Encumbrance Journal Entries for Escrowed Amounts In October of 2008, the North Carolina Department of Public Instruction requested that the escrowed amounts be included in the Monthly Financial Report File. Prior to this request the escrowed amount was only maintained in the Employee Assignment File. No journal entries were made for the escrowed amounts. The process of creating encumbrance journal entries can be automatically performed when the Payroll Post PR to AP program is run and again when the General Ledger Monthly Financial Report program is run. SunPac now provides programs that will allow the user to manually run the process of creating encumbrance journal entries for the escrowed amounts. Each time the Post PR to AP, the Monthly Financial Report, or the Post Escrow J/Es program is run, the program will read through the Employee Assignment File and find the escrowed amounts. The program will calculate the associated liabilities. Then the program will compare the escrowed amounts and liability information with the existing encumbrance entries in the ledger and make an entry for the net change. This section of the documentation will discuss the set up required and the basic function of the feature. 1
System File Parameters There are a couple of system file parameters that will affect the process of creating encumbrance journal entries for escrowed amounts. This section of the documentation will review those system file parameters. Fund Definitions (#7) The account codes used in the encumbrance journal entries will be created based on the Escrow expense and liability codes set up on the Fund Definitions parameter. A screen similar to the next screen will appear when you press the F5 function key from the Fund Definitions Main Screen. Use this screen to set up the escrow related account codes that will be used in the encumbrance entries. The initial values for these accounts will default from the values previously define for the corresponding accrual accounts. YOU SHOULD USE THE ACCOUNT CODES THAT FALL WITHIN DPI S GUIDELINES. Question mark logic may be used on these fields. PLEASE NOTE: The expense accounts are generated by first using the accounts for a normal pay run and then applying the following expense code overrides. Typically these values should be all?. 2
Expense Account Escrow FICA Acct Escrow Retmnt Acct Escrow Salary Acct Escrow ER Ded Acct Enter the code you would like to use as the FICA expense account. Question mark logic may be used in this field. Enter the code you would like to use as the retirement expense account. Question mark logic may be used in this field. Enter the code you would like to use as the salary expense code. Question mark logic may be used in this field. Enter the code you would like to use as the employer matching miscellaneous deduction account code. Question mark logic may be used in this field. PLEASE NOTE: Liability accounts are generated by using the corresponding expense account code generated from the setting above and then applying the following liability code overrides. Liability Account Escrow FICA Acct Escrow Retmnt Acct Escrow Salary Acct Escrow ER Ded Acct Enter the code you would like to use as the FICA liability account. Question mark logic may be used in this field. Enter the code you would like to use as the retirement liability account. Question mark logic may be used in this field. Enter the code you would like to use as the salary liability code. Question mark logic may be used in this field. Enter the code you would like to use as the employer matching miscellaneous deduction account code. Question mark logic may be used in this field. 3
Payroll Process and Run Controls (Option #14) The PR-Process and Run Controls parameter contains the Escrow Settings that will control the escrow encumbrance journal entry feature. A screen similar to the next screen will appear when the F9 function key is pressed from the main Process and Run Controls screen. Enter Funds to Process Use this field to specify the funds which you would like to process. If encumbrance entries should be created for employees that are paid from a specific fund, enter that fund in this field. This should be all of the funds that are normally reported on the Monthly Financial Report. Enter Deduction Types to Omit EE Amt If you would normally omit a certain type of pretax deduction, such as I for insurance, for the employee s portion in Calculations on an installment run, enter that type here. NOTE: EE Deductions are only important in situations where they impact the Retirement or FICA taxable grosses. Enter Deduction Types to Omit ER Amt If you would normally omit a specific type of deduction, such as I for insurance, for the employer s portion in Calculations on an installment run, enter that type in this field. 4
Require that Deductions be Active Pro-rate Deduction Amounts Create Missing G\L Accounts If you are including deductions and you would like to require that the deduction be active, enter Y in this field. This means the deduction must be active as of the date for which the encumbrance process is run. If you are not using Start/Stop dates on deductions you can enter an N in this field. If you would like the deduction amounts to be prorated on a 10 month basis, enter a Y in this field. If you do not want the deduction amounts to be prorate and just want the full two months deduction amounts to be calculated, enter an N in this field. The encumbrance process allows question mark logic on the escrow expense and liabilities accounts, so when the process is run the program will be putting together the account code combinations and making the encumbrance entries to those account codes. The ledger will be updated and the account master file will be updated. If an account code is missing from the account master file, enter a Y in this field to have the program automatically create the missing accounts in the account master file. Enter an N if you do not want the program to automatically create the missing account codes. Maintain Encumbrance Balances in GL This parameter controls the entire escrow encumbrance process. If you would like SunPac to maintain the encumbrance balances for the escrowed amounts, enter a Y in this field. When this flag is set to Y the encumbrance process will be run when the Post PR to AP program and Monthly Financial Report program is run. For NC customers, we strongly recommend you set this flag to Y. PLEASE NOTE: The escrowed amounts must be reported on the Monthly Financial Report per DPI s request. In situations where the above flag is set to N, the Monthly Financial Report program will temporarily create the encumbrance journal entries, produce the MFR file, and then delete the entries that were just produced. 5
Escrow Balance on Assignment File The Encumbrance process will read through the assignment file to find the escrowed amounts. The following is an example of the Assignment screen that contains the escrowed balance for an employee. Notice the installment escrow amount is located in the lower right corner. 6
Programs that Automatically Run the Encumbrance Process There are two programs that will automatically run the Encumbrance Process for Escrowed Amounts. Those programs are the Post PR to AP program located on the Payroll Main Menu and the Monthly Finance Rpt location on the General Ledger Menu. The Escrow programs (#51 - #53), located on the Payroll Year End Menu, do not need to be run unless the user would like to manually run the Encumbrance Process. Each time the Post PR to AP and the Monthly Finance Rpt programs are run, the program will read through the Employee Assignment File and find the escrowed amounts. The program will calculate the associated liabilities. Then the program will compare the escrowed amounts and liability information with the existing encumbrance entries in the ledger and make an entry for the net change. Miscellaneous Journal Report If you would like to print a report to see the journal entries that are created for the escrowed amounts, go to the General Ledger Menu and select the Miscellaneous Journal Report (option #2). A screen similar to the next screen will appear. Change the first option, Enter Misc Journal, to EN. Enter the desired date range and press the enter key. The following is an example of the report. 7
The program will debit the expense accounts and credit the liability accounts. 8
Escrow Programs (Manual Process) The Encumbrance Process for Escrowed Amounts is normally run automatically during the Post PR to AP and the Monthly Finance Rpt. The only reason you would run the escrow options on the Year End Menu would be when you want to make a major correction or want to ensure you have up to the minute encumbrance balances. It is recommended that you contact SunPac Support before running the Build Escrow File, Clear Escrow File, Post Escrow JEs, and/or Delete Escrow JEs programs. Build Escrow File (Option #35/50) The Build Escrow File program will read through the Employee Assignment File and find the escrowed amounts. The program will calculate the associated liabilities. The program will then create a file that contains the totals per account. The program will create a file called PAYESC. A screen similar to the next screen will appear when the Build Escrow File program has been selected. It is recommended that you contact SunPac Support before running the Build Escrow File program. Just press enter and the program will run. Once you have run this option, you will need to run Post Escrow JEs (option #52) program in order to see the changes in your general ledger. 9
Clear Escrow File (Option #35/51) Use this program to zero out the dollars in the work file. A screen similar to the next screen will appear when this option has been selected. It is recommended that you contact SunPac Support before running the Clear Escrow File program. Press the enter key to run the program. PLEASE NOTE: Running the Clear Escrow File (#51) program and the Post Escrow JEs (#52) program has the effect of reversing all escrow related journal entries. Essentially this tells the system that there should be no escrow balances so net change entries are produced to reverse all escrow balances. 10
Post Escrow Journal Entries (Option #35/52) The Post Escrow J/Es option will compare the information in a special workfile against the information in the ledger and make a journal entry for the net change. A screen similar to the next screen will appear when you have selected this option. It is recommended that you contact SunPac Support before running the Post Escrow JEs program. Just press the enter key to run the post program. Running the Build Escrow File program and then immediately running the Post Escrow J/Es program will get you updated to the most current escrow information. 11
Delete Escrow Journal Entries (Option #35/53) Use this option to completely delete all previous encumbrance journal entries for the escrowed amounts. A screen similar to the next screen will appear when this option has been selected. It is recommended that you contact SunPac Support before running Delete Escrow JEs program. Press the enter key and the program will run. You can run the Miscellaneous Journal Report for the EN journal to verify all entries were deleted. The report should be blank. 12
Things to Know about the Encumbrance Entries for Escrowed Amounts At year-end, when the Post Accruals To G/L (option #35/8) program is run, the encumbrance journal entries for the escrowed amounts will be reversed. The Escrow process will be checking the months paid, months employed, and installment indicators on the assignment file to determine whether the amounts should be included in the encumbrance entries. This is important during the installment pay out periods. During installment payoff months, no escrow will be encumbered. Whether escrow balances are encumbered for inactive employees or not, is controlled by the parameter Pay Installments On Inactives? in the System File option #14 PR - Process & Run Controls. 13