Purpose
The following guide is intended for the Procurement Manager and Budget Manager to process year-end encumbrances.
Action
• Closing an open PO individually
• Closing open POs via spreadsheet
• Perform Carry Forward Purchase Order Budgetary Control Balances Process
Key Terms
· Encumbrance Explanation: In Oracle, when a requisition is fully approved and a purchase order is generated, a corresponding encumbrance journal entry is created in the general ledger. The purchase order will encumber the budget related to the COA and/or POETAF information tied to the purchase order. After the invoice has been fully approved and accounted, the encumbrance will be liquidated.
From a Procurement Requester’s perspective, it is imperative to monitor open purchase orders monthly as they represent encumbrances against their unit’s budget. As the University continues to explore more stringent levels of budgetary control, any outstanding encumbrances that remain in the system will affect the unit’s ability to spend. University leadership can block a unit’s ability to submit requisitions if they are over budget.
If a Procurement Requester recognizes that a purchase order has a remaining balance and no future invoices are expected to be submitted against the PO, the Procurement Requester should submit a change order in Oracle to reduce the total amount, consequently relieving the encumbrance.
· Guidelines for Interacting with Campus:
· Provide the campus a list of outstanding Purchase Orders.
· Reference Year End guideline documentation.
· Campus should be encouraged to keep a monitor on their open Purchase Orders (Encumbrances) throughout the fiscal year.
Terminology
· Purchase order: A legal document between a customer and a supplier detailing the goods/services to be purchased.
· Closed for Invoicing: Order is in Closed for Invoicing status when the PO has been fully matched by an invoice. You can invoice against Closed for Invoicing POs, but tolerance holds will be applied.
· Finally Closed: You cannot invoice against a Finally Closed Purchase Order. For further activity, you can reopen a Finally Closed Purchase Order. When a Purchase Order is entered into a Finally Closed status, Oracle liquidates encumbrances against said Purchase Order and creates journal entries reversing the encumbrance.
Approaching Fiscal Year End
· The Procurement Solutions Team in coordination with the Budget Office will send out a campus-wide reminder communication for Procurement Requesters to review a report with their purchase orders with open encumbrances. The communication will include a report of POs with open encumbrances.
· Requesters should review all open purchase orders to determine if the PO total amount should be reduced through a change order, or if the encumbrance amount should be carried forward into next fiscal year’s budget.
Closing an open PO individually
1. Select Company Single Sign-On to access your Oracle account.
2. Navigate and select the Procurement module.
3. Select Purchase Orders
4. Select the Tasks button.
5. Select Manage Orders
6. Search for the Purchase Order using any of the available search criteria
7. Once the search results return, select the purchase order number
8. Click on the Actions dropdown
9. Select Close
10. Choose Finally Close from the Action drop-down, enter the Reason, and select OK
a. Note: Purchase orders that are “Closed” or “Closed for Invoicing” can be matched to future invoices. Purchase orders that are “Finally Closed” are no longer available to invoice against. You can reopen Finally Closed Purchase orders.
You have now completed the process of Closing an open PO individually.
Closing Open POs via Spreadsheet
1. Select Company Single Sign-On to access your Oracle account.
2. Navigate and select the Procurement module
3. Select Purchase Orders
4. Select the Tasks button
5. Select Close Schedules in Spreadsheet
6. Select the Procurement BU, input any additional criteria and select Create Spreadsheet. An Excel file gets downloaded.
7. Open the file. Select Company Single Sign-On access your Oracle account.
8. Fill out the Action column for records you wish to close by selecting Finally Close from the dropdown.
a. Note: Purchase orders that are “Closed” or “Closed for Invoicing” can be matched to future invoices. Purchase orders that are “Finally Closed” are no longer available to invoice against. You can reopen Finally Closed Purchase orders.
9. Select Upload. Close the excel (there is no need to save).
You have now completed the process of Closing Open POs via Spreadsheet.
During Fiscal Year End and after Next Year’s Budgets are opened
· Communicate to the Budget Manager to perform the Carry Forward Purchase Order Budgetary Control Balances process.
1. Select Company Single Sign-On to access your Oracle account.
2. Navigate and select the Budgetary Control
3. Select Budgetary Control process
4. Select the Tasks button
5. Select Carry Forward Purchase Order Budgetary Control Balances
6. Select Finally Close Through Budget Date, and Reopen Budget Date
7. Select Submit
You have now completed the process of Carry Forward Purchase Order Budgetary Control Balances process.