Working Capital Fund Management Flashcards

Which pricing mechanism do DoD Working Capital Funds use to recover costs from customer orders?

Answer: Stabilized rates set in advance

WCFs use stabilized rates established at the start of the fiscal year so customers can budget predictably for services.

A WCF activity ends the fiscal year with a significant accumulated operating loss. What is the most appropriate corrective action?

Answer: Raise stabilized rates in the next budget cycle to recover the loss

Rate adjustments in the subsequent budget cycle are the standard mechanism for recovering accumulated losses within a WCF.

What term describes the concept that WCF rates should neither generate large surpluses nor incur large losses over time?

Answer: Break-even pricing

The break-even pricing principle requires WCF rates to recover full costs without systematically over- or under-recovering.

Under what authority does a WCF activity provide goods or services to non-DoD federal agencies?

Answer: Economy Act orders

The Economy Act (31 U.S.C. § 1535) authorizes federal agencies to order goods and services from other federal agencies, including DoD WCF activities.

Which financial statement is unique to WCF reporting and is NOT produced by general fund appropriations?

Answer: Cash Flow Statement

WCFs produce a Statement of Cash Flows because they operate as business-like enterprises with continuous cash receipts and disbursements.

When a DoD WCF activity purchases capital equipment, how is the cost treated for rate-setting purposes?

Answer: Included as a depreciation charge spread over the asset's useful life

Capital equipment costs are recovered through depreciation charges embedded in the WCF's stabilized rates over the asset's useful life.

A Defense Working Capital Fund activity receives an order late in the fiscal year that cannot be fulfilled until the next fiscal year. Which bona fide needs rule principle applies?

Answer: A valid order placed in FY1 may be executed in FY2 because WCFs are not year-limited

Orders placed against a WCF obligate the customer's appropriation at the time of order, and execution can occur in a subsequent fiscal year because WCFs operate on a revolving basis.