The Definition of a Reimbursable Budget Authority

by Ron Price; Updated September 26, 2017
Reimbursable budget authority provides flexibility to government agencies that work with outside vendors

Reimbursable budget authority (RBA) is a financial management control mechanism that controls which departments or agencies have the authority to create reimbursable agreements (RAs). Although RBA is a term mostly associated with government budgeting, it can also apply to businesses and other organizations. RBA allows an entity the ability to reimburse employees and contractors for work and expenses they incur on behalf of an organization.

Budget Authority

In the budgeting of any large organization, and especially the federal government, a department, division, agency, bureau or task force must be given budget authority before it can spend, allocate, allot, make agreements with contractors or other government agencies, or otherwise obligate funds. In other words, an entity must have the authority before it can operate with its budgeted funds. In your household, you have budget authority to pay your bills and spend your money as you wish. Large company divisions and government agencies are not quite that free with their budget allotments, but with budget authority, they can obligate the funds necessary to perform their missions.

Reimbursable

Reimbursable refers to actions or expenditures, or both, for which you have agreed to compensate or payback another party at an agreed upon time. In a majority of cases, an authorized payment reimburses the expense of another party, provided the expense meets certain guidelines and restrictions. Such is the case with an employee’s travel expenses or a cost-plus agreement with a contractor. The employee or the contractor bears the initial expense, submits a request for reimbursement, and the budget authority repays the expense.

Reimbursable Budget Authority

Not every entity that has budget authority has reimbursable budget authority (RBA). However, those entities that do have RBA have the authority to create policies and enter into agreements that reimburse employees, contractors, or peer organizations within a company or the government for expenses, work or services. In many cases, higher-level departments or agencies reserve RBA to itself to control reimbursed expenses.

Reimbursable Agreements

Another part of a department or agency's RBA is that they can enter into reimbursable agreements (RA). In fact, in order to make reimbursements, an RA must exist. A governmental example of how budget authority, RBA and RAs all came together was in the period of numerous tornadoes, devastating floods, and the massive cleanup effort in the spring of 2011 in the Midwest and southeastern section of the U.S. The agency within the U.S. government responsible for responding to natural disasters is the Federal Emergency Management Agency (FEMA). FEMA does not possess all of the resources it needs to handle a situation this large. Therefore, FEMA, which has RBA, must create RAs with the U.S. Army Corps of Engineers, the U.S. Coast Guard and several other government agencies to take on portions of the work. As work is completed, each of these agencies bills FEMA for reimbursement of their expenditures in order to replenish their budgets, which did not include budgeting for this specific disaster.

About the Author

Ron Price, MBA, has extensive senior level experience in business, information technology, and education. Under his pen name Ron Gilster, Price has written over 40 books for several leading publishers on a topics ranging from business and finance to IT certifications to real estate.

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