BASICS OF NWCF

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BASICS OF NWCF
MARCH 21, 2002
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WHAT IS NWCF?

• Navy Working Capital Fund, is a revolving fund
  account established to finance a cycle of
  operations to which reimbursements and
  collections are returned for reuse in such a
  manner as to maintain the principal of the fund

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WHY NWCF?

• The Revolving Fund was established so that
  commercial/industrial-type activities could be
  freed from many of the worries arising from total
  dependence on the cycle of annual appropriation.

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HOW DOES IT WORK?

• Activity operations are initially financed using
• the revolving fund account (NWCF corpus) and
  then are reimbursed by customers appropriated
  project/program funds. This is accomplished thru
  billing expenses and using predetermined
  stabilized rates.
• The revenue generated finances activity
  operations, replenishing the corpus, including
  overhead costs.

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BASIC NWCF CONCEPTS

• Closer to Private Sector
• Business Practices
• Accrual accounting
• Depreciation of capital assets
• Profit and Loss Statement, Statement of
• Financial Condition
• Job Order and Cost Center financial control.
• Cash Management
• Auditable Financial Statements

CHIEF FINANCIAL OFFICERS ACT REQUIREMENT
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NWCF CYCLE OF OPERATIONS
(Congress Appropriates Cash)
Reimbursable Orders
NAVY DEFENSE WORKING CAPITAL FUND (WORKING
CAPITAL)
CUSTOMER REQUESTS WORK
CUSTOMER REPLENISHES CASH
ALL COSTS FINANCED BY NWCF
DIRECT LABOR
DIRECT MATERIAL
DIRECT OTHER
PRODUCTION EXPENSE
GA EXPENSE
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ALL COSTS FINANCED BY NWCF
DIRECT LABOR
DIRECT MATERIAL
DIRECT OTHER
PRODUCTION EXPENSE
GA EXPENSE
Stabilized Billing Rate to cover Direct Labor
Production Expense GA Expense
Direct Material Direct Other
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CURRENT COMPOSITE RATE CALCULATION
Expenses Cost of Direct
Labor Overhead Expnses (Production GA)
Burdened(Applied)Civilian Military Direct Hours
Customer Rate ( Per Hour)

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GOAL REVENUE EXPENSE
NET OPERATING REVENUE NWCF EXPENSES
RESULTS (NOR)
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NOTIONAL NWCF MODEL
COMPOSITE RATES
139.9K
137.3K
147.2K
154.8K
NWCF O/H (M)
10
-20
-35
BURDENED DIRECT WORKYEARS (K)
-35
-20
FY99 Budget
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Net O/H Expense Burdened Direct Wkyrs Wkyr Rate
317.4M 3.8K 154.8K
342.9M 4.7K 147.2K
377.0M 5.8K 139.9K
394.0M 6.4K 137.3K
Notes FY99 NWCF O/H, Assume Variable Costs
Increase/Decrease Directly with Burdened Direct
Workyears
Source FY99 CON Rate Setting Data (Jan 98)
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NAWC FINANCIAL ENVIRONMENT
NAVAIR CUSTOMERS
MANDATED FUNCTIONAL TRANSFERS W/O
OTHER NAVY CUSTOMERS
EXTERNAL FACTORS
NON-NAVY CUSTOMERS

• NWCF OPERATIONS
• Key Factors
• NOR
• Rates
• Direct Labor Hours
• Productivity Ratio
• GA Overhead
• Production Overhead

MILITARY BILLETS
MAJOR RANGE TEST FACILTY BASE
CIVILIAN MANPOWER
HOST/ TENANT SUPPORT
BRAC
DERF
Direct Indirect Both
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SUMMARY

• The goal of a Working Capital Fund is a zero NOR
  (break-even)
• This goal is achieved by generating enough
  revenue to pay expenses
• Overhead expenses are funded by billing the
  customer thru Overhead Rates which fund a share
  of the overhead expense. The rates are approved
  in the Presidents Budget.
• If applied direct labor hours are not sufficient
  in the execution year to generate revenue to
  cover overhead costs, a net operating loss exists