Category: Acquisition Management
Policy #: CDC-FM-2006-01
Date of Issue: 05/23/2006
Proponent: Financial Management Office, Procurement and Grants Office
COMMITMENT ACCOUNTING
SECTIONS / I. / PurposeII. / Abbreviations, Acronyms, and Definitions
III. / Policy
IV. / Responsibilities
V. / References
EXHIBIT / Detailed Commitment Accounting Flowchart
I. Purpose
This document establishes the policy and procedures for commitment accounting throughout the Centers for Disease Control and Prevention (CDC[1]). A commitment is a timely reservation or set aside of specific funds within a set time frame (such as a fiscal year) to pay for a later obligation. A commitment also:
• Occurs after funds are allotted but before they are obligated.
• Does not legally encumber an appropriation.
• Reserves funds for a future obligation and, consequently, any committed funds are no longer available to be committed or obligated for other purposes.
• Is recorded after a funding request receives appropriate approval through the appropriate authorization chains and/or receipt of an approved funding document and processed through the Financial Management Office (FMO) and/or Procurement and Grants Office (PGO)
The commitment accounting policy described herein will benefit CDC in several ways:
• Enhance the ability of CDC to monitor the commitment of funds.
• Enhance the ability of CDC to monitor the availability of funds and increase the control of funds by providing agency, coordinating center/coordinating office (CC/CO), national center (NC[2]), or office-level views of procurement and grant requests that are in the pipeline.
• Strengthen funds control.
• Allow users to reserve funds for planned obligations, thereby assuring that the money will not be used for other purposes.
• Provide greater oversight by tracking the commitment of funds directly in the CDC financial system of record, currently the Unified Financial Management System (UFMS), thus reducing and/or eliminating dependence on informal records.
II. Abbreviations, Acronyms, and Definitions
A. For the purpose of this policy, the following abbreviations and acronyms apply:
1. CAN – common accounting number
2. CC/CO – coordinating center/coordinating office
3. FMO – Financial Management Office
4. GMIS – Grants Management Information System
5. IAA – interagency agreement
6. ICE – Integrated Contracts Expert
7. Information for Management, Planning, Analysis, and Coordination II
8. NC – national center
9. QADVT – Quality Assurance Data Validation Team
10. SGL – standard general ledger
11. UFMS – Unified Financial Management System
B. For the purpose of this policy, the following definitions apply:
1. Commitment – A timely reservation of a specific amount of available funds that provides for a later incurrence of an obligation. A commitment occurs after the allotment of funds but before the obligation; it does not legally encumber an appropriation; and it does not actually draw down funds until the financial transaction is recorded in the general ledger. The commitment reserves funds for a planned future obligation, and, consequently, any committed funds are no longer available to be committed or obligated for other purposes. The commitment is recorded upon appropriate approval of a funding request.
2. Continuing resolution – Congressional legislation enacted to provide budget authority for federal agencies or for specific activities, or both, to continue operating until the regular appropriations are enacted.
3. Cooperative agreement – A financial assistance mechanism whereby money or direct assistance, or both, are provided for approved activities. A cooperative agreement is used when the awarding office anticipates substantial programmatic involvement with the recipient during performance of the approved activities.
4. De-commitment – The reversal of a commitment that is no longer needed to reserve funds for a future obligation.
5. Grant – A financial assistance mechanism whereby money or direct assistance or both are provided for approved activities. A grant is used when the awarding office does not anticipate substantial programmatic involvement with the recipient during performance of the approved activities.
6. Grants Management Information System – An electronic cost system used to award, administer, and closeout grants and cooperative agreements.
7. Information for Management, Planning, Analysis, and Coordination II – An electronic cost system used to award and administer grants and cooperative agreements from the commitment phase, through performance and administration to closeout.
8. Integrated Contracts Expert – An electronic procurement system used to process procurements from the commitment phase through performance administration to closeout.
9. Liquidated commitment – A commitment amount that has been reversed due to an obligation posting against it.
10. Non-severable – A funding term applied to a contract, grant, or cooperative agreement for a service that is considered a single undertaking to where the Government would receive no tangible benefit if the service were to be terminated or discontinued for some reason such as default or convenience.
11. Obligation – An amount corresponding to an order placed, contract awarded, services received, and similar transaction for bona fide needs existing during a given period that will require payment during the same or future period and that complies with applicable laws and regulations. (OFFM Core; A-34, Sec. 21.1, p. 11-7) (SGL, corresponds to Account 4800, Undelivered Orders).
12. Proposed obligation – The amount determined by the buying activity as acceptable for making an award.
13. Purchase (acquisition) – Using appropriated funds to acquire through a lease or a purchase contract any supplies or services (including construction) that the federal government needs. Those supplies or services may either already exist or need to be created, developed, demonstrated, and evaluated. Acquisition begins when an agency has established its needs. The process of purchasing supplies or services includes describing the requirements to satisfy those needs; soliciting and selecting sources; awarding, financing, performing, and administering contracts; and completing the technical and management functions related to using a contract to fulfill the agency’s needs.
14. Purchase request – A request from a CC/CO, NC or office for products, services, or a grant.
15. Residual commitment – The difference between a commitment and the lower associated obligation which is no longer needed.
16. Severable - A funding term applied to a contract, grant, or cooperative agreement for a service that is continuing and recurring in nature to where the Government would receive some tangible benefit if the service were to be terminated or discontinued for some reason such as default or convenience.
III. Policy
This section provides policy guidance and procedures for commitment transaction types, commitment amounts, Continuing Resolutions, commitment recording, obligations, liquidation of commitments, and aged commitments.
A. Commitment transaction types
CDC will record system commitments for purchases (contractual instruments such as purchase orders, task orders, and contracts), grants, cooperative agreements, and payable Inter-Agency Agreements, including associated modifications.
When commitments are converted to the obligation stage within a short period of time, CDC will not use commitment accounting. For this reason, commitment accounting will not be used for the following types of transactions:
• Payroll and related expenses
• Travel expenses
• Permanent change of station expenses
• Miscellaneous purchases
• GSA Smart-Pay® VISA purchase card and checks
• Training
• IAAs
B. Commitment amounts
CC/COs, NCs, or offices must commit funds, if available. Funds are considered available when FMO has apportioned and allotted the funds to the CC/CO, NC, or office for expenditure. When the government is operating under a Continuing Resolution, CDC limits the funds available for commitment. In general, projects or activities are funded at the same level as during the prior year. Commitments for new projects or activities should not be initiated while operating under a Continuing Resolution. The total of all commitments and obligations for a CC/CO, NC, or office can never exceed the funds available to the CC/CO, NC or office.
C. Continuing Resolution
Under a Continuing Resolution, the commitment process will be based on a limited spending plan submitted by the CC/COs, NCs, or offices and a limited budget authority level. External decisions will be made and annual guidance will be provided by the FMO Budget Branch. The lead budget analyst for each CC/CO, NC, or office will monitor daily status of funds based on UFMS-generated reports. Further review will take place for any failed control checks to ensure an effective resolution. To prevent an insufficient funds status, adequate funding must be committed to cover the minimum obligation of the government. For example, firm fixed priced contracts obligated for a yearly amount must be funded up front for the full amount obligated for the year, even when operating under a Continuing Resolution. If sufficient funding is not available to fully fund a requirement at the time of commitment and/or obligation, then any new requirement should be revised before award and any existing requirement should be administratively modified to allow the funding to fit the requirement.
D. Commitment recording
Commitments must originate at the CC/CO, NC or office level. Commitments will be recorded in UFMS when the CC/CO, NC, or office authorizes the transaction and the financial accounting system verifies funds availability. A detailed flowchart of the commitment accounting process is provided as an exhibit.
E. Obligations
When PGO has approved the grant, cooperative agreement, or contractual instrument, the obligation will be recorded in UFMS, and the commitment will be liquidated as follows:
• If the obligated amount is less than the original commitment and the contracting officer and CC/CO, NC, or office and PGO determine that the amount is final, the obligation will be made and the commitment liquidated. However, if the amount is determined not to be final, a partial liquidation will be made, and the balance will be left for later obligations, if needed.
• If the obligation is more than the commitment amount, the procurement system will determine if the amount of increase is less than or greater than $10,000 or 10% of the original commitment amount. If the amount of increase is less than $10,000 or 10% and funds are available, the system will adjust the commitment and establish the obligation before liquidating the commitment amount. If the amount of obligation is more than $10,000 or 10%, then the award will not be made. The CC/CO, NC or office will be required to submit an amendment to the commitment for additional funding.
F. Liquidation of commitments
Commitments must be properly adjusted when associated obligations are recorded. When PGO makes an award, the obligation will be recorded and the system will liquidate the commitments as the obligations occur. When a commitment has multiple obligations, PGO and/or the CC/CO, NC, or office will identify the last obligation as final to ensure the de-commitment of any residual commitment. Because CC/COs, NCs, or offices sometimes make multiple obligations against a single grant commitment, the CC/COs, NCs or offices must ensure commitments are fully liquidated for grant transactions. When obligations against commitments for grants result in only portions of the commitments being liquidated, the CC/COs, NCs, or offices must de-commit the difference (residual commitment).
If funds are committed, and it is later determined that the funds will not be obligated for the commitment, then the CC/COs, NCs or offices must request that the action be cancelled. This will cause a de-commitment of the funds.
CC/COs, NCs, or offices must cancel all commitment actions that will not be awarded by submitting a request to cancel the action to PGO through the system in which the commitment is recorded. All commitments against all funds must be cancelled by year-end.
G. Aged commitments
CC/COs, NCs, or offices must monitor aging commitment balances regularly. This helps ensure that reserved funds are still needed, and this will also help identify those requests that have already been obligated but may not have been properly liquidated. Regular monitoring and procedures to correct unnecessary reservation of funds are essential to the success of commitment accounting.
IV. Responsibilities
A. Responsibilities for CC/COs, NCs, or offices with regard to commitment accounting
All commitments and de-commitments must originate in the CC/COs, NCs, or offices except at year end when FMO will initiate a program that will de-commit any outstanding amounts. Commitments will be recorded in UFMS when the CC/CO, NC, or office authorizes the transaction and the system verifies funds availability. Funds become unavailable for further use once they are committed. CC/COs, NCs, or offices are responsible for the following steps:
• Identify the need for goods or services.
• Enter all request information in ICE/GMIS IMPAC II and initiate the approval process.
• Enter CC/CO, NC, or office approval for all requests in ICE/ GMIS IMPAC II.
• Act upon disapproved requests (e.g., commitment amount insufficient based on award amount, invalid object class, invalid CAN).
• Monitor commitments and take appropriate action, as needed.
• Submit request to PGO to de-commit residual commitments for grant and cooperative agreement (hereafter, also referred to as grant) awards.
• Cancel commitments against unobligated amounts, including annual or expiring appropriations by year-end.
• Ensure specific purchases are appropriately recognized.
• Submit amendments to commitments, where necessary.
B. Responsibilities of FMO with regard to commitment accounting
• UFMS automated funds control (commitments) will also reduce the number of manual handoffs of funding documents. The ICE system will check for available funds at the budget activity level before a commitment is made. All other systems will check for funds at the point of obligation to provide positive information as to availability of funds against which obligations may be incurred. This precludes over-obligation of the obligation authority. In addition, the automated system will flag all valid transactions that exceed the obligation availability so that corrective stop-action can be taken.
• Review ICE requests greater than $10,000, which requires additional certification from FMO.
• Review GMIS IMPAC II requests and certify funds for those requests.
• Conduct data validation sampling reviews for daily commitment transactions.
• Provide technical support for UFMS, including programming for accounting reports.
• Generate and maintain various commitments and obligations reports from UFMS.
• Assess existing internal controls related to budget and accounting functions.
• Verify and ensure committed funds are appropriately classified with accounting classifications codes (subject CAN relationship, fiscal year, CAN, object class, expense/capitalization, etc.)