WORKING CAPITAL FUND WCF

1
WORKING CAPITAL FUND (WCF)

• 2009 PDISan Antonio, Texas
• Presented by Mr. Thomas Stone
• STONE CONSULTING
• tncstone_at_cox.net [phone]
• 
  
  

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COURSE FOCUS

• HISTORY OF WORKING CAPITAL FUND (WCF)
• MYTHS ABOUT WCF
• BUDGET FORMULATION AND EXECUTION
• COST ELEMENTS AND BUSSINESS MANAGEMENT CONCEPTS
• STABILIZED RATES
• FUNDING DOCUMENTS
• FINANCIAL OPERATING STATEMENTS

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HISTORY OF WCF
4

• 1947-1991 Industrial Fund
• 1991-1996 DBOF
• 1996-Today WCF
• AKA
• Revolving Funds
• Stock Funds

5
HOOVER COMMISSIONRECOMMENDATIONS

• Hoover Commission Recommendations
• Passing of the National Security Act
• Established the Office of The Secretary of
  Defense and the Department of the Air Force
• Created Comptroller positions with overall
  responsibility for Financial Systems
• Business /Commercial Type Activities of the
  Military Departments be financed by Revolving or
  Working Capital Funds

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AUTHORIZING LEGISLATION

• Public Law 216 - 81st Congress
• 10 USC 2208--The law authorized working capital
  funds to provide financing of industrial-commercia
  l type activities, and to effectively control
  cost of programs and work performed
• 10 USC 2216a
• DOD Directive 7410.4
• FMR Vol. 11b

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REVOLVING FUND(Definition)

• The working capital used to finance operations
  from time specific work is begun to the time that
  payment is received from the customer.

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ELIGIBILITY FOR REVOLVING FUNDS

• Buyer-Seller relationship exists
• Produce goods or services for more than one
  customer

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CHARTER REQUIREMENTS

• Signed by the Secretary of each Service with
  approval by Under Secretary of Defense
  (Comptroller)
• Name and location of the activity
• Operating agency responsible for managing the
  activity
• Description of function and type of
  products/services offered
• Statement of Exceptions

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IMPROVED MANAGEMENT/FUNDINGPROCEDURES

• Single fund to finance all operations
• Single and consistent accounting system
• Budget/Accounting for all activity programs
• Commander given increased flexibility and
  authority
• Buyer and Seller relationship
• Encourages cross servicing
• Provides true cost

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HOW WORKING CAPITAL FUNDS WORK
CUSTOMERS OPERATING FORCES READINESS COMMANDS
APPROPRIATES FUNDS
PLACE ORDERS
BILL FOR COSTS/ SERVICES
PAY
INDUSTRIAL FUNDS
WORKING CAPITAL
CONGRESS APPROPRIATED WORKING CAPITAL
FINANCES COST OF PERFORMING WORK
PRODUCTION OVERHEAD
GENERAL ADMINISTRATIVE
LABOR COSTS
DIRECT MATERIAL
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WORK-IN-PROCESS / UNBILLED ACCOUNTS RECEIVABLE

• INCREASED BY - LABOR COST - DIRECT MATERIAL
  COST - DIRECT CONTRACTUAL COST - OVERHEAD
  APPLIED - GAIN ON FIXED PRICE ORDERS WHILE ORDER
  IS IN PROCESS
• DECREASED BY - UNITS COMPLETED X FIXED UNIT
  FUNDED COST - MAN-HOURS INCURRED X FIXED RATE -
  LOSSES ON FIXED PRICE ORDERS WHILE ORDER IS IN
  PROCESS

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REVOLVING FUNDS OPERATE LIKE A BUSINESS

• Must produce
• Quality product
• On Time
• At least possible cost
• Buyer-Seller Relationship
• Customers pay for what they receive
• Production dependent upon customer orders
• Must remain competitive
• Operates on a Profit/Loss
• Has its own inventory
• Purchases and Depreciates Capital Equipment
• Working Capital originally provided by Congress

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THE REVOLVING FUND Myths

• MYTH
• Break even each year with no profit or loss
• FACT
• Provide stability to customer prices
• Obtain an accumulated operating result of zero
  in BY

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MORE MYTHS

• MYTHS
• WCF is Expensive
• An Excuse for poor Management
• TRUTH
• Reports all costs and makes visible
• Provides information for good managers to manage

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Net Operating Result (NOR)

• Is the difference between all revenue and all
  cost realized within one FY.
• There is a annual budgeted NOR target for each
  WCF activity.
• Is a key metric used to determine financial
  success

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NOR/AOR Chart
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Accumulated Operating Results (AOR)

• Reflects the cumulative summation of net
  operating results (NOR) in dollars carried from
  FY to FY, since inception.
• In a budget year, the out-year AOR target is
  typically set at break-even (0).
• Rates are then established to achieve specific
  NOR targets that will help the command reach a 0
  AOR in the out-year.
• Positive or negative AOR from prior years, future
  rates must be considered to get to 0.

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AOR Chart
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NOR/AOR Chart
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WHAT IS THE WCF?

• A revolving fund financial structure established
  to promote TOTAL COST VISIBILITY and FULL COST
  RECOVERY of support services rendered to
  operating forces
• Replaced the DBOF which was established on
  October 1,1991 and had merged the previously
  established stock and industrial funds, and five
  defense commercial operations
• Established on December 11, 1996
• Derives its name from the cyclic nature of the
  cash flow

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THE EVOLUTION OF WCF

• 1947 - National Security Act of 1947 established
  Revolving Funds
• 1950s and 1960s -Stock Fund - Industrial
  Fund
• 1980s - Improved product cost identification
• 1983 - Asset Capitalization Program
• 1991 - Military personnel costs were added
• 1992 - DBOF established
• 1996 - WCF established - Four Working Capital
  Funds
• 1999 - Defense Commissary Activity added

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WCF COMPOSITION

• ARMY WORKING CAPITAL FUND
• NAVY WORKING CAPITAL FUND
• AIR FORCE WORKING CAPITAL FUND
• DEFENSE WORKING CAPITAL FUND
• 1999 DEFENSE COMMISSARY ACTIVITY

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Business Area Activities Currently Financed
Through the WCF Financial Structure

• Commissaries (DeCA)
• Depot Maintenance (Army, Navy, AF)
• Distribution Depots (DLA Navy)
• Financial Operations (DFAS)
• Industrial Plant Equipment (DLA)
• Information Services (Navy DISA)
• Logistics Support Activities (Navy)
• Public Works (Navy)
• Reutilization Marketing Service (DLA)
• Research Development (Navy)
• Supply Management (Army, Navy, AF, DLA)
• Transportation (TRANSCOM, Navy)

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WCF FINANCIAL STRUCTURE

• THE FOUR FUNDS EXPECTED TO EMPLOY 200,000
  CIVILIANS AND 20,000 MILITARY PERSONNEL
• GENERATE APPROXIMATELY 120 BILLION IN REVENUE
• FINANCE OPERATIONS WITHOUT FISCAL YEAR LIMITATION
• SELL GOODS TO CUSTOMERS
• USE INCOME TO REPLACE OR BUY INVENTORY AND
  FINANCE THE PRODUCTION OF GOODS AND SERVICES

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Revolving Fund Concept
Typical Customer Infantry Division Air Wing Naval
Fleet Installation Base
Sample WCF Support Supply Management Depot
Maintenance Transportation Finance Accounting
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Eliminating the Distortion BetweenCost and
Price
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WCF ADVANTAGES

• ALLOW DOD MANAGERS TO THINK IN BUSINESS
  TERMS - IMPROVE QUALITY - IMPROVE
  PERFORMANCE - REDUCE COSTS
• CUSTOMERS ARE THE OPERATING FORCES - THEY SET
  PRIORITIES - REIMBURSABLE FUNDING TO SUPPORT
  ACTIVITIES PROVIDES BETTER RESPONSIVENESS TO
  OPERATING FORCES - BETTER IDENTIFICATION OF
  CAPITAL BUDGET - MORE EFFECTIVE MANAGEMENT BY
  TRADING OFF BETWEEN COSTS

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WCF Disadvantages

• Perceived as too costly (Makes it visible)
• Poor Public Relations/Marketing ?
• Complex financial procedures
• Rates fixed 2 years out (crystal ball)
  Command considered contractor
• Un-funded mandates (CA studies, PPV,
  BRAC, HRO benefits, etc.)

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BUDGET FORMULATION AND EXECUTION
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WCF BUSINESS AREA CUSTOMERS

• DOD ORGANIZATIONS
• NON-DOD FEDERAL GOVERNMENT AGENCIES
• PRIVATE PARTIES AND CONCERNS - FOREIGN
  GOVERNMENTS - STATE AND LOCAL GOVERNMENTS - US
  MANUFACTURERS, ASSEMBLERS, OR DEVELOPERS
  AUTHORIZED BY DOD
• CUSTOMER ORDERS FINANCE THE WCF

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OPERATING BUDGET

• REPRESENTS ANNUAL OPERATING COSTS OF AN ACTIVITY
• INCLUDES REVENUES, EXPENSES, NOR AND AOR
  CIVILIAN AND MILITARY PERSONNEL REQUIREMENTS
  UNIT COST RATES AND CUSTOMER RATES

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CAPITAL BUDGETCAPITAL PROCUREMENT PROGRAM

• REPRESENTS FINANCIAL RESOURCES REQUIRED FOR USE
  IN ACQUIRING CAPITAL ASSETS
• CAPITAL ASSETS INCLUDE- DEPRECIABLE PROPERTY,
  PLANT EQUIPMENT, AND SOFTWARE DEVELOPED,
  MANUFACTURED, TRANSFERRED OR ACQUIRED DURING A
  FISCAL YEAR
• CAPITAL ASSETS MUST- HAVE A COST OF 250,000 OR
  MORE- HAVE A USEFUL LIFE OF TWO OR MORE YEARS

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OPERATING BUDGET JUSTIFICATION AND REVIEW

• OUSD(C) REVIEWS/APPROVES RATES AND PRICES
  DEVELOPED FOR THE PRESIDENTS BUDGET SUBMISSION
• COMPONENTS ENSURE THAT CUSTOMER AND WCF BUSINESS
  BUDGETS ARE IN BALANCE
• ADJUSTMENTS MADE TO BRING AOR TO ZERO FOR THE
  BUDGET YEAR
• ADJUSTMENTS SUMMARIZED IN PBDs

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STABILIZED RATES

• PERMIT MORE EFFECTIVE UTILIZATION OF WCF
  RESOURCES
• ONCE ESTABLISHED THEY ARE STABILIZED FOR THE
  APPLICABLE FISCAL YEAR
• SERVES TO PROTECT APPROPRIATED FUND CUSTOMERS
  FROM UNFORESEEN COST CHANGES
• ALLOWS FOR MORE ACCURATE PLANNING FOR WCF SUPPORT
• SET TO ACHIEVE AN AOR OF ZERO IN THE BUDGET YEAR
• GAINS/LOSSES SHOWN AS OFFSETTING ADJUSTMENTS IN
  SUBSEQUENT FISCAL YEARS

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WCF BUDGET EXECUTION

• COMPONENTS ESTABLISH AND ISSUES UNIT COST GOALS
  TO BUSINESS AREAS IN APPROVED OPERATING BUDGETS
  (AOBs)
• WCF AREAS REALIZE REVENUE FROM SALE OF
  GOODS/SERVICES
• DIFFERENCE BETWEEN COST INCURRED AND REVENUE IS
  THE NET OPERATING RESULTS(NOR)
• GOAL FOR EACH WCF BUSINESS AREA MANAGER IS TO
  ACHIEVE A NOR OF ZERO
• GOAL FOR ALL YEARS AND FOR ALL DIVISIONS OF THE
  FUND IS AN ACCUMULATED OPERATING RESULT (AOR) OF
  ZERO

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Budget Formulation Submittal
Revenue/Requirement projections obtained from the
clients
Start
DOD and Services Marks budget, approves and
issues Rate Approval Letter
Establish NOR/AOR Plan
Nov/Dec
Jan
May/Oct
Set Cost and Revenue Targets for the PS.
Comptroller prepares all applicable exhibits and
submits A-11 Budget to DOD Service
Feb
Fiscal Year
Feb/Apr
Mar
Apr
Briefed Proposed Rates for approval
Departments prepare budgets (Units of Sales,
Cost, Revenue, PL, and Proposed Rates)
Mar
Mar
Comptroller makes any adjustments and established
rates
Comptroller Reviews Budgets with the Departments
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Budget Formulation Submittal Biennial Rate
Development Schedule
A-11 WCF Budget Submitted to Services/ DOD in
April/May
Current Cycle
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Budget Execution
Rates approved Annual Cost Authority received
Start
Receive funded orders from customers
Monitor budget execution results on monthly
schedule
Distribute cost authority to departments
Fiscal Year
Bill customers manage receivables
Product Centers produce work deliver services
Compute customer charges
Capture revenue, costs workload
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• COST ELEMENTS AND BUSINESS MANAGEMENT CONCEPTS

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DEPRECIATION EXPENSE

• DEPRECIATION IS THE EXPENDING OF CAPITAL ASSETS
  OVER THE USEFUL LIFE OF THE ASSET
• DEPRECIATION EXPENSE INCLUDED IN THE STABILIZED
  RATES OR PRICES TO GENERATE CASH
• CAPITAL SURCHARGE ADDED TO THE RATES AS REQUIRED
• DEPRECIATION ON A STRAIGHT LINE BASIS

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WCF BUDGETING AND RATE DEVELOPMENT
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BUDGETING

• A PLANNED PROGRAM FOR A FISCAL PERIOD IN TERMS OF
  ESTIMATED COSTS, OBLIGATIONS, EXPENDITURES AND
  SOURCES OF FUNDS
• INCLUDES - ESTIMATES OF OPERATING COSTS - COST
  OF MAINTAINING UNUTILIZED AND UNDERUTILIZED
  PLANT AND EQUIPMENT - PROCUREMENT BUDGET FOR
  MATERIALS, ETC. - FORECASTS OF MONTHLY CASH
  FLOW - PROJECTED STATEMENTS OF FINANCIAL
  CONDITION

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INTERNAL OPERATING BUDGET (IOB)

• COST CENTER BUDGET PROVIDING AN APPROVED
  OPERATING PLAN FOR EACH ACTIVITY ORGANIZATION
• IDENTIFIES - DIRECT/INDIRECT LABOR HOURS -
  EXPENSES - SALARIES WAGES, MATERIALS OTHER
• PURPOSE - CONTROL EXPENSES - DEVELOP COST
  APPLICATION RATES

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INTERNAL OPERATING BUDGETFUNCTIONS

• FIXES RESPONSIBILITY FOR CONTROLLING RESOURCES
  AND COSTS
• PROVIDES MEANS OF MONITORING AND CONTROLLING
  RESOURCES AND COSTS
• FACILITATES COMPARISON BETWEEN PROJECTED AND
  ACTUAL PERFORMANCE
• BASIS FOR DEVELOPING WORK CENTER RATE

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RATE DEVELOPMENT

• AVERAGE LABOR RATE - BASE LABOR - FRINGE
  BENEFITS - LEAVE
• OVERHEAD APPLIED RATES - PRODUCTION OVERHEAD -
  GENERAL AND ADMINISTRATIVE EXPENSE

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Service Center Rates

• Designed to recover all costs for unit of service
  sold.
• Rates to include all direct and overhead costs.
• Services sold to customers and internal Command
  cost centers.

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TYPES OF RATES

• COST APPLICATION RATE
• COST CENTER LABOR RATE FOR SALARIES AND BENEFITS
• OVERHEAD COST APPLIED TO THAT COST CENTER
• EXCLUDES - DIRECT MATERIAL - OTHER DIRECT
  COSTSCONTRACTS

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COST APPLICATION RATE

• Direct Labor
• Salaries and Benefits of personnel directly
  identifiable to a specific job.
• Production Overhead Expense
• (Within and Above Shop Overhead)
• Mission costs in support of the productive
• effort. Not identifiable to specific job.

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COST APPLICATION RATE

• General and Administrative Expenses
• (GA)
• Base operations costs in support of Activity /
  Mission and not identifiable to a specific job.

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COST APPLICATION RATE USE

• TO APPLY COST TO INDIVIDUAL JOBS
• EXAMPLE - AVERAGE LABOR RATE X DLH LABOR
  COST - OVERHEAD RATES X DLH OVERHEAD COST
  APPLIED - ADD DIRECT MATERIAL COST OTHER
  DIRECT COST
• TOTAL COST

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Funded/Unfunded Rates

• Funded Costs
• Recover all overhead expenses financed by the WCF
  activity
• Unfunded Costs (determined by DoD)
• Records all non-WCF expenses financed by the
  Federal Government and collects a proportionate
  share from non-Federal Government customers
• Collected and reimbursed to the appropriate
  General Fund Receipt account
• FMR Ch 15, Vol 7 for FMS states recoup current
  period costs and a reasonable contribution to
  sunk investment costs

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ANNUAL OPERATING BUDGET(AOB)

• PROVIDES THE BASIS FOR EARNING BUDGET AUTHORITY
• INCLUDES AN OPERATING AND CAPITAL BUDGET
• OPERATING BUDGET IDENTIFIES UNIT COST OUTPUT AND
  ASSOCIATED UNIT COST GOAL
• CAPITAL BUDGET PROVIDES OBLIGATION AUTHORITY FOR
  INVESTMENTS

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COST ACCOUNTING
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COST ACCOUNTING SYSTEM REQUIREMENTS

• IDENTIFICATION OF ALL PRODUCTS AND SERVICES
  WITHIN AN ORGANIZATION
• IDENTIFICATION OF ALL COSTS, BOTH FUNDED AND
  UNFUNDED, OF THE PRODUCTS AND SERVICES PRODUCED
• SERVES AS A SUBSIDIARY LEDGER FOR THE GENERAL
  LEDGER
• RELATES DOLLARS OF COST TO PRODUCT OR SERVICE
  PRODUCED

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DIRECT/INDIRECTCOST CENTERS

• DIRECT COST CENTER Perform functions for
  specific customers. Typically, the direct Cost
  Centers are the Technical Departments.

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G A Cost Centers

• Provide overall support services to the entire
  activity

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• LABOR RATES

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Work Year Rates

• Funded Rates
• Comprised of Four Parts
• Stabilized Labor Rate
• Production Overhead
• General Overhead
• AOR Recoupment

All labor rates are accelerated for benefits
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Acceleration Chart
Annual Leave Account
PAID TO EMPLOYEES ON LEAVE
Sick Leave Account
Liability accounts for fringe benefits increase
from acceleration and decrease from payments.
Eventual balance equals zero
Other Leave Account
CSRS/FERS Account
PAID TO GOVERNMENT AGENCIES
Other Fringe Benefit Accounts
Includes FICA, health insurance, life insurance,
and Medicare portion of FICA for CSRS employees
Cost Accumulation and Cost Recovery Fringe
Benefit Cycle
61

• ACCELERATION FACTOR PERCENTAGE
• Annual Leave 11.50
• Sick Leave 3.73
• Holiday Other Leave 5.55
• FICA Taxes 5.28
• FEGLI 0.19
• CSRS 2.05
• FEHB 6.53
• Medicare 1.75
• Thrift Savings Plan (TSP) 3.86
• FERS 9.56
• Total Acceleration Rate 50.00

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EXAMPLE OF CIVILIAN LABOR RATES
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FUNDING DOCUMENTS
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FundingReimbursable

• Costs are initially charged to the Centers NWCF
  Account
• Center is responsible for payment and then bills
  the sponsor for requirement

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FundingDirect Citation

• Costs are not charged to Center WCF Account
• Sponsor accounting data are cited on contract
  issued

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PROJECT ORDERS

• SAME AS A COMMERCIAL CONTRACT TO THE CUSTOMERS
  APPROPRIATION - EXTENDS BEYOND THE LIFE OF THE
  APPROPRIATION - OVERBILLING MAY CREATE A 31 USC
  1517 VIOLATION
• NORMALLY ISSUED FOR THE OVERHAUL OR
  MANUFACTURING OF A SPECIFIC NUMBER OF ITEMS
  WITHIN A SPECIFIC TIME FRAME FOR A SPECIFIC PRICE
• WORK MUST BE PERFORMED WITHIN THE WCF ACTIVITY
• THE WCF MUST NOT ACCEPT THE PROJECT ORDER IF THE
  REQUIREMENTS OF THE PROJECT ORDER REGULATIONS ARE
  NOT MET

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ECONOMY ACT ORDERS

• ORDER NOT MEETING PROJECT CRITERIA
• EXPIRES WITH APPROPRIATION CITED
• LIMITED TO SERVICE IN CURRENT FISCAL YEAR
• INVOLVES ROUTINE MAINTENANCE OR DAY-TO-DAY
  OPERATION
• MAY COVER EDUCATION, TRAINING, STORAGE, WELFARE
  OR TRAVEL
• WCF ACTIVITIES WHO INCUR COSTS AGAINST
  EXPIREDSERVICE ORDERS MAY VIOLATE 31 USC 1517

68
Other Funding Documents

• Work Requests (WR)NC 2275
• Request for contractual Procurements (RCP)
  NC 2276A
• Military Inter-Departmental Purchase Request
  (MIPR)DD 448
• Cash Deposits

69
Cash Deposits

• Cash deposits are required when work is
  performed for a non-DOD Activity (i.e.,
  agencies, private parties, state or local
  government).
• Deposits are required in advance of work
  beginning and surcharges are applied

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Other Funding Types

• Non-DOD Other Federal Agencies (DOE,
  NASA, Etc.)
• Foreign Military Sales (FMS)
• Private Party

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COMMANDERS ORDERS

• WORK OF AN EMERGENCY NATURE
• CONDITIONS - WRITTEN ASSURANCE OR EQUIVALENT
  DOCUMENTED COMMUNICATION THAT AN ORDER WILL BE
  ISSUED PROMPTLY - BONA FIDE NEED - EXPIRES NOT
  LATER THAN 30 DAYS FROM DATE OF ISSUANCE -
  SIGNED BY THE COMMANDER OR HIS AUTHORIZED
  REPRESENTATIVE

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Exceptions to Funding Document

• Letter of Intent
• Statement from sponsor verifying funding is
  planned for a continuing, approved program
• Letter of Intent approval from sponsor
• Funding amount is authorized and usually limited
  to 250,000
• Issued for 30 days, but may be extended

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Bona Fide Need

• DoD Financial Management Regulation Volume 11A,
  Chapter 3, Section 030403 states that the
  servicing activity should refuse to accept an
  Economy Act order if it is obvious that the order
  does not serve a need existing in the fiscal year
  for which the appropriation is available.
• (http//www.dod.mil/comptroller/fmr/lla/llA03
  .pdf)

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Use of fundsContracts

• Severable Contract
• Benefits received during the performance period
  cannot extend beyond expiration date of funds
• Non-severable Contract
• Calls for an end product to be received at the
  end of the performance period

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STABILIZED RATE CONCEPT

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STABILIZED RATE CONCEPT
PBD ADJUSTMENT (TOA)
CUSTOMER BUDGET
OSD ADJ
STABILIZED RATE
PRESIDENTS BUDGET
PBD ADJUSTMENT (RATES)
WCF BUDGET
77
RATE STABILIZATION OBJECTIVES

• PROVIDE BUDGET STABILITY TO CUSTOMERS
• ASSURE COMPARABLE FUNDING LEVELS BETWEEN WCF AND
  CUSTOMER FUNDS
• EASE IN BUDGETING FOR INFLATION
• DEVELOP MORE REALISTIC PROGRAMS
• PROMOTE MORE EFFICIENT PLANNING
• FOSTER BETTER PROGRAM EXECUTION

78
FIXED PRICE/RATE CONCEPT

• PROTECT CUSTOMER FROM COST FLUCTUATIONS THIS
  CONCEPT IS NOT DESIGNED TO HELP THE WCF.
• WCF MUST ABSORB THE IMPACT OF INFLATION.
• SERVES AS THE PRIMARY VEHICLE TO ESTABLISH
  BUDGETARY REQUIREMENTS
• CONCEPT IS TO RECOVER COSTS AND SURCHARGES (PRIOR
  YEARS GAINS OR LOSSES)

79
STABILIZED RATES

• PROVIDE CUSTOMERS WITH A FIXED OR STABILIZED
  RATE FOR USE IN DEVELOPING THEIR REQUIREMENTS
  BUDGET FOR THE TARGET YEAR
• REVISED ANNUALLY
• EXPRESSED IN DOLLAR RATE CHARGED PER DIRECT LABOR
  HOUR
• BEGINS A YEAR PRIOR TO THE START OF THE FISCAL
  YEAR

80
STABILIZED RATE COMPONENTS

• EXPENSES - BASE LABOR - MATERIAL - MISSION
  OVERHEAD - BASE OPERATIONS COST - GENERAL AND
  ADMINISTRATIVE EXPENSE
• SURCHARGES/CREDITS - AOR ADJUSTMENT - OSD
  ADJUSTMENT - CASH - HQ MANAGEMENT FEE

81
HOW ARE RATES CHANGED ONCE STABILIZED?

• GENERALLY THEY ARE NOTCHANGES VERY RARE
• EXCEPTIONS NOTED
• SERIOUS GAIN/LOSS THREATEN OVERALL CASH POSITION
  (UTILITY/ FUEL PRICE CHANGES)
• SERIOUS SHORTAGES IN OPERATING FUNDS OF NON-WCF
  APPROPRIATIONS WHILE WCF HAD PROFITS

82
FUNDING VIOLATIONS

• NEGATIVE CASH BALANCE
• VIOLATING FUNDING LIMITATIONS
• PERFORMING WORK WITHOUT ORDER
• COST OVERRUNS KNOWING CUSTOMER CANNOT PAY
• TRANSFERRING COSTS TO AVOID COST OVERRUNS
• CHARGING COSTS TO WRONG APPROPRIATION

83
OPERATING RESULTS

• NET OPERATING RESULTS (NOR)
• ACCUMULATED OPERATING RESULTS (AOR)
• MADE UP OF THE FOLLOWING VARIANCES
• UNDER/OVER APPLICATION OF OVERHEAD
• SERVICE CENTER OPERATIONS
• STABILIZED LABOR VARIANCES

84
ACTIONS IMPACTING ON NOR

• HIRING POLICIES
• OVERTIME - CHANGES FROM PROGRAM
• PAY RAISES
• LEAVE - ADMINISTRATIVE LEAVE FOR INCLEMENT
  WEATHER - HIGH SICK LEAVE UTILIZATION
• INVENTORY ADJUSTMENTS, NON-CREDITABLE EXCESS
• FIXED PRICES - GAINS/LOSSES
• DIRECT MANHOURS VARIANCE FROM PROGRAM

85
FINANCIAL STATEMENT ANALYSIS
86
ANALYSIS OF FINANCIAL STATEMENTS

• FINANCIAL STATEMENT ANALYSIS IS USED TO COMPARE
  CURRENT DATA WITH PRIOR DATA
• READY REFERENCE
• TO FORM OPINIONS AND MAKE DECISIONS
• BUDGET PLAN

87
BASIC FINANCIAL STATEMENTS

• STATEMENT OF FINANCIAL CONDITION (BALANCE SHEET)
• STATEMENT OF REVENUE AND COST (INCOME STATEMENT)
• STATEMENT OF CASH SOURCES AND APPLICATION OF FUNDS

88
CONCLUSION/ SUMMARY

• WCFEvolved from NIF and DBOF
• Designed to ID full costs
• Designed to bill at Unit Cost
• Requires accurate and timely IT support

89
CONCLUSION/ SUMMARY

• Budgeting Key
• Need accurate estimates for Stabilized Billing
  Rates.
• Maintain productivity and cost goals
• WCFs receive No Appropriations other than from
  customers.

90

• FOR ADDITONAL INFORMATION
• CONTACT TOM STONE
• [phone]
• E-MAIL tncstone_at_cox.net