02-a-014 - State General Fund Encumbrances (April 5, 2002)

DATE:	April 5, 2002
SUBJECT:	State General Fund Encumbrances
EFFECTIVE DATE:	April 15, 2002
A & R CONTACT:	Jo Ann Remp	(785) 296-2277	(Joann.Remp@da.state.ks.us)
	Randy Kennedy	(785) 296-2125	(Randy.Kennedy@da.state.ks.us)
APPROVAL:
SUMMARY:	State General Fund encumbrances should now be established as contingent encumbrances instead of firm encumbrances.

Historically, policy adopted by the Department of Administration has mandated that all encumbrances against the State General Fund be classified as firm. This policy was adopted at a time when State General Fund balances were sufficient to cover all daily cash flow requirements.

In view of the State's current fiscal situation, State General Fund encumbrance policy is being changed to require that all State General Fund encumbrances established on and after April 15, 2002 must be classified as contingent instead of firm. STARS transaction codes currently used to determine firm or contingent encumbrances will remain the same, i.e., agencies should use existing transaction codes to classify State General Fund encumbrances as contingent.

K.S.A. 75-3730 provides that "All commitments and claims shall be preaudited by the division of accounts and reports as provided in K.S.A. 75-3731. No payment shall be made and no obligation shall be incurred against any fund, allotment, or appropriation . . .unless the director of accounts and reports shall first certify that his or her records disclose there is sufficient unencumbered balance available in such fund, allotment, or appropriation . . . ." STARS has been programmed to identify, and suspend transactions in those cases where available appropriation/limitation and/or cash balances are not sufficient to cover the transaction being processed. STARS edits encumbrances coded firm in the same manner. Contingent encumbrances are allowed to process if the available appropriation/limitation balance is sufficient to cover the transaction, even though unencumbered "cash" may not be sufficient to cover the transaction.

In order to accomplish this policy change, the following information should be noted:

• Firm encumbrances currently in STARS will continue to be paid and ultimately liquidated as firm encumbrances. The current State General Fund firm encumbrances will not be converted to contingent encumbrances.
• All SHARP payroll encumbrances will continue to be classified as firm.
• Agencies should submit all new encumbrances against the State General Fund using the transaction code for contingent encumbrances . If the document is submitted with a transaction code for a firm encumbrance, the Audit Services Team will change the transaction code to establish a contingent encumbrance. Agencies will not be notified of each individual change.
• Policy and Procedure Manual filing 10,206 will be updated soon to reflect this policy change.

DB:rr:jr