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Military Air Transport Service.-The airlift service portion of the Military Air Transport Service was included under this fund on July 1, 1958. The size of MATS and the extent and nature of its operations are keyed to Joint Chiefs of Staff approved military wartime airlift requirements. These requirements are either critical or civil eligible. Because of their nature or the nature of the mission to be supported, the critical or hard core requirements must move in military operated aircraft. The civil eligible requirements can move in either military or civil operated aircraft.

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

Revenue:

Printing and duplicating.
Laundry and dry cleaning....
Military Air Transport Service..
Total expense.

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Expenses:

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To have the capability to surge to meet wartime airlift requirements, the military airlift aircraft must be exercised appropriately during peacetime. The peacetime airlift capability so produced is used in the interest of economy in meeting peacetime airlift needs of the Department of Defense. Military aircraft are used to provide Analysis of retained earnings: air evacuation of patients; special air missions; training of airborne troops; and, as augmented by commercial aircraft, common-use airlift of passengers, cargo, and mail. Airlift service resources and workload are as follows:

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Net gain for the year..

Retained earnings, start of year.
Adjustment of prior year revenue..
Adjustment of prior year expense.

Retained earnings, end of year..

Financial Condition (in thousands of dollars)

Total..

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Financing the budget program.-This program is financed by customer orders for services. These orders constitute valid obligations of the ordering appropriations and authorize activities financed through the fund to provide services requested. Costs are charged initially to the working capital of the fund and are billed to customers on the basis of established tariff rates for services provided. Operating results and financial condition. For 1962 revenues exceeded expenses by $1.1 million, mainly as a result of the operation of the MATS airlift service. Retained earnings increased an additional $3 million in 1962 as a result of adjustments of prior year revenues and expenses. Revenue is expected to increase over the 1962 level in both 1963 and 1964 due to anticipated increases in requirements for airlift service.

Collections exceeded expenditures by $16.8 million in 1962 due to an increase in the level of operations over the previous year as well as an increase in accounts payable. It is estimated that collections will exceed expenditures by $3.5 million in 1963 and $1.2 million in 1964.

Employee annual leave accruals, included in the statement as a current liability, were $2 million at June 30, 1962. Government investment is estimated at $75.7 million at June 30, 1964, consisting of $71.0 million in reappropriations and transfers and $5.6 million in retained earnings less $0.9 million representing the excess of liabilities assumed over assets capitalized.

Liabilities:
Current

Reserves for major maintenance
and repairs (funded)....
Undistributed disbursements (-).

Total liabilities 2.

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21 Travel and transportation of persons..

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22 Transportation of things..

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23 Rent, communications, and utilities.

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24 Printing and reproduction..........

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1963 1964 estimate estimate

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5,193 167 4,936 5,056 5.1 $5,310

Average salary of ungraded positions.

$4,176

$4,312

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5,270

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

Adjustments of selected resources consist of: Materials and supplies -$960 thousand and liabilities assumed $752 thousand in 1962 and materials and supplies -$2 thousand and liabilities assumed of $84 thousand in 1963.

Operations began under this fund in May 1962 (10 U.S.C. 2208). Two activities previously financed from the Army and Navy industrial funds, engaged in manufacture, modification and alteration of clothing and textile items, were transferred to the Defense supply agency, and are now operated as a single activity. The activity produces items required on short notice, in small lots, or to special measurement, or under other conditions which make procurement from commercial sources impractical or undesirable. The factory also serves as a pilot production plant to test design specifications and production methods, and provides a part of the production base for industrial

mobilization.

Financing the budget program.—This program is financed from customer orders of which 95% are from the Defense stock fund. Annual sales are estimated at $11.1 and $11 million, respectively, in 1963 and 1964, a reduction of about $2 million from the previous production rates of the two separate factories. This reduction, combined with anticipated savings through consolidation of the former $5,394 Army and Marine Corps factories, results in a total reduction of about 500 people and $2 million in operating costs from levels previously planned.

161 5.112 5,189

5.1

$4,256

1964 estimate

Operating results and financial condition.-The net loss of $35 thousand for the first two months of operation in 1962 is forecast to be recovered in 1963. The reduction in costs in 1964 reflects the planned reduction in personnel from the peak reached during 1963. Government investment of over $2 million at the end of 1962 results from transfer of the activity Treasury balance from the Army industrial fund and certain other Army and Navy assets, 11,365 less liabilities assumed. This investment is increased to nearly $3 million in 1963 by transfer of the activity Treasury balance in the Navy industrial fund and the remainder of the materials and supplies, less accrued leave liability

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Program and Financing (in thousands of dollars)-Continued

REVOLVING AND MANAGEMENT FUNDS-Con. Intragovernmental funds-Continued

ARMY MANAGEMENT FUND-Continued

2. Transportation services provide for the payment centrally of transportation charges for Government bills of lading, transportation requests, meal tickets, and other charges incident to transportation costs incurred by the Army.

3. Construction activity, Europe, finances certain administrative and overhead expenses in the Department of Defense construction programs in Western Europe. 4. Interchange fleet is now operated under appropriations available to the Defense Supply Agency.

Object Classification (in thousands of dollars)

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1 Reimbursements from non-Federal sources represent payments for inspection work accomplished for foreign governments (22 U.S.C. 1816).

This fund was created to facilitate the financing of operations supported by two or more appropriations (5 U.S.C. 172e). The principal activity financed through the fund is the Polaris ballistic missile program. Reimbursable orders for the Polaris program are issued to the fund from Navy appropriations for Procurement, operation and maintenance, and Research, development, test, and evaluation. Other operations financed are transportation of supplies, materials, and equipment of the Navy; the material inspection service; incentive award payments; departmental telephone and maintenance services and a new program entitled Armed Services Board of Contract Appeals which has been designated as the authorized representative of the Secretaries of Defense, Army, Navy, and Air Force, for the purpose of hearing, considering, and determining each of the appeals by contractors for settlement of disputed questions. Beginning in 1963, the Electronics Production Resources Agency which coordinates the production and allocation of electronics equipment for the Department of Defense and certain functions relating to inter- and intradepartmental activities will be financed under the appropriation Operation and maintenance, Defense Agencies.

Object Classification (in thousands of dollars)

1962 1963 1964 actual estimate estimate

NAVY MANAGEMENT FUND

Program and Financing (in thousands of dollars)

11 Personnel compensation: Permanent positions...

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Positions other than permanent..
Other personnel compensation...

Total personnel compensation.

12 Personnel benefits......
Travel and transportation of persons.
22 Transportation of things....

23 Rent, communications, and utilities.
24 Printing and reproduction.......

25 Other services..

26 Supplies and materials. 1,800 31 Equipment....--

Total obligations............

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This fund was created to facilitate the financing of activities supported by two or more appropriations (5 U.S.C. 172e). The corpus of the fund is $1 million.

Program and Financing (in thousands of dollars)

Supply operations (obligations).

The principal activity financed through the fund in 1962 was the Armed Forces Supply Support Center. The 1962 program of $2,695 thousand represents require- Program by activities: ments financed from July 1, 1961, through December 31, 1961. The functions and activities of the Center were transferred to the Defense Supply Agency on October 1, 1961. Financing was accomplished under the Defense Agencies Management Fund from January 1, 1962, to June 30, 1962.

The fund has no financing activities planned for 1963 or 1964. However, the corpus of the fund is being retained to provide the means for financing appropriate activities in the future.

Financing:

Advances and reimbursements from-
Other accounts.

Non-Federal sources 1.
Unobligated balance lapsing (—).

Total financing..

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1 Reimbursements from non-Federal sources are derived from proceeds of sales of surplus Government property (75 Stat. 377) and receipts from railway carriers for use of Government cars of the interchange fleet (10 U.S.C. 2667).

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