Terminology 21.1. Definitions. The terms used in this Circular are defined as follows: Accounts payable.--Amounts owed by an account on the basis of invoices or other evidence of receipt of goods and services, i.e., the amount of goods and services received but not yet paid. Accounts receivable.--Amounts receivable by an account from another Federal Government account or the public (the latter only when a provision of law specifies that such orders may be used as budget authority) for goods furnished and services rendered. For clarification on the amount available for obligation, see Parts III and XI. Administrative division of funds.--Any division or subdivision of an appropriation or fund by an official having administrative control over such appropriation or fund. Specifically: 1. Apportionment.--A distribution made by OMB of amounts available for obligation in an appropriation or fund account into amounts available for specified time periods, programs, activities, projects, objects, or combinations thereof. The apportioned amount limits the obligations that may be incurred. 2. Reapportionment.--A revision approved by OMB of a previous apportionment for an appropriation or fund account. 3. Agency limitation.--For fund control purposes, an agency limitation is any administrative division or subdivision of funds made by agency officials that restricts the use of Government funds. a. Allotment.--Authority delegated by the head or other authorized employee of an agency to agency employees to incur obligations within a specified amount, pursuant to OMB apportionment or reapportionment action or other statutory authority making funds available for obligation. b. Allocation.--This term is used in two different ways: --It is used restrictively to mean the amount of obligational authority transferred from one agency, bureau, or account that is set aside in a transfer appropriation account (also known as an allocation account) to carry out the purposes of the parent appropriation or fund. See also "Transfers". --It is used broadly to include any subdivision below the suballotment level, such as subdivisions made by the agency financial plans or program operating plans, or other agency restrictions. Advances.--Amounts of money prepaid to a Federal government account for the later receipt of goods, services, or other assets, or as matching funds. Agency.--For purposes of this Circular, the word "agency" is used to designate any department, agency, commission, authority, administration, board, or other independent establishment in the Executive Branch of the Government, including any corporation wholly or partly owned by the United States. Apportionment.--See "Administrative division of funds". Balances of budget authority.--This term refers to the cumulative amount of budgetary resources provided to an account that has not been outlayed (spent). More specifically, balances are referred to as: 1. Obligated balance.--The cumulative amount of obligations incurred (as determined under 31 U.S.C. 1501) for which outlays have not yet been made. It includes undelivered orders and amounts received but not yet earned, less (a) collectible reimbursements receivable from other Federal government accounts, (b) collectible refunds receivable from other Federal government accounts, (c) unfilled orders on hand from within the Federal government that constitute valid obligations of the ordering account and for which reimbursements will be credited to the account being reported, and (d) unfilled orders from outside the Government for which an advance payment has been received and credited to the account being reported. 2. Unobligated balance.--The unobligated balance is the amount remaining after deducting the cumulative obligations from the amount available for obligation. 3. Unexpended balance.--The unexpended balance is the sum of the obligated and unobligated balances. Budget authority.--Budget authority is the authority provided by law to incur obligations that will result in outlays or expenditures. Specific forms of budget authority are: 1. Appropriations, which are authority to incur obligations and make expenditures, including the authority to obligate and expend offsetting receipts and collections (other than borrowing authority), that is provided in appropriations acts and other provisions of law. Certain types of appropriations are not recorded as budget authority to incur obligations. These are appropriations: (a) to liquidate contract authority, (b) applied to the reduction of outstanding debt, (c) for refunds of receipts, and (d) to liquidate deficiencies. For purposes of the Antideficiency Act, the term "appropriations" is defined as appropriations, funds, and authority to create obligations by contract in advance of appropriations or any other authority making funds available for obligation or expenditure. 2. Borrowing authority, which is authority granted to a Federal entity to borrow (e.g., from Treasury or through the issuance of promissory notes or monetary credits), and to obligate and expend the borrowed funds. 3. Contract authority, which provides specific statutory authority to incur obligations in anticipation of either receipts or an appropriation of liquidating cash with which to pay the obligations. The availability of budget authority for obligation and expenditure may be limited by purpose, amount, or time. 1. Purpose. Funds may be obligated or expended only for the purposes authorized in appropriations acts or other laws. 2. Amount. Obligations and expenditures may not exceed the amounts established in law. If the law itself specifies an amount of budget authority as available, the amount is classified as definite authority. This type of authority includes authority stated as "not to exceed" a specified amount. If the law does not specify an amount of budget authority as available, rather the amount is determined by specified variable factors, the amount is classified as indefinite authority. Examples include an appropriation of all or part of the receipts from a certain source or an appropriation of such sums as are necessary. 3. Time. The period during which funds may be obligated or expended is limited by law. Laws that provide budget authority may limit the period during which the budget authority is available for incurring new obligations. Such budget authority is referred to as fixed budget authority. Budget authority that is available for new obligations for one fiscal year is referred to as annual or fiscal year authority. Budget authority that is available for new obligations for two or more fiscal years is referred to as multi-year authority. Budget authority that is not fixed is referred to as no-year authority. Budget authority that is provided in annual appropriations acts is annual authority unless the language providing the authority specifies a longer period of availability for new obligations. This is because the enacting clause of each annual appropriations act specifies that the act is making appropriations for the fiscal year. In addition, a permanent law specifies that amounts made available in appropriations acts are available after the fiscal year covered by the law in which it appears only if the law expressly makes it available for a longer period of time {31 U.S.C. 1301(c)}. Moreover, many appropriations acts contain a general provision specifying that the appropriations provided in the act are not available beyond the current fiscal year unless expressly so provided. When budget authority is made available for new obligations for a fixed period of time, it is usually available for adjustments or expenditures (i.e., disbursements) only during the fixed period and the five fiscal years following the end of the fixed period. After this period, all unexpended balances are permanently cancelled. See Part XI for instructions on procedures for closing accounts. If the authority is not fixed, the authority usually is available for adjustments and expenditures until the purposes for which the amounts were provided are accomplished and there has been no disbursement for two fiscal years. During the period of time that the authority is available for new obligations, it is referred to as unexpired authority. When the authority to incur new obligations has expired but the authority to pay valid obligations previously incurred, as well as valid adjustments thereto still exists, it is referred to as expired authority. When the authority to pay valid obligations or make adjustments no longer exists, it is referred to as canceled authority. Budgetary resources.--See Parts III, IV, and V. Deferral.--Any executive action or inaction that temporarily withholds, delays, or effectively precludes the obligation or expenditure of budgetary resources. Pursuant to 31 U.S.C. 1512 and the Impoundment Control Act {(2 U.S.C. 684(b)}, deferrals are permissible (a) to provide for contingencies, (b) to achieve savings made possible by or through changes in requirements or greater efficiency of operations, or (c) as specifically provided by law. These programmatic deferrals are generally effected through the apportionment process. "Agency deferrals" are those initiated and effected by the agency itself, and not reflected in the apportionments. See Part VII for instructions on reports to Congress. Disbursements.--Sometimes used interchangeably with the term "outlays". Expenditures.--Sometimes used interchangeably with the term "outlays". Feeder account.--Certain appropriation and revolving fund accounts whose resources are available only for transfer to other specified appropriation or revolving fund accounts. Financing authority.--The authority provided by the Federal Credit Reform Act of 1990 to finance the unsubsidized portion of direct loans and loan guarantees. It is used only in credit financing accounts. Fiscal year.--The Federal Government's yearly accounting period begins on October 1 and ends on the following September 30. The fiscal year is designated by the calendar year in which it ends, e.g., fiscal year 1994 began on October 1, 1993, and ended on September 30, 1994. Fund control regulations.--Agency rules specifying the procedures that agency officials and employees are required to follow whenever they obligate or expend Government funds. Fund types.--The budget totals are comprised of two major fund groups, Federal and trust. Within each group there are several types of central accounts established in the Treasury, as described below. The range of four digit Treasury basic account symbols for each subgroup of central accounts is provided in parentheses. 1. Federal funds. This group comprises all of the expenditure, receipt, and fund accounts that are not designated by law as trust funds. a. General fund expenditure accounts (0000-3899) primarily record appropriations and expenditures of general fund receipts. b. General fund receipt accounts (0000-3800) record collections not earmarked by law for a specific purpose, e.g., income and corporate taxes, customs duties, and miscellaneous receipts. c. Special fund expenditure accounts (5000-5999) record appropriations and expenditures of special fund receipts. d. Special fund receipt accounts (5000-5999) record collections that are earmarked by law for a specific purpose and are not designated as trust fund receipts, e.g., the Land and Water Conservation Fund. e. Public enterprise revolving fund accounts (4000-4499) record the permanent appropriations and expenditures of collections, primarily from outside the Government, that are earmarked to finance a continuing cycle of business-type operations. f. Intragovernmental revolving fund accounts (4500-4999) record the permanent appropriations and expenditures of collections, primarily from other agencies and accounts, that are earmarked to finance a continuing cycle of business-type operations, e.g., working capital funds, industrial funds, stock funds and supply funds. g. Management fund accounts (3900-3999) record the permanent appropriations and expenditures of collections from two or more appropriations to carry out a common purpose or project not involving a continuing cycle of business-type operations. These accounts facilitate the administration and accounting for intragovernmental activities. 2. Trust funds. This group is comprised of all the expenditure, receipt, and fund accounts that are designated by law as trust funds. a. Trust fund expenditure accounts (8000-8399 and 8500-8999) record appropriations and expenditures of trust fund receipts. b. Trust fund receipt accounts (8000-8999) record receipts earmarked for specific purposes in accordance with a statute that designates the funds as a trust fund, e.g., the Highway Trust Fund. c. Trust revolving fund accounts (8400-8499) record the permanent appropriation and expenditure of collections used to carry out a cycle of business-type operations in accordance with a statute that designates the fund as a trust fund, e.g., the Employees Health Benefits Fund. Treasury account identification codes. Each central account established in the Treasury is identified by a code that consists of seven or more alphanumeric characters, for example: 28 4 0230 20 4/6 0230 20 X 0230 The account codes provide the following information: --Department or agency code. The first 2 digits identify the agency responsible for the account. It is assigned by the Department of the Treasury. For purposes of the Antideficiency Act, the Treasury accounts apply. The accounts in the President's budget are usually aggregations of Treasury accounts. The printed budget uses the 2 digit Treasury agency code. For puposes of data input for budget formulation, see OMB Circular No. A-11 for the 3 digit department or agency code assigned by OMB. --Period of availability. The next character represents the period of availability of the account for obligation. o Annual accounts. A single digit (0 through 9) represents the last digit of the fiscal year in which the appropriation is available for obligation. o Multiple-year accounts. Two digits separated by a slash (/) indicate a multiple-year appropriation. The digit preceding the slash represents the first fiscal year of availability and the digit following the slash represents the last digit of the final fiscal year of availability. o No-year accounts. An "X" is used to designate a no-year appropriation which is available for an indefinite period of time. --Treasury basic account symbol. The last four digits identify the specific account by appropriation or fund group and are also known as the four digit appropriation or fund group basic account symbol. Impoundment.--Any executive action or inaction that withholds, delays, or precludes the obligation or expenditure of budget authority. See "Deferral" and "Rescission". Obligated balance.--See "Balances of budget authority". Obligations incurred.--Amounts of orders placed, contracts awarded, services received, and similar transactions during a given period that will require payments during the same or a future period. Such amounts will include outlays for which obligations had not been previously recorded and will reflect adjustments for differences between obligations previously recorded and actual outlays to liquidate those obligations. See section 22 for a more detailed explanation of the concept of obligations and section 23 for its application to specific types of transactions. Outlays.--Outlays are recorded when obligations are paid. The amount of the outlay is the amount paid. Obligations are usually paid in the form of cash (currency, checks, or electronic fund transfers). However, obligations may be paid and outlays recorded even though no cash is disbursed. For example, outlays are recorded for the full amount of Federal employees' salaries, even though the cash disbursed to the employee is net of Federal and state taxes, retirement contributions, life and health insurance premiums, and other deductions. Outlays are recorded when debt instruments (bonds, debentures, notes, or monetary credits) are used to pay obligations. For example, the acquisition of physical assets through certain types of lease-purchase arrangements is treated as though an outlay were made for an outright purchase. Because no cash is paid at that time to the nominal owner of the asset, a debt is recorded. Lease payments in such cases are recorded as repayments of principal and interest. The treatment of interest varies. Outlays for the interest on the public issues of Treasury debt securities are recorded as the interest accrues, not when the cash is paid. Interest on special issues of the debt securities held by trust funds and other Government accounts is normally stated on a cash basis. In a few cases where a Government account is invested in Treasury securities at a premium or discount and the differences between the purchase price and par value are significant in total, special treatment is required to amortize the interest recorded. For Federal credit programs, outlays for the subsidy cost of direct loans and loan guarantees are recorded as the underlying loans are disbursed. Refunds of receipts (such as income taxes in excess of tax liabilities) are recorded as reductions of receipts, rather than as outlays. Outlays during a fiscal year may be for payment of obligations incurred in the same year or in prior years. Obligations, in turn, may be incurred under budget authority provided in the same or in prior years. For budget execution purposes, the outlays of an account are stated net of any offsetting collections credited to the account. Reapportionment.--See "Administrative division of funds". Reappropriations.--Amounts of budget authority resulting from legislation to continue the availability of unobligated funds that have expired or would otherwise expire. Any such extension of availability constitute new budget authority in the fiscal year in which the balances become newly available. Recoveries of prior year obligations.--Amounts made available in no-year and unexpired multiple-year accounts through downward adjustments of prior year obligations. Refunds.--Recoveries of erroneous or excess payments that are credited to an appropriation or fund account. Rescission.--Enacted legislation canceling budget authority previously provided by law, prior to the time when the authority would otherwise expire. See Part VII for detailed instructions on rescission proposals by the President. Reserves.--Portions of budgetary resources set aside by OMB, under the Antideficiency Act (31 U.S.C. 1512) and the Impoundment Control Act (2 U.S.C. 684), (a) to provide for contingencies, (b) to effect savings made possible by or through changes in requirements or greater efficiency of operations, or (c) as specifically provided by law. On the forms prescribed by this Circular, "reserves" will be classified and shown as either "withheld pending rescission" or "deferred". Reserves to provide for contingencies will not be proposed for rescissions. Revolving funds.--See "Fund types". Statutory limitation.--For fund control purposes, a statutory limitation is a restriction that establishes the maximum amount that may be obligated or expended from that appropriation or fund. It includes statutory credit limitations. Transfers.--Shifting budgetary resources from one Federal government account to another. See Exhibit 21 and Part VIII. Warrants.--Official documents issued pursuant to law by the Secretary of the Treasury that establish the amount of moneys authorized to be withdrawn from the central accounts maintained by the Treasury. Undelivered orders.--The amount of goods and services ordered by an account from another Federal Government account or the public but not yet received, i.e., the amount of orders for goods and services outstanding for which the liability has not yet accrued. This amount includes any orders for goods or services for which delivery or performance has not yet occurred. For purposes of the Circular, small items of prepaid expense (e.g., subscriptions to periodicals) may be omitted from the reports on undelivered orders. Write-off.--The amount representing uncollectible receivables. (See section 85.2.) Unobligated balances.--See "Balances of budget authority". Unfilled customers orders.--The amount of orders received from other accounts within the Government for goods and services to be furnished on a reimbursable basis. In the case of transactions with public, report orders up to the amount collected (advances received) for which the account or fund has not yet performed the service or incurred its own obligations for the purpose. Concept of Obligations 22.1. General concept. Obligations incurred are defined in section 21 to include amounts of orders placed, contracts awarded, services received, and similar transactions during a given period that will require payments during the same or a future period. In addition to orders and contracts for future performance, obligations incurred include: (a) the value of goods and services accepted and other liabilities arising against the appropriation or fund without a formal order, and (b) outlays made for which obligations were not previously reported. Except as specifically provided herein, the concept of obligations excludes unfunded contingent liabilities. Pursuant to 31 U.S.C. 1501, no amount shall be reported as an obligation unless supported by documentary evidence of transactions authorized by law, such as: a binding agreement in writing, a valid loan agreement, an order, a grant or subsidy, a liability resulting from pending litigation, employment, expenses of travel and public utilities, or any other legal liability of the United States. Further, certifications and records shall be kept in an agency in a form that makes audits and reconciliations easy (31 U.S.C. 1108). Before funds expire, agencies should review estimated obligations to assure that obligations are not understated due to a delay in documentation. There must be adequate funds to cover upward adjustments in expired accounts to avoid a violation of the Antideficiency Act. Moreover, agencies should ensure that obligations are not overstated by the inclusion of obligations that are not likely to require payment. In seeking to recover obligations that are not likely to require payment, agencies should: --Review obligations for goods and services ordered, cancel orders or contracts for goods or services that are no longer needed or that are not likely to be delivered, and deobligate the appropriate amounts. --Review obligations for goods received but not yet paid, return goods that are no longer needed, and recover the amounts obligated. Likewise, accounts receivable from other Federal government accounts should be reviewed periodically to determine their validity and appropriate write-off procedures should be followed on uncollectible amounts. Application of the Concept of Obligations 23.1. General. The application of the concept of obligations to various types of transactions is outlined below. Except in those cases where there are special statutory provisions to the contrary, reports on obligations under this Circular will conform with the guidelines listed below. The principles that are used in determining which fiscal year's appropriation is to be charged at the end of the fiscal year will also be used for the determination of the obligations for any period within the fiscal year, unless otherwise specified. 23.2. Personal services and benefits. As a general rule, include amounts earned. For example: --Amounts earned by employees and others during the reporting period. --Charges based on salaries and wages (such as living and quarters allowances, equalization allowances under 5 U.S.C. 3373, and the employer's share of contributions to the retirement fund, premiums for insurance, such as health and life insurance, and FICA taxes) are obligations at the time the salaries and wages are earned. --Severance pay will be reported as an obligation of the pay period covered, on a pay period by pay period basis, as it is earned. Personnel benefits in the form of authorized reimbursable expenses estimated to be paid to employees for real estate, temporary subsistence, and other expenses incident to dislocation at the request of the Government will be reported as an obligation at the time individual travel orders are approved. The reason is that the costs are a bona fide need of the agency at the time the travel order is approved and the Government has a statutory duty to reimburse the employee. See section 23.3 for parallel treatment of travel and transportation expenses incident to dislocation at the request of the Government. Other allowances (such as uniform allowances and incentive awards) will be reported as an obligation when they become payable to the employee. Annual leave is not generally funded and will not be reported as an obligation until it becomes due and payable as terminal leave or taken in lieu of a lump sum payment. However, some revolving funds are required to recover the cost of annual leave through fees. Therefore, when transfers are made between such revolving funds, budgetary resources in the amount of any funded annual leave must be transferred along with the people. Transfers of people from revolving funds to non-revolving funds must also be accompanied by transfers of budgetary resources in the amount of any funded annual leave but the resources must be credited to miscellaneous receipts. For unemployment compensation payments to the Department of Labor for former Federal employees, obligations should be reported when the agency receives the bills rendered by Labor. 23.3. Travel and transportation. As a general rule, include amounts for travel and transportation that are needed during the reporting period and (a) for which a valid contract for services has been made, or (b) for which travel and transportation expenses have been incurred. A valid contract for services is a binding agreement for specific services. Transportation requisitions, Government bills of lading and shipping orders are not binding agreements for specific goods or services. Obligations may, where practicable, be tentatively recorded for transactions within the year, provided that agencies place them on an actual basis at the end of the fiscal year (except those transactions specifically exempted by a provision of law). Travel and transportation expenses incident to dislocation at the request of the Government will be reported as an obligation on the basis of individual travel orders. The same reasons, specified in section 23.2 for the treatment of personal benefits incident to dislocation at the request of the Government, apply. 23.4. Rent, communications, and utilities. Include amounts for services received or amounts owed for the use of property during the reporting period. In those cases where bills are rendered for a period beginning in one month and ending in the following month, the services received subsequent to the latest billing date need not be included. However, if the accrued liability for communication and utility services performed for the portion of the month between the end of the billing period and the end of the month is material, provision should be made for recording it as an obligation. In the case of postage, include the cost of stamps purchased and the amount owed for metered or penalty mail dispatched during the reporting period. (Note: Penalty mail is government mail that specifies that there will be a fine or penalty if used for personal purposes.) Generally, for contracts involving recurring services within or beyond the fiscal year (such as rent), the contract will cover only the period funded and obligations will be recorded for the full amount of the contract for these services. For example, the annual amount will be recorded as an obligation for a contract funded by an annual account and the full amount for a two-year contract when funded by a two-year appropriation. (NOTE: It is a violation of the Antideficiency Act (31 U.S.C. 1341(a)) to involve the Federal Government in a contract or obligation for payment of money before an appropriation is made, unless authorized by law.) In the case of GSA rental space, include payments owed (both earned and advanced) on the basis of bills rendered by GSA pursuant to regulation. For contracts with renewal options, include the amount required to cover the basic period and any penalty charges for failure to exercise options. 23.5. Printing and reproduction, other contractual services, supplies and materials, and equipment. Include orders placed and contracts awarded. Documentary evidence of binding agreements, orders, or other legal liabilities is required before an amount may be recorded and reported as an obligation (31 U.S.C. 1501). In reporting orders for supplies and services, agencies should bear in mind that the general rule for lawfully obligating a fiscal year appropriation is that the supplies or services ordered are intended to meet a bona fide need of the fiscal year in which the need arises or to replace stock used in that fiscal year. Administrative commitments in the form of requisitions within an agency, invitations for bids, or any other action short of a binding contract, order, or other similar agreement (such as amounts identified for contemplated procurement), will not be included in the amounts reported as obligations. With regard to specific types of contracts and orders, the following procedures will be observed: (1) Cost-plus-fee and other types of contracts without a fixed price.--Include obligations on the basis of the total estimated costs of contracts (including the total fixed fee, if any). This figure will be reported for the month during which the contract is let, and subsequent adjustments upward or downward in the estimated cost (or the fixed fee, if any) will be reflected in subsequent reports. If a maximum price is stated, the maximum amount will be reported at the time the contract is let. (2) Fixed price contracts with escalation, price redetermination, and incentive provisions.--Report the fixed price stated in the contract or the target or billing price in the case of a contract with an incentive clause. (3) Continuing contracts subject to the availability of appropriations.--Report as an obligation the Government's total estimated legal liability, for example, the amount that the contractor has been notified is available for payment under the particular contract and any potential Federal government cancellation costs. The reported amount should be modified based on any subsequent agreements. (4) Letters of intent and letter contracts.--Where such letters constitute binding agreements under which the contractor is authorized to proceed, obligations will cover the maximum liability indicated in the letters. If the letters merely indicate an intention on the part of the Government to enter into a contractual relationship at a later date, then the amounts will not be treated as obligations. The maximum liability under a letter of intent or a letter contract shall be the amount necessary to cover expenses that the contractor is authorized to incur prior to the execution of a definitive contract. (5) Contracts for variable quantities.--Where a contract mentions several quantities as alternatives, report only the amount for the quantity specified for delivery, exclusive of permitted variations. In the case of contracts that provide for delivery only when and if requested by the Government, where the Government assumes no specific obligation, only orders for delivery will be reported. (6) Purchase orders.--Include orders, under which the Government assumes a specific obligation for material or services not reflected in the items described above. (7) Orders required by law to be placed with another Government agency.--When an agency is required by law or regulation to place certain orders with another Government agency, such orders are recorded as obligations of the ordering agency at the time the order is issued. This includes orders placed with the General Services Administration by agencies with limited exemption from procurement under the Federal Property and Administrative Services Act of 1949, as amended. (8) Orders involving deliveries of stock from other appropriations or funds.--The inclusion of an amount as an obligation where an order is placed for deliveries of stock from other appropriations or funds (other than those covered by paragraph (7) above) depends largely upon the capacity in which the supplying activity functions with respect to the particular transaction: (a) where an order involves common-use standard stock items that the supplying activity has on hand or on order for prompt delivery at published prices, the obligation is incurred at the time the order is placed by the requisitioning activity; (b) where an order involves stock items (other than those covered by (a) above), the obligation is incurred by the requisitioning activity at the time of issuance of a formal notification from the supplying activity that such items are on hand or on order and will be released for prompt delivery; and (c) where the order involves execution of a specific contract, the obligation is incurred by the requisitioning activity at the time the contract is entered into by the supplying activity. Agencies may elect to record the obligations for such orders at the time the order is placed with the supplying activity. In such cases, however, adjustments must be made at the end of the year to conform with the application prescribed herein. (9) Other intragovernmental orders.--Include orders placed and accepted under the project order law (41 U.S.C. 23), pursuant to the Economy Act (31 U.S.C. 1535), and similar legislation. It should be noted that amounts obligated pursuant to orders under the Economy Act are available for obligation by the receiving agency only for the same period as the ordering account. In addition, the Antideficiency Act prohibits overexpenditure of funds as well as overobligation. This means that obligations may be incurred against intragovernmental receivables but not to disburse into a negative position. Such obligations are tolerated only where the agency's cash control system will prevent over-disbursement. Furthermore, it is the preferred practice, for the ordering agency, whenever practicable, to advance cash to the performing ageny at or before the time of ordering goods or services. This is extremely important in those cases where the performing agency does not have sufficient working capital to pay bills in anticipation of reimbursement. 23.6. Lands and structures. Include contracts entered into in procuring land and interest in land, buildings and other structures, additions to buildings, nonstructural improvements, and fixed equipment. In the case of condemnation proceedings, include an estimated amount for the price of the land at the time the Attorney General is requested to start proceedings, adjusted to the amount of the payment to be held in escrow where there is a declaration of taking. For lease-purchases and capital leases covered by the scorekeeping rules developed under the Budget Enforcement Act, obligations will be reported, as follows. When the Federal government enters into the contract, obligations will be recorded in the amount of the present value of the lease payments discounted using the Treasury interest rate used in calculating the budget authority provided for the purchase. During the lease period, report obligations equal to the imputed interest costs (i.e., the financing costs Treasury would have incurred if it had issued the debt to acquire the asset). 23.7. Grants and taxes payable to State and local governments. Unless otherwise required by law, the amount of obligations to be included for Federal grant-in-aid programs, and taxes payable to States and political subdivisions will be determined as follows: (1) For grants that involve no administrative determination and are automatically fixed by a statutory formula or specified by law, the obligation will be: --the amount determined by the application of the formula or the amount appropriated, whichever is smaller; and --reported at the time the amount so determined becomes available to the grantee. (2) For grants based upon approved financial programs, obligations to be reported will cover only the period of time for which the financial requirements have been established and approved, and for which it has been administratively determined that funds will be paid to grantees. For example, if requirements have been established and approved for one month, and it has been determined that payment will be made on the basis of such approval, obligations will be based on the requirements for that month. (3) For grants based upon approved construction and related projects, the Federal share of the project will be considered to be obligated at the time the project is approved by the appropriate Federal authority. (4) For any other grants involving administrative determination, obligations will cover the amount approved for payment at the time the determination is made. (5) Payments in lieu of taxes will be reported as obligations at the time the taxes would be due. (6) Taxes and assessments based on property valuation will be reported as an obligation at the time payment is due, unless further action by the Congress is necessary to authorize payment. For revolving funds and other cases specifically authorized by law, taxes will be recorded as they accrue. Obligations for grants administered through the letter-of-credit financing mechanism will be determined on the same basis as outlined above. Since drawdowns on letters of credit are not ordinarily coincident with the incurring of obligations, it is imperative that obligations be duly recorded prior to such drawdowns. Under either the automatic grants or those based on administrative determinations, the fact that recipient agencies are required to match Federal contributions does not affect the Government's obligation. However, in any case where an agency determines that future payments on an approved program should be modified or discontinued, the obligation previously reported will be adjusted accordingly. 23.8. Other grants, subsidies, and contributions. The amount of obligations for grants, subsidies, and contributions other than those referred to above, will be determined as follows: (1) Amounts based upon contracts or agreements will be recorded at the time the contract or agreement is entered into. For direct loan programs covered by the Federal Credit Reform Act of 1990, the subsidy cost will be obligated in the credit program account when the direct loan obligation is incurred in the credit financing account. For guaranteed loan programs, the subsidy cost will be obligated in the credit program account when the loan guarantee commitment is made. (2) Amounts to be paid in accordance with treaties will be recorded at the beginning of the period for which the money is appropriated. (3) All other grants, subsidies, and contributions will be recorded at the time the payment is made. 23.9. Pensions, annuities, insurance claims, refunds, awards, and indemnities. Include amounts determined administratively or judicially to be due and payable when no further action is required by law to authorize payment. 23.10. Interest and dividends. Include the amount of interest owed or dividends declared (other than dividends payable from a Government-owed fund to the Treasury) during the reporting period. 23.11. Investments. Include purchases of securities and other investments made during the period (see Part VIII for the treatment of U.S. Government securities). 23.12. Guarantees. Include the amount of each valid claim at the time the claim is determined to be payable.