1. APPLY OBLIGATION RULES
IDENTIFY KEY FINANCIAL ROLES AND MISSIONS OF DOD, DA, AND ASA(FM&C)
Publish and Process (10 Minutes)
During this phase of the Army Learning Model the instructor will solicit responses of the student’s reaction to the concrete experience. The students will reflect on their experience and knowledge of the topic and they will begin a reconciliation of where they are and, if successful, where they will be at lesson end.
The critical portion of this part of the ALM process is to force the students to reflect. As the instructor you can achieve this by asking a series of thought influencing questions, for example:
Instructor Note:
What is the importance of Applying Obligation Rules?
Give examples of Applying Obligation Rules.
If you give your spouse money to buy groceries, and they spend it on TV, could this cause a problem? How can this be relate to Applying Obligation Rules?
Having the students think critically is the ultimate goal of publish and process. Force the students to explain their answers; meaning, how and why did they arrive at the solution to the questions.
You should also be looking for responses that will help the student’s transition from publish and process to generalize new information. During this process, remind the students of lesson objectives as they transition from publish and process into generalize new information.
NOTE: Incorporate the political, military, economic, social, information, infrastructure, and physical environment and time (PMESII&PT) into each lesson and classroom work as appropriate. Instructor will illustrate them with appropriate examples from the Current Operating Environment (COE) as it pertains to the lesson.
Motivator: As a resource manager, it is important to know where and how your organization fits into Planning, Programming, Budgeting and Execution process.
To succeed, you must know the DoD, DA, and ASA(FM&C) organization structures. Knowledge of these structures will enhance your understanding of how resources are allocated and how resource management structures influence or facilitate resource allocation.
The fund holder is primarily responsible for managing obligations. This includes:
 A. Reviewing obligation documents for compliance.
 B. Ensuring the accounting classification cited on the obligation document is appropriate for the stated purpose of the obligation.
 C. Ensuring the amount obligated meets statutory and regulatory provisions.
 D. Ensuring the obligation is recorded timely and accurately. 
Accounting activities are responsible for ensuring the integrity and accuracy of the obligation information. Accounting activities will not accept, process, or maintain obligation documentation that fails to satisfy applicable statutory and regulatory guidance. In no instance will the accounting activity fail to record a valid obligation.
Whether appropriations are legally available for obligation and expenditure depends upon the following: PTA
 The purpose of the obligation must be one for which the appropriation was made (31 United States Code (U.S.C.) 1301(a)).
 The obligation must be incurred within the time that the appropriation was made available for new obligations (31 U.S.C. 1502(a)).
 The obligation may not exceed the amount appropriated by statute, nor may it be incurred before the appropriation becomes law, unless otherwise provided by law (31 U.S.C and 41 U.S.C. 11).
Show Slide 2

2. Terminal Learning Objective
Apply the general and specific rules of obligation to the posting of financial transactions to accounting records.
Given a summary sheet containing DFAS-IN Regulation 37-1,
DFAS-IN Manual FY, DoDFMR Vol 3 and slides.
Identify the stages of expenditure transactions and the 11 general rules of obligations; determine the specific rules of obligation.
Action:
Conditions:
Standard:
SHOW SLIDE 2: STATE TERMINAL LEARNING OBJECTIVES
Safety Requirements:  Everyone is responsible for safety. A thorough risk assessment must be completed prior to every mission or operation.
Risk Assessment Level: Low
Environmental Considerations: NOTE: It is the responsibility of all Soldiers and DA civilians to protect the environment from damage.
Environmental protection is not just the law but the right thing to do. It is a continual process and starts with deliberate planning. Always be alert to ways to protect our environment during training and missions. In doing so you will contribute to the sustainment of our training resources while protecting people and the environment from harmful effects.
Required Material: DFAS-IN Regulation 37-1, DFAS-IN Manual FY, DoDFMR Vol 3, slides Obligation Rule Summary Sheet
Evaluation: Students will take a comprehensive test at the end of Week 1. Students must score 70% or higher and International officers must score 60% or higher.
Show Slide 3

3. Stages of a Transaction
Authority Received
Commitment
Obligation
Accrued Expenditure
Expense
Disbursement
SHOW SLIDE 3: Stages of a Transaction
STAGES OF AN EXPENDITURE TRANSACTIONS, page 1 of the OBLIGATION RULES SUMMARY SHEET
Add : OBLIGATIONS IN THE ABSENCE OF APPROPRIATIONS
These are the different stages and we will talk about each one individually
Show Slide 4

4. 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.
SHOW SLIDE 4: Authority Received
Authority received is the first stage of an expenditure transaction.
This is the authority provided on a funding document which allows obligations to be incurred against the government.
So you can’t make obligations for the government until you have authorization to do so.
Show Slide 5

5. Commitment
An administrative reservation of funds which authorizes the creation of an obligation without further recourse to the Certifying Officer.
SHOW SLIDE 5: Commitment
Commitment is the second stage of an expenditure transaction
Key term is Administrative reservation of funds - it is not binding - you may not actually disburse or spend money - just reserving the ability to.
Show Slide 6

6. Obligation
A legal reservation of funds for which the government is legally bound to pay a known or specified amount at a specified time.
SHOW SLIDE 6: Obligation
Obligation is the third stage of an expenditure transaction
An obligation is a legal reservation of funds - you must pay this - legally bound to pay. An obligation is properly recordable only when supported by documentary evidence.
Documentary evidence:
is defined as a binding agreement, in writing, between the parties involved, for a purpose authorized by law.
The agreement must be negotiated prior to the expiration of the appropriation. Also, the agreement must identify specific goods to be delivered, real property to be purchased or leased, or work/services to be performed.
Show Slide 7

7. Accrued Expenditure
The actual or constructive receipt of goods and/or services, for which a valid obligation has been incurred.
Establishes the Accounts Payable.
SHOW SLIDE 7: Accrued Expenditure
Accrued Expenditure is the fourth stage of an expenditure transaction.
This is the actual or constructive receipt of supplies or services for which an obligation has been incurred - actually physically received the goods or service
Date when prompt payment begins
This stage creates an accounts payable for the goods.
Show Slide 8

8. Expense
The total value of goods and/or services consumed in accomplishment of the mission or task.
SHOW SLIDE 8: Expense
Expense is the fifth stage of an expenditure transaction
When you are using the product you are expensing it - if you buy a big pack of paper - and you use a few sheets every day - you are expensing the paper at a rate of a few sheets every day.
For Army purposes - In OMA - we record accrued expenditure and expenses at the same time (AE/E).
This is because we are not depreciating the value of the goods over a period of time, we are accruing and expensing at the same
Show Slide 9

9. Disbursement
A payment which satisfies a liability or claim against the government.
Liquidates the Accounts Payable.
SHOW SLIDE 9: Disbursement
Disbursement is the sixth stage of an expenditure transaction
Authority received - Ask wife if we can go to Outback Steakhouse on Friday - she says “Yes - you may spend the money” - Authority received!
Commitment - Since I have the authority received I call and make a reservation at the Outback and I place $50 in an envelope and place it on the refrigerator - I reserved the money to spend at Outback on Friday - no obligation to spend it - just reserved the money
Obligation - On Friday - I take the $50 and put in my pocket and drive to the Outback Steakhouse. I don’t have an obligation to spend it - I can still use it to go somewhere else or even to fix a flat tire if we get on on the way.
Once I sit down and order my food - I create an obligation - I can’t just run out and not pay - I have a legal responsibility to pay for what I order / an obligation
Accrued Expenditure - When Outback Steakhouse brings me my food - I am accruing expenditure - physical receipt of goods
Expense - Once I start to eat my food I am expensing it - the bill is the total expense or total value of goods consumed.
Disbursement - When I give the waitress the $50 and pay my bill (or liability) I am disbursing.
Show Slide 10

10. 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.
SHOW SLIDE 10: General Obligation Rules
NOTE: Refer students to page 2 of the Obligation Rules summary sheet and asafm.army.mil>DFAS 37-1>chapter 8>Tables 8-1 thru 8-7.
Rules of Obligation
Obligating Current Year Funds for Prior Year Needs. Do not obligate current year funds for the needs of a prior year. If a requisition was not submitted in the prior year to satisfy a need in that prior year, and the need continues to exist in the current year, obligate current year funds.
Unrecorded Prior Year Obligations. If an obligation had been incurred in the prior year and the obligation can be lawfully funded from prior year funds, but the obligation was not recorded during the prior year; use prior year funds to record the obligation.
Severable Service Contracts / Non-Severable Contracts / Travel Orders / Protests / Procurement of Information Technology / Supplies / Canceled Appropriations / U.S. Army Corps of Engineers (USACE) Contingencies /
Obligations for Prompt Pay Interest
There are 11 general rules of obligation
Note: Change format too busy. Identify exactly what are the general and specific obligation rules.
Note: Check the regulation/guidelines to see what terminology for obligation “rules”.
Note: Look in 37-1 to confirm definition are still valid.
We will talk about each one individually
Show Slide 11

11. Specific Purpose
Obligate funds only for the purposes for which they were appropriated.
Supplies
SHOW SLIDE 11: Specific Purpose
NOTE: Refer students to page 3 of the Obligation Rules summary sheet
Obligate funds only for the purposes for which they were appropriated
Title 31 U.S. Code, Section 1301 (a) states, “Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law”.
Ex -If $20,000 was received specifically for civilian payroll - you cannot use those funds to purchase supplies and not pay your people.
This falls under the “Can I buy this? - Show me where it says I can’t - Jag is now saying - show me where it says you can”
Show Slide 12

12. Bona Fide Need
Goods and/or services must meet a present need of the fiscal period for which the funds were appropriated by Congress.
SHOW SLIDE 12: Bona Fide Need
NOTE: For slides Refer students to page 2 of the Obligation Rules summary sheet
Goods and/or services must meet a present need of the Fiscal Period for which the funds were Appropriated by Congress
Appropriated by Congress = intent - Congress doesn’t give you money for FY01 to be spent on FY02.
An example of Bona Fide need - The date is 1 Sep 99. I buy 5 pallets of paper - I only use 2 cartons. I have 4 pallets that will be used in the next Fiscal Year - I have a violation of bona fide need.
There are exceptions to this rule such as when down payments are required or lead time is necessary to ensure goods or services are received when needed
Show Slide 13

13. 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.
SHOW SLIDE 13: Documentary Evidence
All obligations must be supported by documentary evidence.
Some examples of documents listed.
Don’t obligate until you have the contract in your hand.
Need to have an audit trail.
Miscellaneous Ob Docs - used at year end with the spending spree - good for 30 days - temp doc supposed to get original within 30 days
Show Slide 14

14. 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.
SHOW SLIDE 14: Ensure Availability of Funds
Before an agreement can be made which binds the government, the responsible official must ensure funds are available.
(The establishment of an obligation in excess of available funds violates Title 31, U.S. Code, Section 1517, (The Anti-Deficiency Act).
Show Slide 15

15. 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 government’s obligation hereunder is made contingent upon Congress enacting appropriations.”
SHOW SLIDE 15: Administrative Lead Time
Imagine the nightmare that would occur if you couldn’t start working on a contract until 1 Oct for services that had to start on 1 Oct.
Some transactions require the processing of obligation documents before funds become available in the next fiscal year. These types of obligations require administrative lead time to ensure that the goods or services are received when needed.
Congress realizes this and has made an exception to the bona fide need rule - so that you can enter into contracts before 1 Oct to start 1 Oct but the contract must say “Subject to the availability of funds”
- that way we aren’t just not doing anything until 1 Oct for contracting.
The phrase the book uses is:
"The government’s obligation hereunder is made contingent upon Congress enacting appropriations.“
No services or supplies will be accepted from the contractor until funding authority becomes available
Show Slide 16
MAY 2002

16. 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.
SHOW SLIDE 16: Defaulted Contracts
This rule governs cases when the contract is terminated due to contractor default.
An example We are getting the parking lot paved and the company goes belly up half way through and the contract is defaulted.
- If we are in the next fiscal year, we can use the money that was originally obligated in the prior year to pay a new contractor to finish the job - we can’t change the scope or add stuff (ie- ok finish the job but also pave someone else's parking lot).
These are the rules / restrictions placed on this:
- The original contract was made in good faith
- A bonafide need for the unfinished work exists when the replacement contract is executed
- The replacement contract is executed without undue delay
- There is no change to the scope of the contract
- The replacement contract is awarded to a different contractor
If additional funds are needed and prior year funds are not available, current year funds may be used as necessary
Show Slide 17

17. Charge Immediately
Once an obligation is incurred, it must be recorded against the applicable appropriation, whether funds are available or not.
SHOW SLIDE 17: Charge Immediately
You have an obligation for the government - you must reflect it immediately
If you don’t have the “money” - you can’t just not post the obligation  - it must still be posted – even if it causes you to have a reportable anti-deficiency violation
An over-obligation is not avoided by failing to post accounting records.
The best example is for installation bills (electricity, water, gas….). This is a debt incurred by the government.
Show Slide 18

18. Adjust Promptly Many obligations are based on estimates.
Differences based on more current financial data will be input promptly, upon receipt of documentary evidence.
SHOW SLIDE 18: Adjust Promptly
Example – estimate TDY - Don’t know the cost for sure until you settle
The documentary evidence (actual amounts) is your travel settlement
·     A traveler goes TDY for 10 days and the TDY is estimated at $ The traveler receives an advance of $ and his/her final settlement is for $ The total cost of the TDY trip was $ When this becomes known an adjustment is necessary to the accounting records. A $50.00 deobligation is done so that the $50.00 may be used at a later date.
A traveler goes TDY for 15 days and the TDY is estimated at $1, The traveler receives an advance of $ and his/her final settlement is for $ The total cost of the TDY trip was $1, When this becomes known an adjustment is necessary to the accounting records. An additional $ needs to be obligated so as to preclude a violation of the anti-deficiency act
Show Slide 19

19. Record at Net
Obligations may be recorded at the gross amount of the contract, less any allowed discounts.
Example: “2/10 net 30”
SHOW SLIDE 19: Record at Net
2 ways to do this – either is ok – based on local policy
Note: Redesign slide to show record at gross/net rules.
2/10 net 30 = receive 2% if paid within 10 days of receiving invoice - or else pay the full amount (Net) at 30 days past date you receive invoice. (reality is its the 11th day past)
1st way is the more conservative way – Record the Gross amount and then deobligate later if necessary
Example: If obligation document amount is for $ , record at that amount. If the payment can be made within 10 days of receiving invoice and a discount if offered (2/20 net 30), a deobligation transaction must be posted to reduce the obligation by $
NOTE: This can not be done in GFEBS! 2nd way is to record the discount amount and then Obligate more money later if necessary
The best policy is to record at gross. Then you will ensure that you have obligated sufficient funds. For our classroom purposes, we will record at gross.
Show Slide 20

20. 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.
SHOW SLIDE 20: Commit for Contingent Liabilities
NOTE: For slides Refer students to page 3 of the Obligation Rules summary sheet
A contingent liability (ie -bonus) is initially recorded as a commitment at the time it is first recognized. An obligation for that bonus is recorded only when the conditions for it have been met
Could be a reward if a contract is completed early
(a) EXAMPLE: In May you sign a contract for $10, with a $ bonus if the contract is completed by 1 August.
How much is committed? $10,
How much is obligated? $10,
On 1 August the contract is completed, what is your action at this time? Obligate the bonus of $
If don’t get done on time then de-commit and use somewhere else.
Show Slide 21

21. 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.
Transportation.
Travel.
SHOW SLIDE 21: Simultaneous Commitment, Obligation, and Disbursement
Some cases the obligation is recorded at the same time as the disbursement.
Examples are prompt payment interest penalty, and civilian payroll. This principle also applies when a valid obligation has not been recorded and the transaction is in the disbursement stage. Thus, if we are about to record a disbursement for which no obligation or accrual exists, this rule would apply.
For Civilian Pay, a Miscellaneous Obligation Document (MOD) is used at the beginning of the month to obligate the estimated civilian payroll expense for the entire month. This ensures that funds will always be obligated for the government’s liability through the end of the month.
Civilian employees are paid every 14 days. This 14 day period is called a pay period and consists of 10 work days. When a payroll is disbursed which covers a pay period falling over two fiscal years, the payroll amount will be distributed properly between the appropriate fiscal years.
The Prompt Payment Act states that the government should pay its bills when they are due or incur a penalty for lateness. Thirty days after the services or products have been accrued and expensed is considered an acceptable payment date.
A service contract for bus transportation: when an installation has a bus contract, and the contract ends at the end of the FY, but you know the contract is going to be renewed. You will commit, obligate, and disburse upon receipt of the new contract.
Travel is just an estimates. When an government employee goes TDY and settles their travel vouchers, you may have to make adjust to commitment and obligation amounts prior to the disbursement.
Show Slide 22

22. Commitment Item
Civilian Personnel Pay (Direct U.S. Hire) Civilian Personnel Benefits Travel and Transportation of Persons Transportation of Things Rents, Communication, and Utilities Printing and Reproduction Other Contractual Services Supplies and Material Equipment TDY Travel Advance Interest and Dividends.
SHOW SLIDE 22: Elements of Resource
Specific rules of obligation pertain to specific elements of resource. We will now discuss or you will review, the rules of obligation as they apply to various elements of resource.
Changed to commitment item/cost element.
Show Slide 23

23. Personnel Pay & Compensation
Commitment Items 1100 and 1200.
Obligate in the month that services are received, whether or not paid.
SHOW SLIDE 23: Personnel Pay & Compensation
NOTE: Page 3 of the Obligation Rules summary sheet
Obligations for the amounts payable to military services members and civilian employees must be recorded in the month in which earned. These obligations must be supported by written administrative determinations of the amounts of the liabilities incurred for personal services based on payroll or personnel records. Payroll charges based on salaries and wages, (such as civilian living and quarters allowances, equalization allowances under 5 U.S.C. § 3584, and the employer’s share of contributions to the retirement fund, insurance premiums, and FICA taxes) also are obligations at the time that salaries and wages are earned. In the event a payroll period covers portions of two calendar months, the proportionate amount accruing within each month must be recorded as an obligation applicable to that month. Enlistment bonuses, and allowances to military members for subsistence, quarters and clothing, as well as civilian uniform allowances and incentive awards, are obligated in the month that they become payable to the member or employee.
Obligations for the amounts payable to military services members and civilian employees must be recorded in the month in which earned.
Civilians paid every 2 weeks (26 pay periods) – not 2 times a month (like military – 24 pay periods)
Obligate the month they work not when they get paid
Services have been rendered - it is owed to the employees
Includes Pay and benefits
A Miscellaneous Obligation Document (MOD) is used at the beginning of the month to obligate the estimated civilian payroll expense for the entire month. This ensures that funds will always be obligated for the government’s liability through the end of the month.
Civilian employees are paid every 14 days. This 14 day period is called a pay period and consists of 10 working days. When a payroll is disbursed which covers a pay period falling over two fiscal years, the payroll amount will be distributed properly between the appropriate fiscal years
Show Slide 24

24. Temporary Duty Travel (TDY)
Commitment Items 21T1 and 21T2
Obligate no later than the month in which travel commences.
SHOW SLIDE 24: Temporary Duty Travel (TDY)
Page 4 of the Obligation Rules summary sheet
Tentative obligations for temporary duty travel must be recorded from written administrative determinations, based on the travel authorizations issued, for the estimated transportation to be purchased and the estimated reimbursement to be earned by the traveler for per diem allowances, use of privately owned vehicles, and incidental travel expenses. When travel is performed under a blanket authorization (with the itinerary not definite), the amount of the tentative obligation recorded in the current month must not exceed the estimate of the travel expenses to be incurred to the end of the current month
If travel begins on 10 July then the estimated TDY cost can be obligated anytime prior to the last day of July.
Normally obligated the day orders are cut.
Commitment Item 21T1 - for TDY transportation payments to vendors. This includes transportation payments to commercial vendors and transportation offices (i.e., payments to carriers via SATO, LOPA, GTS, MAC, etc).
Commitment Item 21T2 - for all other TDY charges (includes per diem, vehicle rental, parking fees, privately owned vehicles (POV) use, individually procured airline tickets.)
Show Slide 25

25. 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.
SHOW SLIDE 25: TDY Crossing FYs
When the period covered by the travel authorization extends beyond the end of the fiscal year, and the travel costs are being paid by means of an annual appropriation or the final year of availability of a multiple year appropriation, the amount of the recorded obligation must be the cost of transportation purchased and reimbursements earned to the end of the fiscal year.
If travel covers two fiscal years there are three things to remember:
Per Diem is prorated between the fiscal years - bona fide need
- On your TDY orders it will have 2 different accounting classification lines on them.
- Broken down and it will say “subject to availability of funds”
Travel by Privately Owned Vehicle (POV) is charged against the appropriation current at the time of travel. Should be broken down - isn’t always done right - but that is what is supposed to be done.
If a transportation request (TR) is issued for a round-trip ticket, the full amount of the TR is obligated against the appropriation current at the time of the purchase.
If 2 one way tickets - then broken down by FY.
Show Slide 26

26. Travel Advances Commitment Item 4110.
A travel advance is never obligated.
SHOW SLIDE 26: Travel Advances
Why don’t we obligate a travel advance?
It is never obligated - why - it is a disbursement not an obligation
The obligation for the TDY was recorded when the Per Diem and Travel costs were obligated using the 1610 document
Show Slide 27

27. Permanent Change of Station (PCS) Travel
Commitment Item 21P3 and 21P4
The gaining installation will incur all costs of PCS travel
Obligate in month orders prepared
PCS
Travel
Orders
SHOW SLIDE 27: Permanent Change of Station (PCS) Travel
Note:
At the time permanent change of station orders are issued for civilian and military personnel, obligations must be recorded against current appropriations for all authorized reimbursable expenses incidental to relocation at the request of the USG and for transportation requests and bills of lading expected to be issued. The only exception is the obligation of costs for non-temporary contract commercial storage of household goods, which must be obligated either in the period in which the service is rendered or to the appropriation current at the contract award. Record an adjustment to the obligation based on the costs itemized on the traveler’s settlement voucher.
Show Slide 28

28. Transportation of Things
Commitment Item
Obligate in the month in which the carrier accepts the goods, as shown on the Government Bill of Lading (GBL).
SHOW SLIDE 28: Transportation of Things
Obligation done when carrier signs for the goods.
Open allotment
Chris Spencer has household goods picked up on the 16th of March. The government bill of lading (GBL) states the date of March 16 as the pick-up or acceptance date. The obligation is posted in the month of March.
Gaining installation pays for it.
Show Slide 29

29. Communication & Utilities
Commitment Item
Obligate the entire amount of the bill in the month in which the billing period ends, regardless of the fiscal year.
SHOW SLIDE 29: Communication & Utilities
Page 5 of the Obligation Rules summary sheet
An obligation for recurring charges for utility services (such as gas, electricity, water, and steam) and communications will be recorded each month or as required based on a written administrative determination of the estimated cost of the service that will be furnished during the month. Charges for utility services and communications for a time period beginning in one fiscal year and ending in another fiscal year must be charged against the appropriation current at the end of the time period covered by the service.
Obligate the entire amount of the bill in the month in which the billing period ends, regardless of the fiscal year. There is no proration between months or fiscal years. - Exception to Bona Fide need.
15 Dec bill = obligate in Dec
Bill for Aug - Sep - Oct = obligate all in Oct
On 17 Oct a utility bill is received for the period 15 September - 15 October in the amount of $15,000. The amount applicable to September is $8,000 and to October is $7,000. The full amount of $15,000 is obligated in October against the funds current for the fiscal year beginning on 1 October of that year.
Show Slide 30

30. Contracts Requirements contracts:
Commitment Items 2310, 2320, 2400, and 2500
Requirements contracts:
Commit when accepted;
Obligate when Delivery Orders are issued
SHOW SLIDE 30: Contracts
NOTE: For slides Refer students to page 5 of the Obligation Rules summary sheet
Show Slide 31

31. Severable Contracts Continuing in nature. < 12 MONTHS:
Examples: Rental/Lease Contracts, Janitorial Services
< 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.
> 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.
SHOW SLIDE 31: Severable Contracts
Note:
A contract is severable when the related services are continuing and recurring in nature and the scope of the work to be performed is defined in the general terms of the contract. Service contracts can be for either a single undertaking or end item (entire) or for performance with compensation fixed in proportion to the amount of service performed. Absent statutory authority, the term of a severable service contract that is funded by annual appropriations will not extend beyond the end of the fiscal year current at the time the contract is awarded except when authorized by law. Option years are treated as new contracts therefore, when the severable service contract has renewal options, obligate funds for the basic period and any penalty charges for failure to exercise options. Refer to
10 U.S.C. § 2410a for statutory authority permitting full obligation of severable service contracts that begin in one fiscal year and end in the next, provided the contract period does not exceed one year. The contract period for performance of severable services must begin during the fund’s period of availability and may not exceed the fund’s period of availability, absent statutory authority.
Remember - These contracts generally refer to contracts that are continuing in nature, such as rental contracts or contracts for services - such as janitorial services.
<12 Months - Obligate current funds for full amount at time contract is signed even if crosses FY (normally this would violate the bona fide need rule - but this is a specific exception)
One rule though - must have a need now to start this FY and carryover.
Example 1: On 16 June a 12 month contract is accepted/signed for $2,000 a month. The full amount of the contract is $24,000. The amount that is applicable to the current appropriation is $7,000. The correct amount to be obligated is $7,000.
>12 Months: Obligate with appropriations of the FYs in which the services are rendered
Example 2: On 1 Jan a 15 month contract is accepted/signed for $1,000 a month. The full amount of the contract is $15,000. The amount that is applicable to the current appropriation is $9,000. The correct amount to be obligated is $9,000.
Show Slide 32

32. 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
SHOW SLIDE 32: Non-Severable Contracts
A service contract is non-severable or entire if performance of the service results in a single or unified outcome, product, or report that cannot be subdivided. The performance period of a fixed price non-severable services contract may cross fiscal years, but must be fully funded in the initial fiscal year unless contract funding requirements exists set forth at DFARS (1)(ii). Unless the period of performance is entirely within a single fiscal year or within the charged account’s period of availability if funded using a multiyear appropriation, non-severable services contracts may not be funded on an incremental basis unless Congress has authorized incremental funding. These type contracts must be funded entirely with appropriations available for new obligations at the time the contract is awarded or options exercised.
These contracts are for single undertakings, such as paving a parking lot or painting a building - once started can’t stop
Obligate the full amount when the contract is signed
A contract is accepted on 1 September to pave the commissary parking lot at a cost of $4,000. The contract will take two months to complete. Though the contract will not be completed until the next fiscal year, the correct obligation amount is $4,000 against the funds current on 1 September
Show Slide 33

33. Purchase Orders
< $100,000: Obligate upon issuance to the vendor. > $100,000: Obligate upon written acceptance from the vendor.
Mr. Vendor
SHOW SLIDE 33: Purchase Orders
A. A purchase order may create an obligation when issued in the amount stated. This occurs when the purchase order represents acceptance of a binding written offer of a vendor to sell specific goods or furnish specific services at a specific price, or the purchase order was prepared and issued in accordance with small purchase or other simplified acquisition procedures.
B. A purchase order requiring acceptance by the vendor in order to form a binding contractual agreement must be recorded as an obligation in the amount specified in the order at the time of acceptance. Evidence of this acceptance must be retained in the files. If written acceptance is not required or provided, then commencement of performance constitutes acceptance by the vendor, and the amount of the order must be recorded as an obligation in accordance with DODFMR Volume 1, Chapters 4 and 7. Formation of the binding contractual agreement should occur during the period of availability of the appropriation cited on the purchase order. If contract formation occurs after expiration of the period of availability of funds cited on the purchase order, the obligation must be recorded against current funds, and the purchase order contract modified accordingly.
Obligations for purchase orders are recorded based on the dollar amount of the purchase order. There are two rules that apply:
RULE 1: The obligation for purchase orders less than or equal to $100,000 is recorded based upon issuance to the vendor. - Don’t wait for them to accept - small $ amount.
RULE 2: The obligation for purchase orders greater than $100,000 is recorded when the purchase order is accepted by the vendor.
Show slide 34

34. 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
SHOW SLIDE 34:
Obligating Contracts
Show Slide 35
UPON ISSUE TO VENDOR
< OR = $100,000
PURCHASE ORDERS
UPON VENDOR ACCEPTANCE
> $100,000

35. 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 it (not when the MIPR is issued) Amount of the order using funds current when the order is issued
SHOW SLIDE 35
Intra-Government Agreements
Show Slide 36

36. Obligation Rules Commitment Item s 2600 & 3100
Supplies (2600) and Equipment (3100):
Installation activities buying through the Single Stock Fund (SSF)
Commit & Obligate - upon submission of requisition
SHOW SLIDE 36
Obligation Rules Commitment Item s 2600 & 3100
NOTE: Refer students to page 6 of the Obligation Rules summary sheet
Note: update concept based SSF. Consider adding form to information.
Show Slide 37

37. Obligation Rule Commitment Item 4300
Commitment Item Interest & Dividends.
Obligate when purchase agreement/ invoice is paid.
BYE!
SHOW SLIDE 37: Obligation Rule Commitment Item 4300
The government will pay interest on late payments to local vendors.
Current year funds of the activity responsible for the late payment will be charged
An obligation will be recorded at the time the invoice is paid.
The interest rate will be based on the rate established by the Treasury Department
Show Slide 38

38. Check on Learning What is Commitment Item 2330 used for?
a. Communications and Utilities
b. Total Printing and Reproduction
c. Total Consulting and Other Services
The following are types of Intra-Government Agreements except?
a. Project or Economy Act
b. Order issued to another U.S. Government Agency
c. Order to a local government in theater
3. Installation activities buying through the Single Stock Fund (SSF) commit and obligate when?
upon submission of requisition
after the fact with proof of purchase
upon receipt of the delivery order
Show Slide 38
Have Soldiers use polling to answer check on learning questions
(a) Communications and Utilities
(c) Order to local government in theater
(a) upon submission of requisition
Show Slide 39

39. Practical Exercise Show slide 39 Practical Exercise
NOTE: Handout Practical Exercise Allow 30 minutes for completion of the practical exercise, and 20 minutes for a review.
Show Slide 40

40. Terminal Learning Objective
Apply the general and specific rules of obligation to the posting of financial transactions to accounting records.
Given a summary sheet containing DFAS-IN Regulation 37-1,
DFAS-IN Manual FY, DoDFMR Vol 3 and slides.
Identify the stages of expenditure transactions and the 11 general rules of obligations; determine the specific rules of obligation.
Action:
Conditions:
Standard:
SHOW SLIDE 40
Summarize and Restate Terminal Learning Objective
Add DoDFMR Vol 3

41. Appendix A Assessment Plan Appendix A Contribution to Group Work 30%
Written Communication
10%
Oral Communication
Module Post Assessment
50%
Total 
100%
Contribution to Group Work. See FM SLC Contribution to Group Work Rubric for specific grading criteria.
Written Communication. See FM SLC Written Communication Rubric for specific grading criteria.
Oral Communication. See FM SLC Oral Communication Rubric for specific grading criteria.
Module Post Assessment. A comprehensive post assessment consisting of multiple-choice, matching, fill-in-the-blank and ordering questions will be administered via Blackboard Academic Suite upon completion of the module.

42. Appendix B Presentation Outline Appendix B Slides
Slide Number Description
Slide Apply OBLIGATION RULES
Slide Enabling Learning Objective
Slide 3 Stages of a Transaction
Slide Authority Received
Slide Commitment
Slide Obligation
Slide Accrued Expenditure
Slide Expense
Slide Disbursement
Slide General Obligation Rules
Slide Specific Purpose
Slide Bona Fide Need
Slide Documentary Evidence
Slide Ensure Availability of Funds
Slide Administrative Lead Time
Slide Defaulted Contracts
Slide Charge Immediately
Slide Adjust Promptly
Slide Record at Net
Slide Commit for Contingent Liabilities
Slide Simultaneous Commitment, Obligation, and Disbursement
Slide Commitment Item
Slide Personnel Pay & Compensation
Slide Temporary Duty Travel (TDY)
Slide TDY Crossing FYs
Slide Travel Advances
Slide Permanent Change of Station (PCS) Travel
Slide Transportation of Things
Slide Communication & Utilities
Slide Contracts
Slide Severable Contracts
Slide Non-Severable Contracts
Slide Purchase Orders
Slide Obligating Contracts
Slide Intra-Government Agreements
Slide Obligation Rules Commitment Item s 2600 & 3100
Slide Obligation Rule Commitment Item 4300
Slide Check on Learning
Slide Practical Exercise
Slide Terminal Learning Objective
Slide Appendix A
Slide Appendix B