What is an encumbrance in the context of school budgeting?

In the context of school budgeting, an encumbrance refers specifically to a charge placed on an account when an order is made or a check is issued. This accounting mechanism helps schools manage their budgets by reserving funds for anticipated expenses. By encumbering funds, the school ensures that money is set aside for specific purchases or services, providing a clearer picture of the remaining available budget. This practice aids in preventing overspending and allows for more accurate forecasting and planning for future financial obligations.

Understanding encumbrances is essential for effective financial management in schools, as it enhances transparency and accountability in fiscal practices. This concept is vital in ensuring that expenditures align with budgetary constraints while still meeting operational needs.