Glossary Of Financial Terms

A11 BUDGET: OMB Circular No. A11 provides preparation instructions for the operating budget for Working Captial Fund activities. This 3-year contract (current plus 2) document contains operating budgets of direct, overhead, and service centers exhibits for manpower plans, financial condition, revenue, and costs and expenses by object class.

ACCELERATION OF LABOR: Increasing salaries and wages, charged to job orders, by a predetermined rate for purposes of accruing leave and fringe benefits.

ACCOUNTS PAYABLE: Amount due but unpaid for materials or services rendered.

ACCOUNTS RECEIVABLE: Amount billed but uncollected for completed work, services, or a claim for lost or damaged material.

ACCRUAL ACCOUNTING: The basis of accounting whereby (1) revenues are accounted for when earned, even though not collected; (2) operating costs are accounted for in the fiscal period during which the benefits are received; (3) costs for which the benefits are applicable to future periods are treated as deferred assets; and (4) liabilities for costs (or expenditures) are recorded when goods or services are received, regardless of when payment is accomplished.

ACCRUED EXPENSE: The liability covering an expense incurred which has been charged to operations, regardless of the date of payment. See ACCRUAL ACCOUNTING.

ACCUMULATED OPERATING RESULTS (AOR): Reflects the cumulative summation of net operating results (NOR) in dollars carried from FY to FY, since inception.

ALLOCATION: The share of funding received from a sponsor that has been assigned to a project, and subsequently assigned to a customer order.

AUDIT: The systematic examination of records and documents, and the securing of other evidence by confirmation, physical inspection, or for one or more of the following: (1) determining proprietary or legality of proposed or consummated transactions; (2) ascertaining whether all transactions are reflected accurately in the accounts; (3) determining the existence of recorded liabilities; (4) determining the accuracy of financial or statistical statements or reports and the fairness of the presentation of the facts therein; (5) determining the degree of compliance with established policies and procedures relative to financial transactions and business management; or (6) appraising an accounting system and making recommendations for improvement therein to perform such an examination.

BID AND PROPOSAL COSTS: General and administrative expense used to prepare and submit written proposals to prospective sponsors.

BILLINGS VARIANCES: The difference between the costs incurred in performing the work and services for the sponsor, and the costs billed to the customer's order. Billing variances include the following:

1. Stabilized Labor Variance. The difference between the actual costs incurred and the stabilized amount billed to a customer under a reimbursable order.

2. Cost Over/Underruns (within variance limitations). The difference between the total billable amount and the authorized amount on the reimbursable order. The amount of billable costs that exceed the amount authorized by the funding document (loss), but is within the authorized variance limitations; or the amount billed up to the funding document authorization that is within authorized variance limiations (profit). Variance limitations are described in NAVCOMPT Manual paragraph 054021.

3. Fixed Price Variance. The difference between the amount of actual costs incurred in the performance of work or services and the amount billed to all customers under a fixed price order.

4. Write-Off Variances. The amount of costs that exceed the authorization of the funding document and authority has been received from NAVCOMPT to write-off the costs. This amount exceeds the authorized variance limitations as described in NAVCOMPT Manual paragraph 054021.

BUDGET: A statement, in financial terms, of projected or anticipated operations of an accounting entity (e.g., cost center) for a given period. It usually represents a goal-not a limitation-and may be revised from time to time within a period to reflect changing conditions that may have an effect on future operations.

CAPITAL EQUIPMENT: See Plant Property, Class 3 and 4.

CAPITAL PURCHASES PROGRAM (CPP): Capital equipment, minor construction, and management system developments (See specific areas).

CAPITALIZATION: The process of acquiring fixed assets with Working Capital Fund corpus funding and recovering the acquisition cost through depreciation over the useful life of the asset.

CARRYOVER: Portion of funds received that have not been costed, includes all current and prior-year commitments, obligations, and unencumbered funds.

COGNIZANT CODE: Cost center which owns or manages a particular project or function.

COLLECTIONS: Amount billed and collected for goods or services rendered

COMMITMENT: A firm administrative reservation of funds, based upon firm procurement directives, purchase orders, requisitions, or requests which authorize the recipient to create obligations without further recourse to the official responsible for certifying the availability of funds.

COMMANDING OFFICER'S ORDER: Under Working Capital Fund procedures, an authorization, normally approved and signed by the Commanding Officer of the activity requesting the work, allowing work to begin prior to receipt of an order from a customer because of a bonafide emergency arising from unforseen or urgent requirements.

COST: The amount paid or payable (accrued) for the acquisition of materials or services.

COST ACCOUNTING: A system of accounting analysis and reporting on costs of production of goods or services, or of operation of programs, activities, functions, or organizational units.

COST CENTER: An administrative unit selected for budgeting, accumulating, and controlling related costs that (1) consists of a natural grouping of machines, methods, processes, operations; (2) is identifiable with single management responsibility; and (3) is made up of elements which have common cost characteristics.

COST CENTER, DIRECT: Organizational units performing for specific customers.

COST CENTER, GENERAL: Organizational units performing overall support services to the entire activity.

COST CENTER, SERVICE: An organizational entity performing common functions that readily identify units of measure on whcih to charge users for the benefits received (i.e., a test, an event, computer running time).

COST, DIRECT: A cost that can directly benefit and economically and feasibly be identified with a sponsor's project.

COST, GENERAL AND ADMINISTRATIVE EXPENSE/COST: Costs incurred by a general cost center that cannot be equitably distributed except by a predetermined activity rate applied to direct labor hours. These costs are generated for the benefit of the entire activity (commonly called G&A).

COST, OVERHEAD: Costs incurred in the performance of assigned mission that cannot be economically or feasibly charged as a direct cost.

COST, PRODUCTION (PRODUCTION EXPENSE/COST): Cost incurred in a direct cost center that supports direct efforts, but cannot be economically or conveniently charged to a specific job order for accomplishing work for sponsors.

COST, REIMBURSABLE: Cost of work or services performed determines the charge to the funding activity.

CROSS CHARGING: One Working Capital Fund activity charging a job order for work and services that is owned by another Working Capital Fund activity.

CUSTOMER ORDER: Document issued by Comptroller, authorizing cost center managers to incur costs for the purpose stated in the sponsor's order.

DEFENSE BUSINESS OPERATIONS FUND (DBOF): The Defense account established 1 October 1991 which consolidated the previously established industrial/stock revolving funds to a single revolving fund to satisfy recurring DoD requirements by using a businesslike buyer-and-seller approach, and to reduce DoD support costs through better business practices. Replaced in FY97 with individual service's Working Capital Fund.

DEPRECIATION: Procedure to recover the cost of capital investment items over the estimated useful life of the item. Depreciation is a cost of doing business and may be charged as direct, service center, or overhead (G&A or production) cost depending on the benefit received. Assets depreciated are equipment, minor construction, or management systems (software).

DIRECT CITE: An authorization to directly cite a sponsor's line of accounting on an obligation document (e.g., contractor, delivery order, travel). Authority is provided on direct-cite documents (RCPs, WXs, and MIPRs) or by letters or messages (invitational travel orders). Costs related to direct-cite orders are not charged to the Working Capital Fund account.

DIRECT LABOR: Labor charged directly to sponsor funded job orders that cite funds provided specifically for a direct project.

DIRECT LABOR HOURS (DLH): Hours charged to sponsor job orders that cite funds provided specifically for direct project. DLHs are the basis for applying general and production overhead.

DISBURSEMENTS: Payment for goods or services rendered

EARNED REVENUE: Completed item X Fixed Price.

ENCUMBRANCES: Sum of obligations and commitments that identifies a portion of authorized sponsor funds not available for other use. Excluded costs incurred.

EXPENDITURE: Payment of funds for goods or services received. A charge against available funds evidenced by outward flow of cash.

EXPIRATION DATE: Date by which costs must be accrued, or contingent liabilities exist or the authority to continue work on a customer order will lapse.

FINANCIAL MANAGEMENT: Area of management concerned with planning, administration, and control of use of resources (property as well as funds) in monetary terms.

FISCAL YEAR: Accounting period established to collect costs (1 October to 30 September).

FIXED PRICE: Agreement between a sponsor and performing organization that carefully defines work to be done for a fixed price regardless of actual cost to the performer. RDT&E work is usually not appropriate for fixed-price funding.

FOREIGN MILITARY SALES (FMS): Work or services requested by foreign governments or foreign private parties.

FULL TIME EQUIVALENT (FTE): A full-time equivalent (FTE) is a standard federal government measure for reporting on employment and personnel compensation, and is intended to represent the equivalent of a single person employed for the entire fiscal year, e.g., one full time employee generally represents one FTE; two employees who work only half-time will count as one FTE. The actual calculation is: The total number of regular straight-time hours paid to an employee divided by the number of compensable hours (2,080 hours in FY 1995). Overtime and holiday hours worked by an employee are excluded from the FTE calculation. However, regular annual, sick, and holiday leave hours taken during the year and paid as part of basic salary are included. Leave hours for lump sum annual leave payments and leave without pay are excluded.

GOVERNMENT-FURNISHED EQUIPMENT (GFE): Equipment furnished to contractors, at no cost to the receiver.

GOVERNMENT-FURNISHED MATERIAL (GFM): Appropriation Purchases Account (APA) material furnished to contractors, at no cost to the receiver.

INDIRECT LABOR: Labor not specifically identified to a direct project and, therefore, not directly charged to job orders for a specific customer order. This labor is charged to general and administrative overhead (expense) or cost center production overhead (expense).

JOB ORDER: Cost-accounting identification for collecting and accumulating costs relative to the performance of certain work according to specifications, estimates, etc. (such as labor, travel, etc., within each job order).

LETTER OF INTENT: Letter (or message) from a sponsor that permits urgent work to begin immediately when the project's full scope and related cost estimates cannot be authorized immediately. A letter of intent states effort requested, provides the funding to cover the cost of work for a definite period (up to 30 days), contains the appropriatede funding citation, and is a reimbursable order.

MATERIAL: Supplies and repair parts used in performing assigned duties.

MINOR CONSTRUCTION: Capitalized additions and changes to Class 2 facilities costing $300,000 or less.

MILITARY INTERDEPARTMENTAL PURCHASE REQUEST (MIPR, DD448): Order issued by one military service to another military service to procure, produce, or deliver services, supplies, or equipment to, or for, the ordering service. The MIPR can be accepted as reimbursable, direct cite, or a combination.

MULTIPLE FUNDING: Combining identical work from differential reimbursable sponsor orders to establish a single customer order. Rules governing multiple funding of customer orders are also followed in allowing multiple funding of contracts and delivery orders.

NET OUTLAYS: Disbursements less collections and transfers

NET OPERATING RESULTS (NOR): The difference between all revenue and all cost realized within one fiscal year. There is an annual budgeted NOR target for each NWCF activity. This is a key metric used to determine financial success.

NEW ORDERS: Reimbursable funding documents, issued by customers with requirements for goods or services, authorizing cost center managers to establish job orders and incur costs.

NON-APPROPRIATED FUNDS: Monies derived from sources other than congressional appropriations, primarily from the sale of goods or services to DoD military and civilian personnel and used to support or provide morale, welfare, and recreational programs (e.g., Employee Services Council). Examples of non-appropriated funds income at NAWCTSD includes: Vending machine income, Recyling income, Cafeteria income, and SATO income.

OBLIGATION: Amount of an order placed, contract awarded, service received, or other transation which legally reserves a specific amount of an appropriation or fund for a future expenditure.

OPERATING RESULTS: Revenue less expenses.

Orders Received: Order accepted from customer, Customer funds obligated, Authority to commence work.

OVERHEAD: Operating costs that cannot economically or feasibly be charged as a direct cost because portion chargeable to any one customer cannot be economically determined.

PERFORMING CODE: Cost center assigned to each employee and carried in the payroll file identifies the cost center of the person doing the work, but does not necessarily correspond to the cognizant code for the job order against which the person is charging.


Class 1: Land.

Class 2: Buildings, structures, and improvements; such as (1) erection, installation, or assembly of a new facility; (2) addition, expansion, extension, conversion, or replacement of an existing facility, or (3) acquisition of a facility or the relocation of a facility from one installation to another.

Class 3: Equipment, other than industrial plant equipment, having an acquisition cost of $25,000, or more, and an anticipated useful life of over 2 years.

Class 4: Industrial plant equipment costing $25,000 or more (laser equipment, environmental chambers, milling machines, welding equipment, etc.). Class 4 is procured for the Center by, or with permission of the Defense Industrial Plant Equipment Center (DIPEC). This equipment can be furnished to the Center without fund transfer by DIPEC or procured by DIPEC approved sponsor-provided funds.

Class 5: Minor personal property that meets the definition of Class 3, but costs between $300 and $24,999, and items considered pilferable regardless of cost (audiovisual equipment, binoculars, photographic equipment, cameras, typewriters, calculators, communication devices, modems, etc.)

NOTE: Items picked up under the old thresholds ($5,000 and $15,000)
are still recorded in Classes 2, 3, and 4.

PRIVATE PARTY: Nonfederal sponsors (state and local municipalities, and private parties) requesting work or services.

PROCUREMENT: Purchasing, renting, leasing, or otherwise obtaining supplies or services.

PROFIT (LOSS): Difference between income received and costs incurred in the performance of an activity by a Working Capital Fund organization.

PROJECT: Single undertaking or group of similar jobs within a program meeting a stated objective. This planned undertaking to be accomplished within defined boundaries or resources, may cover more than one related sponsor task, but not unrelated items.

PROJECT ORDER (PO, NAVCOMPT Form 2276A): Reimbursable order specific to the work order to be performed.

RATE STABILIZATION: Development and use of predetermined rates for the billing of customers for work to be completed in industrially funded activities.

REIMBURSABLE ORDER: Sponsor order that allows the performer to recover costs incurred up to the dollar amount stated in the order.

REIMBURSEMENTS: Amounts received, or to be received, by an activity for the cost of material, work, or services furnished, or to be furnished.

REQUEST FOR CONTRACTUAL PROCUREMENT (RCP, NAVCOMPT Form 2276A): A direct-cite document that authorizes an activity to contract for services listed within the dollar limitation specified. These funds are for contractual effort only and cannot be used for minor or stock fund purchases.

REVENUE: Costs that have been billed to the sponsor for work and services performed. Costs billed to the sponsor include direct labor hours multiplied by the stabilized rates plus non-labor costs. Revenue from applied overhead on direct labor hours is generated by the performing division using the performing division's rates. Revenue is posted to the performing division's account. Applies to a Working Capital Fund organization.

SERVICES: Labor procured from a nonemployee for intangible requirements (e.g., custodial services), or for producing an end product, such as software or a report. If, however, software or a report accompanies a material item, the procurement is considered "material" rather than "services."

SPECIAL DEPOSIT: Funds deposited in advance by a private party or non-DoD activity for work to be performed by the government.

SPONSOR ORDER: Request for work or services to be performed that identifies the work to be completed, the required completion date, the amount and source of funds to be charged for the work, and any Government Furnished Material (GFM) related to the order. Acceptance of a sponsor's order by the Working Capital Fund activity is the basic source of authority to incur costs, perform work, bill, and ultimately be reimbursed for costs incurred identifiable to the sponsor's order (e.g., project orders, work requests, MIPRs).

STABILIZED RATE: Annual predetermined rate that includes accelerated labor and overhead and is applied to direct labor hours performed against a sponsor's job order.

SURCHARGES: Rates applied to recover unfunded costs incurred for services to non DoD federal, private party, and FMS customers.

UNIT COST: The total cost of producing a unit of output. A unit of output may be a product or service. The goal is to know the total cost of producing a unit of output in order to facilitate cost conscious decisions.

WORK COMPLETION DATE: Date on a funding document that states when the work must be completed. This date may be changed by modification to the funding document. The date cannot exceed the funds expiration date, except on a project order.

WORKING CAPITAL FUND: Established in FY97 and replaced DBOF. Includes an individual service's industrial/stock revolving funds.

WORK-IN-PROGRESS (WIP): Costs for work or services performed, but not yet billed to the customer.

WORK REQUEST (WR, NAVCOMPT Form 2275 and 2276A): Funding document issused by a sponsor requesting work or services between Navy activities, or between Navy and Marine Corps activities.

WORK YEAR EQUIVALENT: The effort to date, at any point in time, that equals one person after deducting holidays and leave. For costing purposes, a work year equivalent for the total year is approximately equal to 1,750 hours.

WRITE-OFF: The amount of costs that exceed the amount authorized by the funding document. This amount exceeds the authorized variance limitations. Authority has been received from NAVCOMPT to write-off the costs. A Working Capital Fund activity absorbs this amount as a loss which affects the accumulated operating results (AOR).

Last Update: 29 April 2010