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entitled 'Air Force Working Capital Fund: Actions Needed to Manage 
Cash Balances to Required Levels' which was released on July 31, 2014. 

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United States Government Accountability Office: 
GAO: 

Report to the Subcommittee on Readiness and Management Support, 
Committee on Armed Services, U.S. Senate: 

July 2014: 

Air Force Working Capital Fund: 

Actions Needed to Manage Cash Balances to Required Levels: 

GAO-14-480: 

GAO Highlights: 

Highlights of GAO-14-480, a report to the Subcommittee on Readiness 
and Management Support, Committee on Armed Services, U.S. Senate. 

Why GAO Did This Study: 

The AFWCF earned revenue of $21.2 billion in fiscal year 2013 by, 
among other things, (1) repairing aircraft and engines; (2) selling 
inventory items (parts); and (3) providing air, land, and sea 
transportation. Cash generated from the sale of goods and services is 
used by the AFWCF to cover its expenses, such as paying employees. As 
requested, GAO reviewed issues related to AFWCF cash management. 

GAO's objectives were to determine to what extent (1) the AFWCF 
monthly cash balances were within the DOD minimum and maximum cash 
requirements for fiscal years 2009 through 2013 and (2) the AFWCF 
projected monthly cash balances were within the minimum and maximum 
cash requirements for fiscal years 2014 and 2015 and if not why. To 
address these objectives, GAO reviewed relevant DOD cash management 
guidance, analyzed AFWCF actual and projected cash balances and 
related data, and interviewed Air Force and United States 
Transportation Command officials. 

What GAO Found: 

GAO's analysis of Air Force Working Capital Fund (AFWCF) cash data 
showed that monthly cash balances fell within the minimum and maximum 
cash requirements about one-third of the time in fiscal years 2009 
through 2013. GAO identified three reasons why monthly cash balances 
were above the maximum or below the minimum cash requirements. First, 
the cash balance began fiscal year 2009 above the maximum requirement 
and generally remained above the maximum requirement in fiscal years 
2009 and 2010 because the AFWCF charged more than it cost for spare 
parts. Second, cash balances fluctuated each year because of the 
cyclical nature of events. For example, in the spring and summer 
months, the Air Force flies more training missions, which increases 
revenue for parts and thus the cash balance. Finally, large-dollar 
transactions caused cash balances to fluctuate above and below cash 
requirements. These transactions were used to increase cash to pay for 
costs such as fuel price increases or reduce cash if it was above the 
maximum requirement. 

Figure: AFWCF Monthly Cash Balances Compared to Cash Requirements: 

[Refer to PDF for image: vertical bar and line graph] 

Fiscal year 2008: 

September: 
Actual cash balance: $1.384 billion. 

Fiscal year 2009: 

October: 
Actual cash balance: $1.005 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

November: 
Actual cash balance: $1.077 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

December: 
Actual cash balance: $1.043 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

January: 
Actual cash balance: $1.246 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

February: 
Actual cash balance: $1.637 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

March: 
Actual cash balance: $1.222 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

April: 
Actual cash balance: $1.133 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

May: 
Actual cash balance: $1.226 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

June: 
Actual cash balance: $1.842 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

July: 
Actual cash balance: $1.848 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

August: 
Actual cash balance: $1.730 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

September: 
Actual cash balance: $1.409 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

Fiscal year 2010: 

October: 
Actual cash balance: $885 million; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

November: 
Actual cash balance: $1.270 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

December: 
Actual cash balance: $825 million; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

January: 
Actual cash balance: $1.545 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

February: 
Actual cash balance: $1.456 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

March: 
Actual cash balance: $1.166 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

April: 
Actual cash balance: $1.419 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

May: 
Actual cash balance: $1.269 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

June: 
Actual cash balance: $780 million; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

July: 
Actual cash balance: $792 million; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

August: 
Actual cash balance: $1.395 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

September: 
Actual cash balance: $945 million; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

Fiscal year 2011: 

October: 
Actual cash balance: $975 million; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

November:
Actual cash balance: $1.041 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

December: 
Actual cash balance: $780 million; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

January: 
Actual cash balance: $595 million; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

February: 
Actual cash balance: $1.223 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

March: 
Actual cash balance: $752 million; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

April: 
Actual cash balance: $1.057 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

May: 
Actual cash balance: $1.037 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

June: 
Actual cash balance: $1.033 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

July: 
Actual cash balance: $1.458 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

August: 
Actual cash balance: $1.372 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

September: 
Actual cash balance: $1.026 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

Fiscal year 2012: 

October: 
Actual cash balance: $1.141 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

November:
Actual cash balance: $794 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

December: 
Actual cash balance: $820 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

January: 
Actual cash balance: $935 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

February: 
Actual cash balance: $1.045 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

March: 
Actual cash balance: $1.122 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

April: 
Actual cash balance: $1.177 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

May: 
Actual cash balance: $1.244 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

June: 
Actual cash balance: $1.022 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

July: 
Actual cash balance: $800 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

August: 
Actual cash balance: $455 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

September: 
Actual cash balance: $811 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

Fiscal year 2013: 

October: 
Actual cash balance: $354 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

November:
Actual cash balance: $553 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

December: 
Actual cash balance: $277 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

January: 
Actual cash balance: $810 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

February: 
Actual cash balance: $1.021 billion; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

March: 
Actual cash balance: $796 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

April: 
Actual cash balance: $656 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

May: 
Actual cash balance: $755 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

June: 
Actual cash balance: $992 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

July: 
Actual cash balance: $1.126 billion; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

August: 
Actual cash balance: $1.386 billion; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

Fiscal year 2013: 

September: 
Projected cash balance: $1.458 billion; 
Projected maximum cash requirement: $1.114 billion; 
Projected minimum cash requirement: $846.7 million. 

Fiscal year 2014: 

October: 
Projected cash balance: $1.357 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

November: 
Projected cash balance: $.1398 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

December: 
Projected cash balance: $.1433 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

January: 
Projected cash balance: $1.246 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

February: 
Projected cash balance: $1.221 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

March: 
Projected cash balance: $1.284 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

April: 
Projected cash balance: $1.378 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

May: 
Projected cash balance: $1.397 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

June: 
Projected cash balance: $1.353 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million.  

July: 
Projected cash balance: $1.435 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

August: 
Projected cash balance: $1.558 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

September: 
Projected cash balance: $1.447 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

Fiscal year 2015: 

October: 
Projected cash balance: $1.639 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

November: 
Projected cash balance: $1.571 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

December: 
Projected cash balance: $1.558 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

January: 
Projected cash balance: $1.347 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

February: 
Projected cash balance: $1.196 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

March: 
Projected cash balance: $1.150 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

April: 
Projected cash balance: $1.030 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

May: 
Projected cash balance: $1.074 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

June: 
Projected cash balance: $1.112 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

July: 
Projected cash balance: $1.075 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

August: 
Projected cash balance: $984 million; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

September: 
Projected cash balance: $853 million; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

[End of figure] 

AFWCF projected monthly cash balances are expected to fall within cash 
requirements about 25 percent of the time in fiscal years 2014 and 
2015. In managing cash for those fiscal years, the AFWCF faces three 
challenges: 

* The AFWCF plans to implement a Department of the Treasury initiative 
to provide daily cash balances, instead of monthly balances, in 
October 2014. Because daily balances are more volatile, the AFWCF 
faces a greater risk that a cash shortfall would occur. However, the 
Department of Defense (DOD) has not updated its regulation on 
receiving daily cash balances. 

* Because airlift rates are set to compete with private sector rates, 
they do not cover the full cost. The difference between the full cost 
and revenue received is to be provided by the Airlift Readiness 
Account (ARA) funded by the Air Force. The projected cash balance 
declines in fiscal year 2015 because the Air Force did not fully fund 
the ARA by $927 million. If a cash shortfall materializes, the Air 
Force stated its intent to fund the requirement from other programs. 
Without sufficient ARA funding, the AFWCF cash balance is at risk of 
falling below the minimum cash requirement in fiscal year 2015. 

* The AFWCF has included $620 million in savings from Air Force and 
United States Transportation Command initiatives in its fiscal year 
2015 projected monthly cash balances. If these saving are not 
realized, the Air Force may need to take action to reduce the risk of 
a cash shortfall. 

What GAO Recommends: 

GAO is making three recommendations to DOD that are aimed at 
implementing the Department of the Treasury's daily cash balance 
initiative and ensuring that the AFWCF receives the appropriate 
funding if a cash shortfall occurs because of a lack of ARA funding or 
estimated savings not being realized. DOD concurred with GAO's 
recommendations and cited related actions planned or under way. 

View [hyperlink, http://www.gao.gov/products/GAO-14-480]. For more 
information, contact Asif A. Khan at (202) 512-9869 or khana@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

AFWCF Monthly Cash Balances Did Not Consistently Fall within the 
Minimum and Maximum Cash Requirements: 

AFWCF Monthly Cash Balances Are Projected to Be Above the Maximum 
Requirement in Fiscal Year 2014 but to Fall Below the Minimum 
Requirement by the End of Fiscal Year 2015: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Scope and Methodology: 

Appendix II: Reasons for Year-to-Year Changes in AFWCF Cash Balances 
from Fiscal Years 2009 through 2013: 

Appendix III: Comments from the Department of Defense: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Air Force Working Capital Fund (AFWCF) Monthly Cash Balance 
Information for Fiscal Years 2009 through 2013: 

Figures: 

Figure 1: Air Force Working Capital Fund (AFWCF) Monthly Cash Balances 
Compared with Minimum and Maximum Cash Requirements: 

Figure 2: Air Force Working Capital Fund (AFWCF) Projected Monthly 
Cash Balances Compared with Projected Minimum and Maximum Cash 
Requirements: 

Abbreviations: 

AFWCF: Air Force Working Capital Fund: 

ARA: Airlift Readiness Account: 

CSAG: Consolidated Sustainment Activity Group: 

DFAS: Defense Finance and Accounting Service: 

DOD: Department of Defense: 

SMAG-R: Supply Management Activity Group-Retail: 

TWCF: Transportation Working Capital Fund: 

USTRANSCOM: United States Transportation Command: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

July 31, 2014: 

The Honorable Jeanne Shaheen: 
Chairman: 
The Honorable Kelly Ayotte: 
Ranking Member: 
Subcommittee on Readiness and Management Support: 
Committee on Armed Services: 
United States Senate: 

The Air Force operates the Air Force Working Capital Fund (AFWCF) to 
provide certain goods and services to a variety of customers, 
including the Army, the Navy, the Air Force, non-Department of Defense 
(DOD) agencies, and foreign countries. Under the working capital fund 
concept, the Air Force charges these customers for the anticipated 
full cost of these goods and services. In fiscal year 2013, the AFWCF 
earned revenue of $21.2 billion by, among other things, (1) repairing, 
overhauling, and modifying aircraft, engines, missiles, and 
components; (2) selling depot-level repairable and consumable 
inventory items to customers; and (3) providing air, land, and sea 
transportation for DOD in times of peace and war, with a primary focus 
on wartime readiness. 

The availability of cash in the AFWCF depends on the outcome of many 
decisions made during DOD's budget process with regard to (1) 
projecting workloads, (2) estimating costs, and (3) setting prices to 
recover the estimated full cost of providing goods and services. The 
AFWCF cash balance is directly affected by collections from the sale 
of goods and services, disbursements for such items as salaries and 
the purchase of inventory, appropriations passed by Congress and 
enacted into law, and transfers in and out of the AFWCF.[Footnote 1] 
According to the DOD Financial Management Regulation,[Footnote 2] 
"cash levels should be maintained at 7 to 10 days of operational cost 
and six months of capital disbursements,"[Footnote 3] (hereafter 
referred to as the cash requirement).[Footnote 4] Thus, the minimum 
cash requirement consists of cash that is sufficient to meet 6 months 
of capital requirements plus 7 days of operational cost. The maximum 
cash requirement consists of 6 months of capital requirements plus 10 
days of operational cost. The Air Force may add certain adjustments to 
the calculation if approved by DOD. A disbursement in excess of 
available cash would potentially constitute an Antideficiency Act 
violation.[Footnote 5] If the AFWCF builds excess cash balances, it is 
subject to reduced budget requests by DOD, reduced appropriations from 
Congress, or transfers from the AFWCF to other appropriation accounts. 
For example, Congress reduced the Air Force's fiscal year 2010 
Operation and Maintenance appropriation by $250 million because of 
excess cash in the AFWCF. Consequently, it is important for the AFWCF 
to manage its cash balance to stay within the minimum and maximum cash 
requirements as much as possible. 

You asked us to review issues related to AFWCF cash management. Our 
objectives were to determine to what extent (1) the AFWCF monthly cash 
balances were within the DOD minimum and maximum cash requirements for 
fiscal years 2009 through 2013 and (2) the AFWCF projected monthly 
cash balances were within the minimum and maximum cash requirements 
for fiscal years 2014 and 2015 and if not why. 

To address the first objective, we (1) obtained the DOD regulation on 
calculating the minimum and maximum cash requirements, (2) calculated 
the cash requirements for fiscal years 2009 through 2013 based on the 
regulation, and (3) obtained monthly cash balances for fiscal years 
2009 through 2013. We compared the minimum and maximum cash 
requirements to end-of-month reported cash balances. If the cash 
balances were above the maximum amount or were below the minimum 
amount, we met with Air Force and United States Transportation Command 
(USTRANSCOM) officials and reviewed AFWCF budgets and other Air Force 
and USTRANSCOM documentation to ascertain the reasons.[Footnote 6] 
Further, to determine the extent to which cash transfers for fiscal 
years 2009 through 2013 resulted in the AFWCF cash balances either 
falling below the minimum cash requirement or being above the maximum 
cash requirement, we analyzed DOD budget and accounting reports to 
determine the dollar amount of transfers made for the period. We 
analyzed cash transfers to determine if any of the transfers resulted 
in the cash balances falling outside the minimum or maximum cash 
requirements and, if so, the amount that fell outside those 
requirements. We also obtained and analyzed reprogramming documents 
and journal vouchers and interviewed key Air Force and USTRANSCOM 
officials to determine the reasons for the transfers. 

To address the second objective, we obtained and analyzed AFWCF budget 
documents and cash management plans for fiscal years 2014 and 2015. We 
used the DOD regulation to calculate the minimum and maximum cash 
requirements for those years and compared it to the projected cash 
balances. If the projected cash balances were above or below the cash 
requirement, we met with Air Force and USTRANSCOM officials to 
ascertain the reasons. Further, we interviewed Office of the Under 
Secretary of Defense (Comptroller), Air Force, and USTRANSCOM 
officials on the Department of the Treasury (Treasury) initiative to 
begin receiving daily cash balances in fiscal year 2015 and the 
potential effect on the management of AFWCF cash. We also interviewed 
Air Force and USTRANSCOM officials to determine what actions the AFWCF 
plans to take to increase collections or decrease disbursements to 
avoid potential AFWCF cash shortages. 

We obtained the AFWCF financial data in this report from official 
budget documents and accounting reports. To assess the reliability of 
these data, we (1) reviewed and analyzed the factors used in 
calculating the minimum and maximum cash requirements for the 
completeness of the elements included in the calculation; (2) 
interviewed Air Force, USTRANSCOM, and Defense Finance and Accounting 
Service (DFAS)[Footnote 7] officials knowledgeable about the cash 
data; (3) compared AFWCF cash balance information, including 
collections and disbursements that were contained in different 
reports, to ensure that the data reconciled; (4) obtained an 
understanding of the process used by DFAS to reconcile AFWCF cash 
balances with Treasury records; and (5) obtained and analyzed 
documentation supporting the amount of funds transferred in and out of 
the AFWCF. On the basis of procedures performed, we have concluded 
that these data were sufficiently reliable for the purposes of this 
report. A more detailed discussion of our scope and methodology is 
contained in appendix I. 

We conducted this performance audit from July 2013 to July 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

The AFWCF relies on sales revenue rather than regular appropriations 
to finance its continuing operations. The AFWCF is intended to (1) 
generate sufficient resources to cover the full cost of its operations 
and (2) operate on a break-even basis over time--that is, neither make 
a gain nor incur a loss. Customers primarily use appropriated funds to 
finance orders placed with the AFWCF. Cash generated from the sale of 
goods and services is the AFWCF's primary means of maintaining an 
adequate level of cash to sustain its operations. The ability to 
generate cash consistent with DOD's regulations depends on (1) 
accurately projecting workload, such as the number of aircraft, 
engines, missiles, and components needed to be repaired during the 
year or annual transportation requirements needed to move United 
States forces, equipment, and supplies around the globe, and (2) 
accurately setting prices to recover the full costs of producing goods 
and services. DOD policy requires the AFWCF to establish its sales 
prices prior to the start of each fiscal year and to apply these 
predetermined or "stabilized" prices to most orders received during 
the year--regardless of when the work is accomplished or what costs 
are incurred. Stabilized prices provide customers with protection 
during the year of execution from prices greater than those assumed in 
the budget and permits customers to execute their programs as approved 
by Congress. 

Developing accurate prices is challenging because the process to 
determine the prices begins about 2 years in advance of when the work 
is actually received and performed. In essence, the AFWCF's budget 
development has to coincide with the development of its customers' 
budgets so that they both use the same set of assumptions. To develop 
prices, the AFWCF estimates (1) labor, material, overhead, and other 
costs based on anticipated demand for work as projected by customers; 
(2) total direct labor hours for each type of work performed, such as 
work related to aircraft, engines, and repairable inventory items; (3) 
the workforce's productivity; and (4) savings because of productivity 
and other cost avoidance initiatives. In order for the AFWCF to 
operate on a break-even basis, it is extremely important that the 
AFWCF accurately estimate the work it will perform and the costs of 
performing the work. Higher-than-expected costs or lower-than-expected 
customer demand for goods and services can cause the working capital 
fund to incur losses. Conversely, lower-than-expected costs or higher-
than-expected customer demand for goods and services can result in 
profits. With sales prices based on assumptions that are made as long 
as 2 years before the prices go into effect, some variance between 
expected and actual costs is inevitable. 

If projections of cash disbursements and collections indicate that 
cash balances will drop below the minimum cash requirement, the AFWCF 
may need to generate additional cash. One method that may be used is 
to bill customers in advance for work not yet performed. Advance 
billing generates cash almost immediately by billing AFWCF customers 
for work that has not been completed. This method is a temporary 
solution and is only used when cash reaches critically low balances 
because it requires manual intervention in the normal billing and 
payment processes. 

Description of the AFWCF: 

During fiscal year 2013, the AFWCF earned $21.2 billion in revenue. 
The AFWCF consists of three business entities: the Consolidated 
Sustainment Activity Group (CSAG), the Supply Management Activity 
Group-Retail (SMAG-R), and the Transportation Working Capital Fund 
(TWCF). The Air Force manages the CSAG and the SMAG-R and acts as an 
executive agent for the TWCF. The Air Force assumed responsibility for 
TWCF cash in fiscal year 1998 and TWCF cash is included in the AFWCF 
cash balance.[Footnote 8] However, USTRANSCOM rather than the Air 
Force has the day-to-day management responsibility for TWCF 
operations. The following is a description of the three business 
entities. 

* CSAG: During fiscal year 2013, the CSAG earned $7.4 billion in 
revenue. The CSAG provides repairable supply items and consumable 
supply items as well as maintenance services.[Footnote 9] The Air 
Force operates two CSAG divisions: the supply division and the 
maintenance division. The supply division is primarily responsible for 
managing repairable and consumable spare parts unique to the Air 
Force. The supply division issued about 1.7 million repairable or 
consumable spare parts in fiscal year 2013. The maintenance division 
is responsible for economically repairing, overhauling, and modifying 
aircraft, engines, missiles, and components to meet customer demands. 
The Air Force operated three air logistics complexes performing about 
21 million direct labor hours of work in fiscal year 2013. 

* SMAG-R: During fiscal year 2013, the SMAG-R earned $3.3 billion in 
revenue. The Air Force's SMAG-R manages inventory items, including 
weapon system spare parts, medical-dental supplies and equipment, and 
other supply items used in non-weapon system applications. It also 
procures material and makes spare parts available to authorized 
customers. The SMAG-R comprises three divisions: the General Support 
Division, the Medical-Dental Division, and the United States Air Force 
Academy Division. The General Support Division manages nearly 1.4 
million items procured from the Defense Logistics Agency[Footnote 10] 
and the General Services Administration to support field and depot 
maintenance of aircraft, ground and airborne communication, and 
electronic systems. The Medical-Dental Division manages items for 74 
medical treatment facilities worldwide. Finally, the United States Air 
Force Academy Division purchases uniforms and uniform accessories for 
sale to approximately 4,000 cadets at the Air Force Academy. 

* TWCF: During fiscal year 2013, the TWCF earned $10.5 billion in 
revenue. USTRANSCOM's mission is to provide air, land, and sea 
transportation for DOD in times of peace and war, with a primary focus 
on wartime readiness. USTRANSCOM submits the TWCF budget as a distinct 
subset of the AFWCF budget submission. It reflects the authority 
needed to meet peacetime operations, overseas contingency operations, 
[Footnote 11] the surge/readiness requirements to support military 
strategy, and other priorities needed to meet its transportation 
mission. According to the USTRANSCOM fiscal year 2012 annual report, 
the airlift component of USTRANSCOM flew almost 85,000 sorties 
supporting 31,181 missions around the world and transported over 1.8 
million passengers and 659,000 short tons of cargo to their 
destinations in fiscal year 2012. Further, the sealift and surface 
movement components of USTRANSCOM moved more than 500,000 measurement 
tons of cargo (sea transportation) and 14.5 million square feet of 
cargo (surface transportation) in support of U.S. forces worldwide in 
fiscal year 2012.[Footnote 12] 

DOD Cash Management Policy: 

Effective cash management in DOD largely depends on managers receiving 
accurate and timely data on cash balances, collections, and 
disbursements. Currently, DOD cash balances are visible only in 
official reports at the end of each month. According to DOD's 
Financial Management Regulation, volume 2B, chapter 9, DOD working 
capital funds are to maintain the minimum cash balance necessary to 
meet disbursement requirements in support of both operations and the 
capital asset program. The DOD working capital funds are to maintain a 
minimum cash balance sufficient to pay bills, such as (1) paying 
employees' salaries for repairing aircraft, weapon systems, and 
equipment; (2) purchasing inventory items (spare parts) from vendors; 
and (3) transporting troops, equipment, and supplies worldwide. DOD's 
Financial Management Regulation requires that "cash levels should be 
maintained at 7 to 10 days of operational cost and cash adequate to 
meet six months of capital disbursements." Thus, the minimum cash 
requirement consists of cash that is sufficient to meet 6 months of 
capital requirements plus 7 days of operational cost.[Footnote 13] The 
maximum cash requirement consists of 6 months of capital requirements 
plus 10 days of operational cost. The regulation further provides that 
a goal of DOD working capital funds is to minimize the use of advance 
billing of customers to maintain cash solvency unless advance billing 
is required to avoid Antideficiency Act violations. 

In June 2010, the DOD Financial Management Regulation was amended to 
allow DOD working capital fund activities, with the approval of the 
Office of the Under Secretary of Defense (Comptroller), Director of 
Revolving Funds, to incorporate into the formula for calculating the 
minimum and maximum cash requirements three new adjustments. These 
adjustments would increase the minimum and maximum cash requirements. 
First, a working capital fund may increase the minimum and maximum 
cash requirements for the amount of accumulated operating results 
planned for return to customer accounts. The working capital fund 
returns accumulated profits back to its customers by reducing future 
prices so it can operate on a break-even basis over time. The second 
adjustment allowed by the revised DOD Financial Management Regulation 
is an allowance for funds appropriated directly to a working capital 
fund that are obligated in the year received but not fully spent until 
future years. The adjustment allows the working capital fund to retain 
these amounts as an addition to its normal operational costs. Finally, 
a working capital fund may increase the minimum and maximum cash 
requirements by the marginal cash required to purchase goods and 
services from the commodity/business market at a higher price than was 
submitted in the President's Budget. The adjustment reflects the cash 
impact of the specified market fluctuation. 

AFWCF Monthly Cash Balances Did Not Consistently Fall within the 
Minimum and Maximum Cash Requirements: 

The AFWCF's monthly cash balances fell within the minimum and maximum 
cash requirements about one-third of the time during fiscal years 2009 
through 2013. Our analysis of AFWCF cash data showed that the AFWCF 
monthly cash balances fluctuated significantly from fiscal years 2009 
through 2013 but were almost equally distributed above, between, and 
below the minimum and maximum cash requirements. The AFWCF monthly 
cash balances were above the maximum cash requirement for 19 of the 60 
months, between the minimum and maximum cash requirements for 21 of 
the 60 months, and below the minimum cash requirement for 20 of the 60 
months. Figure 1 shows the AFWCF monthly cash balances compared to the 
minimum and maximum cash requirements for fiscal years 2009 through 
2013. 

Figure 1: Air Force Working Capital Fund (AFWCF) Monthly Cash Balances 
Compared with Minimum and Maximum Cash Requirements: 

[Refer to PDF for image: vertical bar and line graph] 

Fiscal year 2008: 

September: 
Actual cash balance: $1.384 billion. 

Fiscal year 2009: 

October: 
Actual cash balance: $1.005 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

November: 
Actual cash balance: $1.077 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

December: 
Actual cash balance: $1.043 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

January: 
Actual cash balance: $1.246 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

February: 
Actual cash balance: $1.637 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

March: 
Actual cash balance: $1.222 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

April: 
Actual cash balance: $1.133 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

May: 
Actual cash balance: $1.226 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

June: 
Actual cash balance: $1.842 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

July: 
Actual cash balance: $1.848 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

August: 
Actual cash balance: $1.730 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

September: 
Actual cash balance: $1.409 billion; 
Maximum cash requirement: $1.160 billion; 
Minimum cash requirement: $885.3 million. 

Fiscal year 2010: 

October: 
Actual cash balance: $885 million; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

November: 
Actual cash balance: $1.270 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

December: 
Actual cash balance: $825 million; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

January: 
Actual cash balance: $1.545 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

February: 
Actual cash balance: $1.456 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

March: 
Actual cash balance: $1.166 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

April: 
Actual cash balance: $1.419 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

May: 
Actual cash balance: $1.269 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

June: 
Actual cash balance: $780 million; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

July: 
Actual cash balance: $792 million; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

August: 
Actual cash balance: $1.395 billion; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

September: 
Actual cash balance: $945 million; 
Maximum cash requirement: $1.196 billion; 
Minimum cash requirement: $903.5 million. 

Fiscal year 2011: 

October: 
Actual cash balance: $975 million; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

November:
Actual cash balance: $1.041 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

December: 
Actual cash balance: $780 million; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

January: 
Actual cash balance: $595 million; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

February: 
Actual cash balance: $1.223 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

March: 
Actual cash balance: $752 million; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

April: 
Actual cash balance: $1.057 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

May: 
Actual cash balance: $1.037 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

June: 
Actual cash balance: $1.033 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

July: 
Actual cash balance: $1.458 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

August: 
Actual cash balance: $1.372 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

September: 
Actual cash balance: $1.026 billion; 
Maximum cash requirement: $1.265 billion; 
Minimum cash requirement: $950.2 million. 

Fiscal year 2012: 

October: 
Actual cash balance: $1.141 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

November:
Actual cash balance: $794 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

December: 
Actual cash balance: $820 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

January: 
Actual cash balance: $935 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

February: 
Actual cash balance: $1.045 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

March: 
Actual cash balance: $1.122 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

April: 
Actual cash balance: $1.177 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

May: 
Actual cash balance: $1.244 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

June: 
Actual cash balance: $1.022 billion; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

July: 
Actual cash balance: $800 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

August: 
Actual cash balance: $455 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

September: 
Actual cash balance: $811 million; 
Maximum cash requirement: $1.281 billion; 
Minimum cash requirement: $967.2 million. 

Fiscal year 2013: 

October: 
Actual cash balance: $354 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

November:
Actual cash balance: $553 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

December: 
Actual cash balance: $277 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

January: 
Actual cash balance: $810 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

February: 
Actual cash balance: $1.021 billion; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

March: 
Actual cash balance: $796 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

April: 
Actual cash balance: $656 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

May: 
Actual cash balance: $755 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

June: 
Actual cash balance: $992 million; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

July: 
Actual cash balance: $1.126 billion; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

August: 
Actual cash balance: $1.386 billion; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

September: 
Actual cash balance: $1.458 billion; 
Maximum cash requirement: $1.114 billion; 
Minimum cash requirement: $846.7 million. 

Source: GAO analysis of AFWCF cash data. GAO-14-480. 

[End of figure] 

Our analysis of the AFWCF monthly cash balances showed that the 
average monthly cash balance declined each year from fiscal year 2009 
through fiscal year 2013. Further, as monthly cash balances declined 
(1) more months were above the maximum cash requirement in fiscal 
years 2009 and 2010 compared to the next 3 fiscal years and (2) more 
months were below the minimum cash requirement in fiscal years 2012 
and 2013 compared to the prior years. Table 1 shows AFWCF monthly cash 
balance information for each of the 5 fiscal years reviewed and the 
number of months the AFWCF cash balances were above, between, or below 
the minimum and maximum cash requirements. 

Table 1: Air Force Working Capital Fund (AFWCF) Monthly Cash Balance 
Information for Fiscal Years 2009 through 2013: 

Fiscal year: 2009; 
AFWCF average monthly cash balance: $1.368 billion; 
Change in average monthly cash balance from prior year: [Empty]; 
Number of months compared to minimum and maximum cash requirements: 
Above: 8; 
Between: 4; 
Below: 0. 

Fiscal year: 2010; 
AFWCF average monthly cash balance: $1.146 billion; 
Change in average monthly cash balance from prior year: ($222 million); 
Number of months compared to minimum and maximum cash requirements: 
Above: 6; 
Between: 2; 
Below: 4. 

Fiscal year: 2011; 
AFWCF average monthly cash balance: $1.029 billion; 
Change in average monthly cash balance from prior year: ($117 million); 
Number of months compared to minimum and maximum cash requirements: 
Above: 2; 
Between: 7; 
Below: 3. 

Fiscal year: 2012; 
AFWCF average monthly cash balance: $947 million; 
Change in average monthly cash balance from prior year: ($82 million); 
Number of months compared to minimum and maximum cash requirements: 
Above: 0; 
Between: 6; 
Below: 6. 

Fiscal year: 2013; 
AFWCF average monthly cash balance: $849 million; 
Change in average monthly cash balance from prior year: ($98 million); 
Number of months compared to minimum and maximum cash requirements: 
Above: 3; 
Between: 2; 
Below: 7. 

Source: GAO analysis of AFWCF cash data. GAO-14-480. 

[End of table] 

Our analysis of AFWCF financial documents and discussions with Air 
Force headquarters, Air Force Materiel Command, and USTRANSCOM 
officials provided the following information on the AFWCF monthly cash 
balances and the relationship of the monthly cash balances to the 
minimum and maximum cash requirements from fiscal years 2009 through 
2013. First, the monthly cash balances were generally high in fiscal 
years 2009 and 2010 because the Air Force charged more than it cost 
for spare parts. Second, the monthly cash balances fluctuated because 
of the cyclical nature of events, such as the DOD operating under a 
continuing resolution. Finally, large-dollar transactions, such as 
transfers in and out of the AFWCF, affected the monthly cash balances. 
These factors affecting the AFWCF cash balance are discussed further 
in the sections that follow. 

Monthly Cash Balances Were High in Fiscal Years 2009 and 2010 Because 
the Air Force Set Its Rates Too High for Supply Items: 

The AFWCF entered fiscal year 2009 with a cash balance of $1,384 
million--about $224 million or 19 percent above the maximum cash 
requirement for fiscal year 2009. Air Force headquarters officials 
informed us that when they set the rates to be charged to CSAG and 
SMAG-R customers for supply items in fiscal years 2009 and 2010, they 
wanted the cash balance to be at the maximum cash requirement because 
the AFWCF changed the method for charging customers for supply items. 
Specifically, the Air Force changed the method for charging customers 
for spare parts from (1) selling individual parts to customers on a 
transaction-by-transaction basis to (2) charging customers for spare 
parts based on actual hours flown by aircraft. Because the Air Force 
did not have historical data on applying the new method, the Air Force 
wanted to make sure it charged customers enough for supply items so 
that the AFWCF would have a sufficient cash balance. In doing so, the 
Air Force charged more than it cost for spare parts, which resulted in 
a higher-than-expected cash balance. According to Air Force 
headquarters and Air Force Materiel Command officials and our analysis 
of financial documents, the monthly cash balance was above the maximum 
amount for 14 of the 24 months during fiscal years 2009 and 2010. 

Monthly Cash Balances Fluctuated Because of the Cyclical Nature of 
Events: 

Air Force headquarters, Air Force Materiel Command, and USTRANSCOM 
officials informed us that fluctuations in the AFWCF monthly cash 
balances occurred because of the cyclical nature of events that affect 
the AFWCF. Customer orders do not execute in a smooth pattern 
throughout the fiscal year but instead fluctuate on a seasonal basis 
as discussed below. These seasonal fluctuations can result in cash 
balances falling below the minimum cash requirement early in the 
fiscal year and rising above the maximum in the second half of the 
fiscal year. 

* In the beginning of the fiscal year, the monthly cash balances 
generally decrease if DOD operates under a continuing resolution 
because AFWCF customers' funding is constrained, which, in turn, 
suppresses customer demand for AFWCF goods and services.[Footnote 14] 
For fiscal years 2009 through 2013, except for fiscal year 2009, DOD 
operated under a continuing resolution. For example, our analysis of 
fiscal year 2012 financial reports showed that for November 2011, 
December 2011, and January 2012, the AFWCF monthly cash balances were 
below the minimum cash requirement. In another case, our analysis of 
fiscal year 2010 financial reports showed that for the first 3 months 
of fiscal year 2010, the AFWCF monthly cash balances were lower than 
the ending cash balance for fiscal year 2009. The October and December 
2009 cash balances were below the minimum cash requirement. 

* Beginning in the April and May time frame and continuing through the 
summer months, the AFWCF monthly cash balances generally increase 
because the Air Force flies more training missions during these months 
because of the better weather conditions. The additional hours flown 
results in the CSAG and SMAG-R earning more revenue, which, in turn, 
increases AFWCF collections and its monthly cash balance. For example, 
our analysis of financial reports showed that in fiscal year 2009, the 
three highest AFWCF monthly cash balances were in June, July, and 
August, as shown in figure 1. For these 3 months, the monthly cash 
balances were above the maximum cash requirement by over $500 million. 
In another case, our analysis of financial reports showed that in 
fiscal year 2011, the two highest AFWCF monthly cash balances were in 
July and August, as shown in figure 1. For these 2 months, the monthly 
cash balances (1) were the highest cash balances for the fiscal year 
and (2) were the only two months when the monthly cash balance was 
above the maximum cash requirement. 

Monthly Cash Balances Were Affected by Large-Dollar Transactions: 

Air Force headquarters, Air Force Materiel Command, and USTRANSCOM 
officials stated that fluctuations in the AFWCF monthly cash balances 
also occurred because of large-dollar transactions, such as 
appropriations received by the AFWCF or large transfers to and from 
the AFWCF. These fluctuations occurred in the month that a transaction 
was made and resulted in large fluctuations in the cash balance from 
month to month as well as the monthly cash balances fluctuating from 
below the minimum cash requirement to above the maximum cash 
requirement or vice versa. For example, at the end of August 2010, the 
AFWCF monthly cash balance was $1,395 million (above the maximum cash 
requirement). During August 2010, the AFWCF received an $847 million 
appropriation to fund fuel increases. If the AFWCF had not received 
this appropriation, the August 2010 monthly cash balance would have 
been $548 million (below the minimum cash requirement). 

On the other hand, the AFWCF cash balance fluctuated downward and was 
reduced when transfers were made from the AFWCF to other 
appropriations. For example, the Air Force transferred $251 million 
out of the AFWCF in the last quarter of fiscal year 2009. These 
transfers ($105 million in July 2009 and $146 million in September 
2009) reduced the amount of cash that was over the maximum cash 
requirement. Specifically, the September 2009 AFWCF cash balance was 
over the maximum cash requirement by about $249 million. If the $251 
million had not been transferred, the AFWCF fiscal year 2009 ending 
cash balance would have been over the maximum cash requirement by 
about $500 million. 

Further, large transactions can affect the monthly cash balances for 
several months and thus affect the AFWCF's ability to fall within the 
minimum and maximum cash requirements. In developing the fiscal year 
2013 AFWCF budget, the Air Force set its fiscal year 2013 rates to 
return prior year gains to its customers. Air Force officials informed 
us that the fiscal year 2013 rates were expected to lower the AFWCF 
cash balance by about $500 million and the projected cash balance 
would be close to the minimum cash requirement. However, the cash 
balance fell below the minimum cash requirement because of an 
unplanned $370 million transfer from the AFWCF made in August 
2012.[Footnote 15] The transfer was needed to fund overseas 
contingency operations requirements, such as aircraft depot 
maintenance. From September 2012 through May 2013, the monthly cash 
balance was below the minimum cash requirement for 8 of the 9 months. 
If the $370 million transfer had not occurred, the monthly cash 
balance would have been above the maximum cash requirement for 4 
months, between the minimum and maximum cash requirements for 3 
months, and below the minimum cash requirement for 2 months. From June 
2013 through September 2013, the monthly cash balance was between or 
above the cash requirement. 

For further details on the cash balances for fiscal years 2009 through 
2013, see appendix II. 

AFWCF Monthly Cash Balances Are Projected to Be Above the Maximum 
Requirement in Fiscal Year 2014 but to Fall Below the Minimum 
Requirement by the End of Fiscal Year 2015: 

The AFWCF's fiscal year 2015 budget information shows that the fund's 
projected monthly cash balances are only expected to fall within the 
minimum and maximum cash requirements about 25 percent of the time in 
fiscal years 2014 and 2015. Specifically, our analysis of the AFWCF's 
fiscal year 2015 budgeted information that contains its cash 
management plans for fiscal years 2014 and 2015 showed that the 
projected monthly cash balances are expected to be above the projected 
maximum cash requirement for the first 17 months, between the 
projected minimum and maximum cash requirements for the next 6 months, 
and below the projected minimum cash requirement for the final month. 
Figure 2 shows the AFWCF projected monthly cash balances compared to 
the projected minimum and maximum cash requirements for fiscal years 
2014 and 2015. 

Figure 2: Air Force Working Capital Fund (AFWCF) Projected Monthly 
Cash Balances Compared with Projected Minimum and Maximum Cash 
Requirements: 

[Refer to PDF for image: vertical bar and line graph] 

Fiscal year 2013: 

September: 
Projected cash balance: $1.458 billion; 
Projected maximum cash requirement: $1.114 billion; 
Projected minimum cash requirement: $846.7 million. 

Fiscal year 2014: 

October: 
Projected cash balance: $1.357 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

November: 
Projected cash balance: $.1398 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

December: 
Projected cash balance: $.1433 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

January: 
Projected cash balance: $1.246 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

February: 
Projected cash balance: $1.221 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

March: 
Projected cash balance: $1.284 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

April: 
Projected cash balance: $1.378 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

May: 
Projected cash balance: $1.397 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

June: 
Projected cash balance: $1.353 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million.  

July: 
Projected cash balance: $1.435 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

August: 
Projected cash balance: $1.558 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

September: 
Projected cash balance: $1.447 billion; 
Projected maximum cash requirement: $1.198 billion; 
Projected minimum cash requirement: $911.8 million. 

Fiscal year 2015: 

October: 
Projected cash balance: $1.639 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

November: 
Projected cash balance: $1.571 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

December: 
Projected cash balance: $1.558 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

January: 
Projected cash balance: $1.347 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

February: 
Projected cash balance: $1.196 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

March: 
Projected cash balance: $1.150 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

April: 
Projected cash balance: $1.030 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

May: 
Projected cash balance: $1.074 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

June: 
Projected cash balance: $1.112 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

July: 
Projected cash balance: $1.075 billion; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

August: 
Projected cash balance: $984 million; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

September: 
Projected cash balance: $853 million; 
Projected maximum cash requirement: $1.153 billion; 
Projected minimum cash requirement: $873.9 million. 

Source: Fiscal year 2015 AFWCF cash management plan that provides 
AFWCF projected cash balances for fiscal years 2014 and 2015. GAO-14-
480. 

[End of figure] 

Our analysis of AFWCF financial documents and interviews with AFWCF 
headquarters officials identified two reasons for the fiscal year 2014 
projected AFWCF cash balances being above the projected maximum cash 
requirement: (1) the AFWCF entered fiscal year 2014 with a cash 
balance ($1,458 million) that was above the projected maximum cash 
requirement for fiscal year 2014 by about $260 million or 22 percent 
and (2) the AFWCF is building or maintaining a higher cash balance in 
preparation for the October 1, 2014, implementation of a Treasury 
initiative to provide visibility over daily cash balances for all 
appropriations, including the AFWCF. The higher cash balance is needed 
to cover the volatility in the daily cash balance. By the final month 
of fiscal year 2015, the projected AFWCF cash balance is expected to 
decrease below the projected minimum cash requirement. The projected 
decline occurred because of an expected shortfall of $927 million in 
the Airlift Readiness Account (ARA) resulting from the Air Force 
including only a portion ($150 million) of the total projected fiscal 
year 2015 ARA requirement ($1,077 million) in the fiscal year 2015 Air 
Force operation and maintenance appropriated budget request. Further, 
achieving the AFWCF projected cash balances in fiscal year 2015 
depends on the Air Force and USTRANSCOM successfully implementing cost 
reduction and efficiency initiatives to save $620 million during that 
fiscal year. 

Daily Cash Balance Reporting Could Increase Minimum and Maximum Cash 
Requirement for the AFWCF: 

Treasury is modernizing and streamlining its reporting processes 
through its government-wide accounting initiative. One result of this 
initiative will be for Treasury to provide daily cash balances for all 
appropriations, including the AFWCF, beginning in fiscal year 2015. 
Currently, the cash balance is visible only in official reports at the 
end of each month. In preparation for DOD's implementation of 
Treasury's initiative, the Office of the Under Secretary of Defense 
(Comptroller) initiated a study in February 2013 to evaluate the 
impact daily cash reporting will have on working capital fund policies 
and management. The goal of the study was to assist working capital 
fund managers to identify necessary modifications to current controls, 
processes, and policies needed to prevent potential Antideficiency Act 
violations. As part of the study, the Air Force and USTRANSCOM 
collected daily disbursement and collection data from their systems to 
determine the impact these transactions had on their daily cash 
balances. In analyzing these data, they noted the following. 

* The AFWCF's day-to-day cash balances are more volatile than cash 
balances measured on a monthly basis and can fluctuate by hundreds of 
millions of dollars on a given day. These fluctuations increase the 
risk that the cash balance could become negative on a particular day. 

* DOD systems generally bill customers once or twice a month. The 
billing systems run in the middle of the month and at the end of the 
month. Since disbursements are made daily, the daily cash balance is 
generally at its lowest level at about the middle of the month before 
the first billing cycle occurs for that month. 

Air Force and USTRANSCOM officials informed us that managing cash 
daily rather than monthly will require them to take two actions. 
First, these officials stated that the AFWCF will need to maintain a 
higher cash balance to offset the day-to-day volatility of cash during 
the month. The higher cash balance will reduce the risk that (1) the 
AFWCF daily cash balance will become negative on a particular day 
during the month and (2) the AFWCF will incur a potential 
Antideficiency Act violation. However, the Air Force and USTRANSCOM 
have not determined how much the minimum and maximum cash requirements 
should be increased to cover the additional cash needed. Second, the 
Air Force is considering adding another billing cycle for the work 
performed by depot maintenance to increase collections during the 
early part of the month and offset disbursements made during the same 
time period. 

The implementation of Treasury's initiative to provide daily cash 
balances was planned for October 1, 2014 (beginning of fiscal year 
2015). However, according to Office of the Under Secretary of Defense 
(Comptroller) officials, DOD systems will not be ready to provide the 
necessary data to meet the implementation date because (1) DOD has 
multiple disbursing systems and nonintegrated disbursing locations and 
(2) DOD has a requirement to protect classified or sensitive 
information. As of May 2014, the officials stated that they have not 
established a new implementation date. 

When DOD implements Treasury's daily cash initiative, the Financial 
Management Regulation will need to be updated to reflect the new 
requirement for daily, rather than monthly, cash reporting. Office of 
the Under Secretary of Defense (Comptroller) officials acknowledged 
that the policies in the Financial Management Regulation would be 
affected by the new requirement. The following examples in the 
Financial Management Regulation illustrate where updates will need to 
be made to reflect the new requirement for daily cash reporting. 

* According to the DOD Financial Management Regulation, volume 2B, 
chapter 9, "cash levels should be maintained at 7 to 10 days of 
operating cost plus six months of capital disbursements."[Footnote 16] 
The Financial Management Regulation further provides the formula for 
calculating the minimum and maximum cash requirements, which are aimed 
at managing cash on a monthly basis. As previously stated, the Air 
Force and USTRANSCOM study showed that day-to-day cash balances are 
more volatile than monthly cash balances. Office of the Under 
Secretary of Defense (Comptroller) officials stated that DOD will need 
to take into consideration the additional cash needed to cover the day-
to-day volatility in the cash balance and update the methodology for 
calculating the minimum and maximum cash requirements. 

* According to the DOD Financial Management Regulation, volume 3, 
chapter 19, "it is a violation of the Antideficiency Act if a fund's 
cash goes below zero at the close of the monthly reporting period." 
[Footnote 17] Fundamentally, any disbursement in excess of available 
cash in the fund is a potential violation of the Antideficiency Act. 
Further, because the AFWCF will show daily cash balances instead of 
monthly cash balances as a result of Treasury's initiative, Office of 
the Under Secretary of Defense (Comptroller) officials informed us 
that this policy will need to be updated to address a violation of the 
Antideficiency Act if a fund's cash goes below zero on a daily basis 
instead of a monthly basis. 

* According to the DOD Financial Management Regulation, volume 4, 
chapter 2, every defense component with cash accounts must perform 
detailed reconciliations of its cash accounts. Specifically, according 
to the regulation, "reconciliations must be performed at least monthly 
to ensure the accuracy and reliability of entity fund records and 
integrity of the financial statements" and "reconciliations must be 
completed within 10 workdays following the end of the month being 
reconciled."[Footnote 18] Because the DOD Financial Management 
Regulation currently requires reconciliations to be performed on a 
monthly basis, our analysis showed that this policy will need to be 
updated to recognize that DOD has visibility over daily cash balances, 
especially if the cash balances become negative during the month. For 
example, if the cash balance becomes negative on a particular day 
during the month, a reconciliation will need to be performed to 
determine if the cash balance is actually negative or if an error had 
occurred in determining the cash balance. 

While DOD realizes that the Financial Management Regulation needs to 
be revised to effectively implement Treasury's initiative to provide 
daily cash balances, DOD has not revised it to include guidance on (1) 
Treasury's initiative to provide daily cash balances instead of 
monthly cash balances, (2) maintaining sufficient cash balances on a 
daily basis to avoid potential Antideficiency Act violations, and (3) 
the reconciliation of daily cash balances to ensure the integrity and 
accuracy of the data. Further, DOD has not determined the full impact 
of Treasury's initiative to provide daily cash balances for the AFWCF 
or developed an analytical approach for calculating the minimum and 
maximum cash requirements to adjust for the day-to-day volatility of 
cash balances in the AFWCF and reduce the risk that the AFWCF may 
incur an Antideficiency Act violation. Once the updated cash 
requirement is determined, this will affect whether the projected 
AFWCF cash balances for fiscal year 2015 will be above, between, or 
below the cash requirement. Internal control standards state that 
policies, procedures, techniques, and mechanisms are needed to enforce 
management's directives, such as the process of adhering to 
requirements for budget development and execution. They help ensure 
that actions are taken to address risks.[Footnote 19] However, the 
current DOD Financial Management Regulation does not reflect the 
effect that daily cash balances will have on the AFWCF and thereby 
increases the risk of a cash shortage and an Antideficiency Act 
violation. 

ARA Funding Is Expected to Be Sufficient in Fiscal Year 2014, but a 
Funding Shortfall May Occur in Fiscal Year 2015 That Could Affect 
AFWCF Cash: 

The DOD Financial Management Regulation contains a provision that 
pertains to the airlift services provided by USTRANSCOM and that 
affects the TWCF as well as the AFWCF cash balances.[Footnote 20] To 
enable it to better compete with commercial providers, USTRANSCOM's 
airlift rates are set to compete with private sector rates and do not 
cover the full cost of the Air Force's readiness requirements for 
military airlift operations. The difference between the full cost and 
the revenue received from airlift customers is to be provided to 
USTRANSCOM in the ARA through the use of Air Force appropriated funds. 
This requirement exists in both peacetime and contingency environments. 

USTRANSCOM officials stated that since they set rates that are 
benchmarked to private sector rates, USTRANSCOM does not recover its 
full cost of operations and the TWCF incurs losses that in turn result 
in a lower cash balance. To recover these losses, the TWCF identifies 
the peacetime and contingency airlift requirements and the customers 
include these amounts in their budget requests. During the year of 
execution, the TWCF bills the services once a month. Specifically, the 
TWCF receives funding from (1) the Air Force to pay for the peacetime 
airlift requirement (Air Force Operation and Maintenance 
appropriation) and (2) the military services for the contingency 
airlift requirement (overseas contingency operations appropriation). 
Over the last several years, the TWCF has received hundreds of 
millions of dollars that has helped it maintain cash solvency. 

According to the TWCF budget request, USTRANSCOM estimates the fiscal 
year 2014 ARA funding requirement to be $150 million plus $691 million 
for the contingency airlift requirement, for a total of $841 million. 
However, in the fiscal year 2015 TWCF budget, USTRANSCOM estimates the 
fiscal year 2015 ARA funding requirement to be $1,077 million, while 
the fiscal year 2015 Air Force Operation and Maintenance budget 
provides for $150 million for the ARA.[Footnote 21] This estimated 
shortfall of $927 million could negatively affect the TWCF as well as 
the AFWCF cash balances. Maintaining sufficient cash balances in the 
TWCF and AFWCF while minimizing the overall ARA bill to the Air Force 
presents major management challenges for Air Force and USTRANSCOM. If 
the ARA is overfunded, the Air Force may not be using its resources 
efficiently to fund other Air Force program priorities to meet mission 
requirements. Alternatively, if the ARA is underfunded, reductions to 
Air Force programs may be required to maintain adequate levels of cash 
in the AFWCF. 

The Air Force and USTRANSCOM have had a history of problems with the 
Air Force requesting full funding in the Air Force's budget for the 
USTRANSCOM ARA requirement. For example, according to the TWCF budget, 
USTRANSCOM included a requirement for $294 million to fund the ARA in 
fiscal year 2013, but the Air Force did not include funding for the 
ARA in the fiscal year 2013 Air Force operation and maintenance budget 
request. Though the Air Force did not request funding for the ARA in 
the fiscal year 2013 budget, the Air Force paid its fiscal year 2013 
ARA bill. 

In reviewing past AFWCF budgets, the Office of the Under Secretary of 
Defense (Comptroller) has also been concerned with ARA funding issues. 
To address its concerns on these funding issues, in February 2012, the 
Office of the Under Secretary of Defense (Comptroller) directed (1) 
the Air Force to ensure that both the AFWCF and TWCF cash levels are 
adequate to support operational and mobilization requirements in 
fiscal years 2013 and subsequent years; (2) the Air Force and 
USTRANSCOM to determine the appropriate methodology for fully funding 
USTRANSCOM, including the ARA, and estimating the funding sources for 
fiscal year 2014; and (3) the Air Force to ensure that it funds its 
responsibilities for USTRANSCOM, including the ARA, updated for more 
current workload assumptions, in the fiscal year 2014 budget and all 
future budgets. 

Although the Office of the Under Secretary of Defense (Comptroller) 
has previously raised concerns about ARA funding issues, the funding 
issues are projected to continue into fiscal year 2015. As stated 
above, the estimated funding shortfall of $927 million could 
negatively affect the TWCF and AFWCF cash balances in fiscal year 
2015. Air Force officials stated that although the AFWCF projected 
cash balance is expected to be above the projected maximum cash 
requirement at the beginning of fiscal year 2015, they expect the cash 
balance to decrease to $853 million and below the projected minimum 
cash requirement by fiscal year-end. This decline is expected to occur 
because Air Force did not fully fund the estimated ARA requirement in 
the fiscal year 2015 budget. Air Force officials informed us that it 
did not fully fund the ARA requirement because it funded other higher-
priority requirements. 

Air Force officials are aware of the estimated funding shortfall and 
stated that the ARA funding requirement will be best managed in fiscal 
year 2015 when they can better estimate the actual ARA funding 
requirement. Air Force officials stated that Air Force and USTRANSCOM 
senior leadership currently meet monthly to collaborate on AFWCF cash 
challenges and will be evaluating the ARA funding during fiscal year 
2015--the year of execution. They stated that workload and cash levels 
are monitored closely during the year of execution and that any 
potential issues involving workload and cash levels, including ARA 
funding, would be identified several months in advance and brought to 
senior leadership's attention. If a shortfall in the AFWCF cash 
balance begins to materialize in the year of execution because of the 
unfunded ARA requirement, Air Force officials stated that they have 
several options, including (1) reviewing ongoing programs funded by 
the Air Force operation and maintenance appropriation accounts to 
identify where requirements have changed that would allow the AFWCF to 
obtain additional funds for the ARA or (2) reviewing their investment 
accounts for excess funding to transfer to the AFWCF. Air Force 
officials believe any potential cash shortfall would be identified in 
sufficient time to take action. While USTRANSCOM officials understand 
the Air Force's position on funding the ARA, USTRANSCOM officials 
informed us that they believe it is more prudent for the Air Force to 
request a significant amount of funding for the ARA in the Air Force 
budget. These officials further stated that if a funding shortfall 
occurs, the Air Force faces the risk of transferring large amounts in 
the year of execution to cover the unfunded requirement. 

Because the Air Force plans to address potential ARA cash shortfalls 
in the year of execution, the AFWCF projected cash balances are 
currently expected to decline during fiscal year 2015 and be below the 
minimum cash requirement by the end of fiscal year 2015, which could 
impair the ability of the AFWCF to maintain adequate cash balances. 
The ARA funding issue could affect the Air Force's efforts to build 
cash in anticipation of the Treasury initiative to provide daily cash 
balances. Because daily cash balances are more volatile, the lower 
projected cash balance caused by the lack of funding for the fiscal 
year 2015 ARA requirement increases the risk of a cash shortfall and 
the risk of a potential Antideficiency Act violation. 

Achieving Expected Savings from AFWCF Initiatives Is Necessary to Meet 
AFWCF Fiscal Years 2014 and 2015 Projected Monthly Cash Balances: 

As stated previously, our analysis of fiscal year 2015 AFWCF budget 
information that contains the AFWCF cash management plans for fiscal 
years 2014 and 2015 showed that the projected monthly cash balances 
are expected to be above the maximum cash requirement in fiscal year 
2014 and decline in fiscal year 2015 and fall below the minimum cash 
requirement in September 2015. According to Air Force and USTRANSCOM 
officials, achieving the AFWCF projected monthly cash balances for 
fiscal years 2014 and 2015 depends on the Air Force and USTRANSCOM 
successfully implementing cost reduction and efficiency initiatives 
for fiscal years 2014 and 2015. Specifically, the savings from these 
initiatives were a factor used to (1) set prices to charge customers 
in fiscal years 2014 and 2015 and (2) estimate projected disbursements. 

Air Force and USTRANSCOM documentation shows that the fiscal year 2015 
AFWCF budget includes $114 million and $620 million in budgeted 
savings for fiscal years 2014 and 2015, respectively. For fiscal year 
2014, the $114 million in budgeted savings represents less than 10 
percent of the projected cash balance for any month during fiscal year 
2014. On the other hand, $620 million in budgeted savings represents 
about 73 percent of the $853 million projected cash balance at the end 
of September 2015--the lowest projected balance in fiscal year 2015. 
If the budgeted savings are not achieved, the AFWCF cash balance would 
be adversely affected because disbursements would be higher than 
expected, which would reduce the AFWCF cash balance below that already 
projected. 

The Air Force and USTRANSCOM have cost reduction and efficiency 
initiatives that are designed to reduce costs and related 
disbursements for fiscal years 2014 and 2015, as discussed below. 

* The fiscal year 2015 AFWCF budget includes $503 million in fiscal 
year 2015 budgeted savings associated with Air Force initiatives. 
[Footnote 22] Air Force initiatives to reduce costs and related 
disbursements include (1) reducing the Air Force workforce at CSAG 
locations by up to 2,000 personnel, (2) refining forecasting models to 
more accurately reflect future parts requirements, and (3) reducing 
government travel and contracts where appropriate. 

* The fiscal year 2015 AFWCF budget includes budgeted savings of $114 
million and $117 million for fiscal years 2014 and 2015, respectively, 
for USTRANSCOM initiatives. USTRANSCOM initiatives to reduce costs and 
related disbursements include (1) reducing management overhead costs 
by 20 percent by fiscal year 2019,[Footnote 23] (2) reducing spending 
on information technology projects, and (3) transferring base 
operating support costs to Air Force operations and maintenance. 

Since the $620 million in savings initiatives represents 73 percent of 
the September 2015 projected cash balance, it is critical that the Air 
Force and USTRANSCOM achieve these savings. If these savings are not 
realized, it can put a further strain on the AFWCF cash balance, which 
is already projected to be under the minimum cash requirement at the 
end of fiscal year 2015. In managing the AFWCF projected cash balance 
in fiscal year 2015, there are several factors that may affect these 
balances and increase the risk of an Antideficiency Act violation, 
including (1) the Treasury cash initiative that will require 
additional cash to cover the volatility of cash on a day-to-day basis, 
(2) the lack of funding for the fiscal year 2015 ARA requirement, and 
(3) initiatives to achieve savings. If a cash shortfall occurs, 
regardless of the reason, the Air Force will have to determine how to 
fund the shortfall. 

Conclusions: 

The work that the AFWCF performs supports military readiness by 
repairing aircraft and engines; selling inventory items (spare parts); 
and providing air, land, and sea transportation for DOD in times of 
peace and war. Maintaining the AFWCF cash balance within the minimum 
and maximum cash requirements as defined by DOD regulation is critical 
for the Air Force and USTRANSCOM to continue to provide maintenance, 
supply, and transportation services for their fund's customers. Over 
the past 5 years, the AFWCF has managed to maintain a sufficient cash 
balance to pay its bills and sustain operations without disruption 
even though the cash balances were outside the minimum and maximum 
cash requirements about two-thirds the time. While the projected cash 
balances are expected to be above the maximum cash requirement for 
fiscal year 2014 and the first half of fiscal year 2015, Air Force 
officials face challenges in managing the AFWCF cash in fiscal year 
2015. The challenges include Treasury's initiative to provide 
visibility over daily cash balances for all appropriations, including 
the AFWCF; funding ARA requirements; and meeting established savings 
goals for AFWCF cost reduction and efficiency initiatives. First, the 
Air Force has not determined the appropriate minimum and maximum cash 
requirements for the AFWCF that will be needed to cover the volatility 
of daily cash balances that can fluctuate by hundreds of millions of 
dollars each day and reduce the risk that the AFWCF will incur an 
Antideficiency Act violation, nor has DOD updated its policies to 
reflect daily reporting of working capital fund cash balances versus 
monthly cash balances. Second, the Air Force did not fully fund the 
ARA requirement in its operations and maintenance budget for fiscal 
year 2015, which increases the risk of a cash shortfall in fiscal year 
2015. Third, it is critical that the Air Force and USTRANSCOM achieve 
the estimated $620 million savings in fiscal year 2015 as this 
represents a significant amount of the fiscal year 2015 year-end cash 
balance. 

Recommendations for Executive Action: 

We are making three recommendations to the Secretary of Defense to 
improve the management of the AFWCF's cash balances. 

We recommend that the Secretary of Defense direct the Under Secretary 
of Defense (Comptroller) to take the following action: 

* Update the DOD Financial Management Regulation to include guidance 
on (1) maintaining sufficient cash balances on a daily basis to avoid 
potential Antideficiency Act violations and (2) the reconciliation of 
daily cash balances to ensure the integrity and accuracy of the data 
once DOD implements Treasury's initiative. 

We recommend that the Secretary of Defense direct the Secretary of the 
Air Force, in conjunction with the Under Secretary of Defense 
(Comptroller), to take the following action: 

* Develop an analytical approach for calculating the minimum and 
maximum cash requirements to take into consideration the additional 
cash needed to cover the day-to-day volatility in the cash balances 
once DOD implements Treasury's initiative. 

We recommend that the Secretary of Defense direct the Secretary of the 
Air Force and the Commander of USTRANSCOM to take the following action: 

* Take steps to help ensure that the AFWCF receives the appropriate 
funding if a cash shortfall occurs because of (1) the implementation 
of the daily cash requirement, (2) a lack of fiscal year 2015 ARA 
funding, and (3) fiscal year 2015 budgeted savings not being realized. 

Agency Comments: 

DOD provided written comments on a draft of this report. In its 
comments, which are reprinted in appendix III, DOD concurred with the 
three recommendations and cited actions planned or under way to 
address them. Specifically, DOD commented that consistent with 
forthcoming instructions from Treasury regarding daily cash balances, 
the Under Secretary of Defense (Comptroller) will revise the Financial 
Management Regulation on or about the implementation date for daily 
cash reporting. In addition, DOD stated that while the Financial 
Management Regulation is in draft, guidance consistent with this 
recommendation will be published for component submissions of each 
Program and Budget Review and President's Budget. Further, DOD stated 
that in the upcoming Program and Budget review (fiscal year 2016), the 
working capital fund activities will submit information that will 
provide more clarity to minimum and maximum cash requirements. 
Finally, DOD indicated that cash levels and potential shortfalls will 
be monitored closely, and if an unfavorable trend develops, 
appropriate actions will be taken. 

We are sending copies of this report to the appropriate congressional 
committees, the Secretary of Defense, the Secretary of the Air Force, 
the Under Secretary of Defense (Comptroller), and the Commander, 
USTRANSCOM. In addition, the report is available at no charge on the 
GAO website at [hyperlink, http://www.gao.gov. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-9869 or khana@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Key contributors to this report are 
listed in appendix IV. 

Signed by: 

Asif A. Khan: 
Director, Financial Management and Assurance: 

[End of section] 

Appendix I: Scope and Methodology: 

To determine to what extent the Air Force Working Capital Fund (AFWCF) 
monthly cash balances were within the Department of Defense (DOD) 
minimum and maximum cash requirements for fiscal years 2009 through 
2013, we (1) obtained the DOD regulation on calculating the minimum 
and maximum cash requirements, (2) calculated the cash requirements 
for fiscal years 2009 through 2013 based on the regulation, and (3) 
obtained monthly cash balances for fiscal years 2009 through 2013. We 
compared the minimum and maximum cash requirements to the end-of-month 
reported cash balances. If the cash balances were above the maximum 
amount or were below the minimum amount, we met with Air Force and 
United States Transportation Command (USTRANSCOM) officials and 
reviewed AFWCF budgets and other Air Force and USTRANSCOM 
documentation to ascertain the reasons. In addition, we performed a 
walk-through of the Defense Finance and Accounting Service's (DFAS) 
processes for reconciling the Department of the Treasury (Treasury) 
trial balance monthly cash amounts for the AFWCF to the balances 
reported on the AFWCF cash management reports. Further, to determine 
the extent cash transfers for fiscal years 2009 through 2013 resulted 
in the AFWCF cash balances either falling below the minimum cash 
requirement or being above the maximum cash requirement, we (1) 
analyzed DOD budget and accounting reports to determine the dollar 
amount of transfers made for fiscal years 2009 through 2013 and (2) 
obtained journal vouchers from DFAS that documented the dollar amount 
of the cash transfers. We analyzed cash transfers to determine if any 
of the transfers resulted in the cash balances falling outside the 
minimum or maximum cash requirements and, if so, the amount outside 
those requirements. We also obtained and analyzed reprogramming 
documents and journal vouchers and interviewed key Air Force and 
USTRANSCOM officials to determine the reasons for the transfers. 

To determine to what extent the AFWCF projected monthly cash balances 
were within the minimum and maximum cash requirements for fiscal years 
2014 and 2015 and if not why, we obtained and analyzed AFWCF budget 
documents and cash management plans for the 2 fiscal years. We used 
the DOD regulation to calculate the minimum and maximum cash 
requirements for each of those years and compared it to the projected 
cash balances. If the projected cash balances were above or below the 
cash requirement, we met with Air Force and USTRANSCOM officials to 
ascertain the reasons. Further, we interviewed Office of the Under 
Secretary of Defense (Comptroller), Air Force, USTRANSCOM, and DFAS 
officials on the initiative to begin receiving daily cash balances in 
fiscal year 2015 and the potential effect on the management of the 
AFWCF cash. We also interviewed Air Force and USTRANSCOM officials to 
determine what actions the AFWCF plans to take to increase collections 
or decrease disbursements to avoid potential AFWCF cash shortages. 

We obtained the AFWCF financial data in this report from official 
budget documents and accounting reports. To assess the reliability of 
these data, we (1) reviewed and analyzed the factors used in 
calculating the minimum and maximum cash requirements for the 
completeness of the elements included in the calculation; (2) 
interviewed Air Force, USTRANSCOM, and DFAS officials knowledgeable 
about the cash data; (3) compared AFWCF cash balance information, 
including collections and disbursements that were contained in 
different reports, to ensure that the data reconciled; (4) obtained an 
understanding of the process used by DFAS to reconcile AFWCF cash 
balances with Treasury records; and (5) obtained and analyzed 
documentation supporting the amount of funds transferred in and out of 
the AFWCF. On the basis of procedures performed, we have concluded 
that these data were sufficiently reliable for the purposes of this 
report. We performed our work at the headquarters of the Office of the 
Under Secretary of Defense (Comptroller) and the Office of the 
Secretary of Air Force in Washington, D.C.; Air Force Materiel Command 
at Wright-Patterson Air Force Base, Ohio; USTRANSCOM at Scott Air 
Force Base, Illinois; and DFAS in Columbus, Ohio. 

We conducted this performance audit from July 2013 to July 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Reasons for Year-to-Year Changes in AFWCF Cash Balances 
from Fiscal Years 2009 through 2013: 

Over the 5-year period from fiscal years 2009 through 2013, our 
analysis of Air Force Working Capital Fund (AFWCF) data showed that 
the number of months each year (1) above the maximum cash requirement 
generally decreased and (2) below the minimum cash requirement 
generally increased. AFWCF officials stated that AFWCF monthly cash 
balances generally decreased at the beginning of the fiscal year when 
the Department of Defense (DOD) operated under continuing resolutions 
because AFWCF customers' funding was constrained, which, in turn, 
suppressed customer demand for AFWCF goods and services. Beginning in 
the April and May time frame each year, AFWCF monthly cash balances 
generally increased because the AFWCF generated more revenue from 
customers for spare parts that result from the Air Force flying more 
training mission hours during the spring and summer months because of 
better weather conditions.[Footnote 24] 

This appendix contains the year-to-year analysis of the reasons for 
fluctuations in the AFWCF cash balances from fiscal years 2009 through 
2013. Actual AFWCF cash balances fluctuated each year because of the 
dollar amounts that were collected by, disbursed by, appropriated to, 
and transferred to or from the AFWCF. 

Reasons for the Change in the Fiscal Year 2009 AFWCF Cash Balance: 

The AFWCF ended fiscal year 2009 with a cash balance of $1,409 
million--$25 million more than the beginning balance. Our analysis of 
financial documents and interviews with AFWCF officials identified 
three reasons for the net increase in the fiscal year 2009 cash 
balance. First, the AFWCF collected about $200 million more than it 
disbursed because the rates charged to customers of the Consolidated 
Sustainment Activity Group (CSAG) and the Supply Management Activity 
Group-Retail for flying hours were higher than the anticipated costs. 
Second, the AFWCF received about $76 million in direct appropriations 
to fund the transportation of fallen heroes killed in military 
operations and to pay for medical and dental war reserve 
materials.[Footnote 25] Third, the Air Force transferred $251 million 
from the AFWCF to other DOD appropriations in the last quarter of 
fiscal year 2009. If the $251 million had not been transferred, the 
AFWCF fiscal year 2009 ending cash balance would have been $1,660 
million or $500 million above the maximum cash requirement. 

Reasons for the Change in the Fiscal Year 2010 AFWCF Cash Balance: 

The AFWCF ended fiscal year 2010 with a cash balance of $945 million--
$464 million less than the fiscal year 2010 beginning balance of 
$1,409 million. The ending cash balance for fiscal year 2010 was 
between the fiscal year 2010 minimum and maximum cash requirements. 
Our analysis of financial documents and interviews with AFWCF 
officials identified three reasons for the net decrease in the fiscal 
year 2010 cash balance. First, AFWCF disbursements exceeded 
collections by $1,054 million primarily because (1) CSAG reduced 
customer billings associated with the Air Force flying hour program in 
July and August 2010 to return gains to its customers collected in 
prior years and (2) the United States Transportation Command reduced 
its rates for transportation services, relieved the Air Force of its 
requirement to fund the Airlift Readiness Account, and waived the 
military services' overseas contingency operations funding requirement 
(known as the cash recovery charge) because of high balances in the 
Transportation Working Capital Fund (TWCF) cash account in fiscal year 
2010. Second, the AFWCF transferred $337 million to other DOD 
appropriations in fiscal year 2010. Specifically, (1) $250 million was 
transferred to the Air Force operation and maintenance appropriation 
to compensate for an equivalent reduction in that appropriation, which 
was described as excess AFWCF cash; (2) $47 million was transferred to 
the Air Force military personnel appropriation to cover shortages in 
the account; and (3) $40 million was transferred to the Defense 
Logistics Agency in support of a process improvement initiative. 
Third, offsetting some of these reductions, the AFWCF received direct 
appropriations of about $927 million that increased the AFWCF cash 
balance. The appropriations were for TWCF and CSAG fuel price 
increases, medical and dental war reserve materiel, and support for 
the transportation of fallen heroes. 

Reasons for the Change in the Fiscal Year 2011 AFWCF Cash Balance: 

The AFWCF ended fiscal year 2011 with a cash balance of $1,026 
million--$81 million more than the fiscal year 2011 beginning balance 
of $945 million. The ending cash balance for fiscal year 2011 was 
between the fiscal year 2011 minimum and maximum cash requirements. 
For the fiscal year, financial documents showed that disbursements 
exceeded collections by about $3 million. The AFWCF ending cash 
balance was higher because the AFWCF received direct appropriations of 
about $84 million in fiscal year 2011 for medical and dental war 
reserve material, support for the transportation of fallen heroes, and 
a TWCF container deconsolidation project. 

Reasons for the Change in the Fiscal Year 2012 AFWCF Cash Balance: 

The AFWCF ended fiscal year 2012 with a cash balance of $811 million--
$215 million less than the fiscal year 2012 beginning balance of 
$1,026 million. The ending cash balance for fiscal year 2012 was below 
the minimum cash requirement. Our analysis of financial documents 
identified three reasons for the net decrease in the fiscal year 2012 
cash balance: (1) AFWCF collections exceeded disbursements by about 
$78 million; (2) the AFWCF received direct appropriations of $77 
million for medical and dental war reserve material, support for the 
transportation of fallen heroes, and a TWCF container deconsolidation 
project; and (3) $370 million was transferred from the AFWCF to the 
Air Force operation and maintenance appropriation in the last quarter 
of fiscal year 2012 to fund overseas contingency operations 
requirements. According to a DOD financial document, the transfer 
would reduce available cash, but available cash would be sufficient to 
support AFWCF disbursements. 

Reasons for the Change in the Fiscal Year 2013 AFWCF Cash Balance: 

The AFWCF ended fiscal year 2013 with a cash balance of $1,458 
million--$647 million more than the fiscal year 2013 beginning balance 
of $811 million or $344 million above the maximum cash requirement. 
Our analysis of financial documents and interviews with AFWCF 
officials identified three reasons for the net increase in the fiscal 
year 2013 AFWCF cash balance. First, collections exceeded 
disbursements by $250 million. Second, the AFWCF received $56 million 
in direct appropriations for medical and dental war reserve material 
and support for the transportation of fallen heroes. Finally, $341 
million was transferred from the Air Force aircraft procurement 
appropriation to the AFWCF in August and September 2013. 

[End of section] 

Appendix III: Comments from the Department of Defense: 

Office of The Under Secretary Of Defense: 
Comptroller: 
1100 Defense Pentagon: 
Washington, DC 20301-1100: 

July 10, 2014: 

Mr. Asif A. Khan: 
Director: 
Financial Management and Assurance: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. Khan: 

Enclosed is the Department of Defense (DoD) response to the GAO draft 
report (GAO-14-480), "Air Force Working Capital Fund: Actions Needed 
to Manage Cash Balances to Required Levels," dated June 11, 2014 (GAO 
CODE 197128). 

Sincerely, 

Signed by: 

John P. Roth: 

Enclosure: As stated: 

GAO Draft Report Dated June 11, 2914: 
GAO-14-480 (GAO Code 197128): 

"Air Force Working Capital Fund: Actions Needed To Manage Cash 
Balances To Required Levels" 

Department Of Defense Comments To The GAO Recommendation: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Under Secretary of Defense (Comptroller) to update the DOD 
Financial Management Regulation to include guidance on (1) maintaining 
sufficient cash balances on a daily basis to avoid potential 
Antideficiency Act violations and (2) the reconciliation of daily cash 
balances to assure the integrity and accuracy of the data once 
Treasury's initiative is implemented by DOD. 

DoD Response: Concur with comment. Consistent with forthcoming 
instructions from the Department of Treasury regarding daily cash 
balances, the Under Secretary of Defense (Comptroller) will revise the 
Financial Management Regulation (FMR) on or about the implementation 
date for daily cash reporting. While the FMR is in draft, guidance 
consistent with Recommendation #1 will be published for Component 
submissions of each Program and Budget Review and President's Budget. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the Secretary of the Air Force, in conjunction with the Under 
Secretary of Defense (Comptroller), to develop an analytical-based 
approach to calculate the minimum and maximum cash requirements to 
take into consideration the additional cash needed to cover the day-to-
day volatility in the cash balances once Treasury's initiative is 
implemented by DOD. 

DoD Response: Concur. In the upcoming Program and Budget review, the 
Working Capital Fund activities will submit more granular information 
that will provide more clarity to minimum and maximum cash 
requirements. 

Recommendation 3: The GAO recommends that the Secretary of Defense 
direct the Secretary of the Air Force and the Commander of USTRANSCOM 
to takes steps to help ensure that the AFWCF receives the appropriate 
funding if a cash shortfall occurs because of (1) the implementation 
of the daily cash requirement, (2) a lack of fiscal year 2015 ARA 
funding, and (3) fiscal year 2015 budgeted savings not being realized. 

DoD Response: Concur. Cash levels and potential shortfalls are 
monitored closely, and if an unfavorable trend develops, appropriate 
actions will be taken. 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Asif A. Khan, (202) 512-9869 or khana@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Greg Pugnetti (Assistant 
Director), Steve Donahue, Keith McDaniel, and Hal Santarelli made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] A transfer is the shifting of budget authority from one 
appropriation or fund account to another. Agencies may transfer budget 
authority only as authorized by law. 

[2] The DOD Financial Management Regulation directs statutory and 
regulatory financial management requirements, systems, and functions 
for all appropriated and nonappropriated, working capital, revolving, 
and trust fund activities. See DOD Financial Management Regulation 
7000.14-R, Introduction, p. I-3 (June 2011). 

[3] Capital disbursements are purchases of assets that equal or exceed 
capitalization thresholds and have a useful life of 2 or more years. 
For minor construction projects, the capitalization threshold is 
$100,000; for all other assets, the capitalization threshold is 
$250,000. See DOD Financial Management Regulation 7000.14-R, Defense 
Working Capital Funds Activity Group Analysis, vol. 2B, ch. 9, p. 9-8 
(June 2010). 

[4] See DOD Financial Management Regulation 7000.14-R, Defense Working 
Capital Funds Activity Group Analysis, vol. 2B, ch. 9, p. 9-6 (June 
2010). 

[5] The Antideficiency Act, 31 U.S.C. §§ 1341(a)(1), 1517, provides 
that no officer or employee of the government shall make or authorize 
an expenditure or obligation exceeding the amount of an appropriation, 
fund, or apportionment available for expenditure or obligation. 

[6] USTRANSCOM operates the Transportation Working Capital Fund, which 
is part of the AFWCF. 

[7] [7] DFAS performs accounting and disbursement functions for the 
military services and defense agencies. 

[8] The AFWCF cash balance is the AFWCF Fund Balance with Treasury. 
According to DOD Financial Management Regulation 7000.14-R, Accounting 
for Cash and Fund Balances with Treasury, vol. 4, ch. 2, p. 2-4 
(December 2009), the Fund Balance with Treasury is an asset account 
that reflects the available budget spending authority of federal 
agencies. Collections and disbursements will correspondingly increase 
or decrease the balance in the account. For the purposes of this 
report, we will refer to the Fund Balance with Treasury as cash. 

[9] Repairable supply items are spare parts that can be economically 
repaired or overhauled. Consumable supply items are consumed in use or 
discarded when worn out or broken because they cannot be repaired 
economically. 

[10] The Defense Logistics Agency is DOD's largest logistics combat 
support agency, providing worldwide logistics support to the military 
services as well as civilian agencies and foreign countries. 

[11] In 2009, we reported that starting with the fiscal year 2009 
supplemental request in April 2009, the administration now refers to 
funds for the operations in Iraq and Afghanistan as Overseas 
Contingency Operations funds. GAO, Overseas Contingency Operations: 
Reported Obligations for the Department of the Defense, [hyperlink, 
http://www.gao.gov/products/GAO-09-791R] (Washington, D.C.: July 10, 
2009). 

[12] USTRANSCOM did not prepare an annual report for fiscal year 2013. 
Information on fiscal year 2013 air, sea, and surface transportation 
operations by USTRANSCOM were not readily available. 

[13] In developing the budget for a particular fiscal year, the Air 
Force calculates the minimum and maximum cash requirements based on 
budgeted information, such as budgeted disbursements. The Air Force 
updates that calculation the next fiscal year based on more current 
information. 

[14] A continuing resolution is an appropriation act that provides 
budget authority to federal agencies to continue their operation when 
Congress and the President have not completed action on the regular 
appropriation acts by the beginning of the fiscal year. 

[15] The transfer was unplanned because the process to determine 
prices begins about 2 years in advance of when work is actually 
received and performed. Further, this transfer occurred in August--at 
the end of fiscal year 2012. 

[16] See DOD Financial Management Regulation 7000.14-R, Defense 
Working Capital Funds Activity Group Analysis, vol. 2B, ch. 9, p. 9-6 
(June 2010). 

[17] See DOD Financial Management Regulation 7000.14-R, Working 
Capital Funds, vol. 3, ch. 19, p. 19-6 (October 2008). 

[18] See DOD Financial Management Regulation 7000.14-R, Accounting for 
Cash and Fund Balances with Treasury, vol. 4, ch. 2, p. 2-14 (December 
2009). 

[19] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[20] See DOD Financial Management Regulation 7000.14-R, Defense 
Working Capital Funds Activity Group Analysis, vol. 2B, ch. 9, p. 9-18 
(June 2010). 

[21] According to the AFWCF fiscal year 2015 budget, the 
administration has not made final decisions about an enduring presence 
in Afghanistan after calendar year 2014. Once DOD overseas contingency 
operations needs for 2015 are determined, a budget amendment package 
will be transmitted subsequent to release of the budget. According to 
DOD officials, the overseas contingency operations budget may contain 
funds for the contingency airlift requirement. 

[22] According to an Air Force official, the fiscal year 2015 AFWCF 
budget does not include any fiscal year 2014 budgeted cost savings 
from Air Force initiatives. 

[23] In July 2013, the Deputy Secretary of Defense directed a 20 
percent cut in management headquarters spending throughout DOD by 
fiscal year 2019. The cuts are designed to streamline DOD's management 
through efficiencies and elimination of lower-priority activities. The 
Deputy Secretary of Defense directed the cuts to begin in fiscal year 
2015, but stated that to the extent feasible, some cuts could begin in 
fiscal year 2014 in order to increase savings or reduce the cuts 
required in later years. 

[24] The Air Force charges its customers for spare parts based on 
actual hours flown by type of aircraft. 

[25] Section 562 of the John Warner National Defense Authorization Act 
For Fiscal Year 2007, Pub. L. No. 109-364 (Oct. 17, 2006), requires 
the use of military or military contracted aircraft to transport 
service members who died in a combat theater of operations from Dover 
Port Mortuary, Delaware, to their final destination. 

[End of section] 

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