an encumbrance.  Prior year encumbrances cannot be increased using this transaction code.  If a prior year encumbrance has been cancelled or reduced in error, contact the DSA Helpline at servicedesk@sco.idaho.gov for assistance.

The following fields are required.
 

TC 225 – Cancel an Encumbrance

(Approval level 3) Use TC 225 to cancel an existing encumbrance.

The following fields are required.

Encumbrance and Disbursement Reports

In addition to STARS reports, most STARS data is available in IBIS in the State of Idaho Public Folders, Statewide Reports, Accounting, Document File Activity report (select Account Number 4300 when creating a report).

The following reports are available through the SCO Online Reporting application.

DAFR6530 Encumbrance Status by Vendor
Lists the status and balance amounts of encumbrances, grouping the encumbrances by vendor number/suffix. Totals by vendor, then organization, then by GL account (4300), and then by Fund.

DAFR6840 Encumbrance Status by Fund, Program, and Object
Lists the status and balance amounts of encumbrances using the Program/PCA structure. The report sorts by Fund, then Program, and then Object.

DAFR8070 Encumbrance Status by Fund, Org, and Object
Lists the status and balance amounts of encumbrances using the Organization/Index structure. The report sorts by Fund, then Organization, and then Object.

DAFR8140 Encumbrance Aging
Lists encumbrances, showing a balance amount for each encumbrance by 0-180 days, 180-360 days, and over 360 days. Totals by GL account (4300), then by Fund, and then for agency.