Unliquidated Obligations (ULO)

An unliquidated obligation (ULO) is the portion of a federal award's obligated funds that has been legally committed through an obligating action -- such as a purchase order, contract, or subaward agreement -- but for which payment has not yet been made (on a cash-basis report) or the corresponding expenditure has not yet been recorded (on an accrual-basis report). Under 2 CFR 200.1, a 'financial obligation' is created by orders placed for property and services, contracts and subawards made, and similar transactions requiring payment under a Federal award. An 'unliquidated financial obligation' is that same committed amount before it is liquidated -- i.e., before the recipient or subrecipient actually pays it (cash basis) or records the expenditure (accrual basis). A dollar only becomes a ULO once an obligating action has occurred; funds that are merely available but not yet committed to any specific order, contract, or subaward are instead part of the award's unobligated balance, not a ULO.

ByCASRAI Editorial Board

· Last updated 18 Jul 2026

Worked examples

Is an instance

A university issues a purchase order against a federal grant for a piece of lab equipment. The moment the PO is issued, the full order amount is obligated. It remains an unliquidated obligation on the university's books until the vendor delivers, is invoiced, and is actually paid (or, under accrual accounting, until the expenditure is recorded) -- at which point it converts from a ULO into a recorded expenditure.

Is an instance

A prime recipient executes a subaward agreement committing $75,000 to a subrecipient for the remaining months of a project period. That committed $75,000 is a financial obligation on the prime's award as soon as the subaward is signed. It stays classified as unliquidated as the subrecipient does the work and submits invoices, and only liquidates in increments as the prime actually pays each invoice.

Looks similar, but isn't

Not an instance

A recipient has $40,000 in federal funds still authorized under an award, but has not yet issued any purchase order, signed any contract, or executed any subaward against that amount. This is an unobligated balance, not a ULO -- no obligating action has occurred yet, so nothing has been legally committed. It only becomes a ULO at the moment an order, contract, or subaward is actually put in place against it.

Unliquidated obligations (ULO) are a core concept in federal grants accounting, and the phrase shows up by name on the government-wide SF-425 Federal Financial Report and throughout the federal grant closeout process — but the SF-425 form itself doesn’t explain what makes a dollar count as unliquidated versus obligated versus expended. This page fills that gap.

The three-state model: unobligated, unliquidated, expended

Under the Uniform Guidance definitions at 2 CFR 200.1, every federal dollar on an active award sits in one of three states at any given moment:

Unobligated balance — funds still authorized under the award that the recipient has not yet legally committed to any specific order, contract, or subaward.
Unliquidated obligation — funds that HAVE been legally committed (an order placed, a contract signed, a subaward executed) but have not yet actually been paid out (cash-basis reporting) or recorded as an expenditure (accrual-basis reporting).
Expenditure — funds that have been both obligated and liquidated: the goods/services were received and paid for (or the accrual entry was recorded).

A ULO is specifically the middle state. The obligating action — not the payment — is what creates it. 2 CFR 200.1 defines a financial obligation as “orders placed for property and services, contracts and subawards made, and similar transactions … that will result in expenditures.” The same section defines an unliquidated financial obligation as those obligations “incurred … but not paid (liquidated)” for cash-basis reports, or, for accrual-basis reports, obligations incurred for which “expenditures have not been recorded.” An unobligated balance, by contrast, is computed by subtracting cumulative unliquidated obligations plus expenditures from the total amount the agency authorized the recipient to obligate — so the three categories are mutually exclusive and, together with expenditures, account for the full award.

Why ULOs matter on the SF-425

The SF-425’s Box 10 Transactions section requires recipients to separately report the federal share of expenditures, the federal share of unliquidated obligations, the sum of the two, and the resulting unobligated balance. Reporting an accurate ULO figure matters for two practical reasons: it tells the federal awarding agency how much of the award is already legally committed even though cash hasn’t moved yet (so the agency doesn’t mistake a large ULO figure for money that’s still freely available), and it is the number recipients must drive to zero — through either liquidation or deobligation — by the time closeout is complete.

ULOs at closeout

2 CFR 200.343 sets the recipient’s closeout timeline (generally 120 days from the end of the period of performance to submit all required financial, performance, and other reports and to liquidate all financial obligations). Any obligation still outstanding at that point has to be resolved one of two ways: liquidated (the recipient actually pays it and records the expenditure) or deobligated (the recipient or the federal awarding agency formally releases the commitment, freeing the funds and reducing the ULO to zero on the award’s books). 2 CFR 200.344 gives the federal awarding agency its own closeout obligations, including making any necessary adjustments to the federal share of costs and, where appropriate, deobligating unliquidated balances that were never going to be liquidated. See the CASRAI federal grant closeout guide for the full recipient-side and agency-side timeline.

Common sources of ULOs on a research award

On a typical sponsored research award, unliquidated obligations most often come from: purchase orders for equipment or supplies that have been placed but not yet invoiced/paid; executed subaward or subcontract agreements where the committed amount exceeds work completed and invoiced to date; and outstanding travel or service commitments authorized under the award but not yet reimbursed. A large or growing ULO balance late in a project period is a common closeout risk flag for research administrators, since every outstanding obligation has to be either liquidated or deobligated before the award can close.

Related concepts

SF-425: The Federal Financial Report Explained — where ULOs are reported, alongside expenditures and unobligated balance.
Federal Grant Closeout: The Process and a Practical Checklist — the recipient/agency timeline for resolving ULOs before an award can close.

Use in your systems

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Schema.org DefinedTerm (JSON-LD)

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