Updated December 23, 2019
Defense Primer: Defense Working Capital Funds
Since 1870, the U.S. military has used working capital
Figure 1. How a DWCF Operates
funds to procure and provide materiel and commercial
products and services to its forces. Authorized under 10
U.S.C. §2208, a Defense Working Capital Fund (DWCF) is
a type of revolving fund that is intended to operate as a self-
supporting entity to fund business-like activities (e.g.,
acquiring parts and supplies, equipment maintenance,
transporting personnel, research and development) for the
Department of Defense (DOD). DWCF transactions move
hundreds of billions of dollars within DOD annually.
According to DOD Financial Management Regulation
(FMR) 7000.14-R, revolving fund accounts finance a
“continuing cycle of business-type operations” by incurring
“obligations and expenditures that generate receipts.”
DWCFs are designed to break even over the long term
through fees charged for products and services provided.
These funds are widely used across the DOD in an effort to
provide continuous base-support services, utilities, and

industrial capabilities.
Source: CRS Graphics.
Notes: The process il ustrated above is a general example of how a
DWFCs offer benefits and flexibility to government
DWCF operates. Variations can exist (e.g., private party customers).
procurement. They generally operate without fiscal year
limitations (i.e., amounts in a DWCF account do not
Rates and Budgeting
expire); they facilitate the aggregation of orders, allowing
Fund managers typically establish rates 18-24 months
the government to leverage its purchasing power; and they
ahead of schedule, locking in rates for the specified future
allow for the establishment of product inventories that can
fiscal year. DWCFs are expected to be self-sustaining after
reduce delivery time.
the initial appropriation. Fund managers establish rates
taking into account all costs associated with each
Fund Basics
anticipated transaction, including the cost of the goods and
When establishing a DWCF, Congress typically provides a
services and a surcharge that includes overhead, operating,
direct appropriation to the fund. This initial appropriation
and administrative expenses.
and positive fund balance is called a cash corpus. Using the
corpus, fund managers purchase products and services,
DWCFs are typically organized by budget activity (i.e., a
usually in advance of an anticipated requirement (e.g., a
category within each fund that identifies the purposes,
depot overhaul of an aircraft platform), then establish a
projects, or types of activities financed by the fund). In a
product catalog (e.g., an aircraft parts and supplies catalog)
supply-oriented budget activity fund, a surcharge is
for its customers. Fund managers then set product prices
generally added to items provided in order to cover
and stabilized rates for services that typically do not change
management and other overhead expenses such as shipping
until the next fiscal year.
costs. For budget activities that are not supply-oriented
(e.g., maintenance or information technology services),
Once a DWCF-funded organization (e.g., a depot) is open
fund managers establish surcharge rates based on an
for business, the customer―normally a military unit or
estimated unit cost of the service provided plus overhead
DOD organization (though a private party can be a
costs. In general, fund managers budget to recover all
customer)―orders the product or service through a
operating expenses including
reimbursable agreement. Upon receipt of the product or
service, the government customer then reimburses the
 direct costs, such as labor and materials;
DWCF with operation and maintenance funds appropriated
 indirect costs, such as facilities operation and
for that specified purpose. If the customer is a private party,
maintenance;
they typically prepay for products and services.
 hardware costs, such as acquisition and repair of
equipment needed to support operations;
 operations costs, such as labor, travel, training,
transportation of personnel; and
 other general and administrative costs.
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Defense Primer: Defense Working Capital Funds
Financial Management
are two activity groups in the fund: Industrial Operations
DWCFs may realize gains or losses within each fiscal year.
and Supply Management.
At the end of the fiscal year, fund managers can recoup
losses by establishing higher rates in future years, or if
Navy Working Capital Funds (NWCF)
necessary, by seeking additional appropriations from
The Assistant Secretary of the Navy (Financial
Congress. Inversely, fund managers assess gains and lower
Management & Comptroller) manages the NWCF. Five
rates for customers in future fiscal years, potentially
activity groups within the fund support the Navy and
providing a benefit to customers. Regardless, DWCFs must
Marine Corps: Depot Maintenance, Base Support, Supply
maintain a net positive cash balance at all times to avoid
Management, Research and Development (all Naval
Anti-Deficiency Act (P.L. 97-258, 96 Stat. 923) violations.
Warfare Centers and the Naval Research Laboratory), and
Transportation.
DOD FMR 7000.14-R directs DWCFs to operate on a
“break-even” basis (revenue generated equals the cost
Select Defense-Wide DWCFs
associated with receiving the revenue). Fund managers
track and report two main types of operating results: the (1)
Defense Commissary Agency (DeCA)
net operating result (NOR), which is the net difference
The Under Secretary of Defense (Personnel and Readiness)
between expenses and funds received for a single fiscal
has oversight of the DeCA DWCF. (See CRS InFocus
year; and (2) accumulated operating result (AOR), which is
IF11089, Defense Primer: Military Commissaries and
the net difference between expenses and funds received
Exchanges, by Kristy N. Kamarck and Barbara Salazar
since the inception of the fund. Managers normally examine
Torreon) There are two activity groups in the fund:
AOR when establishing future rates for customers.
Commissary Resale Stocks and Commissary Operations.
A Brief History of DWCFs
Defense Information Systems Agency (DISA)
DWCFs were codified in law in 1962 in P.L 87-651
The DOD Chief Information Officer oversees the DISA
§207(a) (10 U.S. Code § 2208),which provides the
DWCF. There are two activity groups in the fund:
Secretary of Defense the authority to create a variety of
Computing Services and Telecommunications/Enterprise
working capital funds to support DOD operations.
Acquisition Services.
In 1991, the Secretary of Defense combined five industrial
Defense Finance and Accounting Service (DFAS)
funds, four stock funds, and multiple appropriated fund
The Under Secretary of Defense (Comptroller) oversees the
support activities established by the DOD and the services
DFAS DWCF. DFAS is the one activity group within the
into what was titled the Defense Business Operations Fund
fund.
(DBOF). This consolidated fund was created to streamline
management and oversight responsibilities. Major activities
Defense Logistics Agency (DLA)
performed under the DBOF included depot maintenance,
The Assistant Secretary of Defense (Sustainment) has
transportation, supply management, and finance and
oversight of the DLA DWCF. There are three activity
accounting.
groups in the fund: Consumable Supply Management,
Energy Management, and Document Automation and
By 1996, DOD recognized the difficulty in managing one
Production. DLA is also the Executive Agent of the
large DWCF, including the challenge of setting suitable
DWCFs for DFAS and DISA.
rates for the entire DOD. As a result, the Under Secretary of
Defense (Comptroller) disestablished the DBOF and
Budget Information
reorganized it into three military department funds and one
Budget information for DWCFs is publicly available
defense-wide fund. In 1997, a second defense-wide
through the DOD Comptroller’s website. The annual budget
working capital fund (sometimes referred to as a DWWCF)
justification books provide a financial profile of each fund
was established for the Defense Commissary Agency.
over a three-year period (year of the request and two years
Today, there are several defense-wide working capital
prior). The profile generally includes an accounting of fund
funds.
revenues, operating expenses, capital investments, cash
forecasts for the budget year, and NORs and AORs (actual
Military Department DWCFs
and projected).
Air Force Working Capital Fund (AFWCF)
The budget justification books also depict and explain any
The Deputy Assistant Secretary for Budget (SAF/FMB)
anticipated rate/surcharge adjustments, and provide details
manages the AFWCF. There are two activity groups in the
to support requests for direct appropriations when required.
fund: Consolidated Sustainment and Supply Management-
They may also provide information on fund operations to
Retail. SAF/FMB is also the Executive Agent for the
include: performance metrics, management challenges, new
Transportation Working Capital Fund (TWCF), however
initiatives, and manpower trends.
United States Transportation Command manages day-to-
day operations of the TWCF.
G. James Herrera, Analyst in U.S. Defense Readiness and
Infrastructure
Army Working Capital Funds (AWCF)
The Assistant Secretary of the Army (Financial
IF11233
Management and Comptroller) manages the AWCF. There
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Defense Primer: Defense Working Capital Funds


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