1. Obligating Contracts 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.

2. PE 1 Explanations Trans# Reference Title Slide Explanation 1
Severable Contract Slide
Rentals are considered severable. Obligate whole amount since it was 12 months rental and rental started on Sep. (4K x 12m)= $48K 2
Bona Fide Need Slide
The contract doesn’t start until Oct, situation is on Sep. Therefore, 0 (none) is obligated in Sep. 3
Obligating Contract (Requirement)
0 (none is obligated) since a reqm’t contract is obligated upon delivery of the order. However, we still commit( reserve) the funds when we receive the issuance of delivery orders.0 obl and 10K committed 4
Obligation rule 2600 and 3100
(Supply rule)
$4,800 was obligated because anything ordered through the SSF is obligated upon requisition 5
TDY; Documentary Evidence
0 is obligated because its only a request. This is not the valid document to obligate funds. For planning purposes, commit the estimated expense of $1,950K 6
Commit for contingent Liabilities
Commit $103K(98K + 5K), obligate 98K only. Plan for the bonus amount and reserve the funds in the event that they are able to comply with the contingent rule. If they are able to comply, then obligate the bonus amount. If not, de-commit.
12/5/2018
FINANCIAL MANAGEMENT SCHOOL

3. PE 1 Explanations Trans# Reference Title Slide Explanation 7 TDY
TDY commenced 8 Sep and supported by a Travel order, obligate whole amt. on the month that he travels since he travels to and from on the month of Sep.$1,950 8
Travel Advances
Obligated amount is zero because travel advance amount is already budgeted within when the Travel was obligated. it is not an addt’l obligation amount. It is disbursed . 9
Severable Contracts
Rentals are severable contracts. Any contracts that are 12 months or less, whole amount of contract is obligated on the month where services begin, regardless if it crosses FY. Obligation amt $60K 10
Contract,OBL Contract
Delivery order was issued on 10 Sep, requirement contract is obligated when orders are issued. Obligation amount is $2K 11
TDY crossing FY
Travel order was processed for 8 days of travel, all 8 days falls in September. $1800 is obligated 12
PO rule
For PO.s anything less than 100K, the whole
12/5/2018
FINANCIAL MANAGEMENT SCHOOL

4. PE 1 Explanations Trans# Reference Title Slide Explanation 7 TDY
TDY commenced 8 Sep and supported by a Travel order, obligate whole amt. on the month that he travels since he travels to and from on the month of Sep.$1,950 8
Travel Advances
Obligated amount is zero because travel advance amount is already budgeted within when the Travel was obligated. it is not an addt’l obligation amount. It is disbursed . 9
Severable Contracts
Rentals are severable contracts. Any contracts that are 12 months or less, whole amount of contract is obligated on the month where services begin, regardless if it crosses FY. Obligation amt $60K 10
Contract, OBL Contract
Delivery order was issued on 10 Sep, requirement contract is obligated when orders are issued. Obligation amount is $2K 11
TDY crossing FYs
Travel order was processed for 8 days of travel, all 8 days falls in September. $1800 is obligated 12
PO rule
The whole amount is obligated upon issuance to the vendor
12/5/2018
FINANCIAL MANAGEMENT SCHOOL

5. PE 1 Explanations Trans# Reference Title Slide Explanation 13
Obligating Contracts
For contracts that are fixed price printing(CI 2400), full amount is validated it is accepted by the vendor. If vendor fails to accept it but starts, work, it is considered acceptance. 14
Communication Utility
Obligate the whole amount of the bill in the month where the billing cycle ends regardless of FY. The bill ended in Sep, therefore it is obligated in September. $25,800 was obligated.
12/5/2018
FINANCIAL MANAGEMENT SCHOOL

6. PE 2 Explanations Trans# Reference Title Slide Explanation 15
Bona-fide-need
For contracts that are fixed price printing(CI 2400), full amount is validated it is accepted by the vendor. If vendor fails to accept it but starts, work, it is considered acceptance. 16
Transportation of Things
Obligate in the month that carrier accepts the goods. Since the goods are not scheduled to be accepted until Oct, 0 is obligated because it is currently September. 17
Record at Net
Regardless of the discount price, obligations are recorded at net. If we are able to get the discount for prompt payment, then the difference is de-obligated. Ex. $65,000 is obligated. If discount terms is met, then $1,300 is de-obligated. 18
Adjust Promptly
The amount obligated for this travel was $`1950. The total actual cost of the travel was 1,710. ( $1500 from the advance requested + $210 from the disbursement). The amount adjusted is $240 ( ). 19
Intra- Govt Agreement
Obligated When received from the performing activity who accepts it (not when the MIPR is issued). The MIPR was only issued so we do NOT obligate yet. $0 obligated, we can commit $9,500 to reserve the funds and it will be ready to obligate once FT Drum accepts it. 20
Severable Contract
For recurring contracts that are equal to or less than 12 months, we obligate full amount when contract is signed using current year funds when the contract begun. Rent is 12,000 /month x 12 months = $144,000
12/5/2018
FINANCIAL MANAGEMENT SCHOOL

7. PE 2 Explanations Trans# Reference Title Slide Explanation 21
Record at Net and Non severable contract
Paid full amount of $20,000 since construction is a single undertaking. The full amount is obligated despite the discounted terms. If discount term is met ( paid within 10 days), then we de-obligate the discounted amount of $400. 22
Charge immediately; Simultaneous Comm., Obl. and disb.; adjust promptly; document. evidence
When a valid obligation has not been recorded and the transaction is in the disbursement stage, we have to obligate the full amount. In this case, $16,226 was disbursed and therefore has to be obligated immediately. $774 has to be adjusted and de-committed, since $17,000 was committed for this transaction. 23
Adjust Promptly
The TDY travel order was originally obligated for $1,800. Since TDY is always an estimate, the actual disbursement of the travel was $2050. Therefore, an additional $250 needs to be obligated. 24
Obligation Rules CI 2600 and 3100
If buying through the SSF, it is obligated when requisition is submitted. The whole $58K is obligated. 25
TDY crossing FY’s
Per diem is prorated between the different FY’s but transportation requests(TR) for a round trip ticket is obligated against the appropriation. Current at the time of purchase. $750(TR)is fully obligated + per diem of 5 days (120*5) since travel begins on 26 Sep. The rest of the 10 days will be obligated next FY. Obligation amt for current FY is $1,350 ($ ) 26
O is obligation, since the PO was already obligated for the $9,800 in the previous trans. Disbursement is of equal amount. In the event that disbursement is not the same as obligated amount, adjustments are made provided there’s documentary evidence.
12/5/2018
FINANCIAL MANAGEMENT SCHOOL

8. PE 2 Explanations Trans# Reference Title Slide Explanation 27
Adjust Promptly
There is no transaction, so zero is the obligated amount to be done. However, the reduction in FAD reduces the Total obligation authority by $20K per the fad, check to see if this will result in negative balance 28
Zero is obligated since there is already an obligation made on this requirement contract. The amt of disbursement is the same as the amt of obligation, no $$ adjustments needed. 29
Intra- gov’t Agreement
MIPR was accepted, therefore obligate whole amount of $9,500 on the MIPR 30
Commit for contingent Liabilities
Obligate the additional bonus amount of $5,000 since the work was completed prior to 1 Oct. ( $103K was committed for this contract, $98K was already obligated for the contract and $5K remained for the contingency bonus) 31
Obligating Contracts, Reqm’t Contract Example
Delivery orders were issued for the contract in the amount of $7,000. $7,000 is obligated. Reqm’t contracts are obligated for the amount on the delivery order once issued. 32
Adjust promptly; Record at Net
An original obligation was recorded at net for $65,000. The disbursement was made for $63,700. The difference of $ 1,300 is de-obligated.
12/5/2018
FINANCIAL MANAGEMENT SCHOOL

9. PE 3 Explanations Trans# Reference Title Slide Explanation 33
Bona Fide Need, Severable contract
Janitorial contract is for Oct and last 12 months, $24,000 (whole amt) is obligated because it is a severable contract and not more than 12 months. 34
Obligation rules CI 2600 and CI 3100
Supply requests submitted through the stock fund is obligated upon submission of requisition. $122K 35
Severable Contract
Rentals are continuing in nature. If its more than 12 months, amt obligated is only those that fall under the current FY. Contract begins in Dec, and last 18 months. Only 10 months will be obligated in the current FY. ($2,000 x 10 mos.)= $ 20,000 36
Temporary Duty Travel (TDY)
TDY begins in Oct for 10 days with travel order #, it does not cross FY’s. Obligate NLT than the month in which travel commences. Obligate the full amount of $1,800. 37
Non-Severable contract
For single undertaking contracts, obligation is done when contract is signed. Obligate $128K 38
Travel Advances
0 is obligated; travel advance is not an obligation, it’s a disbursement. 39
Adjust Promptly; Documentary Evidence
de-obligate $500 under PY funds. The MOD was for $2,000 but the delivery order was only for $1,500. 40
PCS Travel
Since we are the gaining installation, we will incur all cost of travel. $2,000 is obligated in OCT when the orders were prepared
12/5/2018
FINANCIAL MANAGEMENT SCHOOL

10. PE 3 Explanations Trans# Reference Title Slide Explanation 41
Severable contract
Rentals are continuing in nature. If its more than 12 months, amt obligated is only those that fall under the current FY. Contract begins in mid Oct, and last 18 months. Only 11 ½ months will be obligated in the current FY. ($2,000 X 11.5 months)=$23,000 is the amt obligated for the current FY. 42
Adjust Promptly
$550 is de-obligated against PY funds since $9500 was obligated in previous FY, the actual cost when job was completed is $8950. ($9500-$8950) 43
Obligating Contracts
Under Fixed/Firm amt CI 2400 (printing and Reproduction), full amount of $6,000 is obligated upon vendor acceptance. 44
Severable Contract
Full amount of $96,000 ($8,000 X 12 months) are obligated. Full amount is obligated for Rentals that are 12 months or less. 45
$150 needs to be adjusted from prior year funds. $1,950 was the final settlement voucher, only $1800 was obligated from prior year. ($1950-$1800) 46
Transportation of Things
Obligate in the month where carrier accepts the goods, goods was accepted in Oct. $1800 Is obligated
12/5/2018
FINANCIAL MANAGEMENT SCHOOL

11. PE 3 Explanations Trans# Reference Title Slide Explanation 47
Adjust Promptly
$0, no adjustments necessary. 48
Adjust Promptly,
De-Obligate $400 from prior year funds. Discount of 2% was earned (the original obligation for $20K was decreased to 19,600 when we paid within 10 days of the contract) 49
Simultaneous Commitment., Obligation. And Disbursement; Adjust Promptly
Obligation and Disbursement had to be done since the original obligation amt. was only $24,000, an additional $25 needed to be obligated immediately due to late payment of 15 days ( violation of prompt payment act) 50
PCS Rule
The gaining installation always pays for PCS. Therefore, zero amount is paid since the gaining installation is NOT Ft. Stewart. The gaining station Ft . Knox will pay for costs incurred during PCS travel. 51
Communication and Utilities
Obligate the entire amt. in which the billing period ends. Since it ended in Oct, we pay the whole billing period from Sep-Oct
$6,175 52
12/5/2018
FINANCIAL MANAGEMENT SCHOOL

12. 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
12/5/2018
FINANCIAL MANAGEMENT SCHOOL