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    What is the definition of cancelling funds?


    Every year Congress appropriates and authorized money to the Department of Defense (DoD).  (i.e. puts money in the DoD checkbook).  Congress requires these funds to be obligated to a contract within a specified period of time depending on the type of funds.  Congress also requires these funds be liquidates (paid out) within specified timeframes.
    All types of money has three phases.
    ·  Current – this means these funds are available for obligation to a contract which will legally bind the Government to make payment.  There are different time periods for obligation depending on type of funds.
    o  O&M Funds must be obligated within one year
    o  R&D Funds must be obligated within two years
    o  Procurement Funds must be obligated within three years
    o  Military Construction must be obligated within five years

    ·  Expiring Funds – this means the time period for obligation has past but if these funds have been obligated, they are available for payment.  Once funds have been obligated to a contract (no matter what type), it must be paid to the contractor within five years after obligation period ends. 

    ·  Canceled Funds – this means the funds are no longer available for payment purchases. The funds cancel after five years of being obligated.  If funds do cancel and are later needed to fulfill prior year’s obligation, replacement funds must be withdrawn from current year appropriations. 

    At the beginning of the fiscal year, DCMA gets a report of the contracts/ACRNS that identify funds that will cancel that fiscal year.  The funds on this report are referred to as “Canceling Funds”.  If these funds are not paid to the contractor or deobligated from the contract, they will cancel at the end of the fiscal year.  DCMA is task to work with contractors to get their invoices submitted and work with DFAS to resolve any payment issues so funds can be used before they cancel. 

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