Defense Primer: Defense Working Capital Funds

Updated April 20, 2026

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 revolving fund

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 revolving funds—

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.

DWFCs 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.

Figure 1. 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

general and administrative costs.

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Defense Primer: Defense Working Capital Funds

Financial Management

DWCFs may realize gains or losses within a fiscal year. At

the end of each fiscal year, fund managers recoup losses by

establishing higher rates in future years or, if necessary, by

seeking additional appropriations from Congress. Inversely,

fund managers assess gains and lower rates for customers in

future fiscal years, potentially providing a benefit to DWCF

customers. Regardless, DWCFs must maintain a net

positive cash balance at all times to avoid Anti-Deficiency

Act (P.L. 97-258, 96 Stat. 923) violations. As stated in the

DOD FMR: “Effective [DWCF] cash management is

dependent on the availability of accurate and timely data on

cash activity, demand planning, rate setting, and operational

results.”

The DOD FMR directs DWCFs to operate on a “breakeven” basis (revenue generated equals the cost associated

with receiving the revenue). Fund managers track and

report two main types of operating results: the (1) net

operating result (NOR), the net difference between

expenses and funds received for a single fiscal year; and the

(2) accumulated operating result (AOR), the net difference

between expenses and funds received since the inception of

the fund. Managers normally examine AOR when

establishing future rates for customers.

A Brief History of DWCFs

The modern DWCF evolved from other forms of revolving

funds (e.g., stock funds, industrial funds) over the course of

approximately 150 years. However, statutory authority for

DOD to establish its own working capital funds was first

enacted in law in the National Security Act Amendments of

1949 (P.L. 81-216, §405; 10 U.S.C. §2208). Under this

authority, the Secretary of Defense can establish as many

DWCFs as necessary to support DOD operations.

In 1991, the Secretary of Defense combined five industrial

funds, four stock funds, and multiple appropriated fund

business activities into the Defense Business Operations

Fund (DBOF). By 1996, DOD recognized the difficulty in

managing one large fund, including the challenge of setting

suitable rates for the entire DOD. As a result, DOD

disestablished the DBOF and reorganized it into four

DWCFs: three Military Department funds and one defensewide working capital fund (DWWCF). Since 1997, other

DWCFs have been established within DOD that support the

department, such as the Defense Commissary Agency

(DeCA) DWCF, and the Defense Counterintelligence and

Security Agency (DCSA) DWCF.

Military Department DWCFs

Navy Working Capital Fund (NWCF)

The Assistant Secretary of the Navy (Financial

Management & Comptroller) manages the NWCF. Four

activity groups (called “business areas”) support the Navy

and Marine Corps: Depot Maintenance, Research and

Development, Transportation, and Supply Management.

Army Working Capital Fund (AWCF)

The Assistant Secretary of the Army (Financial

Management and Comptroller) manages the AWCF. There

are two activity groups in the fund: Supply Management

and Industrial Operations.

Air Force Working Capital Fund (AFWCF)

The Air Force’s Deputy Assistant Secretary for Budget

(SAF/FMB) manages the AFWCF. There are two activity

groups in the fund: Consolidated Sustainment, and Supply

Management-Retail. SAF/FMB is also the Executive Agent

for the U.S. Transportation Command (TRANSCOM)

Transportation Working Capital Fund (TWCF); however,

TRANSCOM manages TWCF day-to-day operations.

DOD DWCFs

Defense-Wide Working Capital Fund (DWWCF)

The Defense-Wide Working Capital Fund funds the

operations of three defense agencies: the Defense Logistics

Agency (DLA), the Defense Information Systems Agency

(DISA), and the Defense Finance and Accounting Service

(DFAS). These agencies manage a total of five activity

groups within the DWWCF:

• DLA. The Assistant Secretary of Defense (Sustainment)

has oversight of the DLA DWCF. DLA manages three

activity groups: Supply Chain Management, Energy

Management, and Document Services.

• DISA. The DOD Chief Information Officer oversees the

DISA DWCF. DISA manages one activity group:

Information Services.

• DFAS. The Under Secretary of Defense (Comptroller)

oversees the DFAS DWCF. DFAS is the one activity

group within the fund.

DeCA DWCF

The Under Secretary of Defense (Personnel and Readiness)

has oversight of the DeCA DWCF. There are two activity

groups in the DWCF: Commissary Resale Stocks and

Commissary Operations.

DCSA DWCF

The Under Secretary of Defense (Intelligence) has

oversight of the DCSA DWCF. DCSA manages one

activity group: Background Investigation Services.

Budget Information

Budget information for DWCFs is published on DOD and

military department comptroller websites. The annual

budget justification books provide a financial profile of

each fund over a three-year period (year of the request and

two years prior). This profile generally includes an

accounting of fund revenues, capital investments, cash

forecasts for the budget year, and NORs and AORs (actual

and projected). Justification books also describe any

anticipated rate or surcharge adjustments, and provide

details to support requests for direct appropriations.

Issues for Congress

Congress may assess the readiness of DWCF information

systems, demand forecasting, and rate-adjustment practices

to support large-scale combat operations in multiple

theaters of operation. Congress may also assess DWCF

requirements emerging from the National Defense

Sustainment and Logistics Review (10 U.S.C. §118b) and

reserve mobilization exercises (see P.L. 119-60, §383).

Cameron M. Keys, Analyst in Defense Logistics and

Resource Management Policy

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Defense Primer: Defense Working Capital Funds

IF11233

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