Federal Funding Reimbursement
Funding for projects is programmed or planned until these funds are "obligated". Obligation is a way of ensuring that actual cash is available to pay for project costs. Obligation of funds occurs on a project phase basis (i.e., design, right of way, or construction). Key activities under each phase will trigger the need for obligation of funds. Typically, these are critical points at which commitments are made, but expenditures have yet to start. Such items as advertisement of consultant or construction contracts and preparing offers for property acquisition are actions that require obligation of funds to be eligible for reimbursement.
Before an agency can receive approval to obligate funds, it must include the project in the FTIP. In the case of Federal Highway Administration (FHWA) related projects (highway and streets), the authority to approve the obligation of funds is passed on to Caltrans, California's Department of Transportation. Caltrans has specific processes that must be followed for an agency to get to a point where funds can be obligated. These vary depending on the program but generally include submitting a "project authorization request" and/or entering into an agreement with Caltrans. For Federal Transit Agency (FTA) related projects (transit), the lead agency for the project must transmit specific information directly to the FTA. Any work performed on the project before receiving authorization to proceed is not eligible for reimbursement.
Federal funding is typically transferred to an agency on a reimbursement basis. Therefore, the agency must ensure it has adequate cash flow to cover planned project expenditures. Generally, once expenditures are incurred, the agency can request reimbursement for those costs. If the agency is required to provide matching monies to the federal funds, those must be spent. Once the project is complete, the lead agency may have to conduct an audit to ensure funds were spent in accordance with the grant or funding program guidelines.
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