Legal obligations are commitments made by a Member LEA to purchase goods or services either immediately or in a future period. This commitment is typically made through a purchase order or written contract. Member LEAs may include legal obligations within the appropriate expenditure report. The California School Accounting Manual ("CSAM") Procedure 765 provides guidance to determine the legal obligation. 

Important Note: Legal obligations at the end of a fiscal year may create a discrepancy between the amount of the expenditure report period and the Member LEA's general ledger period. This is acknowledged in the following excerpt from CSAM: 

For purposes of accounting at year-end, obligations for future periods are not reflected in the current year’s books. Rather, the obligated goods or services are recognized in the following year’s books, when the goods or services are actually received. But for purposes of grant reporting, federal funding may be claimed under a current-year grant for certain qualifying legal obligations incurred by the end of the grant period, even though the goods or services will not be received until after the grant period ends.

To help provide consistency between the Member LEA's expenditure report period and its general ledger period, it is recommended that the Member LEA create a liability to accrue the expenditure back to the fiscal year and thereby align the amounts of the two periods.