Working Capital Funds Offer Financing Speed, Agility

In an organization as huge as the Department of Defense, cost tracking and efficiency measurement can be enormously difficult. The Patuxent Partnership Board of Directors President Gene Townsend says the Navy Working Capital Fund offers increased financial transparency to activity managers and their customers.

Mr. Townsend, a former NAWCAD comptroller, walked a July 12 audience at the Southern Maryland Higher Education Center through NWCF’s finer points. While NWCF projects comprise only a small percentage of defense spending, they are extremely useful for projects that require financing speed and agility.

The Navy Working Capital Fund consists of congressional authorized “activity groups” for depot maintenance, supply management, research and development, base support, transportation and information services. Organizations within the Navy and DoD use their appropriated funds to become customers of these activity groups, which “sell” them the desired services at pre-established rates, using a “working capital funds corpus” (cash) provided by Congress to cover costs incurred. The funds are replenished when the customer pays the final bill. The activity providing the service or product to the customer isn’t out to make a profit, but rather to break even and keep enough of the corpus on hand to handle fulfillment of future orders until it’s time to bill those customers.

Each service branch has a working capital fund. The customer base can include non-DoD entities and private industry as well.

Working capital funds are designed specifically to highlight the total costs of providing the requested goods or services, so that customers and providers are fully aware and in accord with the full costs of the transaction and can allocate their resources accordingly.

The success of working capital funds, according to Townsend, depends on “being able to execute really well.” Forecasting workloads and timelines accurately, establishing rates that are win-wins for the activity and the customer and predicting timelines that reduce the chance of too much work being carried over to another fiscal year, are key to getting the most out of this approach.

The advantage of working capital funds is it is not dependent on budget appropriations cycle and NWCF has  the ability to ramp up projects quickly.  Other benefits:

• Includes all costs as defined by the NWCF Charter
• Provides financial flexibility for management
• Provides customers with stabilized fixed rates
• Provides more uniform cost visibility to management
• Provides total costs to provide service for a customer
• Profits/losses can be carried forward to next fiscal year
• Offers flexibility that can accommodate the unique circumstances of DoD entities

The working capital funds have many  similarities to private-sector businesses. Continuous financial analyses are required, with monthly and quarterly reviews that track progress toward targets and compliance with budgets, assuring more effective cost control.

The end result is that decision-making is decentralized and more easily adapted to evolving situations faced by customers supporting the warfighter. This requires that the teams managing projects through the NWCF  be both professional and passionate about their work. In the end, it comes down to your people, Townsend said: “The key is finding the right people to do the work and trusting them to do it.”

To learn more about The Patuxent Partnership and its programs, visit their Leader Member Page.