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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

Clothing and textiles..

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Subsistence..

Tank and automotive supplies:

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General supplies...

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-10,616

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-35,553

Ground equipment parts and supplies.

Mobilization reserve stocks.

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Aeronautical supplies..

Long supply.

8,507

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14.9

56.7

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Weapons and fire control supplies:

-42,315

Missile parts.

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Tank and automotive supplies..

23,028

Mobilization reserve stocks.

88.7 90.3 76.9 56.8 33.6 27.5 14.0 14.5

-109,378

Weapons and fire control supplies..

Long supply.

-5.199

119.8 76.0

74.5 84.8

-30,284

Special weapons and chemical supplies..

-10,261

Special weapons and chemical supplies:

-28,455

Industrial supplies...

Operating and other stocks.

-4,632 -11,597

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Petroleum products..

Mobilization reserve stocks.

-25,130 -38,163

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4.9 4.9

Electronics supplies..

Long supply..

-74,008

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3.7

-86,534

Defense Supply Service.

Industrial supplies:

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Operating and other stocks.

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-7,635

Other continental U.S. supplies....

Mobilization reserve stocks.

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1.6

41,488

European area supplies.

Long supply

4.2

541,551

5.3

Pacific area supplies..

111.343

Petroleum products:

200,533

Alaska area supplies.

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23,695

Southern area supplies..

Mobilization reserve stocks.

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27.7 27.7

14,076

Long supply...

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Inventory received from or donated

to other accounts....

Electronics supplies:

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

-44,985
-9,600
-3,655 -16,611

Operating and other stocks.

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89,215 120,900

Mobilization reserve stocks.

57.3 47.1 41.0 50.5

Long supply

139.0

98.1 25.2 14.7

Defense Supply Service: Operating and

other stocks..

.9

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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 of selected air items to the stock fund, discussed above, and capitalization of medical mobilization reserve stocks from the Defense Supply Agency.

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..

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

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

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Continental Army Command supplies:

27.2

1.0 114.5 125.4 115.8 7.4 25.5 32.0 32.0 6.8

1.0 1.0

34.0 14.5

6.8

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Pacific area supplies:

Operating and other stocks.

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Mobilization reserve stocks.

40.4

105.0

105.0

Long supply....

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20.7

Alaska area supplies:

Operating and other stocks.

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Mobilization reserve stocks..

6.1

6.1

Long supply...

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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):

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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)

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Accounts payable.... Undistributed charges..

108,368 1,967

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Liabilities:

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

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Unobligated balance... Unfilled customer orders on hand..

-361,486

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Invested capital and earnings.

2,214,320

570,272 589,820 501,228 40,291 37,688 29,198 -389,491 -266,231 2,046,924 1,946,847

494,820 1,374 -230,585 1,872,590

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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.

Government equity at June 30, 1966, is estimated at $885.8 million consisting of $238.8 million in appropriations and cash transfers, $1,539.4 million from capitalization of inventory and other assets, less $892 million deficit.

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

Operating and other stocks.

137.1

115.8

68.5

61.3

Mobilization reserve stocks.

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