The purpose of this bulletin is to provide guidance to agencies regarding the Office of the State Comptroller’s (OSC) policy requiring a full encumbrance on contracts.

OSC is committed to ensuring that contractual obligations to contractors can be met, and accordingly , requires a full encumbrance on all contracts which are submitted for the Comptroller’s approval. Full encumbrance means the full amount that is expected to be obligated during the period for which the appropriation is provided.

Determining the Amount to Encumber:

To determine the amount which must be encumbered, the source of funds must be considered:¹

• Generally, unless exceptions are provided in budget bills or consolidated law(s), state operations and aid to localities appropriations are provided for the period April 1 – March 31. Therefore, for most contracts, the amount which must be encumbered is the amount that is expected to be obligated through the end of the State Fiscal Year.
• For contracts funded with Federal funds (enacted in state purposes and aid to localities appropriations in special revenue funds – federal), the amount appropriated in the State budget is the amount estimated to be obligated through March 31 of the State fiscal year in which the appropriation(s) is enacted. Therefore, the minimum amount which must be encumbered is the estimated liability through March 31.²
• For contracts which are funded from appropriations to the State University and City University, the amount of funds which must be encumbered is the amount that is expected to be obligated during July 1 – June 30.
• Contracts which are funded from the Community Projects Fund must be encumbered for the full amount of the contract, since such appropriations are generally provided for payment to recipients equal to the full amount of the contract(s).
• Contracts which are funded from Capital Projects appropriations, regardless of fund source, must be encumbered for the total contract amount, since such appropriations are typically for the total cost of the project to be undertaken.

Agencies should work with the Division of the Budget to ensure that the full encumbrance is available at the time the contract is submitted to OSC. Specific encumbrance procedures to be followed by State agencies at the end of the State fiscal year are set forth in OSC Bulletin G-163.

OSC may consider modifications to its encumbrance policy in certain circumstances where such modification is consistent with OSC’s overall objective of ensuring that contractual obligations to contractors can be fulfilled. For example, when a State budget has not been enacted by the start of the State’s fiscal year, interim procedures may be established. Agencies may request an exception to the policy in other situations where a full encumbrance is not feasible, for example, if federal grant award authority is temporarily unavailable.

The two most common situations in which a State agency might request that OSC approve a contract with less than a full encumbrance are:

• The Federal budget is not passed and the program is receiving federal funding through continuing resolutions, which commit limited funding for short periods of time and allow the program to continue pending final approval of a federal budget.
• The availability of Federal funds does not correspond to the agency’s contract term, for example, if the contract term overlaps two Federal fiscal years, or if the grant award funds are released to the agency at intervals during the grant period.

Note: The unavailability of sufficient funds due to the absence of a certificate(s) approved by the Director of the Budget is not acceptable justification for an exception to the encumbrance policy. Further, an agency’s inability to determine the exact amount of a contract at the time of award is not, in and of itself, sufficient justification for an exception. For such contracts, the agency will be required to estimate the amount of liability that will be incurred during the appropriation period, and provide a full encumbrance for that amount.

Agency Requirements:

If an agency submits a contract to OSC with insufficient funds encumbered, the contract may be returned non-approved, unless the following information and documentation accompanies the contract when it is submitted for approval:

1. The basis for requesting an exception to OSC encumbrance policy, including:

• the full encumbrance amount, i.e. the estimated obligation expected to be incurred through the end of the appropriation period, and an explanation of how this amount was calculated;
• anticipated time frames for when the balance of the full encumbrance amount will become available and encumbered.

2. A copy of the Federal Notice of Grant Award (if the exception is being requested because of Federal funding delays). The agency must specify the portion of the Grant Award which is allocated to fund the identified contracts, and must demonstrate that the amount allocated ensures that the obligations to contractors can be fulfilled.

Grant contracts must comply with the requirements described above. In addition, for grant contracts that are fully or partially funded with Federal funds, if the amount encumbered is less than the total liability under the proposed agreement, the agency must provide the following in order to demonstrate how payment obligations to the contractor(s) will be met:

• Anticipated timeframes for when the balance of the funds needed for the full contract period will be available;
• A comparison of when payments will be due under the terms of the contract(s) to when funds will be available.

Agencies should complete the attached template in order to provide the required information for programs with multiple grant awards. The information should be submitted prior to the submission of the first contract sent to OSC for approval and should then accompany each contract when it is submitted for OSC approval, as long as the information provided remains valid, e.g. the anticipated date for Federal funds has not passed.

For questions regarding this bulletin, please contact:

New York State Office of the State Comptroller
Bureau of Contracts
110 State Street , 11 th Floor
Albany NY 12236
(518) 474-4622

[1]These policies and procedures do not apply to the limited number of agencies which submit contracts to OSC for prior approval but whose transactions are not part of the Central Accounting System.

[2]State Finance Law Section 40 (subd 2 d) provides that when the grant period of such Federal funds extends beyond March 31 st of the State fiscal year in which the appropriations are enacted, the appropriation shall be available for liabilities incurred during the grant period after March 31 st. While this does not change the minimum amount required to be encumbered, in such circumstances, if the State agency has sufficient funds available to encumber the estimated obligation beyond March 31 st , OSC will allow such an encumbrance.