AAF budget execution during WWII

The disparity between the two columns in Table 15 requires explanation. Funds appropriated in one year may be spent in that year, in subsequent years, or not at all. Sums obligated, that is, written into contracts, may be paid out across a period of deliveries stretching over many months; they may be recovered by means of renegotiation or not paid out at all as a consequence of cutbacks or terminations. For this reason, in wartime, the status of funds obligated may often provide a far more meaningful indicator of the current production pattern than either the size of the annual appropriation or the actual rate of expenditure in any one year. 

Thus, for example, as of 30 June 1945,the end of fiscal year 1945, the cumulative obligations or contracts entered by the AAF but not paid off amounted to 15.33 billions. Yet by November, after the war had ended, terminations rather than deliveries played a major role in whittling this backlog down to about five billions. Obviously any statistical compilation that looked only to actual expenditures would neglect a vast area of effort simply because it did not mature into payments. Moreover, expenditures from direct appropriations take no account of foreign aid funds. Since in 1942 alone obligations from this source ran to nearly 2.5 billion dollars, it must be clear that statistics on appropriations give at best a partial view of AAF procurement.

That was from Irving B. Holley Jr.’s excellent resource: Buying Aircraft: Materiel Procurement for the Army Air Forces (1951).

The budget authority of the Army Air Forces grew by a factor of 124 between FY1940 and FY1942. Yet it could only grow obligations by a factor of 23 over the same time.

What’s missing from the picture is the actual expenditure of funds by contractors. Usually, contractor expenditures would trail Government obligations, sometimes by several years. But in the run-up to WWII, people like William Knudsen were able to coordinate industry conversion into wartime production ahead of the Pearl Harbor attacks. Others like Henry Ford fought to keep out of war production. But in this case, contractor expenditures may have kept up with, or even anticipated, obligations.