One of the more confusing aspects of government contracts is the presence of contract line item numbers (CLINs). They often seem to have no relationship to the tasks you’ve been asked to perform or the commodities you’ve have been asked to provide. Thus, they require you to break out your invoices in weird ways that add cost and complexity to your accounting for no apparent reason. So, why are they required?
CLINs are specified in the FAR part 4.10. They serve two purposes: (1) they break the contract down by the commodities being procured (labor hours of services, funding for travel, quantity of product A, quantity of product B, etc.) and (2) they provide for traceable accounting classification citations.
The confusion comes from this second purpose. It is driven by internal government accounting requirements like fiscal years and appropriations that are often not visible to the outside observer.
Government financial personnel are required to account for expenditures to their oversight agencies (GAO, Congress, etc.). The primary purpose is to insure that what is being bought is what was authorized to be bought.
Ultimately, all government spending must be consistent with appropriation bills (laws) passed by Congress. These laws are passed annually (i.e. they address spending for a specific fiscal year (1 October to 30 September) and by agency (Defense, Transportation, etc). Not surprisingly, they don’t simply give out a blank check. Rather, they go into considerable detail as to the purpose for which the funds are intended. These breakouts are sometimes by function (research and development, procurement, operation and maintenance, personnel and training, etc) and sometimes by project (build a ship, operate a program), and sometimes both.
Thus, budgets are broken down as a minimum by fiscal year, agency, function and/or project. Often, they are broken down to even lower levels of detail. Regardless, the internal accounting system (e.g., chart of accounts) of a government agency must be consistent with the budget structure that provides its funds. Correspondingly, its contracts with outside vendors must be consistent with the accounting system to provide traceability.
The CLIN breakout seems strange when there is not a one to one relationship between the commodities being purchased and the funding sources that will be utilized. This is not unusual, as products and services are often funded with dollars from multiple pots of money. When this happens, the CLINs must be broken out by the product or service as well as the funding accounts. So be assured that CLINs are not just an attempt by government bureaucrats to make your lives difficult; there is actually a method behind the madness.
