Encumbrance Reporting and Lapsing of Appropriations (APS 018)

Reporting Guidelines

Definitions

Payables

Amounts obligated for goods or services actually rendered or provided to the agency by the end of the reporting period but for which the agency has not yet made payment should be recorded as accounts payable.

Encumbrances

Over encumbering of an appropriation should be avoided. Amounts obligated for goods or services through contractual obligations should be encumbered according to Texas Attorney General Opinion Numbers 0-2815(1940), V-1139 (1950); WW-40 (1957) and WW-978 (1961). For purposes of the Binding Encumbrances and Payables Certification, an outstanding encumbrance is defined as a contract, agreement or other action that legally obligates state funds.

Encumbrances differ from payables. Encumbrances are commitments for goods or services made before the end of the reporting period, but the actual receipt of the good or service does not occur until after the end of the reporting period (Nov. 30, Feb. 28/29, May 31 or Aug. 31).

An encumbrance is for actual contracts awarded, not anticipated contracts or contracts under negotiation. For example, funds dedicated for construction but not yet awarded would not be reported as an encumbrance. The implementation of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, in fiscal 2012 replaced the need to reserve fund balance for encumbrances. The allocation of fund balance, including encumbrances, should now be reflected as Assigned or Committed. Please refer to Fund Balance/Net Position: Governmental Funds on the AFR website for detailed instructions.

Appropriation Years

Agencies must obligate (encumber) an appropriation during the appropriation year for which the appropriation is made. Payments for such obligations must be made within two years following the last day of the AY for non-construction appropriations:

Lapsed Appropriations

Appropriations expire when:

• They are not obligated in USAS by Aug. 31 of the appropriation year in which they were made.
• Obligated appropriation balances are not expended within two years following the last day of the AY.

  –OR–

• They are not reappropriated in subsequent legislation.

Unless the unobligated appropriation balance is specifically reappropriated for a new term, it cannot be encumbered after the end of the appropriation term. All unobligated appropriation balances must be lapsed by processing a budget lapse transaction into USAS. The Comptroller’s office automatically lapses all unobligated balances as early as Nov. 1 each year.

Agencies with appropriations that may be expended for both operating and construction purposes must lapse or move forward (if appropriate legal authority exists) the unobligated portion.

Unexpended Balance Forward

Unexpended balance (UB) refers to the unobligated balance remaining in an appropriation at the end of an appropriation term. Agencies must have legislative authority to move funds from one year to the next or from one biennium to the next biennium. Any UB of funds must occur prior to Oct. 30 to avoid lapsing of those funds. (The recommended due date for GR consolidated agencies is Sept. 30.)

Important Dates

Quarterly entries of encumbered and payable amounts must be made into USAS with an effective date on or before the end date of the quarter or year. Because the annual reporting requirement encompasses the fourth quarter of the previous appropriation year, there is no requirement for separate fourth quarter reporting. The agency type for annual financial reporting determines the annual due date.

The tables below show the due dates for entering binding encumbrances and payables into USAS:

Due Dates for First Three Quarters

Required form: Quarterly Certification

Annual Due Dates

Required form: Annual Certification

Budget Revisions and Expenditure Transfers

All transactions for budget revisions and expenditure transfers for open AYs must be completed by Oct. 30 for full reporting agencies and by Sept. 30 for GR consolidated agencies. Doing so will reduce the number of issues that may arise with the lapse that occurs as early as Nov. 1.