Below is a list of common accounting definitions:
Commitment (Apportionment): A firm administrative reservation of funds based on firm procurement requests, unaccepted customer orders, directives, and equivalent instruments which authorize the recipient to create obligations without further recourse to the official responsible for certifying the availability of funds.
Expenditure: An actual payment of funds when checks are issued or cash is disbursed for work performed that liquidates the outstanding obligation associated with that work.
Obligation (Allocation): A legal liability incurred by the government, representing the amount of an order placed, a contract awarded, a service rendered, or other transaction that legally encumbers a specified amount of an appropriation or fund for expenditure. 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. Payment may be made immediately or in the future. Budgetary resources must be available before obligations can be incurred legally.
Bona Fide Need: The bona fide needs statute, 31 U.S.C. 1502, states that a fixed-term appropriation “is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made within that period….” This law requires that a fiscal year appropriation may only be obligated to meet a legitimate, or “bona fide” need arising in or in some cases arising prior to but continuing to exist in the fiscal year for which the appropriation was made.
Updated: 7/19/2017