An encumbrance refers to funds that have been reserved for goods or services ordered but not yet received or paid for. The main benefit of encumbrance accounting is to avoid budget overspending. There are three types of encumbrances.
Salary and benefit encumbrance
When a full-time employee is hired and entered into the HR system, an encumbrance is generated to commit the total cost of the salary and benefit for the remaining fiscal year.
When an employee is hired on a term contract, the contract end date is used to commit the total projected cost of the salary and benefit for the remaining fiscal year. Those funds are no longer available for use for other transactions and have been deducted from the budget balance available (BBA).
When a purchase requisition is processed, funds are placed aside for that transaction. Those funds are no longer available for use for other transactions and have been deducted from the BBA. When the goods arrive and the vendor is paid, the encumbrance is reversed and the funds will appear in reports as an actual expense instead of as an encumbrance.
At times, budget managers may manually commit funds in anticipation of an expense that will occur during the fiscal year. In those instances, the committed funds no longer show as available for use and will be deducted from the BBA.
To commit funds manually, please email a request to your department’s financial advisor or analyst. Such requests should include the amount, distribution code and a description of the reason for having funds encumbered.
Viewing encumbrance details in the financial system
There are two reports that show encumbrance details in the Ryerson University Financial Information System (RUFIS or Oracle), opens in new window:
- RU Commitment Detail Report
(Displays details of posted encumbrance transactions for a specific cost centre)
- RU Revenue/Expense Summary - 3 Selections
(Displays the budget balance available (BBA), budget actuals and encumbrances)