The authorized amounts distributed to the States through apportionment or allocation represent lines of credit upon which States may draw as they advance federally assisted projects. No cash is disbursed at this point. An obligation is a commitment of the Federal Government to pay, through reimbursement to the States, the Federal share of a project s eligible cost.
Obligation is a key step in financing.
Incurring an obligation is similar to the use of a credit card. The holder of the card is obligated to reimburse the credit card company when a purchase is made. Although no cash has exchanged hands, the money is as good as spent when the holder signs the charge receipt. Likewise, the Federal Government must eventually provide the cash to reimburse the States once an obligation is made. With few exceptions, the Federal Government does not pay for the entire cost of construction or improvement of Federal-aid highways.