50 CFR 80.91 - What is a Federal obligation of funds and how does it occur?
An obligation of funds is a legal liability to disburse funds immediately or at a later date as a result of a series of actions. All of these actions must occur to obligate funds for the formula-based grant programs authorized by the Acts:
(b) The agency sends the Regional Director an application for Federal assistance to use the funds available to it under the Acts and commits to provide the required match to carry out projects that are substantial in character and design.
(d) The agency accepts the terms and conditions of the grant in one of the following ways:
(1) Starts work on the grant-funded project by placing an order, entering into a contract, awarding a subgrant, receiving goods or services, or otherwise incurring allowable costs during the grant period that will require payment immediately or in the future;
(2) Draws down funds for an allowable activity under the grant; or
(3) Sends the Regional Director a letter, fax, or e-mail accepting the terms and conditions of the grant.