FAC Budgeting & Financial Oversight 3 — Questions and Answers
Question 1: What is the purpose of a 'funds availability certification' on a contract action?
- To confirm that sufficient, legally available funds exist to cover the obligation (Correct answer)
- To certify that the contractor's pricing is fair and reasonable
- To document that competition requirements have been met
- To verify the contractor's past performance record
Correct answer: To confirm that sufficient, legally available funds exist to cover the obligation
Funds availability certification ensures that money is properly appropriated, available in the correct amount, and legally usable for the stated purpose before an obligation is created.
Question 2: Under FAR Part 32, what is an 'incremental funding' arrangement?
- Funding a contract in stages rather than obligating the full estimated cost at award (Correct answer)
- Dividing a contract into separate lots to stay under simplified acquisition thresholds
- A method of paying contractors weekly rather than monthly
- Funding only the base period of a contract with options unfunded
Correct answer: Funding a contract in stages rather than obligating the full estimated cost at award
Incremental funding obligates less than the total contract value at award, with additional funding added as it becomes available, commonly used in cost-reimbursement contracts.
Question 3: What is the 'bona fide needs rule' in federal appropriations law?
- An agency may only obligate current-year funds for needs that genuinely exist within that fiscal year (Correct answer)
- Agencies must prove a legitimate business need before initiating any acquisition
- Only bonafide small businesses may receive sole-source awards
- Contracts must address a documented mission need before award
Correct answer: An agency may only obligate current-year funds for needs that genuinely exist within that fiscal year
The bona fide needs rule prohibits agencies from obligating current-year funds to stockpile supplies or fund future-year requirements, ensuring appropriations serve present needs.
Question 4: A contracting officer is about to award a contract but the fiscal year ends in two days and the funds are expiring. Which action is appropriate?
- Award only if there is a genuine current-year need and funds are properly available (Correct answer)
- Obligate the funds to a miscellaneous holding account and award next year
- Request an automatic continuing resolution to extend the funds
- Delay award until the new fiscal year begins and use new appropriations
Correct answer: Award only if there is a genuine current-year need and funds are properly available
A valid obligation can be made with expiring funds only if there is a genuine bona fide need in the current fiscal year and all procurement rules are followed.
Question 5: What distinguishes 'no-year' funds from 'single-year' appropriations?
- No-year funds remain available for obligation indefinitely, while single-year funds expire at fiscal year end (Correct answer)
- No-year funds can only be used for capital equipment, while single-year funds cover operating costs
- No-year funds are exempt from the Antideficiency Act
- Single-year funds can be carried over with agency head approval
Correct answer: No-year funds remain available for obligation indefinitely, while single-year funds expire at fiscal year end
No-year (or 'X-year') appropriations have no expiration date and remain available until expended, unlike annual appropriations that expire at the end of the fiscal year.
Question 6: Which document formally requests funds to be moved from one budget line item to another within an approved appropriation?
- A reprogramming action (Correct answer)
- A continuing resolution
- A Budget Activity Transfer (BAT) voucher
- A Congressional notification memorandum
Correct answer: A reprogramming action
Reprogramming actions formally transfer funds between budget line items within the same appropriation, often requiring Congressional notification depending on the amount.
Question 7: What is the significance of the 'period of performance' in relation to multi-year contract funding?
- Funds must be available for each year of performance, with each year's work funded by that year's appropriation unless multi-year authority exists (Correct answer)
- The period of performance determines how long the contractor has to submit invoices
- Only the base year requires funded appropriations; options years are funded from reserves
- Multi-year contracts can use a single year's appropriation for the entire period
Correct answer: Funds must be available for each year of performance, with each year's work funded by that year's appropriation unless multi-year authority exists
Unless multi-year contracting authority is granted, annual appropriations fund only the year in which costs are incurred, making period of performance critical to funding planning.
FAC Budgeting & Financial Oversight 3
What is the purpose of a 'funds availability certification' on a contract action?