How can I perform budgetary control and encumbrance accounting for my transactions?

You can perform budgetary control for both raw costs and burden costs and perform encumbrance accounting for burden costs on project transactions.

Use the Manage Budgetary Control or Manage Encumbrance Accounting task from the Setup and Maintenance work area to enable budgetary control.

The project accounting business function requires that you enable budgetary control for a business unit before enabling encumbrance accounting.

How can I perform budgetary control for project-specific procurement for an inventory or work order destination?

Oracle Projects enables you to check for funds availability, reserve funds against control budgets, and account for encumbrances, if applicable, when procuring material to an inventory destination for sponsored or non-sponsored projects.

You have this ability even when procuring material directly to a work order destination from a project-specific manufacturing or maintenance work order.

Use project-specific requisitions created with an inventory or work order destination, as well as back-to-back requisitions, to reserve funds as commitments against projects or chart of account-based control budgets, or both, when budgetary control is enabled for these transaction types. These funds can include both raw (requisition cost) and related burden costs.

When you review a requisition in Procurement, you can check whether funds have been reserved for the requisition and associated requisition lines. You can also see the destination of the requisition and project costing details, such as the project number, budget date, and so on.

When you perform budgetary controlled validation on purchase orders created independently or from such requisitions, you can see whether funds are reserved for them as an obligation. Liquidation of reserved funds on a requisition happens when the requisition turns into a purchase order. Payables invoices do not play a part in this process. The funds status on the purchase order is updated throughout the procurement lifecycle until the costs have been imported into Project Costing.

The inventory receipt and costing of items for such purchase orders are not budgetary controlled in Receipt Accounting or Cost Management. It is at the time of importing the purchase order related inventory costs from Supply Chain Cost Management into Project Costing that the purchase order obligation is liquidated, and the inventory costs reserved as project expenditures. This includes raw (inventory) costs and related burden costs. If the burden schedule associated with the project has been updated with new rates between purchase order creation and the import of inventory costs into Projects, the revised burden rates will be used to reserve the funds. Project Costing will also liquidate the raw and burden costs originally reserved against the purchase order.

Use the Budgetary Control Analysis Report to view control budget balances for non-sponsored projects, and the Manage Awards page to view control budget balances for sponsored projects.

Here's an image displaying the requisition, purchase order, and project cost created for the purchase order inventory receipt, denoted in the image as Project Expenditure, which is our project cost.

The Budget Control Analysis Report enables you to identify the stage in the lifecycle of a supply-chain-related project cost at which the requisition becomes a purchase order, and the commitment becomes an obligation, and on receipt, a project cost. This report enables you to track when a requisition was made, when the funds were reserved, when the requisition was approved, and so on. For example, the report shows that when a requisition gets approved, related funds get reserved, and the requisition creates a commitment. You can then see how, at the Purchase Order stage, the commitment gets liquidated, and the purchase order amount becomes reserved as an obligation until goods are received and payment made. The obligation is then liquidated, and a project cost is created.

Customers who are working on sponsored projects and are using these features can view similar details in the Grants Management > Awards > Manage Awards > Award page.

Note: Payables invoices associated with project-specific purchase orders with inventory and work order destinations are not applicable for budgetary control validation. Invoice variances, if any, will be budgetary controlled by the Import Costs process in Project Costing when the acquisition adjustment costs are imported from Supply Chain Cost Management. Payables Invoices now display project attributes at the invoice line and distribution levels for invoices matched to project-specific purchase orders

If encumbrance accounting is enabled for the relevant business function and transaction subtypes, then accounting and liquidation of the encumbered raw and burden costs is done when creating accounting for the requisition, purchase order, receipt accounting, and project costs.

Returns, cancellations, and other adjustments on project-specific purchase orders to an inventory or work order destination and back-to-back orders are budgetary controlled. Applicable encumbrances are also accounted.

Funds that the Project Costing subledger reserved at the time of importing purchase order costs from the Supply Chain Cost Management application might differ from the accounted encumbrances on the same transaction. This is because the Supply Chain Cost Management application could have imposed item cost overheads, resulting in additional costs to the originally encumbered purchase order costs. Funds reservation in Project Costing will be based on these actual costs received from the Supply Chain Cost Management application.

Tips and Considerations

Here are a few tips and considerations that you must keep in mind while using this feature:

Budgetary Control

• Transaction subtypes that support budgetary control and account encumbrances for a project-specific procurement to an inventory or a work order destination and back-to-back orders are enabled by default for newly created business units and ledgers that are enabled for budgetary control. These transaction subtypes will remain disabled for business units and ledgers that were enabled for budgetary control before these subtypes were created. They will have to be manually enabled if you would like to have budgetary control and account encumbrances for project-specific procurement to an inventory or work order destination and back-to-back orders.
• To successfully budgetary control and account encumbrances for a project-specific procurement that involves use of both requisitions and purchase ordersto an inventory or a work order destination and back-to-back orders, you must enable the budgetary control transaction subtypes for both the Requisitioning and Procurement business functions. Failure to enable these subtypes for both the business functions will result in funds being reserved or liquidated incorrectly.

Requisitions

Project-specific requisitions for inventory or work order destination as well as back-to-back requisitions created before enabling budgetary control or encumbrance accounting for requisition transaction subtypes will remain not applicable for budgetary control and encumbrance accounting. Once you enable these transaction subtypes for the requisitioning business function, only new requisitions will be subject to budgetary control and encumbrance accounting.

Purchase Orders

Project-specific purchase orders for inventory or work order destination, as well as back-to-back purchase orders created before budgetary control is enabled for these transaction subtypes, will continue being excluded from budgetary control and encumbrance accounting throughout their fulfillment cycle. Once budgetary control for these transaction types is enabled for existing inventory or work order destination purchase orders, the changes listed below will trigger budgetary control and encumbrance accounting.

• Changes to account, project, or budget date
• Addition of back-to-back or project-specific lines, schedules, or distributions

Receipt Accounting and Cost Management

• Verify that the journal sources for cost accounting and receipt accounting are displayed in the Budgetary Control Journal Exceptions section, under the Ledger Options region in the Edit Budgetary Control and Encumbrance Accounting page. Add these sources if they have not been previously included.

• The encumbrance liquidation of raw (purchase order) costs will be done by the Receipt Accounting subledger using the following transaction types:

Transaction Flow	Transaction Type
Delivery of Receipt into Inventory	Delivery to Inventory Destination
Delivery of Receipt into Work Order	Delivery to Work Order Destination
Correction to Delivery Event	Correction to Deliver for Inventory
	Correction to Deliver for Work Order
Return to Receiving	Return to Receiving for Inventory
	Return to Receiving for Work Order
Price update on Inventory Purchase Order	Cost Adjustment - PO Price Update for Inventory Destination
Price update on Work Order Purchase Order	Cost Adjustment - PO Price Update for Work Order Destination

• Encumbrance liquidation of raw costs due to price update to a purchase order is done only for the uninvoiced receipt quantities in Receipt Accounting using the transaction types Cost Adjustment - PO Price Update for Inventory Destination and Cost Adjustment - PO Price Update for Work Order Destination.

• To successfully reserve funds for invoice variance costs in projects for project-specific purchase orders to an inventory and work order destination, disable the profile option to Exclude Invoice Variances from Cost Management, if enabled.

• For description-based purchase orders without item reference and to a work order destination, the encumbrance liquidation and budgetary check will be done directly in receipt accounting using the Delivery to Expense transaction type.

Projects

• Project-specific purchase orders to an inventory or work order destination and back-to-back orders that were created prior to enabling the new transaction subtypes may exist. This can also include inventory receipts and returns. If these project costs are imported into the Project Costing subledger after enabling the new transaction subtypes, they will be subject to budgetary control in Project Costing. Funds reservation will happen in Project Costing for such scenarios irrespective of whether funds were originally reserved at the time of creating the purchase order or not. It is recommended you review and adjust your control budgets to allow for these reservations.

• Budgetary control, when enabled for this feature, is successful only for projects with project types that have not been enabled for exclusion from cost collection in the Manage Project Type Cost Exclusions task.

• The encumbrance liquidation of the purchase order raw costs will be done by Receipt Accounting, and that of burden costs associated with the purchase order by Project Costing. It is recommended that you run the relevant create distributions and accounting processes for each application without delay to ensure the encumbrances are accounted promptly.

Payables

• Before this feature, for budgetary control enabled ledgers, Payables reserved funds for invoice price variances in the applicable control budgets when the invoice was matched to project-specific purchase orders to an inventory destination. With this feature, Payables stops reserving funds for invoice price variances, and the reservation will instead be done by Project Costing. We recommend that you review your existing user-defined business flows that could be impacted by this change.

• When invoice price variances exist for project-specific purchase orders to an Inventory and Work Order destination, the funds status for such distributions will show as not applicable. These distribution lines are also not subject to further funds reservation at General Ledger.

• Before this feature, for capital projects or construction-in-process (CIP) projects, there was a possibility of capitalization or asset lines being created twice, once in Payables and again in Projects, if the accrual account is also an asset clearing account. With the project details being captured at Payables, this will no longer occur. It is recommended to review your existing user-defined business flows, if any, that could be impacted due to this change.

• View and report project details on payables invoice lines and distributions, available in the Payables Invoices > Transactions Real Time OTBI Subject Area.

Other

• Budgetary control for purchase orders related to outside processing services or contract manufacturing is not supported at this time.

• Budgetary control and encumbrance accounting is not supported for project-specific internal material transfer requisitions to an inventory destination.