[Purchasing] [Purchasing Manual] Obligations Incurred Prior to an Encumbrance (16A Violation)
Definition: Employees shall not commit the University to a purchase or agreement before the purchase order is approved or the contract is fully executed (in either case the purchase order status needs to be 450).
Policy: Obligations incurred prior to an encumbrance in the Purchasing Control System is a violation of M.S. 16A.15 subdivision 3 and Minnesota Colleges and Universities Purchasing Policy 5.14.5 Part 5.
“Funds must be encumbered prior to making an obligation through an authorized employee certifying that the accounting system shows sufficient allotment or encumbrance balance in the fund, allotment, or appropriation to meet it. An expenditure or obligation authorized or incurred prior to encumbering funds is illegal and ineligible for payment until made valid and is in violation of M.S. 16A.15, Subd. 3. An employee authorizing or making the payment, or taking part in it, is liable to the state for the amount paid. A knowing violation of M.S. 16A. 15, Subd. 3 is just cause for the employee’s removal. The state cannot agree to indemnify third parties or hold them harmless (M.S. 10.17); Minn. Const. Art. XI, Sec. 1.”
It is understood that the University has sufficient allotment of reserves and carry-forward balances that violations under $15,000 can be covered using those means and no violation would occur.
Procedure: The individual in violation must complete a 16A form. It is to be signed by the person responsible for the violation and submitted with the invoice/contract/PO paperwork to Business Services. The Director of Business Services will determine whether payment is approved.
16A violation forms are kept on file and are subject to review by internal and legislative audit.
- 16A Violation Form (pdf)