Feb 2013Lesson 21 Financial Management Cost
Feb 2013
Lesson 2.1: Financial Management: Cost Estimation
Budget Terms
Each of these terms has an official definition in budget execution.
TERM
DEFINITION
Budget Authority
"Budget Authority" is the authority granted by appropriations law to enter into obligations that will result in immediate or future outlays.
Commitment
A "commitment" is the administrative reservation of funds, usually by the local comptroller, in anticipation of a future obligation. A commitment is the response to a request for a spending action. It ensures that funds are available in the amount requested, in the correct fiscal year, and in the proper appropriation.
Obligation
An "obligation" is the legal reservation of funds to make a future payment of money. The obligation is incurred as soon as an order is placed, or a contract is awarded for the delivery of goods and performance of services.
Expenditure
An "expenditure" is a charge against available funds. It results from a voucher, claim, or other document approved by a competent authority. Expenditure represents the presentation of a check or electronic transfer of funds to the performer of the work.
Outlay
An "outlay" occurs when a vendor cashes the expenditure check and money flows from the Treasury to the vendor or supplier. With the advent of Electronic Funds Transfer (EFT), the time between an expenditure and outlay can be instantaneous.
Scope of Life-Cycle Costs (LCC)
The Life-Cycle Cost is the total cost to the Government for a system over its entire life.
1
Feb 2013
LCC includes all costs for:
●
●
●
●
●
●
Research and development
Investment (production and facilities)
Operations
Maintenance
Environmental concerns
Disposal
Life-Cycle Cost Estimates (LCCEs)
All military departments and defense agencies perform Life-Cycle Cost Estimates (LCCEs) for their acquisition process. An LCCE:
●
●
●
Is a very comprehensive estimate.
Tries to identify all the costs from program initiation through disposal of the system from
Lesson 2.1: Financial Management: Cost Estimation
Budget Terms
Each of these terms has an official definition in budget execution.
TERM
DEFINITION
Budget Authority
"Budget Authority" is the authority granted by appropriations law to enter into obligations that will result in immediate or future outlays.
Commitment
A "commitment" is the administrative reservation of funds, usually by the local comptroller, in anticipation of a future obligation. A commitment is the response to a request for a spending action. It ensures that funds are available in the amount requested, in the correct fiscal year, and in the proper appropriation.
Obligation
An "obligation" is the legal reservation of funds to make a future payment of money. The obligation is incurred as soon as an order is placed, or a contract is awarded for the delivery of goods and performance of services.
Expenditure
An "expenditure" is a charge against available funds. It results from a voucher, claim, or other document approved by a competent authority. Expenditure represents the presentation of a check or electronic transfer of funds to the performer of the work.
Outlay
An "outlay" occurs when a vendor cashes the expenditure check and money flows from the Treasury to the vendor or supplier. With the advent of Electronic Funds Transfer (EFT), the time between an expenditure and outlay can be instantaneous.
Scope of Life-Cycle Costs (LCC)
The Life-Cycle Cost is the total cost to the Government for a system over its entire life.
1
Feb 2013
LCC includes all costs for:
●
●
●
●
●
●
Research and development
Investment (production and facilities)
Operations
Maintenance
Environmental concerns
Disposal
Life-Cycle Cost Estimates (LCCEs)
All military departments and defense agencies perform Life-Cycle Cost Estimates (LCCEs) for their acquisition process. An LCCE:
●
●
●
Is a very comprehensive estimate.
Tries to identify all the costs from program initiation through disposal of the system from