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1 [1] (April 20, 2026)

handle is hein.crs/govetyr0001 and id is 1 raw text is: Defense Primer: Defense Working Capital Funds Since 1870, the U.S. military has operated various types of working capital funds to procure materiel and commercial products and services for its forces. Codified under Title 10, Section 2208, of the United States Code (U.S.C.), a defense working capital fund (DWCF) is a type of revolvingfund intended to operate as a self-supporting entity to fund buying and selling activities of the Department of Defense (DOD) (e.g., acquiring parts and supplies, maintaining equipment, transporting personnel, conducting research and development). (DOD is using a secondary Department of War designation under Executive Order 14347 dated September 5, 2025.) DWCF transactions move more than $100 billion within DOD annually. According to the DOD Financial Management Regulation (FMR), revolving fund accounts finance a continuing cycle of business-type operations by incurring obligations and expenditures that generate receipts. These funds are designed to break even over the long term through fees charged for goods and services provided. DWCFs are broadly categorized as intragovernmental revolvingfunds- a type of revolving fund whose receipts come primarily from other government agencies, programs, or activities, according to the Fiscal Law Deskbook 2025. DWCFs and other types of revolving funds are used in DOD to support recurring requirements and to ensure the continuous delivery of goods and services such as utilities, fuels, food, clothing, and a range of industrial base capabilities. DWCFs offer certain procurement advantages and flexibilities to DOD. They generally operate without fiscal year limitations (i.e., funds in a DWCF account do not expire); facilitate aggregation of orders, allowing DOD to leverage its purchasing power; and allow for the establishment of inventories that reduce delivery times. Fund Basics When establishing a DWCF, Congress typically provides a direct appropriation to the fund. This initial appropriation, therefore a positive fund balance, is called a cash corpus. Using the cash corpus, fund managers purchase products and services, usually in advance of an anticipated requirement (e.g., a depot overhaul of an aircraft or ship), and establish a product catalog (e.g., a parts and supplies catalog) for its customers. Fund managers set product prices and stabilized rates for services that typically do not change until the next fiscal year. Once a DWCF-funded organization is established, the customer orders the product or service through a reimbursable agreement. Typically, the customer is a military unit or DOD organization (though a private party can also be a customer). Upon receipt of the product and/or service, the DOD customer reimburses the DWCF with funds appropriated for that specified purpose. Private-party customers typically prepay for the products and services. Updated April 20, 2026 Figure I. How a DWCF Operates Source: Figure created by CRS using data from DOD. Notes: The process illustrated above is a notional example of how a DWCF operates. Variations can exist (e.g., for private-party customers). Rates and Budgeting DWCFs are expected to be self-sustaining, after the initial cash corpus, through rate setting and budgeting. Fund managers typically establish rates 18-24 months in advance, though out-of-cycle rate adjustments may occur during the year of execution. Fund managers establish each rate taking into account all costs associated with each anticipated transaction, including the cost of the goods and services and a surcharge that includes overhead, operating costs, and other necessary administrative expenses. According to the DOD FMR, DWCFs are organized by chartered activity groups (i.e., categories within each fund that identify the purposes, projects, or types of activities financed by the fund). In a supply-oriented activity group, a surcharge is generally added to items provided to cover management and other overhead expenses (e.g., shipping costs). For activities that are service-oriented (e.g., equipment maintenance or information technology services), fund managers establish surcharge rates based on an estimated unit cost of the service provided, plus overhead costs. In general, fund managers budget to recover all operating expenses, including * direct costs (e.g., labor and materials); * indirect costs (e.g., facilities operation and maintenance); * hardware costs (e.g., acquisition and repair of equipment to support operations); * operations costs (e.g., labor, travel, training, transportation of personnel); and Annual Appropriations U.S. Congress Initial Appropriation (Cash Corpus) Customer $ (- Reimbursestor Prod uct/Services, DWCF DOD Customers Purchase Product/Services in Advance of Orders Products/Services __ Provided II! 4- PlacesOrdersfor Support Provider Products/Services