A ceiling positioned on bills deemed reimbursable or payable underneath a selected settlement or regulation. This restrict is established to regulate expenditure and guarantee fiscal accountability. For instance, a authorities contract would possibly stipulate that solely prices as much as a sure degree for journey or supplies will likely be coated.
This follow is significant for funds administration, stopping overspending, and offering monetary predictability. It’s common in sectors like healthcare, authorities procurement, and insurance coverage. Traditionally, the institution of such limits arose from a have to curtail extreme fees and enhance transparency in monetary transactions.
