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It is the policy of the BOCC that open encumbrances for outstanding purchase orders less than $25,000 lapse at the end of the fiscal year. Open encumbrances for outstanding purchase orders equal to or greater than $25,000 will continue as an obligation of the prior year budget for a maximum of twelve (12) months. The Director of Budget and Financial Planning may extend this twelve (12) month maximum for individual purchase orders.

Definitions:

An encumbrance is a commitment of budgeted funds to purchase an item or service prior to actual payment and prior to actual delivery of the item or service. Generally, an encumbrance is created after a contractual obligation has been incurred.

Procedure 120.13 Encumbrances

  1. Open encumbrances for outstanding purchase orders do not lapse at the end of the fiscal year. Open encumbrances for outstanding purchase orders will continue as an obligation of the prior year budget for an additional twelve (12) months until the close of the purchase order or the subsequent fiscal year. At the close of that subsequent fiscal year, i.e. the additional twelve (12) months, the Director of Budget and Financial Planning may extend the open encumbrance for individual purchase orders, on a case by case basis, for an additional period of time when necessary to protect the financial interests of the County. In addition, the Director of Budget and Financial Planning is authorized to increase the budget amounts recorded in the County’s financial system as necessary for the financial system to properly process, during the current fiscal year, those open encumbrances derived from outstanding purchase orders from previous fiscal years.
  2. Requests to extend the additional twelve (12) period shall be submitted in a format determined by the Director of Budget and Financial Planning and shall include a complete explanation and justification of why the request is necessary. All requests must be submitted to the Director of Budget and Financial Planning no later than December 1st of each year.
  3. If the Director of Budget and Financial Planning determines that a request to extend the additional twelve (12) month period is not necessary and appropriate, he/she shall inform the elected official, agency director, or department director of the decision.
  4. Requests to increase the budget amounts in the County’s financial system for open encumbrances derived from outstanding purchase orders from previous fiscal years shall be submitted in a format determined by the Director of Budget and Financial Planning and shall include a complete explanation and justification of why the increase is necessary. All requests must be submitted to the Director of Budget and Financial Planning no later than December 1st of each year.
  5. If the Director of Budget and Financial Planning determines that a request to increase the budget amounts for open encumbrances derived from outstanding purchase orders from previous fiscal years is not necessary and appropriate, he/she shall inform the elected official, agency director, or department director of the decision.
  6. Treasury and Financial Management shall maintain documentation for all open encumbrances that continue as an obligation of the prior year budget.
  7. The Budget and Financial Planning Department shall maintain documentation for all increases to budget amounts for open encumbrances derived from outstanding purchase orders from previous fiscal years.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

 

Policy Number: