Obligation (CongressionalGlossary.com)

From the Congressional Glossary – Including Legislative and Budget Terms


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A legally binding agreement that will result in outlays, immediately or in the future. A promise to pay. The obligation, the promise to pay, is the initial action in the Federal spending process. Appropriations laws establish whether funds are available to obligate.

What is needed to Obligate?

An obligation may be “matured” or “unmatured”; “matured” means a liability that is currently payable; “unmatured” means a liability that is not currently payable but for which a definite liability exists in the future.

Services and supplies that are purchased by contract are recorded as obligations at the time there is a binding agreement – usually when the contract is signed. As a general rule, the amount of the obligation is the maximum liability to the Federal Government. The maximum liability is normally limited by the terms of the contract (e.g., cancellation clauses).

A definite commitment that creates a legal liability of the government for the payment of goods and services ordered or received, or a legal duty on the part of the United States that could mature into a legal liability by virtue of actions on the part of the other party beyond the control of the United States. Payment may be made immediately or in the future. An agency incurs an obligation, for example, when it places an order, signs a contract, awards a grant, purchases a service, or takes other actions that require the government to make payments to the public or from one government account to another. The standards for the proper reporting of obligations are found in section 1501(a) of title 31 of the United States Code. 31 USC Sec. 1501(a).

An outlay is a payment to liquidate an obligation. Paying the promise.


See also


Discretionary and mandatory outlays of the US Federal Government




Expenditures Versus Expenses | Governmental Accounting | CPA exam FAR





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