What is it?
Encumbrance is an accounting term that represents a commitment to spend money for a particular purpose at some point in the future. For example, you may have entered into a contract with a supplier, via purchase order, to receive some good or service several months from now. Salary commitments, typically the largest operating expense, are also encumbered.
Why is it important?
The encumbrance serves as a reminder to budget managers or fund holders that funds have been committed and to preserve enough funds to pay for the good or service when it is eventually delivered.
Typically, the encumbrance will clear automatically as payment for the good or service is processed. Occasionally the final expense is not as large as the anticipated commitment, leaving an outstanding encumbrance showing against your budget.
Where do I find more information?
If you realize that there is an uncleared portion of an encumbrance, please contact