COMMITMENT AND OBLIGATION RULES

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COMMITMENT AND OBLIGATION RULES
Rule 1 Rule 2 Rule 3 Rule 4 Rule 5 Rule 6
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Terminal Learning Objective
Action Conditions Standard
Identify and apply the general and specific rules
of obligation to the posting of financial
transactions to accounting records. Given
DFAS-IN Regulation 37-1, DFS-IN Manual 37-100-FY,
and Situation Worksheet. IAW DFAS-IN Regulation
37-1 and DFS-IN Manual 37-100-FY.
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Expenditure Transaction Stages

• Authority Received.
• Commitment.
• Obligation.
• Accrued Expenditure.
• Expense.
• Disbursement.

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Authority Received

• Authorization provided via a funding document
  (i.e. Funding Authorization or Allowance Document
  (FAD) or Resource Distribution Document (RDD)),
  which allows obligations to be incurred against
  the government.

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Commitment

• An administrative reservation of funds which
  authorizes the creation of an obligation without
  further recourse to the Certifying Officer.

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Obligation

• A legal reservation of funds for which the
  government is legally bound to pay a known or
  specified amount at a specified time.

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Accrued Expenditure

• The actual or constructive receipt of goods
  and/or services, for which a valid obligation has
  been incurred.
• Establishes the Accounts Payable.

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Expense

• The total value of goods and/or services consumed
  in accomplishment of the mission or task.

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Disbursement

• A payment which satisfies a liability or claim
  against the government.
• Liquidates the Accounts Payable.

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General Obligation Rules

• Specific purpose.
• Bona fide for the current fiscal year (FY).
• Documentary evidence.
• Ensure availability of funds.
• Administrative lead time.

• Defaulted contracts.
• Charge immediately.
• Adjust promptly.
• Record at net (may record net of discount).
• Contingent liabilities.
• Simultaneous obligation and liquidation.

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Specific Purpose

• Obligate funds only for the purposes for which
  they were appropriated.

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Bona Fide Need

• Goods and/or services must meet a present need of
  the fiscal period for which the funds were
  appropriated by Congress.

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Documentary Evidence

• Input into the accounting records will be made
  only when supported by valid documentary
  evidence.
• Documents

• Travel Request/ Authorization.
• Government Bills of Lading (GBL).
• Purchase Request and Commitment (PRC).

• Purchase/Delivery Orders.
• Contracts.
• Supply Requests/Issues.
• Miscellaneous Obligation Documents.

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Ensure Availability of Funds

• Before entering into a binding agreement on
  behalf of the government, the responsible
  official must ensure that funds are available.
• Commitment stage of accounting fund certification.

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Administrative Lead Time

• Documents may be prepared ahead of Congressional
  appropriations.
• No goods or services will be accepted until
  funding authority has been received.
• Contingency Statement
• The governments obligation hereunder is made
  contingent upon Congress enacting
  appropriations.

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Defaulted Contracts

• When a contract obligated with prior year funds
  has been defaulted by the contractor, a new
  contract may be issued citing prior year funds,
  provided the original scope of the contract has
  not changed.

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Charge Immediately

• Once an obligation is incurred, it must be
  recorded against the applicable appropriation,
  whether funds are available or not.

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Adjust Promptly

• Many obligations are based on estimates.
• Differences based on more current financial data
  will be input promptly, upon receipt of
  documentary evidence.

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Record at Net

• Obligations may be recorded at the gross amount
  of the contract, less any allowed discounts.
• Example 2/10 net 30

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Commit for Contingent Liabilities

• A contingent liability (bonus) will be obligated
  only when it is actually earned by the vendor per
  the terms of the contract.

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Simultaneous Commitment, Obligation, and
Disbursement

• In some cases, the obligation will be recorded at
  the same time as the disbursement
• Examples
• Civilian Pay.
• Prompt Payment Interest Penalty.

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Elements of Resource

• 1100 - Civilian Personnel Pay (Direct U.S. Hire).
• 1200 - Civilian Personnel Benefits.
• 2100 - Travel and Transportation of Persons.
• 2200 - Transportation of Things.
• 2300 - Rents, Communication, and Utilities.
• 2400 - Printing and Reproduction.
• 2500 - Other Contractual Services.
• 2600 - Supplies and Material.
• 3100 - Equipment.
• 4100 - TDY Travel Advance.
• 4300 - Interest and Dividends.

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Personnel Pay Compensation

• EORs 1100 and 1200.
• Obligate in the month that services are received,
  whether or not paid.

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Temporary Duty Travel (TDY)

• EORs 21T1 and 21T2
• Obligate not later than the month in which travel
  commences.

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TDY Crossing FYs

• Per diem will be prorated between the different
  FYs.
• Travel by Privately Owned Vehicle (POV) will be
  charged against the appropriation that is current
  at the time of travel.
• Transportation requests are charged against the
  appropriation that is current at the time of
  issue.

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Travel Advances

• EOR 4110.
• A travel advance is never obligated.

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Permanent Change of Station (PCS) Travel

• EOR 21P3 and 21P4
• The gaining installation will incur all costs of
  PCS travel
• Obligate in month orders prepared

PCS Travel Orders
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Transportation of Things

• EOR 2200.
• Obligate in the month in which the carrier
  accepts the goods, as shown on the Government
  Bill of Lading (GBL).

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Communication Utilities

• EOR 2330.
• Obligate the entire amount of the bill in the
  month in which the billing period ends,
  regardless of the fiscal year.

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Contracts

• EOR 2310, 2320, 2400, and 2500
• Requirements contracts
• Commit when accepted
• Obligate when Delivery Orders are issued

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Severable Contracts

• Continuing in nature.
• Examples Rental/Lease Contracts, Janitorial
  Services
• lt 12 MONTHS
• Obligate current funds at time contract is signed
  for the amount of the contract.
• Crosses FY Obligate current funds at time
  contract is awarded. Option years are treated as
  new contracts.
• gt 12 MONTHS
• Obligate with appropriations of the FYs in which
  the services are rendered.
• Exception Obligate current funds when services
  are rendered in foreign countries where laws and
  customs require advance payments.

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Non-Severable Contracts

• Single undertakings
• Partial Performance No Benefit
• Obligate the full amount when the contract is
  signed
• Examples
• Paving a Parking Lot
• Painting a Building

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Purchase Orders

• lt 100,000 Obligate upon issuance to the
  vendor.
• gt 100,000 Obligate upon written acceptance
  from the vendor.

Mr. Vendor
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Obligating Contracts
UPON VENDOR ACCEPTANCE
FIXED/FIRM AMOUNT (Printing)
BASIC
UPON DELIVERY OF ORDER
REQUIREMENTS
Full amount of contract, not to exceed 12 months

SEVERABLE (Rental)
AMOUNT
NON-SEVERABLE
Full amount of contract
UPON ISSUE TO VENDOR
lt OR 100,000
PURCHASE ORDERS
UPON VENDOR ACCEPTANCE
gt 100,000
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Intra-Government Agreements

• TYPE
• Project order or an Economy Act
• Order to another military department
• Order issued to another U.S. Government agency

• OBLIGATE
• Amount of the order using funds current when the
  performing agency accepts it
• When received from the performing activity who
  accepts a contract (not when the MIPR is issued)
• Amount of the order using funds current when the
  order is issued

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Obligation RulesEORs 2600 3100

• Supplies (2600) and Equipment (3100)
• Installation activities buying through the Army
  Supply System (SSF)
• Commit Obligate - upon submission of requisition

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Obligation RuleEOR 4300

• EOR 4300- Interest Dividends.
• Obligate when purchase agreement/ invoice is paid.

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Terminal Learning Objective
Action Conditions Standard
Identify and apply the general and specific rules
of obligation to the posting of financial
transactions to accounting records. Given
DFAS-IN Regulation 37-1, DFS-IN Manual 37-100-FY,
and Situation Worksheet. IAW DFAS-IN Regulation
37-1 and DFS-IN Manual 37-100-FY.