3.2 Period of Availability of Funds
Obligation of Funds
An obligation is a legal liability for which funds are committed and disbursement is expected to occur during a specified time period. For example, if an order is placed for a piece of equipment to be purchased with award funds, the order is an obligation. See 2 C.F.R. § 200.71 (definition of “Obligations”).
Obligations must occur during the project period stated on the award document. An obligation occurs when funds are committed, such as in a valid purchase order or requisition to cover the cost of purchasing an authorized item on or after the begin date and up to the last day of the award period. See 2 C.F.R. § 200.309 (Period of Performance).
Financial Management Tip
Obligations must occur during the project period. If funds are obligated (e.g., enter into a contract) prior to the start of the project period, that obligation may not be an allowable expense, unless this was approved in advance by the awarding agency.
Any funds not obligated by the recipient by the end of the award period will lapse and revert to the awarding agency. The obligation deadline is the last day of the grant award period unless otherwise stipulated. No additional obligations can be incurred after the end of the award. For example, if the award period is October 1, 2017 to September 30, 2019, the obligation deadline is September 30, 2019.