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Business and Financial Policies and Procedures

Manage Your Unit's General Encumbrances

Before You Begin

Banner sets up automatic encumbrances for purchase orders, requisitions, indirect costs related to grants, and most personnel appointments. However, units can create general encumbrances as an optional tool to help them manage funds over the course of a fiscal year or project. Make sure that all encumbrances are correctly recorded in Banner as of June 30 each fiscal year to ensure that the University's financial statements are accurate and all available state funds are utilized.

Units can set aside funding for major purchases and expenses as all general encumbrances are classified as reservations of budgeted funds in Banner. General encumbrances reduce the budget balance available for the associated Fund, Organization, and Program code combination, although the fund balance remains unaffected. For more information about the difference between budget and fund balances, consult Lesson 5: Finding Balances and Appendix G: Finding Balances in the Participant Guide to Understanding University Financial Statements & the Reconciliation Process (GL 104).

Examples of expense tracking that can be done through general encumbrances are:

  • Funds set aside for P-Card purchases
  • Registration and travel expenses for an upcoming conference
  • Contractor fees for a Web design project
  • Personnel appointments not automatically encumbered by Banner, such as wages paid to student, academic/grad hourly, and extra help employees

Do not create encumbrances for internally-provided goods and services.

Managing your unit's encumbrances includes creating, adjusting, liquidating, and closing them.

Begin

To manage your unit's encumbrances:

Create
Before you decide to create an encumbrance, first identify known anticipated expenditures that will not be automatically encumbered by Banner. Then consider these questions:

  • Is this a significant expenditure you need to track?
  • Will having it in Banner help you manage your available funds?
  • Is it a recurring expense that you need to track on an on-going basis?

If the answer to any of these questions is "yes," you may want to create a general encumbrance in Banner. For step-by-step instructions, consult the job aid Creating a General Encumbrance or GL 103: General Encumbrances Training Guide.

Adjust
The encumbrance amount in Banner may need to be revised if:

  • You need to modify the original estimate
  • A part, but not all, of the encumbrance is cancelled

To record the revised amount in Banner, consult the job aid Adjusting a General Encumbrance or GL 103: General Encumbrances Training Guide.

Liquidate (Fully or Partially)
Partially liquidate the encumbrance in Banner when a partial payment is made against the encumbrance. To liquidate a general encumbrance by paying a vendor, submit the Purchase Order Special Payment Request Form.

Fully liquidating an encumbrance changes its balance to zero, but does not close it, which allows anticipated purchases to be added in the future. For additional information, consult the job aids Partial Liquidation of General Encumbrances or Total Liquidation of General Encumbrances and Lesson 2.3 Partially Liquidating a General Encumbrance Using the Journal Voucher Entry Form (FGAJVCD) in GL 103: General Encumbrances Training Guide

Close (Total Liquidation)
When all goods and services have been provided and paid for, and no future purchases are anticipated on an encumbrance, close the encumbrance in Banner. Consult the job aid for Total Liquidation of General Encumbrances and Lesson 3, Totally Liquidating a General Encumbrance in GL 103: General Encumbrances Training Guide.

Forms Used in this Procedure

Purchase Order Special Payment Request Form

Additional Resources

Participant Guide to Understanding University Financial Statements & the Reconciliation Process (GL 104)
Creating a General Encumbrance
Adjusting a General Encumbrance
Partial Liquidation of General Encumbrances
Total Liquidation of General Encumbrances
Frequently Asked Questions
GL 103: General Encumbrances Training Guide
General Encumbrances Job Aids, Handouts, and Participant Guide in Accounting and Financial Reporting Training Materials

Last Updated: July 24, 2017 | Approved: Senior Associate Vice President for Business and Finance | Effective: November 2009

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