Defense Primer: Defense Working Capital Funds

Since 1870, the U.S. military has operated various forms of working capital funds to procure and provide materiel and commercial products and services to its forces. Authorized under Title 10, Section 2208, of the United States Code (U.S.C.), a defense working capital fund (DWCF) is a type of revolving fund that is intended to operate as a self supporting entity to fund business-like activities (e.g., acquiring parts and supplies, equipment maintenance, transporting personnel, research and development) for the Department of Defense (DOD). DWCF transactions move hundreds of billions of dollars within DOD annually. According to the DOD Financial Management Regulation (FMR) 7000.14-R, 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. Working capital funds are broadly categorized as intragovernmental revolving funds - revolving funds "whose receipts come primarily from other government agencies, programs, or activities" (see 2020 Fiscal Law Deskbook). DWCFs and other types of revolving funds are widely used across DOD to support recurring requirements and ensure the continuous delivery of goods and services such as utilities, fuels, food, clothing, and an assortment of industrial base capabilities. DWFCs offer benefits and flexibility to DOD procurement and disposal of materiel. They generally operate without fiscal year limitations (i.e., funds in a DWCF account do not expire); they facilitate the aggregation of orders, allowing the DOD to leverage its purchasing power; and they allow for the establishment of product inventories that can reduce delivery times.