FINANCIAL MANAGEMENT POLICY MANUAL

2. FUND MANAGEMENT.
All cash, functional, and cost responsibilities are managed by the
applicable major command within the DON. Prices for outputs produced
in a business area are the responsibility of the managing command and are
set, in the form of stabilized rates, to recover costs over the long term.
Individual business activities concentrate on managing these costs rather
than on the level of cash available. Profits, when they occur, are returned
to customers through lower rates in subsequent years, while losses are
recouped through increased rates in subsequent years.
3. UNBUDGETED DEPOT MAINTENANCE AND CENTRAL DESIGN AGENCY
GAINS AND LOSSES.
Unbudgeted depot maintenance and central design agency operating gains
and operating losses of $10 million or more per activity group are returned
to or recouped from the customers, as appropriate. This recoupment or
return will occur via rate adjustment in the current fiscal year, or in the
subsequent quarter of the next fiscal year in the case of fourth quarter
gains or losses. This rate adjustment will increase financial discipline,
encourage depot commanders to implement cost controls more rapidly,
provide the right incentives to set rates correctly in the budget, eliminate
the routine use of advance billing to cover execution losses, and improve
operational efficiency.
4. UNIT COST.
The unit cost, or cost per output, concept has been established for business
areas within the NWCF. Unit cost goals are established by the USD(C)
and passed, via the chain of command, to each NWCF activity. These
goals are to be used as a control mechanism and indicator of business
efficiency. This cost-oriented approach is designed to encourage
management to consider all costs, including overhead, in terms of the
output of the business.
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074601 STRUCTURE AND CONTENT
1. GENERAL.
Within the Department of the Navy, NWCF activities operate under
USD(C) guidelines for centralized policy and decentralized management.
The following paragraphs briefly describe the business areas operated by
the Department of the Navy.
2. SUPPLY MANAGEMENT .
The Supply Management business area provides inventory management
functions for certain repairable and consumable items, management of
overseas Fleet Industrial Supply Centers, and miscellaneous support
Financial Management Policy
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