SECTION 18: Encumbrance Adjustment Procedures

1. Adjustment to original purchase order. This type of adjustment is required when:
   1. An open purchase order encumbers either too large or too small a dollar amount compared to the ordering department's experience and/or expectations for the balance of the order.
   2. The object code on which the purchase order was encumbered is incorrect.
   3. Merchandise or services ordered will never be received or are no longer needed.
   4. The account number on which the purchase order was encumbered is incorrect.

      Situations described under items a., b., and c., and others which involve a change in the original purchase order (except as specified for account number changes described below) must be handled through the Purchasing Department. The requisitioning department must inform Purchasing in writing of the change desired, giving the reason and rationale for the change. The memo requesting the change must be signed by an authorized signer. The Purchasing Department will, if appropriate, issue a change order to the original purchase order.

      When the account number is the only change necessary on a purchase order encumbrance (item d. above), the request should be directed to Invoice Audit. This may be accomplished by sending a copy of the appropriate fund ledger, highlighting the encumbrance(s) to be changed. Notation should be made on the fund ledger of the reason for the change and the account against which the encumbrance should be recorded. Alternatively, this request may be made in a memo. If a memo is used, be certain to include the P.O. number, vendor name, account number presently encumbered, object code, etc., so that the encumbrance can be properly identified. The correspondence submitted must be signed by an authorized signer for the accounts involved.

2. Adjustment of encumbrance liquidations on a departmental accounting fund ledger.

   These adjustments are required to correct errors in account number, object code, purchase order number or dollar amount on payments made against purchase orders when the payment does not agree with the purchase order information.

   These adjustments should all be processed through the Invoice Audit. In no case should a department process this type of adjustment on their own. Rather, the department should inform Invoice Audit of the account number, object code, vendor name, purchase order number, check number, date and dollar amount of the purchase order payment made in error. This may be accomplished by sending a copy of the fund ledger involved (showing the erroneous payment) or by sending a memo. The correspondence submitted must be signed by an authorized signer for the account involved.

   If payments have been made in accord with the purchase order, subsequent changes of payment transactions should be handled by the department using a journal voucher entry (see Section 40).

   If it is determined that a purchase order reported on the departmental accounting fund ledger should be closed because all merchandise or services have been received and all payments have been reported on the fund ledger, the department should notify Invoice Audit in writing. Such information should indicate that the balance of the encumbrance should be canceled; giving the purchase order number, account number, object code, vendor name, check number, date and amount of payments made against the purchase order.

Do not request a change order to adjust expenditures if the expenditures have been made in accordance with the terms of the original purchase order or as amended by subsequent change orders. You should adjust such expenditures by means of a journal voucher (see Section 40).

You should provide the account number, object code, vendor name, purchase order number, check number, date and amount of expenditure you want to adjust. You should also explain why the expenditures are being adjusted.

Additional assistance will be helpful in maintaining the usefulness of purchase order encumbrance information provided on the departmental accounting fund ledgers.

1. When encumbering an open order purchase order, care should be taken to establish the initial dollar amount at as realistic an amount as possible.
2. For purchase orders on general fund accounts, attempt to have annual contracts correspond to the University's regular fiscal year (July through June).
3. Continue to carefully monitor the departmental accounting fund ledgers and departmental weekly invoice summaries. This will assist in the discovery of errors in processing payments against purchase orders.