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REVOLVING AND MANAGEMENT FUNDS-Con. Intragovernmental funds-Continued

ARMY INDUSTRIAL FUND-Continued

The net gain of $1.1 million, primarily in the Munitions and Missile Commands, reflects an operating variance resulting principally from the use of standard costs and the pricing of customer billings at predetermined rates. Revenue and expense are projected to break even in 1963 and 1964, with the objective of avoiding either augmentation or overcharging of customer appropriations.

Collections exceeded expenditures by $6.3 million in 1962, and are forecast to exceed expenditures by $73.8 million in 1964 with implementation of new policies for billing for work to be performed.

In 1962, $100 million was transferred to Military personnel, Army and $650 thousand to the Defense industrial fund. The Government equity at the end of 1964 is estimated at $70.6 million, composed of $56.9 million in reappropriations and $13.8 million in capitalized assets, less an accumulated operating loss of $0.1 million.

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

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Revenue:

Manufacturing and assembly.

214,378

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-650

Transportation..

Printing..

72,912 886

70,993

Supply services.

39.707

Capital additions and improvements.

12,141

Support of nonindustrial activities.

42,709

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69,364 1,014 1,011 35,915 40,063 18,384 15,993 49,027 50,789 12,830 13,924 113,854 113,942

Unbilled costs...

Material and supplies..

-766

-837

Working capital, net.

Assets capitalized or decapital

ized (-)-

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Material and supplies transferred to "National Aeronautics and Space Administration" (42 U.S.C. 2473) (-). Liabilities assumed (-) or cancelled, net..

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Number of employees at end of year.

60,417

56,994

58,479 874 57,479 58,422

Applicable receipts..........

Budget expenditures...

1,854,713 2,034,178 2,222,375

20,484

399-144,314

Average GS grade..

7.8

Average GS salary.

$6,969

7.8 $7,279

Average salary of ungraded positions..

$5,745

$5,973

7.8 $7,193 $5,897

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1 Balances of selected resources are identified on the statement of financial condition.

2 Adjustments in selected resources consist of: Materials and supplies capitalized, net, $299 thousand; inventory adjustments credited to prior year revenue, -$584 thousand; and accrued leave assumed. $7.273 thousand in 1962; and accrued leave assumed. $6,305 thousand, and materials and supplies decapitalized, $49 thousand in 1963.

This fund finances 67 industrial and commercial type
activities on a reimbursable basis (10 U.S.C. 2208).

Budget program. The Navy Industrial Fund was ex-
tended to eight additional activities during the latter part
of 1962 and the first few months of 1963. The overhaul
and repair departments at Alameda and San Diego, Calif.,
and the public works center at Guam, Mariana Islands,
were chartered during March and April 1962. During
the period July 1 through November 1, 1962, the overhaul
and repair departments at Norfolk, Va.; Cherry Point,
N.C.; Jacksonville, Fla.; Pensacola, Fla.; and the public
works center at Subic Bay, Philippine Islands, were
chartered under the fund. With the exception of the
public works center at Guantanamo Bay, Cuba, the
Navy's immediate plans for the extension of the industrial
fund are completed. While these eight additional activ-
ities were added to the program, the fund was withdrawn
from the Naval Weapons Plant, Washington, D.C., the
Marine Corps Clothing and Equipment Factory, Phila-
delphia, Pa., and two New York printing plants operating
1,900,976 1,959,127 2,076,042 under the fund were consolidated. The net addition of
five activities has increased the value of goods and services
produced by activities under this program to approxi-
16,293 16,676 17,198 mately $2 billion a year.
224,741 175,908 196,859
1,091,549 984,992 999,028
428,588 410,442 432,411
3,127
4
87,677 98,757 101,114
49,867 65,855 66,275
85,993 251,766 284,409

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Printing. There are 30 printing plants, 6 of which are
overseas, included in this program. These plants provide
printing services at the seat of Government and through-
out the field establishment. During 1962 the branch
plant, located at Brooklyn, N.Y., was consolidated with
the main plant in New York City. The increase in the
1,987,835 2.004,400 2,097,294 printing program workload is generally related to the
753,172 838,031
overall military program, and to the increased workload
at the Philadelphia, Pa. plant to meet the printing
requirements of the Defense Industrial Supply Center.
Ordnance.-With the closing of the Naval Weapons
Plant, this program includes eight major activities engaged

-2,000

-20,000

862,383

-90,000

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REVOLVING AND MANAGEMENT FUNDS-Con. sciences, the shapes and forms of naval vessels, and other

Intragovernmental funds-Continued

NAVY INDUSTRIAL FUND-Continued

in the production of missile launchers, torpedoes, avionics equipment, guns and mounts, propellants, and other items of ordnance and ammunition. The cost of goods and services produced in 1963 is expected to exceed that of 1962 by $11.7 million, primarily as a result of the completion of torpedoes at Naval Ordnance Plant, Forest Park, which were ordered in 1962.

Shipyards. The shipyard program includes 11 shipyards and 1 ship repair facility engaged in the construction, overhaul, repair and alteration of active and reserve fleet vessels. The shipyard workload for 1963 will be gradually reduced, from the heavy workload experienced during the second half of 1962, to a level which will provide for implementation of the congressional restriction in the 1963 Department of Defense Appropriation Act requiring placement of a minimum of 35% of the Navy repair, alteration, and conversion work in private shipyards. This reduction in workload will require approximately 2% reductions in naval shipyard employment during the first and second quarter of 1963. During 1964 the shipyard workload and employment is expected to continue at approximately the 1963 level.

Military Sea Transportation Service. This organization provides ocean transportation of dry cargo, passenger, and petroleum products, and provides the ocean platforms for scientific and other special projects. The estimates include the costs of operating Government-owned ships and the procurement of commercial augmentation. The cargo and petroleum workload for 1962 was abnormally high as a result of increased military activity. The volume of business for 1964 reflects increases in passenger transportation and other categories of shipping. A summary of workload and costs is provided in the following table (dollars in thousands):

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ship design problems, and into guided missile fuzes. The slight increase in the workload assigned to these activities continues the trend of the last several years, and is reflected in the estimates of the three activities.

Base services. With the addition of the public works centers at Guam and Subic Bay, this program includes six activities engaged in providing utility, maintenance, custodial, and transportation services for customers in their geographic areas. The increase in the workload for this program is directly related to the two activities added during 1962 and 1963.

Aircraft maintenance.-During 1962 and 1963 this program increased from one to seven activities. These activities overhaul and repair aircraft and missiles, and manufacture aircraft parts and assemblies. The substantial increase reflected for 1963 relates primarily to the addition of the six activities to the Navy Industrial Fund program. The workload for these activities was abnormally high during 1962 as a result of the accelerated rework program under the third amendment defense buildup. The estimates for 1964 indicate higher workload as a result of customer requirements for aircraft and engine rework and repairable material.

Financing the budget program. This program is financed by orders citing the customers' appropriations. Costs are initially financed by the working capital of the fund and subsequently billed to the customers' appropriations by periodic progress payments or upon completion of the work. During 1962 customer orders placed at the ordnance plants, shipyards, MSTS and aircraft maintenance activities were abnormally high as a result of the military buildup and related events. The 1963 and 1964 customer orders for these activities are expected to return to more normal levels. In addition, the shipyard orders reflect the assignment of 35% of the Navy repair, alteration, and conversion work to private shipyards. The increase in orders for the base service and aircraft maintenance activities results primarily from the work to be performed by the additional activities chartered under the Navy industrial fund during 1962 and 1963.

Operating results and financial condition. The following table shows 1962 net revenue and expense by activity (in thousands of dollars):

12,497,449 5,056

$256,181

1962 actual 1963 estimate 12,255,714 3,140 $240,423

12,036,969 3,048 $253,252

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Cost

$96,156

15,394,278 943 $90,595

16,650,252 943 $97,692

Gain of

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Shipyards

Military Sea Transportation Service Marine clothing and equipment.. Research

Base services.

Aircraft maintenance.

Total.....

1,048,778 1,054,919 -6,141

429,278 424,812 4,466

5,531 88,626 88,378

5,540

-9 248

48,359 48,520 -161

56,165 57.270 -1,105

1,889,171 1,891,786 -2,615

Retained earnings decreased $1.5 million in 1962, the net result of the $2.6 million operating loss being offset, in part, by prior year revenue, expense, and inventory adjustments. During 1962 expenditures exceeded collections by $20.5 million primarily as a result of a lag in the collection of accounts receivable. Expenditures are expected to exceed collections in 1963 by $0.4 million, and in 1964 collections are expected to exceed expenditures by $144 million with implementation of new policies for billing for ferred to Military personnel, Navy; during 1963, $921 work to be performed. During 1962, $2 million was transthousand has been transferred to the Defense industrial fund, and $20 million is planned to be transferred to Shipbuilding and conversion, Navy. In 1964, a transfer of $90 million to Military personnel, Navy, is proposed.

The significant decrease, between 1961 and 1962, in work in process and progress billings results from a change in the method of reporting shipyard work in process. The scope of the customer orders issued to the naval shipyards for construction and conversion type of work extends beyond the completion of the ship to include essential post delivery work, and these orders were held in work in process until all work was completed. This method of reporting has been revised and the cost of completed ships will not be included in work in process until the post delivery work has been accomplished. Government investment on June 30, 1964, is expected to decrease to $165 million representing $190 million in reappropriations and $25.3 million in retained earnings, offset, in part, by $50.7 million representing the excess of liabilities assumed over assets capitalized. Activity allocations on June 30, 1963 and 1964, are estimated at $186 million, with $4.4 million held available at the total corpus level as a modest reserve for emergency, short term requirements for additional working capital. In order to extend the Navy Industrial Fund program without an additional appropriation, cash allocated to the then existing activities was reduced by $27 million and reallocated to the new activities.

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

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Provision for subsequent

estimate

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Revenue:

Deferred credits (undis

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tributed receipts) .......

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Construction and conversion of ships.

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Overhaul and repair..

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Alteration and modification..

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Research and development..

115,235

Quality evaluation..

8,286

Transportation..

421,524

Printing...

15,573

Utility and sanitation services.

15,477

Receipt, stowage, and issue of ammunition..

Supply services

29,998

Support of nonindustrial activities.

Capital additions and improvements.
Support of reserve industrial capacity.

Other revenue..

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119,805

124,114

Government equity:

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Non-interest-bearing

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to

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1,405
632
44,035 45.676 42,939

544

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Assets capitalized or

decapitalized (-).. Liabilities assumed (-) or canceled..........

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Analysis of retained earnings:

-2,615

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Retained earnings, start of year..

Adjustment of prior year expense.

Adjustment of prior year revenue..

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ited to prior year revenue....

Inventory adjustments charged (-) or cred

376

584

Retained earnings, end of year.

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

Includes accrued annual leave liability not currently payable. of: $67,308 thousand in 1961; $78,220 thousand in 1962; $86,813 thousand in 1963; and $89,621 thousand in 1964.

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171,393
544
164,182
161,486
6.9
$6,791
$6,200

1963 1964 estimate estimate

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Revenue and other receipts (customer orders
received from program and financing).
Increase (-) or decrease in receivables:
Accounts receivable and undistributed re-
ceipts..

Unbilled customer orders.

Budget expenditures.......

-3,719
-56
405,314 435,501 437,760

-16,842 -3,510 -1,160

This fund finances industrial and commercial type activities on a reimbursable basis (10 U.S.C. 2208).

Budget program-Printing and duplicating service.There are nine plants financed under this program. These plants provide area support to the Air Force and other military services on a reimbursable basis. Production in 1962 was 2.3 billion printing units and is estimated to increase to 2.4 billion in 1963 and 1964. The increased production is due to increased requirements of consumer appropriations and increased productivity per press unit due to upgrading of equipment and production techniques.

Laundry and dry cleaning service. At June 30, 1962, there were 41 plants operating under this fund. Two 10,177 plants will be added during 1963, with no further changes 7.519 projected for 1964. Total production in 1964 is esti mated at 108 million pieces of laundry and dry cleaning as compared with 105.8 million for 1963 and 101.9 million

418,946

405,779 433,230 436,642 in 1962.

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