1-C. Tools for Managing Funds

BudgetsBudgets define spending limits and acknowledge spending authority. Budgets also establish spending categories and spending maximums. We use budgets to align spending with available funds.  Best practices at UNM include establishing an appropriate budget in each Banner index where spending is to occur.

Encumbrances. To plan and make accurate financial decisions, we can encumber funds. Encumbered funds represent monies that are set aside or reserved until the funds are actually spent.  When funds are encumbered they are no longer available to be used for any other purpose. Future payroll commitments are the most common encumbrance processed at UNM. 

Expenditures. An expenditure represents a transaction that records and classifies the actual payment of cash for goods or services, or a charge against encumbered funds in settlement of an obligation as evidenced by an invoice, receipt, voucher or similar document.  The Accounts Payable Department issues a check to the vendor.  The Payroll Department is responsible for payments made to employees.

Uncommitted Amounts. In Banner, the uncommitted amount tells account managers what funds are available to spend. The uncommitted amount equals budgeted dollars minus encumbrances and expenditures. It is the money that is not encumbered or spent. This formula is illustrated below:
graphic: hand holding money 

   Budgeted Dollars
- Encumbrances and Expenditures
   Uncommitted Amount