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Encumbrance Reporting and Lapsing of Appropriations (APS 018)

FPP A.019

Instructions for All Agencies

Background

Why Report Appropriated Funds?

According to the Texas Constitution, Article VIII, Section 6, money can only be drawn from the state treasury by a specific appropriation. Appropriations contained in the General Appropriations Act (GAA) usually have a term of one year, coinciding with the state fiscal year (Sept. 1 to Aug. 31); however, 403.071(b), Government Code effectively permits the expenditure of properly encumbered funds for up to two years after the end of the fiscal year for which the appropriation was made.

Government Code, Section 403.021(b), states that state agencies must report all binding encumbrances and payables into the Uniform Statewide Accounting System (USAS) for the first three quarters of the current appropriation year within 30 days after the close of each of the first three quarters. Annually, year-end binding encumbrances and payables must be reported to the Comptroller’s office, the State Auditor and the LBB by Oct. 30. (The recommended due date for GR consolidated agencies is Sept. 30.) The report must contain all open appropriation years, as well as all appropriated funds whether received as a direct appropriation or a transfer.

Impact on Economic Stabilization Fund

At the end of each biennium, half of the unencumbered positive General Revenue Fund balance is transferred to the Economic Stabilization Fund (ESF) per the Texas Constitution, Article III, Section 49-g. Entering binding encumbrances and payables into USAS by the deadline is crucial in determining the amount that will be transferred into the ESF, as required by the Texas Constitution.

Impact on Biennial Revenue Estimate

Accurate encumbering and lapsing of appropriations is also critical in the creation of the Biennial Revenue Estimate (BRE), which is used by the Legislature to determine available resources for state agency and institutions of higher education appropriations during each legislative session.

Over encumbering of funds could skew the data included in the BRE and the amount deposited into the ESF. State agencies and institutions of higher education are required to accurately report all encumbrances.