What is a commitment in budgeting terms?

What is a commitment in budgeting terms?

• A. A binding contract with a vendor.
• B. The total approved budget for the fiscal year.
• C. An administrative reservation of funds by the local comptroller, in anticipation of a future obligation.
• D. A contingency plan for overruns.

Answer: (C)

In budgeting terms, a commitment is an administrative reservation of funds by the local comptroller in anticipation of a future obligation. This means money is set aside (an encumbrance) so it will be available when the goods or services are actually contracted and received. It isn’t a payment yet, and it isn’t the total annual budget or an emergency plan. A binding contract would create a future liability tied to an actual expenditure once the obligation is fulfilled, whereas a commitment simply safeguards the funds in advance.

In budgeting terms, a commitment is an administrative reservation of funds by the local comptroller in anticipation of a future obligation. This means money is set aside (an encumbrance) so it will be available when the goods or services are actually contracted and received. It isn’t a payment yet, and it isn’t the total annual budget or an emergency plan. A binding contract would create a future liability tied to an actual expenditure once the obligation is fulfilled, whereas a commitment simply safeguards the funds in advance.