Operation and Maintenance (O&M) appropriations fund expenses such as civilian salaries, travel, minor construction projects, operating military forces, training and education, depot maintenance, stock funds, and base operations support.  Importantly, O&M has one year of availability, during which funds are available for new obligations, obligation adjustments, expenditures, and outlays.  As such, O&M obligations for new projects must be made by 30 September of the first fiscal year of the fund’s availability.  That one-year period for O&M funds is known as its Current (Unexpired) Phase.  During that Current Phase, besides being able to obligate for new projects or adding funds to a project for out-of-scope (new) work, the funds can be used (expended) to pay bills incurred during that first year.  

As of 01 October, of the second fiscal year, the O&M funds are considered to have entered their 5-year Expired Phase.  During the Expired Phase, the funds retain their identity (Fiscal Year, Appropriation, and Program Element), and unobligated amounts are controlled at the Service level.  During the Expired Phase, the O&M funds can be used (expended) to pay bills incurred during years two through six on existing obligations.  In addition, during the Expired Phase, O&M funds, with the same identity, can be obligated for upward adjustments for in-scope, NOT new out-of-scope, work of the existing project. Upward adjustments could be caused by unanticipated increases in labor, material, or indirect costs.

On 01 October of the seventh fiscal year, the O&M funds are considered to have entered their Cancelled (Closed) Phase.  During the Cancelled Phase, the funds are no longer available for obligations, or expenditures, of any kind. Therefore, if bills arise from work funded with the now Cancelled O&M funds, they must be paid using O&M funds in their Current Phase.

I recommend contacting SAF/FM or the appropriate SAF/FM sub-organization with authority over the subject matter content to get an authoritative interpretation.  Moreover, it is advisable to consult with your organization’s acquisition legal counsel for interpretation of this issue before acting.