The purpose of this chapter is to provide an understanding of the Commitment Budgetary Control process. A process flow diagram shows the interaction between the different components in the Commitment Budgetary Control feature. Each function is briefly explained and chapter references are provided for more information.
The Commitment Model enables public sector organizations to manage their business using dual budgeting, which includes standard budgetary control and commitment budgetary control. The standard budget represents the amount an organization is willing to pay in a given period. The commitment budget represents the amount of encumbrances an organization is willing to commit itself to in a given period.
For information on the Commitment Model, see Commitment Model.
Commitment Budgetary Control focuses on the encumbrance subcomponent of the expenditure activity used by standard budgetary control. The commitment budget represents the amount of encumbrances an organization is willing to enter into for a given period. Subsequently, commitment budgetary control is attained by measuring encumbrance activity against the commitment budget.
The purpose of Commitment Budgetary Control is to prevent overspending of the commitment budget. Commitment Budgetary Control verifies whether sufficient funds exist for a contract and if the funds do exist, commits the full amount of a contract into a contract commitment.
Multiple one-year budgeting enables public sector organizations to do long range planning even though budgets must be approved one year at a time for a project spanning more than one year. The multiple one-year budgeting feature allows an organization to use the same account or account range for multiple years into the future while defining a separate funding budget for one year.
At the end of each budget year, the remaining funds lapse, and the next year’s funding is provided by the new funding budget. Any budgeting beyond the current year is a projection into the future. These projections are necessary for large projects spanning multiple funding years. Multiple one-year budgeting acknowledges that funding for projects over a period of years can change and is not static.
Before budget data can be entered, a commitment budget must define estimated cost and revenue amounts for a range of accounting periods. These estimated amounts can be compared to these:
Actual balances with projected results
Control actual and anticipated expenditures
The commitment budget is defined in Oracle General Ledger. A budget is defined by specifying these:
Budget name
Budget type
Period of activity range
For information on defining a budget, see Defining Budgets, Oracle General Ledger User Guide.
Budgetary control refers to the level of funds checking desired for an account, range of accounts, or a summary account. Budgetary control is defined in General Ledger. The areas of budgetary control described in this section are:
Budget organizations represent the departments, cost centers, division, or other groups for which budget data is entered and maintained. One general budget organization that includes all accounts or many budget organizations containing a set of accounts can be defined depending on the organizational requirements.
When using budgetary control, the budgetary control requirements for an account are set within its budget organization. The budgetary controls for a range of accounts, an individual account, or a summary account are defined for both commitment and standard accounts simultaneously. Not all budgets or accounts must be included in a budget organization.
The functional requirements for defining budget organizations are:
The budgetary control options for the budget organization is defined using the primary ledger and secondary ledger for the standard and commitment budgets respectively.
When dual budgetary control is enabled, the Amount Type and Boundary Code combinations supported by commitment budgetary control are as follows:
| Amount Type | Boundary Code |
|---|---|
| Period-to-date | Period |
| Quarter-to-date | Quarter |
| Year-to-date | Year |
The restricted selection of amount type and boundary prevents a negative funds available when severity level is absolute.
For information on defining a budget organization, see Defining Budget Organizations, Oracle General Ledger User Guide.
A summary template sets budgetary controls for a group of accounts. A summary template can be defined for a number of standard and commitment budgets simultaneously. Consistent rolling up of accounts, whether to an organizational level or other suborganizational level, is achieved by defining the summary template and associating applicable standard and commitment budgets with the particular summary template.
The functional requirements for defining summary templates:
The budgetary control options for the summary templates are defined using the primary ledger and secondary ledger for the standard and commitment budgets respectively.
The same Amount Type restrictions applied to budget organization apply to summary templates.
Multiple funding budgets can be assigned to the same summary template, provided there are no overlaps or gaps in the funding budget periods.
Funding budgets can have different funds check levels to accommodate future years.
For information on summary templates, see Detail Level Budgetary Control, Oracle General Ledger User Guide and Summary Level Budgetary Control, Oracle General Ledger User Guide.
Budgetary control groups enable users to set budgetary controls for a specific module, such as Contract Commitment, and to set budgetary controls for a specific transaction or event, such as a confirmed contract. For commitment budgetary control, only budgetary control groups for commitment budgetary control budget journals and contract commitment transactions are supported. With dual budgetary control enabled, override amount, tolerance percent, or tolerance amounts within budgetary control groups are not supported by commitment budgetary control.
For information on budgetary control groups, see Creating a Budgetary Control Group, Oracle General Ledger User Guide.
A major reason for entering a provisional and confirmed contract commitment is to monitor the available budget. A funds check verifies whether sufficient funds are available for the contract commitment amount. The commitment budgetary control process encumbers the funds and adjusts the funds available accordingly. When a contract commitment is encumbered or approved, it automatically encumbers funds on the commitment and standard budgets as:
A provisional contract commitment raises Commitment type encumbrances against both the commitment budget and the standard budget.
A confirmed contract commitment raises Obligation type encumbrances against the standard budget and commitment budget.
To encumber funds for a contract commitment, sufficient budget must be available for all contract commitment accounts and related payment forecasts. Partial encumbering or reserving is not allowed.
The table describes passing and failing rules that apply to funds checking and funds reservation:
| Pass or Fail Status | Rule Description |
|---|---|
| Funds Check Passing or Failing | Commitment budgetary control is called first and then standard budgetary control is called. |
| Funds Reservation Passing | Commitment budgetary control is called first and then standard budgetary control is called to perform funds reservation. |
| Funds Reservation Failing | If commitment budgetary control is called to funds check and funds fail, standard budgetary control is not called. |
| If commitment budgetary control passes funds checking and standard budgetary control is called to do funds reservation and it fails, entries in both the budgets are rolled back. |
A transaction has ten account lines and each account line must pass funds check. If nine lines pass and one line fails, the whole transaction fails.
A transaction has five payment forecast lines and these payment forecasts break down as:
Year 1: one line
Year 2: one line
Year 3: one line
Year 4: one line
Year 5: one line
Each payment forecast line for each year must pass funds check. If any of the payment forecast lines fail, then the whole transaction fails and no funds reservation occurs.
The cover contract commitment is subject to the same funds checking procedures and encumbers funds on the appropriate accounts, standard and commitment, in the same manner that individual contract commitments do. Releases to a cover contract commitment are not subject to funds checking against any budget accounts. Instead, they are checked against the available amount remaining within the cover contract commitment. These checks are made simultaneously:
The amount on the release account line must be equal to or less than the available amount of the corresponding cover contract commitment account line.
The amount of each release payment forecast line must be equal to or less than the available amount of the corresponding cover contract commitment payment forecast line.
Available amount of a cover contract commitment account information line is defined as the total amount encumbered by the cover contract commitment account line minus the amount encumbered by releases related to the cover contract commitment account line. When one or more of these conditions are met, it is not possible to approve the release.
Available amount of a cover contract commitment payment forecast line is defined as the total amount encumbered by the cover contract commitment payment forecast lines minus the amount encumbered by releases related to the cover contract commitment payment forecast lines.
Releases do not encumber funds directly on the standard or commitment budget. However, encumbering or approving a provisional or confirmed release against a cover contract commitment encumbers funds on the cover contract commitment account line and the appropriate payment forecast lines. Invoices are always matched against these releases. Invoices cannot be matched against a cover contract commitment directly.
The encumbrance type that is created is not determined by the state of the release, but that of the related cover contract commitment.
For information on the Executing Budgetary Control procedure, see Execute Budgetary Control Procedure.
For information on commitment budgetary control and the Commitment Model, see Commitment Model.
Use Oracle General Ledger to inquire commitment budgetary control:
For more information on budget inquiry, see Budget Inquiry, Oracle General Ledger User's Guide
For information on funds available, account inquiry, and journal inquiry, see Commitment Budgetary Control Procedures.