The historical roots of morale, welfare, and recreation (MWR) activities and nonappropriated funds (NAF) date back to the American Revolution.

The sutlers

The American Articles of War of 1775 provided for “sutlers” whose mission was to provide for the individual personal needs of military personnel. These itinerant merchants provided many of the services now found through the Exchange Service and were soon an integral part of the Service.

By 1821, the sutlers were returning part of their profit to the units they served. The Post Fund was created to account for this money and was soon being used for varied welfare projects. In 1821, Congress provided its first recognition of welfare programs and regulated the provision for needs of enlisted men through certain activities and NAF.

Post traders and the Canteen Associations

Eventually, the sutlers were charging exorbitant prices, engaging in usurious credit practices, and providing inadequate service. In 1867, Congress authorized the establishment of Post Traders to replace the sutlers, but Traders were not always available in remote locations. Soldiers formed cooperatives to provide their own retail and social outlets known as “Canteen Associations.” By 1893, the canteens were so widespread and successful that Congress abolished the Post Trader.

Because these canteens had become centers for command-sponsored social functions and were recognized as important for promoting esprit de corps, Congress authorized the use of public buildings and public transportation (“not needed for other purposes”) for canteen activities. By this time, regulations governing NAF canteen funds had been published and the funds were used to provide “gymnastic exercise facilities, billiards, and other proper games,” among other things. At the same time, ration savings within a company became a part of the company fund, thus indirectly bringing about an appropriated fund (APF) “contribution” to an MWR NAF activity.

The Post Exchange

In 1895, the War Department established the Post Exchange and directed post commanders to establish an exchange at every post where practicable. This MWR activity combined the features of a reading and recreation room, a store, and restaurant, all providing goods and services not supplied by the government. In 1903, Congress provided APF for the construction, equipment, and maintenance of suitable buildings for the Post Exchange, school, library, reading room, lunch room, amusement room, and gymnasium. In 1904, Congress appropriated $5,000 for “athletic exercise and sports” as part of the Navy budget. These appropriations established the precedent for federal funding for MWR programs.

In 1918, funds were appropriated for “athletic activities.” After World War I, the Army and Navy decided to provide troop morale and entertainment programs regularly. In June 1920, the Army Motion Picture Service was established, and in 1923, Congress appropriated funds for Army libraries and hostess (later Service Club) personnel.

The 1933 War Department Appropriations Act

In 1932, due to complaints from local civilian businesses about unfair competition, Congress conducted the first examination of Post Exchange operations. The War Department explained that Post Exchanges were the only means for providing troops with recreational funds. Since Congress did not provide appropriations for recreation, NAF represented a direct savings to the tax-payer and a subsidy to low-paid service members. To mitigate the competitive advantage, the War Department prohibited the use of any appropriations to pay expenses connected with the Post Exchange. Appropriations authorization was not eliminated for other kinds of MWR activities. Except for specific exceptions overseas, that prohibition continues to this day.

The President’s Committee on Religion and Welfare in the Armed Forces – 1951

In 1951, the President’s Committee on Religion and Welfare in the Armed Forces reported on the MWR program during the period of rapid expansion of the Military Services. In this review, free-time activities were divided into three categories: indispensable, essential, and desirable. The committee recommended providing programs and funding based on an order of precedence.

In 1953, the Department of Defense (DoD) issued the first funding policy statement for MWR activities stating that APF was intended to provide, operate, and maintain “adequate facilities” while NAF supplemented the cost of MWR programs using the facilities. NAF had to be used to pay MWR activity expenses for civilian employees, operating equipment, stock, supplies, utilities, and maintenance of interior space and equipment.

Investigations lead to changes

In 1968, military club scandals resulted in two years of investigation by Congress. The investigation found that a group of military personnel in the MWR business had gained control of the job assignments process and were successful at placing corrupt cohorts in key military club management jobs. With this network, the group was able to engage in illicit business activity. Procurement of food and beverage for resale was fraught with kickbacks, extortion, fraud, favoritism, and graft, and the entertainment program was notorious for kickbacks, extortion, and prostitution. Once exposed, Congress focused its interest on control and oversight of military resale activities and funding of MWR programs. The military took significant steps to institutionalize a structure for control and oversight, which continues to evolve.

In 1970, the House Armed Services Committee (HASC) Special Subcommittee on Exchanges and Commissaries recognized the necessity for adequate recreational and welfare facilities but held the position that Congress was responsible for providing facilities.

In 1972, the HASC Special Subcommittee to examine NAF Activities recommended that the DoD identify APF costs. In response, the DoD issued financial management policies for NAF and APF requiring annual reports on APF support furnished to military MWR activities.

As a result of the 1977 Appropriations Act, the Office of Management and Budget reviewed the feasibility and advisability of making NAFs fully self-supporting and eliminating APF subsides. That led to the creation of the DoD funding policy authorizing APF support by MWR category.

A January 1986 House MWR Panel Report on NAF Construction criticized DoD regulations, which appeared to allow broad APF support for profit-generating activities. The panel opposed using APFs to operate profit-generating activities, except in remote and isolated areas.

Mission essential activities funded

In August 1987, the DoD reported to Congress on a reassessment of program authorizations, organization and staffing, and funding policies for programs. The funding policy grouped MWR into four categories and stated that APF should support mission essential activities and revenue generating activities should support the needs of non-revenue generating MWR activities. Through the Fiscal Year 1988 (FY88) Appropriations Act, Congress retained the prerogative to review and evaluate the level of APF support under the new policy.

The FY89 Authorization Act reduced the number of categories to three to promote a “business like” operation. APF was authorized for “remote and isolated” business activities. Congress directed reallocation of APF to mission sustaining MWR programs and family support areas.

In November 1991, the HASC questioned the use of NAFs to support essential activities. Congress criticized the disparity among the Services in APF per capita support to mission essential MWR activities and held DoD responsible for not properly supporting MWR.

Penalties established for misuse of NAF

The FY93 Authorization Act codified congressional concerns about MWR support. The statute required that the Office of the Secretary of Defense (OSD) establish oversight of NAFs and NAF Instrumentalities (NAFIs), define how NAFs may be used, and establish penalties for misuse of NAFs. Congress sought to ensure that service members benefit from NAF and that those benefits are equitable across all Services.

Supplemental funding for Operation Iraqi Freedom and Operation Enduring Freedom

Between 1993 and the present, Congress has continued to pressure DoD to provide the maximum amount of APF support to Category A (mission sustaining) and B (basic community support activities) MWR activities as is practicable. Major studies have resulted in recommendations for greater efficiency and consolidation where appropriate among the Category C activities (business activities). Congress authorized supplemental APF support for MWR operations in Operation Desert Shield, Operation Desert Storm, Operation Iraqi Freedom, Operation Enduring Freedom, the Bosnia and Herzegovina theater, and in many other contingency locations, confirming the long-standing policy that MWR activities are essential and should be supported by the tax-payer.