CDFM Working Capital Fund Management 4 — Questions and Answers
Question 1: Which pricing mechanism do DoD Working Capital Funds use to recover costs from customer orders?
- Cost-plus fixed-fee pricing
- Stabilized rates set in advance (Correct answer)
- Spot market pricing adjusted monthly
- Appropriated fund direct payments
Correct 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.
Question 2: A WCF activity ends the fiscal year with a significant accumulated operating loss. What is the most appropriate corrective action?
- Immediately request supplemental appropriations
- Raise stabilized rates in the next budget cycle to recover the loss (Correct answer)
- Transfer the loss to the military department's O&M account
- Write off the loss and reset the fund to zero
Correct 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.
Question 3: What term describes the concept that WCF rates should neither generate large surpluses nor incur large losses over time?
- Zero-based budgeting
- Break-even pricing (Correct answer)
- Full cost recovery
- Revolving fund equilibrium
Correct answer: Break-even pricing
The break-even pricing principle requires WCF rates to recover full costs without systematically over- or under-recovering.
Question 4: Under what authority does a WCF activity provide goods or services to non-DoD federal agencies?
- Economy Act orders (Correct answer)
- Foreign Military Sales agreements
- Interagency acquisitions under FAR Part 17
- Congressional special appropriation
Correct 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.
Question 5: Which financial statement is unique to WCF reporting and is NOT produced by general fund appropriations?
- Balance Sheet
- Statement of Net Cost
- Cash Flow Statement (Correct answer)
- Statement of Changes in Net Position
Correct answer: Cash Flow Statement
WCFs produce a Statement of Cash Flows because they operate as business-like enterprises with continuous cash receipts and disbursements.
Question 6: When a DoD WCF activity purchases capital equipment, how is the cost treated for rate-setting purposes?
- Expensed entirely in the year of purchase
- Included as a depreciation charge spread over the asset's useful life (Correct answer)
- Funded by a separate capital appropriation and excluded from rates
- Charged directly to the ordering customer's appropriation
Correct 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.
Question 7: 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?
- The order must be cancelled and reordered in the new fiscal year
- A valid order placed in FY1 may be executed in FY2 because WCFs are not year-limited (Correct answer)
- The customer's appropriation expires and cannot fund the order
- The activity must request a waiver from OMB
Correct 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.
CDFM Working Capital Fund Management 4
Which pricing mechanism do DoD Working Capital Funds use to recover costs from customer orders?