FINANCIAL MANAGEMENT SCHOOL

FINANCIAL MANAGEMENT SCHOOL
Obligation Rules Rule #1 Rule #2 Rule #3 Rule #4 Rule #5 Rule #6 SHOW SLIDE 1: Determine Obligation Principles and Rules SECTION I. Determine Obligation Principles and Rules ADMINISTRATIVE DATA All Courses Including This Lesson Course Number Version Course Title 01 Planning Programming Budget & Execution Course (PPBE) Academic Hours The academic hours required to teach this lesson are as follows: Resident Academic Hours/Method Technique of Delivery Hours Method of Instruction Introduction Conference/Discussion Group-Paced Practical Exercise Instruction/Individualized, Self-Paced Instruction Large Group Instruction Conference/Discussion Summary Conference/Discussion Total Hours 6.0 Clearance Access Security Level: Unclassified Requirements: There are no clearance or access requirements for the lesson. Foreign Disclosure Restrictions FD5. This product/publication has been reviewed by the product developers in coordination with the Fort Jackson Soldier Support Institute foreign disclosure authority. This product is releasable to students from all requesting foreign countries without restrictions. Instructor Requirements Must meet physical qualifications IAW AR Materials Required Instructor Materials: Lesson plan slides, DFAS-IN Regulation 37-1, DFAS-IN-MANUAL FY, Instructor copy Student Materials: Determine Obligation Principles and Rules Lesson plan and summary sheet, Practical Exercise #1, #2, and #3 calculator and pencils. Classroom, Training Area, and Range Requirements General Purpose Classroom - 25 Seats Instructional Guidance Note: Before presenting this lesson, instructors must thoroughly prepare by studying this lesson and identified reference material. Also, provide the students with situational awareness of the Operational Environment (OE) variables and actors. Proponent Lesson Plan Approvals Name Rank Position Date Harris, Norman CTR Writer/Developer xx-xxx-xxxx Bonig, Reid GS-12 Chief - FMITD xx-xxx-xxxx Davis, Bobby LTC FM-DOT xx-xxx-xxxx Zellars, Eric COL Commandant xx-xxx-xxxx Show Slide 2 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: 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). 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Terminal Learning Objective
Action: Conditions: Standard: Determine Obligation Principles and Rules Given a summary sheet containing DFAS-IN Regulation 37-1, DFAS-IN Manual FY, DoDFMR Vol 3 and slides. With 80% Accuracy: Identify the stages of expenditure transactions and the 11 general rules of obligations; determine the specific rules of obligation. 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. Evaluation: Students will take a comprehensive test at the end of Week 1. Students must score 80% or higher and International officers must score 70% or higher. Add DoDFMR Vol 3 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Stages of a Transaction
Authority Received Commitment Obligation Accrued Expenditure Expense Disbursement SHOW SLIDE 3: Stages of a Transaction Note: Have Students go to Obligation Rules Summary Sheet 1 page, paragraph 3 and follow along. These are the different stages and we will talk about each one individually 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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. Basically, you have to have money. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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. It’s basically setting money aside. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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. Look at it like you’re placing an order a restaurant. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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. Look at it like you’re receiving the food you ordered from the restaurant. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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 time. Look at this like it’s you restaurant bill. $ 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Appropriations – Period of Availability
FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 1-Year Appropriations Operations & Maintenance (OMA, OMAR, OMNG) Military Pay (MPA, RPA, NGPA) Army Family Housing, Operations (AFHO) New obligations* Adjust obligations, expense and disburse (expired) Unavailable for any transaction (canceled) 2-Year Appropriations RDTE Adjust obligations, expense and disburse (expired) 3-Year Appropriations Procurement (ACFT, AMMO, MSLS, OPA, WTCV) 5-Year Appropriations Military Construction (MCA, MCAR, MCNG) Army Family Housing, Construction (AFHC) X-Year Appropriations Base Realignment and Closure (BRAC) SHOW SLIDE 10: Appropriations – Period of Availability Obligations are adjusted to account for actual costs – Pay is obligated at the beginning of a pay period based on the previous pay period – the amount for the actual payroll is used to adjust the obligation and the new obligation is calculated Travel may cost less based on the cost of the airline ticket or actual car mileage Contracted work may take less time or cost more money X-Year appropriations are sometimes called “no-year” appropriations because new obligations can occur in any year. However, Congress may review the available balance for carry-over. They may reduce the new authority to force the old money to be spent first. * New obligations includes the ability to adjust obligations, expense and disburse

General Obligation Rules
(1of 2) Specific Purpose Bona fide for the current fiscal year (FY). Documentary evidence Ensure availability of funds Administrative lead time. SHOW SLIDE 11: General Obligation Rules Note: Rules of obligation start on page 2, paragraph 4 of your summary sheet. 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 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

General Obligation Rules
(2 of 2) Defaulted contracts Charge immediately Adjust promptly Record at net (may record net of discount) Contingent liabilities Simultaneous obligation and liquidation SHOW SLIDE 12: General Obligation Rules (Cont.) The remaining slides will cover obligation rules in more detail 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Specific Purpose Obligate funds only for the purposes for which they were appropriated. Supplies SHOW SLIDE 13: Specific Purpose 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” 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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 14: Bona Fide Need 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 FY16 to be spent on FY17. 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 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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 15: 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 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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 16: 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). 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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 17: 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 MAY 2002 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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 18: 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 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Charge Immediately Once an obligation is incurred, it must be recorded against the applicable appropriation, whether funds are available or not. SHOW SLIDE 19: 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. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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 20: 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 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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 21: Record at Net 2 ways to do this – either is ok – based on local policy 1st way is the more conservative way – Record the Gross amount and then De-Ob later if necessary 2nd way is to record the discount amount and then Obligate more money later if necessary 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) 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. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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 22: Commit for Contingent Liabilities 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. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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. SHOW SLIDE 23: Simultaneous Commitment, Obligation, and Disbursement Some cases the obligation is recorded at the same time as the disbursement Civilian pay is and example - just hits the system as a disbursement - then need to go back and obligate 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Commitment Items (CI) 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 24: Commitment Items Specific rules of obligation pertain to specific Commitment Items. We will now discuss or you will review, the rules of obligation as they apply to various Commitment Items. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Personnel Pay & Compensation CI 1100 and 1200. Obligate in the month that services are received, whether or not paid. SHOW SLIDE 25: Personnel Pay & Compensation This is the example of a simultaneous, commitment, obligation, and disbursement that was talk about in a previous slide. 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 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Temporary Duty Travel (TDY) CI 21T0 Obligate not later than the month in which travel commences. SHOW SLIDE 26: Temporary Duty Travel (TDY) If travel begins on 10 July then the estimated TDY cost can be obligated anytime prior to the last day of July. It is possible even to obligate it in the month of June. Remember, the rule states not later than. Normally obligated the day orders are cut. CI 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). CI 21T2 - for all other TDY charges (includes per diem, vehicle rental, parking fees, privately owned vehicles (POV) use, individually procured airline tickets.) 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

TDY - Example Today is 1 Sep **
Action: Travel order was processed directing TDY travel of a civilian employee for 8 days commencing 1 Sep **. The estimated expenses are $2,800. TDY Rule CI does NOT cross FYs SHOW SLIDE 27: TDY – Example Today is 1 Sep ** Action: Travel order *-114 was processed directing TDY travel of a civilian employee for 8 days commencing 1 Sep **. The estimated expenses are $2,800. Action taken: TDY Rule CI does NOT cross FYs Obligate $2,800 Note: ** = Year Obligate $2,800 Note: ** = Year

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 28: TDY Crossing FYs 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. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

TDY Crossing FYs - Example
Today is 1 Sep ** Action: Travel order was processed directing TDY travel of a civilian employee for a 10 day PPBE course commencing 26 Sep **. A round trip ticket was issued for $800 and per diem is estimated at $100 per day. TDY Rule: CI does cross FYs? SHOW SLIDE 29: TDY crossing FYs - Example Today is 1 Sep ** Action: Travel order *-115 was processed directing TDY travel of a civilian employee for a 10 day PPBE course commencing 26 Sep **. A round trip ticket was issued for $800 and per diem is estimated at $100 per day. Action taken: TDY Rule CI Does cross FYs Obligate round trip ticket $800 Obligate 5 days left in FY = 5 days * $100 per day = $500 Obligate round trip ticket $800 Obligate 5 days left in FY = 5 days * $100 per day = $500

Travel Advances CI 4110. A travel advance is never obligated. SHOW SLIDE 30: 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 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

TDY Advance- Example Today is 4 Sep 20**
Action: A civilian requested an advance of $200 on Travel order that was processed on 1 Sep **. The TDY order directed TDY travel of a civilian employee for a 10 day PPBE course commencing 26 Sep **. A travel advance was paid to the civilian today (4 Sep **) for $200 TDY Rule Advance SHOW SLIDE 31: TDY Advance- Example Today is 4 Sep 20** Action: A civilian requested an advance of $200 on Travel order that was processed on 1 Sep **. The TDY order directed TDY travel of a civilian employee for a 10 day PPBE course commencing 26 Sep **. A travel advance was paid to the civilian today (4 Sep) for $200 Action taken: TDY Rule Advance This is a disbursement NOT an obligation $0 to obligate This is a disbursement NOT an obligation $0 to obligate

Permanent Change of Station (PCS) Travel
CI 21P3 and 21P4 The gaining installation will incur all costs of PCS travel Obligate in month orders prepared PCS Travel Orders SHOW SLIDE 32: Permanent Change of Station (PCS) Travel Note: The gaining installation will obligate in the month the employee is dropped from the rolls of the losing installation. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Transportation of Things
CI 2200. Obligate in the month in which the carrier accepts the goods, as shown on the Government Bill of Lading (GBL). SHOW SLIDE 33: 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. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Transportation of things - Example
Today is 1 Sep ** Action: Received an estimate of $2,000 for the transportation charges on a shipment of items scheduled to be accepted by the carrier on 10 Sep **. Obligate $0 Goods not accepted Today is 10 Sep ** Action: Goods were accepted by the carrier for above transaction. SHOW SLIDE 34: Transportation of things – Example Today is 1 Sep ** Action: Received an estimate of $2,000 for the transportation charges on a shipment of items scheduled to be accepted by the carrier on 10 Sep **. Action taken: Obligate $0 Goods not accepted Today is 10 Sep ** Action: Goods were accepted by the carrier for above transaction. Obligate $2,000 Obligate $2,000

Communication & Utilities
CI 2330. Obligate the entire amount of the bill in the month in which the billing period ends, regardless of the fiscal year. SHOW SLIDE 35: Communication & Utilities 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. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Communication & Utilities - Example
Today is 11 Sep ** Action: Received a $5,000 utility bill for the period 10 Aug through 9 Sep **. The amount applicable to Aug ** is $4,000 and the amount applicable to Sep ** is $1,000. Utility / communication rule SHOW SLIDE 36: Communication & Utilities – Example Today is 11 Sep ** Action: Received a $5,000 utility bill for the period 10 Aug through 9 Sep **. The amount applicable to Aug ** is $4,000 and the amount applicable to Sep ** is $1,000. Action taken: Utility / communication rule Obligate total- $5,000 Obligate total- $5,000

Contracts CI 2310, 2320, 2400, and 2500 Requirements contracts: Commit when accepted; Obligate when Delivery Orders are issued SHOW SLIDE 37: Contracts 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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

Requirement Contracts - Example
Today is 5 Sep ** Action: Requirements contract, 7-C-5538, was accepted for recurring maintenance on government vehicles. Maintenance is to be performed when delivery orders are issued. The estimated amount of maintenance to be provided is $15,000. SHOW SLIDE 38: Requirement Contracts – Example Today is 5 Sep ** Action: Requirements contract, *-C-5538, was accepted for recurring maintenance on government vehicles. Maintenance is to be performed when delivery orders are issued. The estimated amount of maintenance to be provided is $15,000. Action taken: Requirements contract rule Obligate total- $0 Not obligated until delivery orders are issued / received Requirements contract rule Obligate total- $0 Not obligated until delivery orders are issued / received

Severable Contracts Continuing in nature. 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 39: Severable Contracts 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. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Severable Contracts - Example
Today is 1 Sep ** Action: You processed an accepted copy of a rental contract for office space for 12 months effective 1 Sep ** in the amount of $1,500 per month Severable contract < 12 months 12 months * $1,500 = $18,000 to obligate Action: You processed an accepted copy of a rental contract for custodial services for 18 months effective 1 Sep ** in the amount of $2,000 per month. SHOW SLIDE 40: Severable Contracts – Example Today is 1 Sep ** Action: You processed an accepted copy of a rental contract for office space for 12 months effective 1 Sep 07 in the amount of $1,500 per month. Action taken: Severable contract < 12 months 12 months * $1,500 = $18,000 to obligate You processed an accepted copy of a rental contract for custodial services for 18 months effective 1 Sep ** in the amount of $2,000 per month. Severable contract >12 months 1 month left in the FY * $2,000 = $2,000 to obligate Severable contract >12 months 1 month left in the FY * $2,000 = $2,000 to obligate

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 41: Non-Severable Contracts 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 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Non-Severable Contracts - Example
Today is 1 Sep ** Action: You processed an accepted 15 month copy of a contract to pave a new road effective 1 Sep 07 in the amount of $10,000 Non Severable contract SHOW SLIDE 42: Non-Severable Contracts – Example Today is 1 Sep ** Action: You processed an accepted 15 month copy of a contract to pave a new road effective 1 Sep ** in the amount of $10,000. Action taken: Non Severable contract Obligate full amount regardless of FY $10,000 Obligate full amount regardless of FY $10,000

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

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

Non-Severable Contracts
Severable vs. Non-Severable Contracts SHOW SLIDE 43: Severable vs. Non-Severable Contracts What picture represents a severable contract and non-severable contract? Severable Non-severable 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Non-Severable Contracts (Cont.)
Severable vs. Non-Severable Contracts (Cont.) SHOW SLIDE 44: Severable vs. Non-Severable Contracts What picture represents a severable contract and non-severable contract? Painting is a non-severable contract. IOT hire a new contractor to finish painting a room, the new contractor will require payment for the full room. Bus drivers are a form of severable contracts. Non-Severable Contracts Severable 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

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 48: Intra-Government Agreements 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Obligating Contracts - Example
Today is 1 Sep ** Action: Issued a Military Interdepartmental Purchase Request (MIPR) to FT Drum, NY for $19,500 for training support at their location. Obligate $0 intra government agreement rule only (DD 448 when issued) SHOW SLIDE 49: Obligating Contracts – Example Today is 1 Sep ** Action: Issued a Military Interdepartmental Purchase Request (MIPR) to FT Drum, NY for $19,500 for training support at their location. Action Taken: Obligate $0 intra government agreement rule only (DD 448 when issued) Obligate full amount regardless of FY $19,500 (DD when accepted) Obligate full amount regardless of FY $19,500 (DD when accepted)

Obligation Rules CI 2600 & 3100 Supplies (2600) and Equipment (3100): Installation activities buying through the Single Stock Fund (SSF) Commit & Obligate - upon submission of requisition SHOW SLIDE 50: Obligation Rules CI 2600 & 3100 Note: update concept based SSF. Consider adding form to information. 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Supply Rules- Example Today is 1 Sep **
Action: Activities at the installation submitted requests for supplies from the Single Stock Fund. The total value of the request is $5,800. Obligate $5,800 supply rule SHOW SLIDE 51: Supply Rules- Example Today is 1 Sep ** Action: Activities at the installation submitted requests for supplies from the Single Stock Fund. The total value of the request is $5,800. Action taken: Obligate $5,800 supply rule

Obligation Rule CI 4300 CI Interest & Dividends. Obligate when purchase agreement/ invoice is paid. BYE! SHOW SLIDE 52: Obligation Rule CI 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 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

Check On Learning 1. What is Commitment Item 2330 used for?
Communications and Utilities Total Printing and Reproduction Total Consulting and Other Services 2. 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? a. upon submission of requisition b. after the fact with proof of purchase c. upon receipt of the delivery order Show Slide 53: Check On Learning Conduct Check on Learning with Students

Practical Exercise Show slide 54: Practical Exercise NOTE:
Handout Practical Exercise 1 Allow 30 minutes for completion of the practical exercise, and 20 minutes for a review. Handout Practical Exercise 2 Allow 30 minutes for completion of the practical exercise, and 20 minutes for a review. Handout Practical Exercise 3 Allow 30 minutes for completion of the practical exercise, and 20 minutes for a review.

Terminal Learning Objective
Action: Conditions: Standard: 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. With 80% Accuracy: Identify the stages of expenditure transactions and the 11 general rules of obligations; determine the specific rules of obligation. SHOW SLIDE 55: Terminal Learning Objective 11/15/2018 FINANCIAL MANAGEMENT SCHOOL

FINANCIAL MANAGEMENT SCHOOL

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