Revolving Funds
The funding of the NWCF is based on a revolving-fund concept of operations, under which the NWCF activities received their initial working capital through an appropriation or through a transfer of resources from existing appropriations of funds and used those resources to finance the initial cost of products and services. Financial resources to replenish the initial working capital and to permit continuing operations are generated by the acceptance of customer orders.
Revolving funds operate in a fashion similar to a personal checking account. An individual deposits income into their account. In order to maintain themselves as a "continuing operation," necessary goods and services must be purchased, reducing the fund total. In order to keep the fund balanced, expenditures must not exceed income. By keeping a positive account balance, and by looking for ways to stretch capital further, revolving fund activities are exercising sound financial management.
A revolving fund gets its name from the cyclic nature of the cash flow. Income from customer purchases is used to finance a service providers' continuing operations, i.e., the business areas in a working capital fund sell goods or services with the intent of recovering the total cost incurred in providing those goods and services. Income from sales is then used to buy or replace inventory and finance the production of future goods and services.
Read more about this topic: United States Navy Working Capital Fund
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