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REVOLVING AND MANAGEMENT FUNDS-Con.
Intragovernmental funds-Continued

ARMY STOCK FUND-Continued

in U.S. Army Europe, U.S. Army Alaska, and U.S. Army Southern Command. Also a new division has been established under the Army Materiel Command to include those inventories at installations under the Army Materiel Command and The Surgeon General. In addition, the U.S. Army Pacific Division has been extended to include inventories in Korea and Okinawa. During 1965 selected secondary items coded for repair at depot level, insurance type items and items essential to the safety of personnel have been removed from the fund and are financed thereafter by the appropriation Procurement of equipment and missiles, Army. In 1966 selected aeronautical secondary items will be transferred from that appropriation and financed under this fund. The effect of these changes is summarized by category as follows (in thousands of dollars):

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1964 actual 1965 estimate 1966 estimate
-14,560 -64,805
-54,956

-139.519

-10,616

-35,553

-85,080

-77,599

8,507

-16,583
-46,568

-25,582
-42.315
-34,709

-109.378

Inventory received from or donated to other accounts.. Stock withdrawal credits established. Increase or decrease in undelivered purchases to be paid from other accounts.

Net change in capitalized inventory..

23,028

-5.199

-10,261

-4,632

-25,130

-74,008

159,730

111,343

-44,985
-9,600

-3,655

-30,284

-28.455

-58,240

-11,597

-38,163

-86,534

-7,635

41.488

541,551

200.533

23,695

14,076

89.215 120,900

42,900
78,000

-16,611

Continental Army Command supplies:
Operating and other stocks.

Mobilization reserve stocks..
Long supply..

Other continental U.S. supplies:
Operating and other stocks.
Mobilization reserve stocks..
Long supply...

The increase of $73 million for 1965 results primarily
from capitalization of inventories in Okinawa and Korea.
The increase of $121 million for 1966 reflects the transfer European area supplies:
of selected air items to the stock fund, discussed above,
and capitalization of medical mobilization reserve stocks
from the Defense Supply Agency.

Operating and other stocks.
Mobilization reserve stocks..
Long supply...
Pacific area supplies:

Operating and other stocks..
Mobilization reserve stocks.
Long supply...
Alaska area supplies:

Operating and other stocks.
Mobilization reserve stocks.
Long supply.
Southern area supplies:
Operating and other stocks.
Mobilization reserve stocks.
Long supply...
Summary:

Operating and other stocks.
Mobilization reserve stocks.
Long supply...

Total inventories.

72,603

120,900

Clothing and textiles:
Operating and other stocks.
Mobilization reserve stocks.
Long supply...
Subsistence:

Operating and other stocks.
Mobilization reserve stocks.
Long supply
General supplies:

Operating and other stocks.
Mobilization reserve stocks.
Long supply....

Ground equipment parts and supplies:
Operating and other stocks.
Mobilization reserve stocks.
Long supply.
Aeronautical supplies:

Operating and other stocks.
Mobilization reserve stocks.
Long supply...
Medical-dental supplies:

Operating and other stocks.
Mobilization reserve stocks.
Long supply
Missile parts:

Budget program.-The increase in obligations for 1965 and 1966 results primarily from the extension of the command stock fund divisions. Continued emphasis is being placed on maximum utilization of long-supply stocks and on conservative procurement of material in relation to sales requirements. Obligations for peacetime operating stocks were 92% of sales in 1964 and are projected at 89% of sales in 1965 and 1966, respectively. The program reflects procurement for augmentation of mobilization reserve stocks of $33 million in 1964, $35 million in 1965, and $34 million in 1966. The program provides for year-end inventories as follows (in millions of dollars):

Operating and other stocks.
Mobilization reserve stocks.
Long supply

Tank and automotive supplies:
Operating and other stocks.
Mobilization reserve stocks.
Long supply

Weapons and fire control supplies:
Operating and other stocks.
Mobilization reserve stocks
Long supply.

Special weapons and chemical supplies:
Operating and other stocks.
Mobilization reserve stocks..

Long supply..
Industrial supplies:

Operating and other stocks.
Mobilization reserve stocks.
Long supply...
Petroleum products:

Operating and other stocks.
Mobilization reserve stocks.
Long supply..
Electronics supplies:

Operating and other stocks.
Mobilization reserve stocks.
Long supply

Defense Supply Service: Operating and
other stocks...

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2.2 1.9 852.6 840.9 869.0 799.4 610.1 583.5 669.3 701.7 580.3 383.6 2,164.3 2,004.7 1,921.9 1.844.7

776.0 269.3

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Total inventory is estimated to decline by $320 million for the 3-year period from the beginning of 1964 to the end of 1966. Of this, $145 million is due to sales of stock without replacement and $340 million from disposals, donations and adjustments. These decreases are partially offset by a net increase in capitalization of $165 million.

Costs exceed obligations by a total of $562 million for the 3 years presented here, because inventory is being sold or disposed of at a faster rate than it is being ordered. Financing the budget program.-Funds for financing the budget program are derived from sales to authorized customers. Sales are forecast to increase by $408 million from 1964 to 1966. The relationship of cash expenditures and collections is as follows (in thousands of dollars):

Gross expenditures... Applicable receipts.

Net expenditures.

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A transfer of $35 million to Military personnel, Army, is reflected for 1965 and $155 million in 1966 in keeping with the practice of transferring unneeded balances from this fund to offset the need for new obligational authority. Operating results and financial condition.-The net loss was $74 million in 1964 and is forecast at $111 million in 1965 and $39 million in 1966 due to losses on disposal or donation of stocks in long supply.

Government equity at the end of 1966 is estimated at $2,138.2 million, consisting of $9,887.8 million in inventory and other assets capitalized, less $3,407.2 million in net cash withdrawals or transfers from the fund and $4,342.4 million cumulative operating loss, the latter due primarily to disposal of stocks which were excess at the time of capitalization or determined to be excess as a result of purification of stocks.

Revenue, Expense, and Retained Earnings (in thousands of dollars)

Expense:

Purchase of goods (at cost)
Transportation..

Repair of unserviceable inventory.

Other operating expense.
Inventory decrease..
Inventories donated from (-) or to
other accounts, (capitalized)

Total expense..

Net loss for the year.
Deficit, start of year.

Deficit, end of year.

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Financial Condition (in thousands of dollars)

1964 actual

Assets:

Treasury balance....
Accounts receivable, net.
Selected assets: 1
Advances.
Inventories

Due in from undelivered purchases to be paid from other accounts... Undistributed credits...

Total assets.

Liabilities:
Accounts payable..
Undistributed charges...

Total liabilities..........

Government equity: Non-interest-bearing capital: Start of year.. Unobligated balance transferred to other accounts (see pro

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1963

actual

gram and financing). -200,000 Net change in capitalized inventory...

End of year.

215,177 154,235

29,721 2,164,333

Identification code 07-40-4991-0-4-051

20,266

-10,000

2,573,732

108,368

1,967

110,335

6,798,471

25,615 2,004,698

570,272

40,291

-361,486

2,214,320

22.0 Transportation of things. 25.1 Other services..

25.2 Services of other agencies 26.0 Supplies and materials. 31.0 Equipment......

99.0

Total obligations..

16,611

1,643

2,397,321

2,463,397

211,506 270,306 248,306 137,248 150,712 150,885

-16,907 -58,240

6,581,563

6,581,564

1965 estimate

108,323 157,800 4,057

-726

112,380 157,074

24,899 1,921,948

Analysis of Government Equity (in thousands of dollars)

253

2,368,118

2,284,941

1964 actual

1966 estimate

-4,047,663 -4,118,166 -4,192,128 -4,303,630 -70,503 -73.962 -111,502 -38,743 -4,118,166 -4,192,128 -4,303,630 -4,342,373

27,899 1,844,691

-46,254 -35,000 -155,000 72,603 120,900 6,477,070 6,514,673 | 6,480,573

2,463,397 2,284,941 2,211,043 2,138,199

248

501,228 29,198

2,272,029

6,477,070 6,514,673

134,556 -726

133,830

589,820

37,688

-389,491

-266,231

-230.585 2,046,924 1,946,847 1,872,590

494,820 1,374

1 The changes in these items are reflected on the program and financing schedule.

Object Classification (in thousands of dollars)

2,211,043 2,138,199

1965 1966 estimate estimate

26,492 27,340 24,790 2,402 2,392 2,221 20,127 21,197 20,631 1,594,856 1,787,329 1,828,080 212.219 244,444 241,326

1,856,097 2,082,702 2,117,048

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funding is not required. The budget program provides for year-end inventories as follows (in millions of dollars):

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Summary:

Operating and other stocks. Mobilization reserve stocks Long supply..

Total inventories..

1963 actual

Gross expenditures.. Applicable receipts..

28.1

6.9

5.8

Net expenditures...

3.2

.6

3.9

209.4

93.5 239.5

2.2

.1

3.5

55.6

6.7

137.1

10.4

111.4

37.4

53.2

98.6

7.0

61.8

10.0

88.6

19.1

73.0

1964 actual

19.6

6.9

3.5

3.1

.7

2.3

136.4

27.6

172.0

1.9

.1

3.7

41.9

6.8

115.8

7.1

75.7

25.7

32.5

96.5

25.4

4.4

66.0

1965 1966 estimate estimate

19.5

7.4

2.8

4.9

.7

1.3

121.1

32.6

79.7

2.9

.1

1.9

40.6

6.8

15.2

3.1

22.9

87.5 93.8

23.4

62.4 38.6

18.9
8.5

2.0

675.5 496.1 430.4 245.9 173.5 180.3 532.7 385.6 192.4

1,454.1 1,055.2 803.1

4.3
1.3

.3

68.5

61.3

4.3

15.3

45.2

38.5

26.6

27.3

31.3

30.3

96.5 96.5

85.7

73.1

37.8

2.9

.1

1.4

40.9

7.3

14.6

7.6

16.3

99.8 84.9 28.8 46.7 21.3

Total inventory is estimated to decrease by $709.1 million from the beginning of 1964 to the end of 1966. This involves $50 million in sale of stocks without replacement, $243 million through donation or disposal as surplus, and $470 million in decapitalization, partially offset by increases of $54 million through returns to the supply system and price changes. For the 3 years presented here, costs exceed obligations by $237 million because inventory is being sold and disposed of at a faster rate than it is being

ordered.

371.0 256.4

117.6

745.0

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345

authorization in the amount of $148.8 million was available at the start of 1964. This is necessary because the leadtime on material to be procured is greater than the time required to fill and collect for customer orders. As indicated in the statements, the current assets available and reflected for 1965 and 1966 will provide adequate resources for fund operations. The contract authorization of $148 million available at the start of 1964 is reduced to $44 million at the end of 1966, because customer orders are forecast to exceed obligations through the 3 years shown.

Operating results and financial condition.-An operating loss of $63 million is estimated for 1965, to result primarily from losses on disposal of material in long supply. A gain of $18 million is estimated for 1966.

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Government equity: Non-interest-bearing capital: Start of year. Unobligated balance transferred to other accounts (see program and financing).. Unobligated balance transferred from "Defense stock fund" (10 U.S.C. 126) ............. See footnote at end of table.

1963

actual

62,025 46,255

1964 actual

1965 estimate

1966 estimate

1,230,885 1,200,767 1,204,813

1,094,107 1,120,557 1,093,978 58,279 54,101 51,761 782 674

2,716

5,000 400 58,144 -277,222-168,912 -23,553 1,281,153 1,263,950 1,186,404 -50,268 -63,183 18,409 -797,367-847,635-910,818

-847,635-910,818-892,409

-15,000

4,971

-552 398,854

40,000

5,000

327 252,095

1965 1966 estimate estimate

803,139

5,630

1,454,089 1,055,235 4,778 5,630 50,903 50,903 -706 333 333 1,566,441 1,242,254 1,000, 158

95,658 105,658 34,495

34,495

103,658 34,495

48,542

48,542

48,542

47,447 3,468 4,099 4,099 39 1,615 1,615 1,615 50,954 54,256 54,256 54,256

4,099

744,995

5,630 50,903 333 940,014

2,354,195 2,312,856 2,035,633 1,856,721

-10,000 -55,000

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