CDFM Working Capital Fund Management 5 — Questions and Answers
Question 1: What is the primary purpose of the 'corpus' or initial capital of a DoD Working Capital Fund?
- To pay civilian employee salaries before orders are received
- To provide startup capital so the fund can operate before collecting sufficient revenues (Correct answer)
- To cover Congressional mandated reserve requirements
- To fund classified programs outside normal appropriations
Correct answer: To provide startup capital so the fund can operate before collecting sufficient revenues
The initial corpus provides working capital so the fund can purchase inventory and deliver services before customer payments are received.
Question 2: Which metric is most commonly used to evaluate the cash sufficiency of a DoD Working Capital Fund?
- Return on equity
- Days of operating cash on hand (Correct answer)
- Debt-to-equity ratio
- Price-earnings ratio
Correct answer: Days of operating cash on hand
Days of operating cash on hand measures how long a WCF can sustain operations without additional cash inflows, a key liquidity indicator.
Question 3: Under DoD policy, what happens to a WCF activity's accumulated operating results (AOR) that exceed the authorized variance threshold?
- They are transferred to the Treasury General Fund
- Rates must be adjusted downward to return AOR to within acceptable limits (Correct answer)
- Excess is automatically converted to a capital investment account
- The activity must submit a reprogramming request
Correct answer: Rates must be adjusted downward to return AOR to within acceptable limits
When AOR exceeds policy thresholds, the activity is required to reduce future rates to return the net position toward zero.
Question 4: A Supply Management Activity within the DWCF sells materiel at a price below standard price due to an approved discount. How is the resulting loss treated?
- Absorbed by the selling activity as an operating loss (Correct answer)
- Charged back to the customer's appropriation as a surcharge
- Funded by a separate price reduction appropriation
- Offset against unrelated WCF surpluses
Correct answer: Absorbed by the selling activity as an operating loss
Losses from approved price reductions are absorbed by the supply management activity and reflected in its accumulated operating results.
Question 5: Which DoD instruction establishes the primary financial management policy framework for Defense Working Capital Funds?
- DoDI 7000.14-R (FMR) Volume 11B (Correct answer)
- DoDI 5000.02 (Acquisition Management)
- DoDI 1400.25 (Civilian Personnel)
- DoDI 8510.01 (Risk Management Framework)
Correct answer: DoDI 7000.14-R (FMR) Volume 11B
DoDI 7000.14-R, Volume 11B of the Financial Management Regulation, provides the authoritative policy for DWCF financial management.
Question 6: How does a WCF activity account for the difference between its standard price and the actual cost of providing a good or service?
- As a contingency reserve
- As a price-cost variance recorded in accumulated operating results (Correct answer)
- As an adjusting entry to the corpus
- As an off-budget supplemental request
Correct answer: As a price-cost variance recorded in accumulated operating results
Price-cost variances are tracked and recorded in the accumulated operating results, driving future rate adjustments.
Question 7: What is the significance of the 'stabilized rate' approval process in the President's Budget for WCF activities?
- It legally caps the maximum number of orders the activity can accept
- It establishes the rates customers use for budget formulation and commits DoD to those prices for the year (Correct answer)
- It authorizes emergency supplemental spending authority
- It sets the civilian pay cap for WCF employees
Correct answer: It establishes the rates customers use for budget formulation and commits DoD to those prices for the year
Once stabilized rates are submitted in the President's Budget, customers build those prices into their budget requests and DoD is committed to honoring them for the fiscal year.
CDFM Working Capital Fund Management 5
What is the primary purpose of the 'corpus' or initial capital of a DoD Working Capital Fund?