Lessons · Accounting · what is actually available to spend
What is actually available to spend
Available budget is the appropriation, less what has been spent, less what has been committed but not yet spent. Any figure that ignores the commitments is not the amount available and will let somebody overspend while reading a report that says they cannot.
Hone is a place to practise a career, one idea a day. This is one of its lessons, written out in full and free to read without an account.
In beta. This lesson was written for Hone and has not yet been checked by a qualified accountant. Practice material, not professional advice. What that means.
What it is for
This is the number the whole road has been building towards, and it is the one a manager needs before approving anything. The three-term arithmetic is trivial; the discipline of never quoting the two-term version is what keeps an organisation inside its limits.
How to think about it
Appropriation, minus expenditure, minus encumbrances. Report that. If a system only shows two of the three, the third has to be found before the figure means anything.
Worked example
Appropriation 480,000What was authorised.
Less expenditure 312,000What has been spent.
Less encumbrances 86,000What has been ordered and not yet invoiced.
Available = 82,000Ignoring the commitments would report 168,000, and somebody would spend it.
Your turn
Appropriation 480,000, expenditure 312,000, encumbrances 86,000. Write the available line.
Available = 480,000 - 312,000 - = 82,000
Solve one, graded on the server
The trap
Quoting appropriation less expenditure as the amount available. It is always larger than the truth, it is the figure most systems display by default, and it is the single commonest route to an overspend in an organisation that had a control designed to prevent one.