Questions concerning this policy chapter should be directed to:

• Veterans Health Administration
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0501 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) financial policies regarding Obligation at Claims Approval.

Prior to FY 2019, VA recorded obligations for Community Care at the time the care was authorized by a VA health care provider. The recorded obligation reflected the total value of care a Veteran might receive under the authorization, which resulted in significant over-obligation. For example, in the case of a knee injury, a VA health care provider’s authorization would cover a variety of possible medical interventions, to include up to ten physical therapy sessions, an MRI, and even surgery, at a total cost of thousands of dollars. VA would record the obligation for the total care possible under the authorization, but the Veteran might complete only three physical therapy sessions, costing only a few hundred dollars. Several months or years later VA would de-obligate the unused funds, making it more difficult to efficiently optimize resource allocation and planning, and increasing the risk that funds could expire instead of being available to provide care for Veterans.

In FY 2019, VA began to record obligations for Community Care at the time of approval of payment to providers, rather than the prior practice of obligating at the time of authorization for care. When VA changed its practice, it applied the recording change to all types of Community Care acquisitions, which meant that VA recorded obligations not only when it approved claims received directly from health care providers but also when it approved vouchers, invoices, and requests for payment received from a Third-Party Administrator (TPA) who acquired healthcare services for Veterans from the TPA’s network of health care providers.

In FY 2020, VA determined that its revised accounting practice was not allowed under current law and that a change in law was required to continue the practice. In the FY 2021 appropriations act (P.L. 116-260), Congress provided VA with the necessary legislative authority to continue to record Community Care obligations at the time of approval of payment to providers, retroactive to FY 2019.

Key points covered in this chapter:

• Obligation at Claims Approval may only be used to carry out section 1601 of division FF of Public Law 116-260 in alignment with Congress’ intent when providing VA with the necessary legislative authority to continue to record Community Care obligations at the time of approval of payment.
• This policy authorizes the Veterans Health Administration (VHA) to establish obligations under Obligation at Claims Approval authority.
• For the purposes of establishing an obligation under Obligation at Claims Approval authority, VA defines hospital care or medical services furnished at non- Departmental facilities as hospital care or medical services delivered by community providers. VA uses the term community care when referring to these services.
• Obligation at Claims Approval authority is applicable to all VA obligations owed for hospital care or medical services delivered by community providers regardless of the appropriation used to fund this care, the type of care provided, or the physical location where the veteran receives care.
• The definitions, roles and responsibilities, and statements within this policy are limited to the application of Obligation at Claims Approval authority used to establish financial obligations; they should not be applied outside the specified scope and context.

0502 Revisions

Section	Revision	Office	Reason for Change	Effective Date
Various	Moved documentation coverage into 050501; copied Vol III Ch 3 App D process to 050503	OFP	Format edit to match other Vol III breakout chapters including placeholder for iFAMS process TBD	December 2025
0503 and 0506	Added ADA and related references.	OFP	Enhance clarity	December 2025
Appendix A	Added Appendix for Prior Revisions	OFP	Format standard-targeted change	December 2025
Appendix B	Added Medical Services Funded provision for transplant services	VHA CFO	Requested addition to listed items covered	December 2025

For a complete list of previous policy revisions, see Appendix A: Prior Revisions.

0503 Definitions

Antideficiency Act – Federal law that prohibits the making of expenditures or the incurring of obligations in advance of an appropriation; prohibits the incurring of obligations or the making of expenditures in excess of amounts available in appropriation or fund accounts unless specifically authorized by law (31 U.S.C. § 1341(a)); prohibits the acceptance of voluntary or personal services unless authorized by law (31 U.S.C. § 1342); requires the Office of Management and Budget (OMB), via delegation from the President, to apportion appropriated funds and other budgetary resources for all executive branch agencies (31 U.S.C. § 1512); requires a system of administrative controls within each agency (see 31 U.S.C. § 1514 for the administrative divisions established); prohibits incurring any obligation or making any expenditure in excess of an apportionment or reapportionment or in excess of other subdivisions established pursuant to 31 U.S.C. § 1517; and specifies penalties for deficiencies.

Community Care – Hospital care, medical services, and extended care services to covered Veterans and family members delivered by community providers.

Community Providers – A 38 U.S.C. § 1703 provider, external to VA, that delivers hospital care, medical services, or extended care services to covered Veterans and family members through a third-party administrator (TPA) contract, community care contract, or Veteran Care Agreement.

Departmental Facilities – A point of care where VA delivers hospital care, medical services, or extended care services to covered individuals.

Hospital Care and Medical Services at Non-Department Facilities/Community Care – Hospital care, medical services, and extended care services delivered to covered Veterans and family members by community providers. This definition only applies to obligations recorded under Public Law 116-260, the Consolidated Appropriations Act, 2021, Division FF, Title XVI, Section 1601, Recording of Obligations.

Non-Departmental Facilities – Facilities other than those designated as Departmental Facilities.

Obligation – A legally binding agreement that will result in outlays, immediately or in the future. An obligation is a legal liability of the Government against an available appropriation.

Obligation at Claims Approval – Occurs when a liability does not arise until the agency formally reviews, applies all established business rules, and approves payment of the healthcare claim or invoice. In these instances, the agency should not record an obligation until it approves the claim or invoiced for payment. (See discussion at Government Accountability Office (GAO) Redbook Chapter 7, Obligation of Appropriations, Administrative Approval of Payment).

0504 Roles and Responsibilities

Under Secretary of Health is responsible for ensuring compliance with and issuing standard operating procedures to implement the policies set forth in this chapter.

Delegated Accountable Officer receives the Secretary’s delegated authority, through the Under Secretary for Health, to certify that all VA claims and invoice processing systems apply business rules to claims, vouchers, invoices, or requests for payment for services provided by community providers or State Homes.

VHA CFO is responsible for establishing a system of internal controls that support obligations subject to Obligation at Claims Approval authority, ensuring appropriations are spent in accordance with the Congressional intent and limits and identifying the Delegated Accountable Officer(s).

VHA Finance Offices are responsible for carrying out the responsibilities assigned by the VHA CFO and performing reconciliations and providing oversight of open obligations to ensure funds are expended appropriately and proper amounts are reflected in VA’s financial statements.

0505 Policies

050501 General Policies

1. In accordance with section 1601 of division FF of Public Law 116-260, VHA will establish “Obligation at Claims Approval” processes and procedures.
2. Obligation at Claims Approval authority is applicable to all VA obligations owed for hospital care or medical services delivered by community providers regardless of the appropriation used to fund this care, the type of care provided, or the physical location where the veteran receives care.
3. The term “all services” includes both clinical and administrative. Accordingly, contract administrative services for hospital care or medical services delivered by community providers will be accounted for as Obligation at Claims Approval.
4. VA considers hospital care or medical services furnished at non-Departmental facilities as hospital care or medical services delivered by community providers.
5. Under the Obligation at Claims Approval authority, VA recognizes an obligation for community care when it receives, validates, and approves a healthcare claim. VA does not record estimated obligations subject to Obligation at Claims Approval authority.
6. To avoid potential violations of the Antideficiency Act (ADA), VA will ensure that adequate funding is available to pay all claims, vouchers, invoices, and requests for payment VA anticipates approving.
7. VA will not issue new authorizations or orders for care or services for any fiscal year in which an appropriation for the payment of hospital care or medical services furnished at non-Departmental facilities has been exhausted or has yet to be enacted.
8. VA will post fiscal end of year accruals to capture the full value of all approved claims and invoices, including claims and invoices approved but not yet established in VA’s accounting system. By calculating the end of year accruals based on all approved claims and invoices, VA represents the full value of all obligations recognized under Obligation at Claims Approval authority.
9. Each claim will be obligated individually; lump-sum obligations are not permitted.
10. VA will ensure sufficient documentary evidence exists (i.e., a received, validated, and approved payment claim) for each obligation. Such evidence must provide a clear audit trail and substantiate the validity of the obligation..
11. See VA Financial Policy Volume III, Chapter 2 – Obligations for further information on obligation requirements.
12. VA will comply with National Archives and Records Administration (NARA) General Records Schedule for financial management and reporting records.

050502 Integrated Financial and Acquisition Management System (iFAMS)

1. VHA has not migrated to iFAMS for Obligation at Claims Approval for VA community care obligation processing.
2.  Obligation at Claims Approval will be developed as VHA migrates to iFAMS.

050503 Financial Management System (FMS)

1. When recording a community care obligation in FMS, a miscellaneous obligation document (e.g., 1358) may be used. However, the majority of these payments are processed as obligate and pay which do not require VA Form 1358 to be established in IFCAP.
2. Obligation at claim approval transactions, will use VA Form 1358 approved use 1 for nursing homes/adult day healthcare and use 2 for community care, including dental, homemaker/home health aid, and community hospitalization.
3. Prior to, or at the beginning of each FY, the VHA Finance Office will identify which categories of claims transactions require VA Form 1358:
   1. For claims that need to be paid in VistaFee requiring VA form 1358, the VHA Finance Office will issue guidance providing the numbering schema to be used for creating the obligation in IFCAP. Utilizing this schema, the Local Finance Office will create an obligation for $1 within IFCAP. The IFCAP obligation will be transmitted to FMS, establishing the line of accounting to be used for all claims of this type.
   2. For categories not requiring VA form 1358 (these transactions will be directly processed within FMS) the VHA Finance Office will establish an obligation directly in FMS for $0.01 thereby establishing the line of accounting for these types of claims.
4. Payment will be made simultaneously upon claim approval following the standard process for electronic funds transfer (EFT).

0506 Authorities and References

• Public Law 115–182, the VA MISSION Act of 2018
• Public Law 116-260, the Consolidated Appropriations Act, 2021, Division FF, Title XVI, Section 1601
• The Caregivers and Veterans Omnibus Health Services Act of 2010
• United States Code (U.S.C.)
  • 31 U.S.C. § 1341, Limitations on expending and obligating amounts
  • 31 U.S.C. § 1342, Limitation on voluntary services
  • 31 U.S.C. § 1501, Documentary evidence requirement for Government obligations
  • 31 U.S.C. § 1512, Apportionment and reserves
  • 31 U.S.C. § 1514, Administrative division of apportionments
  • 31 U.S.C. § 1517, Prohibited obligations and expenditures
  • 38 U.S.C. § 1701 – Definitions
  • 38 U.S.C. § 1703 – Veterans Community Care Program
  • 38 U.S.C. § 1717. Home health services; invalid lifts and other devices
  • 38 U.S.C. § 1718, Therapeutic and Rehabilitative Activities
• 38 C.F.R. § 17.4030 – Eligible entities and providers
• Measures of Quality for Different Health Care Settings | Agency for Healthcare Research and Quality (ahrq.gov)
• National Archives and Records Administration (NARA) General Records Schedule
• VA Financial Policy
  • Volume III, Chapter 2, Obligations
  • Volume III, Chapter 3, Non-Contractual Obligations
  • Volume III, Chapter 4, 1358 Obligations
• VA Form 1358, 1358 Obligation or Change in Obligation

0507 Rescissions

Volume III, Chapter 5 – Obligation at Claims Approval, March 2024

Appendix A: Prior Revisions

Section	Revision	Office	Reason for Change	Effective Date
Various	Move policy to Volume III Chapter 3	OFP	Realignment of obligation policies to Volume III	March 2024
Various	New Chapter	OFP	Implementation of policy for recording obligations at approval	October 2022

Appendix B: Obligation at Claims Approval Categories of Care Examples

VA aggregates costs for hospital care or medical services delivered by community providers into Categories of Care. The list below shows examples of current Categories of Care that record obligations under Obligation at Claims Approval. Obligation at Claims Approval authority is applied to a Category of Care independent of the medical appropriation used to fund the care, the type of care provided, or the physical location where the veteran receives care.

Categories of Care

• Medical Community Care Funded
  • Behavioral/Mental Health
  • Dental
  • Department of Defense
  • Camp Lejeune
  • CHAMPVA
  • Children of Women Vietnam Veterans
  • Contract Nursing Home
  • Dialysis
  • Foreign Med
  • Geriatrics
  • Home Health Care
  • Indian Health
  • Inpatient
  • Medical Contract Administrative Services
  • Outpatient
  • Pharmacy
  • Prosthetics
  • State Home
  • Tribal Health
  • Unauthorized Care
  • Urgent Care
  • Vaccinations
• Medical Services Funded:
  • Caregiver Support programs (Non-VA Caregiver Respite and Non-VA Oversight)
  • CHAMPVA Caregivers
  • Outpatient In Vitro Fertilization
  • Transplant and live donor services at an integrated affiliate VA transplant center

Appendix C: Frequently Asked Questions (FAQs)