What is an Unencumbered Balance?

An unencumbered balance is that portion of an appropriation that has not yet been spent or tagged for use. Thus, it is the amount of money remaining that is available for use. The unencumbered balance tends to be quite small towards the end of a budget period, so managers tend to pay more attention to it at that time, to keep from spending an excessive amount of funds. The concept is most commonly employed in governmental accounting.