CLG 006 Certifying Officer Practice Exam

Question: 1 / 400

What is meant by the term “obligation” in the context of federal funds?

A pending cash withdrawal

A legally binding commitment to pay

In the context of federal funds, the term “obligation” refers to a legally binding commitment to pay. This indicates that when the federal government enters into a contract or agreement that incurs costs, such as providing services or purchasing goods, it signifies that the government has committed to pay for those costs. This commitment forms the basis for the government’s budgetary encumbrance, ensuring that funds are set aside for specific purposes.

Understanding “obligation” in this way is crucial for federal financial management since it lays the groundwork for tracking government spending and ensuring that funds are available for future expenditures. This distinguishes it from various other terms or concepts that may involve financial transactions or agreements, but do not carry the same legal implications or implications for budget accountability as an obligation does.

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An informal agreement between agencies

A discretionary fund not yet spent

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