A. It is essential that city does not obligate itself for amounts in excess of those budgeted, for a particular purpose. In an accrual accounting system, all expenditures must be charged against the budget of the year in which the goods or services are received. To achieve these goals, the budgetary device of encumbering must be employed. An encumbrance does not result in the recognition of an expenditure. It simply obligates or "reserves" a portion of an unexpended budget for the purpose of paying a liability when the related goods are received or services rendered. In the encumbrance system used by the city, it will be necessary to encumber for all expenditures requiring a purchase order.
B. At fiscal year-end, all outstanding encumbrances will be analyzed as to status. All encumbrances for items which have not been received before June 30, will be canceled, and, if desired and provided for in the new budget, re-encumbered in the new fiscal year. Encumbrances for items that have been received, or services which have been performed, but not yet paid at fiscal year-end will be charged to the fiscal year in which the items were received, or the services were performed. In order to accomplish a timely year-end cutoff, purchase orders, other than emergencies, will not be issued after the second week of May of each fiscal year. Departments should plan their purchases, including those not requiring purchase orders, accordingly.
(Res. 2008-011, passed 2-19-2008)
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