Purpose: To provide IRS policy and guidance regarding the establishment of commitments and obligations recorded in the Integrated Financial System (IFS) by:

Audience: These procedures apply to IRS employees responsible for establishing, recording and monitoring commitments and obligations including but not limited to:

Policy Owner: Government Payables and Funds Management (GP&FM) is under the CFO.

Program Owner: Government Payables and Funds Management is the program office responsible for establishing IRS commitments of obligations recorded in IFS and to ensure these entries are accurate and timely.

Primary Stakeholders: CFO and Office of the Chief Procurement Officer.

Program Goals: To ensure that all commitments and obligations are recorded in the IRS IFS system accurately and timely.

Congressional authority to enact federal budget authority for federal funds is provided under U.S. Constitution: Article 1, Section 9, clause 7, Taxes and Congressional Spending.

The ADA explicitly prohibits federal employees and officers from making contracts or other obligations in advance of, or in excess of an appropriation, unless authorized under law. Additionally, public funds may only be used for the purpose(s) for which Congress appropriated funds.

The Department of the Treasury assigns an appropriation warrant for the OMB to apportion. The apportioned funds are then made available for various federal agencies to execute their missions.

The CFO’s Corporate Budget office manages the IRS’s budget authority on behalf of the Commissioner. The IRS receives budget authority from congressional appropriations, negotiated Economy Act orders (with other federal agencies), and user fees for requested services.

Corporate Budget establishes business units’ funding levels through the annual plan development process. Financial plan levels are approved by IRS leadership and entered into the IFS as initial funding levels for the business units. Levels are adjusted once an appropriation bill is signed and apportionments are received. Business units budget authority limits must be strictly adhered to during the fiscal year to ensure the IRS remains compliant within OMB apportionments.

IFS edit checks are in place that ensure:

The business unit financial plans are the approved operational strategies that the business unit intends to execute in accomplishing assigned missions and responsibilities. It is critical for the financial plan managers to oversee and approve business unit spending throughout the year.

Financial plans are representatives of a point in time and must be adjusted throughout the year to account for operational requirements or changes. Business units should adhere to approved budget authority and Economy Act orders.

Reimbursable projects are funded according to joint agreements and funded solely for that particular reimbursable project. Project overruns need to be funded by the participating parties ensuring IRS’s budget authority is not diverted from direct missions to support other federal agencies. The prompt return of unused budget authority allows other federal agencies to obligate their other agency priorities.

Business units use commitments as an administrative reservation of funds in anticipation of an obligation. Requests are validated and approved in PPS.

Federal agencies execute assigned missions with appropriated funds through the obligation process. GAO-05-734SP, A Glossary of Terms Used in the Federal Budget Process, states that an obligation is "a definite commitment that creates a legal liability of the government for the payment of goods and services ordered or received, or a legal duty on the part of the United States."

The IRS processes and records obligations into IFS in three ways:

Title 31, USC, section 1501 (a), states: An amount shall be recorded as an obligation of the United States government only when supported by documentary evidence of a binding agreement between an agency and another person (including an agency) that is:

Open obligations pertain to those for which goods and services that have not been completely received, if the contract is not officially closed. The funds for the obligation remain available to liquidate or adjust the obligation through the fifth year of "expired" appropriation status until the identified appropriation is cancelled.

All business units must continually monitor the status of open obligations, ensuring goods and services are received and accepted in a timely manner and that associated invoices are paid. Business unit managers must work with Procurement and Government Payables and Funds Management to close obligations.

The AUC/AUO discussed in section IRM 1.35.24.10, Aging Unliquidated Commitments and Aging Unliquidated Obligations, is also used to effectively manage open obligations.

The IRS records commitment and obligation transactions into IFS. Budgetary accounts are used to monitor budget approval and execution. Proprietary accounts are used to monitor assets, liabilities, revenues and expenses.

The IRS’s financial reports provide the Treasury, OMB and Congress with the status (obligations and expenditures) of appropriated funds. They are referenced to support decisions in managing assigned programs and controls the cost of operations. Treasury publishes guidance in the Treasury Financial Manual for agencies to follow for the use of funds and the preparation of financial reports on their accounts.

The review of AUCs and AUOs provides an effective management tool for validating aging commitments and obligations for potential recoupment of budgetary resources. Government Payables and Funds Management prepares reports periodically to review open commitments and obligations considered as "aging" and outlined in the AUC/AUO review schedule.

Business unit managers are responsible for monitoring and updating the status of their open commitments and obligations. Business units must certify the validity of open commitments and obligations that include substantive supporting documentation.

There are instances when the IRS must start the contract process in advance of receiving an appropriation because the IRS cannot afford a disruption of contractor- delivered critical services that are due to be renewed by October 1. The CO will insert the following language where necessary if the acquisition is based on an unfunded requisition: Funds are not presently available for this contract action. The government’s obligation under this contract is contingent upon the availability of appropriated funds from which payment for contract purposes can be made. It is anticipated that once an appropriation is enacted and the budget is received, funds in the amount of $__ will be provided.

The supporting material required for recording obligations and any other posting as part of the IRS’s financial statements, financial systems and financial reports are governed by Generally Accepted Government Auditing Standards.

Supporting or source documentation is the evidence that transactions have occurred, for the proper purpose, and for the posted amounts.

Transactions cannot be entered into IFS until proper criteria for recording obligations is met.

The GAO Red Book is used as a reference to help determine if appropriated funds are legally available. Among other principles of fiscal law, it provides guidance on the following ADA principles:

Government Payables and Funds Management is the central internal inspection office for monitoring IRS compliance and this policy and guidance. Government Payables and Funds Management conducts regular inspections of commitment and obligating documents ensuring legal, accurate and timely recording of all transactions.

The Federal Accounting Standards Advisory Board states that, a liability is a present obligation of the federal government to provide assets or services to another entity at a determinable date, when a specified event occurs, or on demand. A liability arises when one party acts causing a probable and measurable future outflow of resources resulting from the event. Probability refers to actions that can reasonably be expected or are believed to be more likely than not based on available evidence or logic except for pending or threatening litigation and unasserted claims (SFFAS #5, (33)). These reciprocal or exchange transactions usually occur as a part of the authorized goods and services delivered within the performance work statements of awarded contracts. Once a contractor performs an authorized action, the IRS has incurred a liability. The IRS recognizes and funds these liabilities before the period of performance begins, even when using incremental funding.

Liabilities directly affect incrementally funded obligations and include:

Obligations should be fully funded once established to ensure the IRS is compliant with the ADA. Business units must request CFO senior leadership approval before using an incremental approach to fund non-CRA affected obligations. If the business unit must incrementally fund an obligation, Procurement will include the following language from IRSAP Procedures, Guidance and Information (PGI) 1032.790 (c), (d), (e), (f), and (g) in the award:

Incremental funding due to a CRA is an approved strategy that doesn't require CFO leadership approval before implementation.

When necessary to incrementally fund a non-CRA affected obligation, the business unit must forward the request through their DFO to the Associate CFO for Financial Management. The Associate CFO for Financial Management will coordinate and approve in conjunction with the Office of the Chief Procurement Officer and the Associate CFO for Corporate Budget.

The approved incremental funding strategy must identify the relevant future funding sources for fully funding the obligation. Incrementally-funded obligations must be monitored to ensure that planned funding sources are realized. If funding sources are not realized, the business unit must immediately notify the IRS’s senior leadership for approval.

Federal agencies are required to develop annual contingency plans for implementation when there is a lapse in appropriations as defined by the Antideficiency Act, 31 United States Code 1341 and 1342. This Act severely restricts the conduct of business by agencies and prohibits government officials from incurring obligations in excess of appropriations except in those categories of activities as defined by the Attorney General. This opinion identified three categories of activities that may be continued. They are:

The measures were created along four performances areas that are essential to enabling the workforce to accomplish the IRS Mission. These four areas, referred to as Human Capital Pillars, are listen, lead, develop and support. They represent the Human Capital projects, initiatives, objectives and strategies that are outlined in the five-year Human Capital Business Plan.

This contingency plan becomes effective after official notification is received from the Department of the Treasury that a lapse in appropriations is possible or in effect.