Commitment Accounting

Updated 8/15/18

What is Commitment Accounting?• Commitment Accounting business process enables

users to budget for payroll expenses and track actual payroll costs.

• Encumbrances are calculated on salary and fringe expenses based on actual payroll distributions.

• Generally, encumbrances are projected through the end of the fiscal year.

– For Combination Codes with Project IDs, encumbrances are projected using the project’s end date.

• Since payroll distributions (ePAR Distribution Changes) drive the encumbrance calculations, it is critical for departments to stay up to date on distributions.

Why and When are the Changes being Implemented?

The University System of Georgia (USG) requires that salary and fringe be encumbered (see section 1.6 of USG Business Procedures Manual).

Implementation is scheduled to be effective August 26, 2018.

What is Changing?• Interface Between PeopleSoft Financials and PeopleSoft HCM

• Combination Codes

• ePAR Distribution Changes

• Budget Retros

– Personal Services Cost Transfers

• Personal Services Encumbrances

• Budget Checking for Personal Services

• Suspense Account

• Fringe Redirect

• Effort Reporting System

Who Will Benefit from this Presentation?

Anyone who:• submits Budget Amendments

• submits or approves ePAR Distribution Changes

• submits Cost Transfers

• manages departmental budgets

• approves payroll transactions

• reports effort

Interface Between PeopleSoft Financials and PeopleSoft HCM

Interface Between PeopleSoft Financials and PeopleSoft HCM

• Payroll encumbrances will be calculated in PeopleSoft HCM Commitment Accounting module and pushed into PeopleSoft Financials.

– Budget checking processes for salary and fringes will be replaced by encumbrances.

– Encumbrances will allow departments to track and monitor their budgets more efficiently and effectively.

• Effort adjustments and salary Cost Transfers currently only post in PeopleSoft Financials, but do not feed back into PeopleSoft HCM, which currently leaves the 2 systems unreconciled (potential audit issue).

• In the future, any changes in the funding of salary and fringes will take place in PeopleSoft HCM via an ePAR Distribution Change and feed to PeopleSoft Financials (the 2 systems will reconcile).

Combination Codes

Combination Codes

What is a Combination Code?

A numeric code used in PeopleSoft HCM to assign positions to a funding source.

What to expect?

• The Combination Code will be shortened.

• The account number (e.g. 511100) will not appear in the Combination Code which will make it easier when processing extra duty pay and ePAR distribution changes.

Combination CodesCurrently 22 Digits:

3333333310000511100001

Department Fund Account Sequence

Number

New 18 Digits:

123333333310000001

Company Department Fund Sequence

Code Number

Combination Codes

How does this change impact departments?

• When submitting ePAR Distribution Changes, or any PeopleSoft HCM changes using a Combination Code, the Combination Code selected WILL NOT be account specific. The account will default to 999999.

• When requesting the setup of Combination Codes, no account will need to be specified. The only account that will be setup is account 999999.

• When actuals post, the 5xxxxx account will be automatically selected based on the paygroup and earn code. The paygroup is predetermined by HR and the earn code is predetermined by Payroll.

ePAR Distribution Changes

ePAR Distribution ChangesWhat to expect?• The Combination Code will not look the same on the ePAR

Distribution Change screen.

• Budget Retros will be processed through the ePAR Distribution Change screen.

How does this change impact departments?• New Combination Codes will be selected when submitting

ePAR Distribution Changes.

• Any changes to the funding of salary and fringes will take place in PeopleSoft HCM via an ePAR Distribution Change and feed to PeopleSoft Financials.

ePAR Distribution ChangesRemember: the combination code will not be account specific. Instead,

the default account of 999999 will populate. An example of the new

combination code and default account are below.

New Combination Code Default Account

ePAR Distribution Changes

The newly created “DSPA group” will be automatically added to ePAR Distribution Changes when funds 20000 and 20300 are present.

Budget Retros

Budget RetrosWhat is a Budget Retro?

A back-dated ePAR Distribution Change which will move actualexpenses from one Combination Code to a new Combination Code. This process replaces Personal Services Cost Transfers for a specified time period.

What to expect?

– Budget Retros will be processed through the ePAR Distribution Change screen.

– Budget Retros will replace Cost Transfers for Personal Services.

Budget RetrosBudget Retros will be processed just like ePAR Distribution Changes. The effective date for the ePAR Distribution Change will be back-dated based on when the personal services actual expenses should be moved.

• Please note the effective date is very important!

• Actual expenses will be moved in PeopleSoft

Financials for the effective date selected.

• The process for Cost Transfers for accounts 600000, 700000, and 800000 will remain the same.

Budget RetrosFor example: Below is the current distribution, but the Position

should have been paid 50% from Combination Code

120425000010000076 effective 1/1/18.

Current Combination Code

Budget RetrosInstead of submitting a Cost Transfer and an ePAR Distribution Change, all

that will need to be submitted is an ePAR Distribution Change. Update the

effective date and combination code. The Cost Transfer step is eliminated

for Personal Services.

Update the Effective Date

Update the Combination Code

Personal Services Encumbrances

Personal Services Encumbrances

Encumbrance

A claim against funds. A projection of future expenses based on the situation, as it is known today. Encumbering funds is not the same as spending them or even guaranteeing that the funds will be spent. It just means that if the situation as it exists today does not change, all of the funds will be spent by the end of the fiscal year.

Actuals

The actual portion of the encumbered amount that has been spent to date. An encumbered amount becomes an actual expense whenever an encumbered amount is paid. When payments are processed (eg: by running a payroll) actual expenses are created.

Personal Services Encumbrances

Starting in FY19, Personal Services will be encumbered based on actual expenses. • Encumbrances will be forecasted out to the end of the fiscal

year and will be recalculated on a regular basis.

• For Combination Codes with a Project ID, encumbrances will be forecasted out to the end of the Project End Date or the end of the fiscal year, whichever is sooner.

• Vacant and non-benefits eligible positions will not be encumbered.

• Salaries and fringes will be encumbered by the PeopleSoft delivered processes. Departments do not have to submit anything to generate encumbrances.

Personal Services Encumbrances

Please note:

Just because funds have been encumbered does not mean that the funds will be expended. If an employee leaves part way through the fiscal year, the department is not committed to spending the remainder of their salary. Encumbrance calculations are updated throughout the year to account for changes. As staff and budget information change, the encumbrance calculations will be updated to reflect these changes.

Personal Services Encumbrances

How does this change impact departments?• Encumbrance calculations are tools to help departments

monitor budgets.

• Departments must continue to review budget balances regularly. Departments may need to submit a Budget Amendment or Budget Retro.

Budget Checking for Personal Services

Budget Checking for Personal Services

Starting in FY19, Personal Services will not budget check.

What does this mean?

• Budget checking processes for salary and fringes will be replaced with encumbrances.

• Personal Services Budget Checking Errors will NOT be emailed out to departments to clear before payroll posts.

• Instead of Budget Checking Errors, payroll transactions will post either generating negative budgets OR entries to a suspense account.

– Financial Accounting/DSPA will have more information about how the suspense account will be maintained.

Suspense Account

Suspense Account

Items that will hit the Suspense combination:

• Positions not fully funded

• Departments and/or grants that are inactive

• Grants that end during the pay period

Suspense Account

• Queries/Reports will be run daily to identify potential items that will hit the suspense account.

• Managers will be notified that they should process an ePAR Distribution Change immediately. This will prevent expenses from posting to the suspense account in the ACTUALS ledger.

• If the ePAR Distribution Change is not processed in a timely manner, the expense will hit the suspense account in PeopleSoft Financials, which will have to be corrected.

Fringe Redirect

Fringe Redirect• Fringe redirects give the ability to distribute Fringes and Taxes

separately from earnings.

• Fringe redirects will now be processed within the ePAR Distribution Change screen.

• They will no longer be processed in PeopleSoft Financials. Users must choose from several fringe groups:

– All-Health, Life, Retirement, and Taxes (FICA and Medicare)

– HLO-Health and Life only

– HLR-Health, Life, and Retirement

– HLT-Health, Life, and Taxes

– REO-Retirement Only

– RTO-Retirement and Taxes

– LTD-Resident Long Term Disability

– TXO-Taxes Only

Fringe RedirectExample: the Fringe Group selected is ALL and the redirected Account Code is 120425000010000209. Please note that Fringe Redirects are not common.

Add a detailed comment in the comment box indicating the reason for the fringe redirect.

Fringe Group Redirect Account Code

Effort Reporting System

Effort Reporting System

DSPA Processes That Will be Impacted• Effort adjustments (after-the-fact adjustments to personal

services expenses) will not be able to be made in the Effort System.

– These adjustments currently post directly in Financials.

• Salary and fringe Cost Transfers that are currently processed via journal entry in PeopleSoft Financials (not done in Effort System) will have to be processed in HCM.

• Current Effort System will not be able to operate with Commitment Accounting.

Effort Reporting System

DSPA Processes That Will be Impacted• DSPA will be implementing a new Effort System this fall.

• Moving to quarterly effort certification (data in effort system will still be populated monthly for viewing purposes).

• Staying up to date on payroll distributions will be critical, as the Effort System cannot be used as an alternative to ePAR Distribution Changes.

• More training to follow on the new Effort Reporting System.

Effort Reporting SystemNew Processes and Tools to Assist

Departments and DSPA

• New queries/reports will be created to assist in monitoring committed effort vs. payroll distribution.

• Departments will be notified by Post Award when an individual’s payroll distribution is set to an inactive project.

• Post Award including a screenshot of project committed effort in “new award emails.”

• Pre/Post Award created the Department Administrator Closeout Checklist (first item is to Update ePAR Distribution Changes).

Questions?Please contact BUDGET@augusta.edu