February 13, 2020 - Office of Research Administration

Historically, payroll encumbrances (i.e. future expenditure commitments not yet posted) on sponsored award accounts were generally inaccurate because they were based on the current fiscal year as opposed to the expiration date of the sponsored award. Sponsored project accounts start and stop throughout the fiscal year and, as a result, payroll encumbrances were either under- or over-stated. This deficiency required additional steps for departments to create accurate expenditure status reports for PI’s.

The Office of Research Administration (ORA), in collaboration with Financial Management Services (FMS), and University Human Resources (UHR) have implemented changes to more accurately reflect payroll commitments on sponsored project accounts resulting in more accurate balances. These changes to encumbrances are in effect for all employee types except for biweekly paid employees (which will be addressed in a future release).

The change to payroll encumbrances automatically applies encumbrances to the expiration date of the grant account instead of the fiscal year-end. 

• If a sponsored account expires prior to fiscal year-end (e.g. April 1), payroll encumbrances will be reduced on the account to match the end date.
• If the account expires after fiscal year-end (e.g. August 1), encumbrances will be increased to align with the account expiration date. 

Thus, the accuracy of encumbrance balances should improve, providing a more accurate view of available finances to Fiscal Officers and Project Directors.

This change is reflected in payroll encumbrances in the Kuali Financial System (KFS) and in the Grants Management Toolkit (GMT).

• Current year encumbrances are “internal encumbrances” and use the Balance Type code of “IE”. 
• Future-year encumbrances are “pre-encumbrances” and use the Balance Type code of “PE”, with special document number “Future20”.
• To see balances without these encumbrances, remove balances with the “PE” Balance Type code.

Some sponsors award time for the entire project period but award the funds annually. In these cases the encumbrances may appear inflated relative to the budget.  ORA is reviewing options to address this issue to further improve the accuracy of payroll encumbrances.

ORA encourages PI’s and departments to utilize the Grants Management Toolkit (GMT) located at one.iu.edu to view proposals, awards, related documents, and financial balances. The changes to the payroll encumbrances are reflected in both KFS and GMT.

Questions regarding these changes should be directed to Jim Becker, ORA, at jambecke@iu.edu.