| Reference: | II.F.05 |
| Subject: | Encumbrance Accounting System |
| Effective Date: | 1 July 1986 |
| Revision Date: | |
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All counties are required to use an encumbrance or other budgetary control system to ensure that appropriation to county departments are not overspent. An encumbrance system is a budgetary procedure whereby funds are reserved from an appropriation account at the point when the purchase order is executed without waiting for the receipt of merchandise and the related invoice. The purchase order and the disbursement vouchers are the basic documents from which the transactions in the appropriation expenditure ledger are recorded.
The appropriation ledger is composed of five major columnar sections: the first is for recording the expenditures; the second is for recording the encumbrances; the third is to record the total expenditures and encumbrance; the fourth is for recording the appropriations; and the fifth is for recording the unexpended appropriation.
When a purchase order is received and approved by the county auditor, an entry of the amount involved is made in the appropriation expenditure ledger of the fund and account to which it applies in the column headed
Aencumbrances@. The amount of the order as recorded is subtracted from the balance in the appropriation column and the remainder is entered as the Aunencumbered balance@. When the obligation is approved for payment, the amount entered from the purchase ordered in the encumbrance column is canceled by reversing the original entry and the actual expenditure is then recorded in the Aexpenditure column@. If the amount of the purchase order and the amount of the expenditures are the same, the encumbered balance will not be affected. If, however, the amounts vary, the unencumbered balance will either be increased or reduced by the difference.