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Council aims to revamp encumbrance method

The Harrison County Council, at its meeting Monday night, introduced a possible method of dealing with encumbrances at the end of the year, as well as transfers from one fund to another.
Council Chair Gary Davis said at a previous meeting that the goal of the financial committee ‘ Davis and councilmen Phil Smith and Gordon Pendleton ‘ was to prohibit department heads from spending all of their reserve money at the end of the year, simply because it was the end of the year and encumbering the bills to the following year.
Davis said the rules were proposed to maintain the integrity of the budget process, matching the annual county budget’s proposed expenses with expected revenues.
The aim is also to eliminate excessive paperwork in the auditor’s office for ‘relatively insignificant’ amounts, according to a handout from Davis.
Davis read through the list of encumbrances for 2012, including those that the financial committee recommended to not allow. An encumbrance is money left over in funds set aside for certain projects, equipment or any budgetary item. The encumbrances the council did not allow will be paid with 2012 funding, instead of 2011.
Councilman Chris Timberlake wanted to be sure the department heads would be notified of the change. Auditor Karen Engleman said a copy of the encumbrance list with approved and not-approved funds will be sent to all department heads.
The encumbrance list was unanimously approved.
‘It seems like there’s an easier way to do this; the system needs some changes to it,’ Commissioner James Goldman said.
The proposed rules, that will be discussed further at the council’s next meeting are as follows:
‘Amounts of $1,000 cannot be encumbered.
‘Unexpended payroll amounts cannot be encumbered unless there are extenuating circumstances. There are 26 payroll periods each year so the carryover from one December should be offset by the carryover for the next December.
‘Encumbrances must be supported by a signed contract or invoice in an amount sufficient to cover the amount to be encumbered.
‘There must be sufficient unexpended funds in the current budget to cover the amount to be encumbered.
‘Utility bills for the month of December that are due in January cannot be encumbered. (The carryover from one year will be offset by the carryover for the next year.)
‘The practice of trying to spend all unspent funds before year-end is highly discouraged. (If the current year budget was not needed, the balance should be allowed to revert back to the parent fund and be available to support the next year’s budget.)
The financial committee also recommended a few changes to the method of transferring funds: transfers from payroll are not permitted and transfers of more than $1,000 must be explained by the department head at the council meeting they are to be considered. Davis’ report said attempts to avoid this requirement by proposing transfers for a few dollars less will result in the transfer being disallowed until the department head appears before the council.
The council had yet to begin approving additional appropriations this year, but plans to do so in March.
The council’s next meeting will be Monday, Feb. 27, at 7 p.m. at the Government Center in Corydon.