Understanding Commitment Control in PeopleSoft Purchasing

In PeopleSoft Purchasing, commitment control enables you to track or control commitments, obligations, or expenditures. You can track for encumbrance accounting, as well as check validation against predefined, authorized budgets. Commitment control enables you to automate large portions of the accounting control process.

When you set up your budgets, you designate amounts for those budgets and associate them with the appropriate PeopleSoft General Ledger business unit. After budgets are established, you can track and control all transactions in the procurement life cycle against the overall budget.

From a budgetary perspective, the procurement life cycle includes pre-encumbrances, encumbrances, and expenditures, all of which are tracked against a designated budget. When you use commitment control, the system deducts each type of financial obligation from the budget and tracks it according to obligation type; this enables you to determine how many dollars you have committed in pre-encumbrances, encumbrances, and expenditures. You can liquidate your pre-encumbrance and encumbrance balances by amount or quantity. Depending on the liquidate method that you specify on a document, the budget processor uses that method scheme to calculate the remaining spending authority accordingly.

Here is a high-level overview of the procurement life cycle in commitment control:

1. When you generate a requisition, a pre-encumbrance is created in your budget records by the budget-checking process.

2. When a requisition is sourced to a purchase order, commitment control liquidates the pre-encumbrance from the requisition and establishes an encumbrance for the purchase order.

3. When the purchased goods or services are delivered and the purchase order references a voucher, commitment control liquidates the encumbrance and records an expenditure.

You can set up commitment control to act on transactions that exceed your budget limit. Transactions and future obligations that exceed the budget are exceptions. You can specify the degree of control and corrective action that you want to enable individual users to exercise over exceptions. Commitment control warns you of exceptions if transactions and future obligations exceed your budgeted amounts. You can set this feature to prevent transactions that exceed a designated budget or to warn you about transactions that exceed a budget, and therefore, require corrective action.

Here are some examples of corrective actions:

• Increasing approved budgetary amounts.

• Requesting competitive bids from alternate suppliers.

• Denying requisitions or canceling purchase orders.

• Overriding exceptions by authorized users.

Commitment control enables you to receive warnings about activities that may send your budgets over their approved amounts. For example, a transaction that exceeds the budget can trigger a workflow warning to personnel at a higher level, while still going through the system as if the necessary budget existed. The transaction can also be rejected and stopped without approval from a higher authority. In either scenario, you can define options in PeopleSoft General Ledger that provide you with control over how your system handles exceptions for individual budgets and business units.

Commitment control also enables you to determine a budget date default scheme to use when setting up your system for the first time. Use the Installations Options page to define your preferred budget date defaults. You can either automatically change the accounting date to the document's accounting date, or you can copy the budget date from the predecessor document.

You can view summarized budget checking information for affected transactions on the PeopleSoft Purchasing requisition and purchase order inquiry pages.