Appropriation. Annual funding to federal agencies. Funds are then generally available for limited time periods and agencies are legally obligated to use the money within the availability period. Fixed appropriations are cancelled five years after the availability period starts.

Antideficiency Act. This act prohibits government officers or employees from making or authorizing an expenditure or an obligation (1) in excess of allotted funding amount (2) in excess of formal subdivisions of funds or permitted under regulations or (3) in advance of an appropriation unless authorized by law. It also prohibits accepting voluntary services unless authorized by law.

Apportionment. The Office of Management and Budget distributes funds for specified time periods, activities, projects or objects. Funds are apportioned to prevent agencies from obligating at a rate that would create a deficiency or need for additional funding.

Augmentation. An agency action increases the fund amount available in the agency’s appropriation which causes the agency to spend more than the amount originally appropriated by Congress. Agencies are prohibiting augmenting funds without authorization and augmentation that includes transferring funds from one account to another. Such transferring essentially expands the funding pool for a project and is not permitted.

Authorization. An authorization act annually clarifies an appropriation’s intended purposes or restricts use of appropriated funds.

Bona Fide Need. Agencies must demonstrate a bona fide need for a specific period before an agency may obligate funds. An inquiry into a bona fide need focuses on the obligation of funds’ timing and demonstration of a current government need.

Cancellation. A cancellation ends the requirements of all remaining program years. Unlike termination, it occurs between fiscal years or at the end of a program year and must apply to all subsequent fiscal years’ quantities of items. A contract or program is generally cancelled when funds are not available.

Cancellation Ceiling. This charge is the maximum amount the contractor can receive if the contract or program is cancelled.

Closed Appropriations. These are appropriations no longer available for any purposes. An appropriation becomes "closed" five years after the end of its availability period as defined by the applicable appropriation act.

Color of Money. This term refers to the funds’ purpose. The various types of appropriations are operational and maintenance (O&M); personnel; research, development, test and evaluation; procurement; shipbuilding and conversion; military construction, multiple year; working capital; and no-year appropriations. O&M and personnel programs are funded each year.

Commitment of Funds. A commitment is the administrative or formal reservation of funds based upon firm procurement requests, orders, directives and equivalent instruments. An obligation equal to or less than the commitment may be incurred without further approval of a certifying official.

Contingent Liability. This liability is contingent upon an event occurring before it becomes an agency obligation. Such a liability cannot be recorded as a valid obligation until the event occurs. Examples include escalation, price redetermination or funds made as part of incentive clauses. While contingent liabilities do occur, agency finance departments do not like them.

Continuing Resolution. Often called a "stop-gap measure" it is required for an agency to continue to fund operations for a fiscal year when no new fiscal year appropriation bill has passed. Interim funding is simply conferred until Congress enacts permanent legislation.

Current Appropriations or Funds. These are funds whose availability for new obligations has not expired under the terms of the applicable appropriations act. An interchangeable term is unexpired appropriations.

Deobligate. Just as the government must obligate finds when it incurs a liability it must also "de-obligate" funds when it reasonably expects to not incur a liability. This is especially important before the end of the fiscal year, when many funds face expiration.

Disbursement. Government payment usually in the form of a check or electronic deposit. A disbursement on a contract should be made only for contracted work in the same scope and effort.

Economy Act Orders. This act authorizes interagency orders where the ordering agency must reimburse the performing agency for costs of supplying goods or services.

Expired Appropriations or Funds. Expired funds retain their fiscal identity and are available to adjust and liquidate previous obligations. Fiscal year identify is retained for five years after the availability period ends.

Extraordinary Contractual Relief. Public Law 85-804 grants the president the power to authorize agencies or departments to provide extraordinary emergency relief if doing so promotes the national defense. Government contractors may request this type of extraordinary assistance in cases of extreme financial hardship during contract performance.

Fiscal Year. The period from October 1 to September 30.

Full Funding. A program has full funding when all funds are available at award to cover the contract’s total estimated cost. Full funding does not exist if a future year’s appropriation is required for delivery.

Future Years Defense Program (FYDP). The Secretary of Defense’s approved plans and programs for DOD. This is the sole official, annual program for which a contract must be identified with before an agency may expend monies. Civilian agencies have similar, approved program plans for each fiscal year.

Imprest Funds. An imprest fund contains a fixed amount established by advanced funds. A disbursing officer can provide such funds to a duly appointed cashier for cash disbursements in relatively small amounts without charging to an appropriation.

Military Interdepartmental Purchase Request (MIPR). MIPR uses Government Form DD448 to transfer funds from one defense agency to another. Such an interagency obligation is recorded the same way any other contract is recorded.

Necessary Expense Rule. This requires a logical connection between fund purpose and fund spending. An expenditure is permissible if it is reasonably necessary to carry out an authorized function or will contribute materially to the function’s accomplishment.

New Obligational Authority. The only time an agency can proceed with certain initiatives that were not in the fiscal year’s approved budget is when Congress specifically grants the authority to incur obligations.

Nonappropriated Fund Instrumentalities (NAFIs). NAFIs are unique in that these entities recover their money to operate from sale of goods and services, not from congressional appropriations. There is no accountability for NAFIs in the fiscal records of the US Treasury. They provide essentially morale, welfare and recreational support and are engaged in certain religious and educational programs.

Nonseverable Services. A service is nonseverable if it produces a single or unified outcome, product or report that cannot be subdivided for separate performance in different fiscal years. Hence, the government must fund the entire effort with money available for obligation at the time the contract is executed, even if contract performance crosses many fiscal years. In contrast, severable services can be separated into components that independently meet a separate need. Generally, severable services are the needs of the fiscal year in which they are performed. Requested services then must be paid from that respective fiscal year’s funds or with dollars available when the contractor performs the services.

Nonrecurring costs. These are costs generally incurred on a one time basis. Example may include plant or equipment relocation, special tooling and testing equipment and preproduction engineering.

Obligation. This term refers to the legal obligation to pay appropriated funds. Any obligation must be officially charged to an appropriation. The general fiscal law rule is that the government must obligate current funds as it incurs a liability.

Offsetting. The mechanism by which an agency can apply user fees and other receipts to its accounts without depositing into the US Treasury general fund.

Overobligations. These are violations of the Antideficiency Act when an agency, through a government employee, incurs obligations for which funds are not available.

Procurement request (PR). The approval of a PR signals internal agency approval to proceed with a program or initiative. The term is usually interchangeable with purchase requests. A PR describes requirements and requests a specific contract action (purchasing) by an agency’s contracting officer.

Ratification. When legally appropriate, ratification approves an unauthorized commitment. An unauthorized commitment occurs when a government representative who lacks authority enters into an agreement with a contractor and then attempts to authorize funds. An agency official with proper authority must then approve the unauthorized commitment or the agreement remains invalid. Before ratification occurs, an agency must determine that funds are available and were available at the time the individual made the unauthorized commitment.

Reprogramming. This is a request for the reapplication of funds and is not considered a request for additional funding. Reprogramming requests are less formal than transfer requests.

Sequestrations. The law provides mechanisms for spending reductions or sequestrations, if spending will exceed a cap. Sequestrations may occur at several points during the fiscal year. A government employee may not authorize an expenditure or obligation for the payment of money to be sequestered.

Severable Services Exception. The exception to the general requirement to pay severable services performed in a certain year with that year’s funds allows an agency to fund severable service contracts for up to one year with current funds even if the contract crosses fiscal years. This exception has become common and helps avoid the end-of-the-year rush and funding gap issues.

Transfer. A transfer of budget authority is a shifting of money form one appropriation or fund account to another. Agencies can transfer funds between accounts within an agency, between agencies or with accounts that are subdivided. The two types of transfer authority are general and specific authority and Congressional approval is required.

User Fee. Charged to users for goods and services provided by the federal government. The fees generally apply to federal activities that provide special benefits to identifiable recipients and relate to the costs of goods or services provided. They are usually considered an offset receipt and hence available to the agency. A user fee is distinguished from an excise tax that must be recorded as a budget receipt.

Working Capital Fund or revolving fund. It operates as an accounting entity. They are management tools that provide working capital for the operation of certain activities including industrial and commercial activities. In the fund assets are capitalized and all government income is in the form of offsetting collections derived from the fund’s operations. The receiving activity must reimburse the revolving fund account for the goods and services provided. All monies are available to finance the fund’s continuing cycle of operations without fiscal year limitation.

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