16. Atlantic Transportation Terminal Command | Plan, regulate, and control movement of personnel and Army (military personnel, operation and mainte- July 1, 1955 (Transportation), Brooklyn, N.Y. cargo through waterfront terminals.

a. Budget programs

FINANCIAL CONDITION

The following statement of revenue and expense which, with your permission, will be inserted in the record, shows the dollar volume of business transacted during 1960 and the estimated dollar volume for 1961 and 1962. As indicated before, the $14 million increase in costs of goods and services produced estimated for 1961 over 1960 is chiefly the result of increased labor and material costs and the purchase of components previously supplied by ordering agencies. The net loss from operations in fiscal year 1960, resulting from the use of standard costs and predetermined pricing guides, amounted to $4 million or about 0.6 percent of total sales. The net of current year loss and prior year adjustments reduced accumulated operating results from a gain of $1.9 million on June 30, 1959, to a loss of $1.7 million on June 30, 1960. While it is not possible to achieve an absolute break-even position each year in actual practice, installations develop budgets on this basis in order to avoid, so far as possible, any loss or gain. No gain or loss is projected in 1961 or 1962.

The financial status of the Army Industrial Fund is approximately the same as last year. On June 30, 1960, the cash balance of the fund with the U.S. Treasury amounted to $179.5 million, of which $103.4 million was in the activity accounts of the installations operating under the fund and $76.1 million was in the unallocated reserve.

The cash balance of the industrially funded installations is equivalent to approximately 60 days' disbursements at the level of activity anticipated in 1961 and 1962. The unallocated reserve will provide working capital to finance contingency requirements, including increased workload and the expansion or extension of activities under the fund.

c. Investment of U.S. Government

The investment of the Government in the fund consists of cash, receivables, inventories, and retained earnings, less the amount due suppliers, and employees' unpaid leave (liabilities). The total amount of the Government investment on the above basis as of June 30 for fiscal years 1958 through 1962 is as follows:

A statement of the financial condition of the fund as of June 30 for fiscal years 1958 through 1962 is contained in the following table which will be inserted, with your permission, in the record.

ARMY INDUSTRIAL FUND MANAGEMENT IMPROVEMENT

The Army is continuing to emphasize the use of Army industrial fund management data through the application of engineered standards, predetermined rates and standard prices, quarterly reviews, consolidated financial reports, accounting manuals and other proven techniques. Operators have improved production techniques, use of inventory and labor, internal operating budgets, and collection practices.

Substantial progress has been made toward achieving top management appreciation and concern for industrial fund operations. The activity of the improvement task force sponsored by the Department of Defense has stimulated wider interest in the Army industrial fund at all levels. In addition, the distribution of a descriptive folder of the Army industrial fund to industry and throughout the Army has been a valuable tool for communicating knowledge of the system. The Army will continue to evaluate its industrial fund in order to improve it as an effective tool of management.

This concludes my presentation.

ARMY STOCK FUND

The purpose of this presentation is to review:

PURPOSE

(1) The authority, objectives, and organization for stock funding;
(2) The current operating program and status of war reserves;
(3) Significant features of the fiscal year 1962 program; and

(4) Proposed improvements in supply and financial operations.

The Army stock fund was initially established in 1952 under the authority of the National Security Act of 1947, as amended. It is basically a single assignment of responsibility for the supply and financial management of that portion of the Army supply system financed by the Army stock fund. The Army stock fund provides the means of financing the procurement of supplies and holding them in inventory until issued to the consumer and the stock fund reimbursed from appropriated funds. As I will illustrate later, cash received from appropriated funds is reinvested to support subsequent issues. Addi

tionally, the fund provides a system of financing and holding stock fund inventories as war reserves. This integration of supply and financial management responsibilities is designed to promote improved supply management.

1. THE AUTHORITY, OBJECTIVES, AND ORGANIZATION FOR STOCK FUNDING :

2. THE CURRENT OPERATING PROGRAM AND STATUS OF WAR RESERVES:

3. SIGNIFICANT FEATURES OF THE FISCAL YEAR 1962 PROGRAM; AND.

4. PROPOSED IMPROVEMENTS IN SUPPLY AND FINANCIAL OPERATIONS.

The scope of Army stock fund operations is influenced by the specific items included and by the areas to which stock fund operations are extended. As of June 30, 1960, total Army stock fund inventories amounted to $4.8 billion and encompassed some 570,000 line items. Generally speaking, the Army stock fund includes those items for which there are fairly uniform recurring demands. These are better described as consumable supplies such as clothing, subsistence, petroleum product, and medical-dental supplies; repair parts for a wide range of equipment; and certain minor secondary items such as tool sets, and small engines. The stock fund excludes major items of equipment such as aircraft, tanks, vehicles, and artillery. It also excludes aircraft and missile peculiar repair parts which I will discuss later.

Supply and financial operations of the fund are centrally directed and controlled by the Department of the Army. For budgetary purposes the 570,000 items under the fund, about 85 percent of the Army total of centrally managed items, are grouped into 12 material categories as indicated on page 547 of the President's budget. For Army management these categories are organized into 15 divisions as indicated on this chart.

This chart lists the Army stock fund divisions and shows the locations where they own stocks. The three general locations are:

First, continental U.S. depots; second, continental U.S. stations; and third, Oversea commands which include Europe, the Caribbean, Alaska, and a portion of the Pacific (Hawaii and Japan). The stock fund has not been extended to either Korea or Okinawa because of the operational and administrative problems involved.

Group 1 divisions under the Quartermaster General include the single manager divisions for subsistence, clothing and textiles, and general supplies. These divisions own stocks in continental U.S. wholesale depots only.

Group 2 divisions include supplies of chemical, engineers, ordnance, signal, and transportation. These divisions own stocks in continental U.S. wholesale depots and in the oversea commands.

Group 3 divisions include Quartermaster General supplies and Quartermaster petroleum products. These divisions own stocks in the depots and stations in the continental United States, and in the oversea commands.

Group 4 divisions include Quartermaster Army clothing and equipment, Quartermaster Army subsistence, and medical-dental supplies which own stocks in the stations as indicated and in the oversea commands.