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PRESIDENT'S MESSAGE

Where we are and how we got here:
There has been more activity in the past six months on resale in the Congress than in any time in history ...

In the fall of 2014, the Congress moved to restore budget cuts proposed by the Administration to the commissary benefit. The Administration's plan was for a $200 million cut in FY 2015, a $600 million cut in FY 2016, and a $1 billion cut in FY 2017. The $200 million FY 2015 proposed budget cut was rejected by both the defense authorizing and appropriations committees and Congress then set in motion several reviews of the system while it awaited the report of the Military Compensation and Retirement Modernization Commission. ALA also worked to turn back a number of proposals that would have negatively affected the exchanges ability to control costs and generate revenue and measures that would have inhibited open access of legal products to patrons.

In January 2015, the Military Compensation and Retirement Modernization Commission, proposed by the Administration and chartered by Congress, issued its report in January. The Commission affirmed the value of commissaries and called for reforms including combining the commissary and exchange systems. The Administration's comments on this report (including its views on resale programs) have yet to be provided to Congress.

The President submitted his budget for fiscal year 2016 (Oct. 1, 2015-Sept. 30, 2016) in January as well. This request proposed to cut the commissary budget by $322 million and sought legislative authority to transfer costs of commissary operations from annual appropriations to patrons by: (1) raising prices to pay for these cuts, (2) raising prices 2 percent to have commissary patrons worldwide pay for the cost of transporting goods overseas (around $139 million; and (3) having the surcharge pay for the cost of operating supplies that were are currently paid from appropriations.

The House Armed Services Committee bill was first out of the gate. This bill, which passed the full House, restored the $322 million cut and stated in their report that "commissary and exchange benefits have substantial value to Active Duty and retired personnel." They cited a report by the Military Compensation and Retirement Modernization Commission that "commissaries are considered by many to be a relevant and important contributor to military quality of life." They encouraged the DoD to review the Commission report and find ways to improve the commissary and exchange system without increasing prices or reducing hours of operation.

The House Appropriations Committee moved next. The Committee restored the $322 million and stated, "The Committee is aware of ongoing efforts by the Department of Defense to reduce the costs incurred by the Defense Commissary Agency. The Committee supports efforts to reduce costs and encourages the Secretary of Defense to evaluate alternative methods of controlling commissary costs." They asked for a report by Dec. 1, 2015, on reducing costs including the potential efficiencies that can be realized in air transportation contracts and the effect that these efficiencies may have on second destination transportation funding needs. They directed DoD to defer any changes to the Defense Commissary Agency's second destination transportation funding policy that would increase commissary retail prices until 30 days after the report is submitted. This Bill passed the full House on June 11.

The Senate Appropriations Committee moved next. On June 11, the full Committee restored the $322 million cut. This Bill has not yet passed the full Senate.




The Senate Armed Services Committee was the last of the four defense committees to act. The Committee-passed Bill adopted many of the President's proposals and added legislation to have DoD plan for and implement privatized commissaries at no less than five major bases in the United States. This caused uproar in the Senate where amendments were filed to restore the $322 million cut, strike provisions that passed costs paid by appropriations to patrons and strike the provisions mandating privatization and replacing it with a study. The amendments on restoring cuts and offsetting costs with higher prices were not considered in the final bill. Sens. Jim Inhofe and Barbara Mikulski introduced an amendment with 25 co-sponsors that nullified the privatization provision and replaced it with a study looking at: (1) Methodology for defining the total number and locations of commissaries; (2) Commissary utilization by location in the following beneficiary categories: E-1 – E-4; E-5 – E-7; E-8 – E-9; O-1 – O-3; O-4 – O-6; O-7 – O-10; and military retirees; (3) Commissary utilization in locations outside the continental United States and in remote and isolated locations in the continental United States compared with other locations; (4) Costs of commissary operations from fiscal year 2009 through fiscal year 2014; (5) Potential savings and efficiencies of implementing some or all of recommendations of the 2015 Military Compensation and Retirement Modernization Commission; (6) Defense Commissary Agency's strategy for pricing products sold at commissaries; (7) Defense Commissary Agency's transportation strategy for products sold at commissaries; (8) Defense Commissary Agency's formula for calculating savings for its customers as a result of its pricing strategy; (9) Average savings per household garnered by commissary usage; (10) Use of private contractors and vendors as part of the commissary system; (11) Costs or savings and potential impacts to patrons and the government of privatizing the commissary system, including potential increased use of government assistance programs; (12) Barriers to privatization of the commissary system; (13) Extent to which patron savings would remain under privatization; (14) Impact of any recommended changes to the operation of the defense commissary system on commissary patrons, including morale and retention; (15) Genuine interest of major grocery retailers in management and operations of all, or part of, the existing commissary system; (16) Impact of privatization on off-installation prices of similar products available in the commissary;(17) Impact of privatization as well as conversion of the Defense Commissary Agency workforce to non-appropriated fund status on employment of military family members, particularly with respect to pay, benefits, and job security; and(18) Impact of privatization on Exchanges and Morale, Welfare and Recreation quality-of-life programs. The amendment passed and the report is due from DoD by Feb. 1, 2016 and a GAO review of the report is due by May 1, 2016.

The Appropriations bills will not conference until after the full Senate passes its bill. This bill is being held up by a dispute over the top line funding level for DoD that Democrats are saying violates the Budget Control Act and breaks the ceiling on defense spending. Democrats are maintaining that they want domestic spending increases if defense is going to increase. The President has issued a veto threat if the bill remains unchanged. Ultimately, when the differences in the Senate are worked out, we expect that they will agree to restore the commissary funding because both Houses have restored the exact amounts.

The authorization bills (SASC and HASC) are a different story. Because both bills now have passed both houses, they are in conference to work out differences. The House and Senate will appoint conferees this week. Staff has already started negotiations. We expect that the conferees will agree with the privatization report. There are reports that the SASC staff has said that the across-the-board price increases to pay for operating costs provision was "inadvertent" and that they will fall off of this provision in conference with the House. However, it looks as though the Senate will stand firm on the 2 percent price increase to pay for transportation and having surcharge pick up the tab for operating supplies instead of using appropriations.


All of this comes as the Pentagon is reviewing options for restructuring and reforming military resale programs. The DoD's Chief Management Officer is currently leading the effort. It has been reported that they are looking at a wide range of options including restructuring DeCA as a nonappropriated fund instrumentality, combining functions of the exchanges and commissaries and privatization of the commissaries. This effort will be influenced heavily by a report from the Boston Consulting Group that was requested by Congress in last year's authorization act and is looking at a wide range of proposals including variable pricing in commissaries, combining exchanges and commissaries and other reforms to commissary and exchange operations. The report is circulating in draft in the Pentagon and is required to be provided to Congress by Sept. 1.

The next major development is the conference between the House and Senate authorizing committees. ALA and The Coalition to Save Our Shopping Benefits will be working to eliminate those provisions in the Senate bill that pass costs traditionally paid by appropriations to patrons in the form of higher prices. Conferees have been appointed and the Chairmen of the SASC and HASC are looking to complete the conference far earlier than usual and by the end of July. We do not know at this time whether DoD plans to provide the resale report to the conferees. At the ALA's Congressional Caucus and Public Policy Forum held in Washington, D.C., on June 10, members of the HASC affirmed their commitment to commissaries, portending that they intend to work to protect the benefit when they meet in conference with the Senate.

Final spending levels for DoD are not expected to be agreed to by the appropriations committees until late summer or fall. We are optimistic that DeCA will have sufficient funding to continue operations at a normal rate until decisions are made on structural changes to the resale system and other reforms. We also are optimistic that there be either a grand deal, a continuing resolution, or other mechanism to ensure that we do not have a Government shutdown over failure to reach a deal as took place in the Fall of 2013.

At each step along the way, the ALA, along with our valued associates in The Coalition to Save Our Military Shopping Benefits have been working with the Congress to ensure a thoughtful approach to continuing to gain efficiencies in the system without significant price increases for patrons. Cuts and changes to the system must not be made ahead of the system's ability to absorb them and without increasing prices and diminishing the benefit. Exchanges must continue to be empowered to control costs and generate revenue and allow open access to legal products enjoyed by the rest of American citizenry. This effort has been underway for five years and is ongoing. We will continue to educate policy makers in the Administration and in the Congress at each step in the process and membership involvement and commitment is key.

On June 10, ALA members assembled with elected representatives and Administration officials in the Rayburn Building on Capitol Hill to discuss the resale legislative developments and the political and policy context in which the resale debate is occurring. Also, all of these developments will be items of discussion at the ALA's Hawaii conference in August and at the Annual Convention that will be held in Washington, D.C., in October.



Patrick B. Nixon
President, American Logistics Association




WASHINGTON UPDATE


Budget fight threatens military pay raises
The Hill
Democrats and Republicans are locked in a budget fight that could keep the military from receiving expected pay raises next year.
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Will Obama really veto defense authorization bill?
Military Times
The fate of the usually bipartisan defense authorization bill could hinge on the political fight over spending on nonmilitary programs next year.
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Work: No sequestration 'pretty certain'
Defense News
Deputy Defense Secretary Bob Work believes a budget deal will be reached to avoid sequestration levels of funding, good news to those in the defense industry who are nervously tracking the budget debate in Washington, D.C.
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Lawmaker: Veto threat undercuts US position in world
Military Times
The head of the House Armed Services Committee blasted President Barack Obama's threats to veto recent defense budget proposals as undermining national security efforts and emboldening international adversaries looking for U.S. weakness.
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Notifications start going out to federal employees affected by data breach
Stars and Stripes (tiered subscription model)
A message from DOD's chief information officer sent to U.S. personnel in Japan said OPM has begun notifying about 4 million federal civilians who may have been victims of the breach.
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Military retirement changes could cut into new, old troops' benefits
Defense One
In an interview, Armed Services Committee Chairman John McCain told National Journal that he has been waiting almost 30 years to modernize the compensation of military personnel. He considers this year's proposed changes in retirement benefits to be one of the most significant parts of the Defense bill.
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Leadership openings an opportunity for Carter
Defense News
Ash Carter is on a clock. It's the widely acknowledged truth about his time as secretary of defense — a new president takes office in January 2017, likely bringing along a handpicked new leader for the Pentagon.
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MARK YOUR CALENDAR

Specific information on upcoming ALA events is posted regularly on the ALA website. To learn more about each event, please click the following links:

Date Event
June 26 Europe Chapter Charity Golf
Oct. 26-28 68th Annual Convention


COALITION UPDATE


Plan to privatize commissaries killed; 'couples BAH' cut survives
Stars and Stripes (tiered subscription model)
The Senate voted to kill a plan hatched by its armed services committee to privatize five large commissary stores to test the concept of commercial grocers running base stores to save defense dollars. But as the Senate version of the fiscal 2016 defense authorization bill moved toward a final floor vote late Thursday, amendments to block other initiatives to curb compensation were denied consideration. Only a modest number of amendments among hundreds drafted got up-or-down votes.
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Congress divided on future of commissary
Military Officers Association of America (MOAA)
The House and Senate approved their versions of the defense bill, and they don't see eye to eye on the commissary. Senate lawmakers cut $322 million from the commissary budget. A cut this big will lead to increased prices, reduced operating hours and days of operation, and a reduction in store staff. As Vice Chairwoman of the Senate Appropriations Committee, Senator Barbara Mikulski, rejected the commissary cut and provided full funding. House lawmakers rejected the cuts and included full funding for the commissary in the budget. MOAA thanks Senator Jim Inhofe, R-Okla., and Mikulski, D-Md., for leading the charge to prevent privatization of commissaries.
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'Odd Couple' champions commissary
Air Force Sergeants Association (AFSA)
One would not immediately associate staunch Republican Senator James Inhofe, R-Okla., with proud Democratic Senator Barb Mikulski, D-Md., on many issues. However, given the importance of commissaries as part of nonpay compensation, the two came together for what AFSA believes is a very common sense amendment to the Senate Armed Service Committee version of the National Defense Authorization Act. Related specifically to the commissary issue is AFSA's membership in The Coalition to Save Our Military Shopping Benefits. Along with some of our VSO friends, many business partners outside the Veterans community that AFSA would not otherwise partner with also belong to this group. We invite you to check them out: Save Our Benefits.
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Senate passes NDAA despite spending controversy
Fleet Reserve Association (FRA)
The Senate approved its version of the FY 2016 National Defense Authorization Act despite a Presidential veto threat and a partisan disagreement over spending. The House and Senate versions bypass sequestration spending limits on the Defense budget by shifting an extra $38 billion into the emergency war fund, which is not included as part the general DoD budget. Only a small number of floor amendments were considered. The Senate approved an FRA-supported amendment to halt the privatization of five stateside commissaries, but deferred other amendments that would advance FRA's legislative agenda.
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Losing faith because of budget impasses
Association of the United States Army (AUSA)
Lasting scars to our nation's national security are forming because of the continued political stalemate over spending priorities, including our financial commitment to defense. While some view the tug-of-war over the budget as a game of political brinksmanship, there are consequences from leaving the military adrift and undirected. Good people are deciding to leave our military because they have lost confidence in the government's commitment to their future. A generation of warriors now hear a constant drumbeat of complaints that taking care of soldiers and their families has become too expensive.
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AAFES offers good jobs for military dependents
NAUS Weekly Update
Day-to-day living is challenging for transient military spouses with children, who suffer an unemployment rate of 30 percent. Nearly 17 percent of approximately 35,000 Exchange associates identify themselves as military spouses. The Army and Air Force Exchange Service spouse continuity and preference programs allow spouses and domestic partners to build a career alongside their service members with each relocation. Complete details on how to apply for a career with the Exchange, along with a listing of current available opportunities, are available at the Exchange Employment website.
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COMMISSARY ANNOUNCEMENTS

Commissary Web Posts

The following commissary items were posted to the ALA Website between 10 AM, June 18, 2015 and 10 AM, June 25, 2015:

PROMOTIONS:
- DP #15, Alaska Promotion & Shipper/Pallet/OTB Quantities.
- Holiday Chill/Freeze/PPM, Far East & Alaska Quantities.
- Dry Grocery, Far East & Alaska Quantities.
- Cookies/Crackers/Fruitcakes, Far East & Alaska Quantities.
- Ham Seasonal Program, Far East & Alaska Quantities.
- Severe Weather, Far East & Alaska Quantities #2.

NOTICES TO TRADE (NTT)
None Received.

MISCELLANEOUS:
- Adds/Changes/Deletes, Week 15-26.
- CRV Values as of June 21, 2015.




COMMISSARY NEWS


The big changes sweeping the food industry
National Center for Business Journalism
Earlier this spring, Fortune Magazine looked at The War On Big Food. It noted that major packaged food companies lost $4 billion in market share alone in 2014, as shoppers ignored the center aisles of grocery stores in favor of fresh and organic products. But it isn't just a switch from packaged to fresh: Consumers are rethinking how they eat, dine and shop.
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Kroger expanding e-commerce efforts
Food Business News
The Kroger Co. seeks to fuel continued growth by expanding its use of digital technology. Less than a year after acquiring Vitacost.com Inc., an online retailer of natural and organic products, the Cincinnati-based supermarket chain is leveraging the company's e-commerce expertise to test and launch new platforms. In the Denver market, Kroger has introduced a new web site with its King Soopers division.
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Top consumer brands pledge to halve food waste by 2025
Reuters
The world's top food and drink companies have promised to halve the food they waste by 2025, seeking to preempt government regulation prompted by concern about the environmental, economic and social costs of such inefficiency.
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Robot grocery store gives high-tech upgrade to food shopping
Fox News
No more long lines at the grocery store — the future of food shopping is getting a high-tech upgrade. Des Moines, Iowa, is planning to build a first-of-a-kind robotic grocery store as an experiment to offer food and necessities to locals anytime at their convenience. A partnership between the nonprofit Eat Greater Des Moines and the business equipment firm Oasis24seven will see an automated, vending machine-style unit come to the area.
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Genetically modified salmon: Coming to a river near you?
NPR
While the debate over whether to label foods containing GMO ingredients plays out across the country, another engineered food has long been waiting to hit grocery stores: Genetically modified salmon.
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Researchers call on government to drop restrictions on total fat consumption in Dietary Guidelines for Americans
Tufts University, Health Sciences Campus via News-Medical.Net
In a Viewpoint published in the Journal of the Medical Association, researchers from the Friedman School of Nutrition Science and Policy at Tufts University and Boston Children's Hospital call on the federal government to drop restrictions on total fat consumption in the forthcoming 2015 Dietary Guidelines for Americans.
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European deal creates US grocery Giant
The Associated Press via ABC News
The owner of Stop & Shop and Giant will tie up with the parent company of Food Lion, creating a $29 billion grocer that will be in a stronger position to compete with Wal-Mart and other discount retailers.
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INDUSTRY NEWS


Tablet systems replace registers, satisfy sellers
St. Cloud Times
Basic facets of trade have stayed the same for thousands of years. But ever-developing computer technology is changing transactions. Many now happen through tablets — a pleasing opportunity for some local retailers.
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The 10 biggest retailers in the Fortune 500
Fortune
Many chains, like the Gap and J.C. Penney, fell down several notches, while discounters, like TJX Cos, parent of Marshalls and T.J. Maxx, and Dollar General, grabbed market share.
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Where do millennials love to shop? Hint: It's based in Bentonville, Arkansas
Advertising Age
What's the hottest big retailer with millennials? Wal-Mart. The reason may be its investment in e-commerce and mobile, or it could be that its low prices resonated during the economic downturn. Or it could be Tommee Tippee baby bottles (read on).
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Welcome back, Wal-Mart greeters
The Wall Street Journal (tiered subscription model)
Wal-Mart Stores Inc. is keeping a closer eye on the front door. Three years ago, the retailing giant moved its "greeters" away from entrances in many stores so they could double-duty directing shoppers to open registers or tidying shelves. Now, it is experimenting with moving them back, in part to deter theft.
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American retail, as we know it, is dying a slow and painful death
Business Insider
Gap once ruled the retail world. But today, America's largest apparel retailer is closing a quarter of its stores and laying off hundreds of workers after disappointing sales. Gap's closures are indicative of a larger trend in American retail.
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Former Wal-Mart executive buys stake in hardware store Gracious Home
The Wall Street Journal (tiered subscription model)
A former Wal-Mart executive is hoping to breathe new life into Gracious Home, where New Yorkers have come for 50 years to buy $1,000 Miele vacuum cleaners, $300 Nespresso coffee makers and $20 Olympia tool sets.
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How Lord and Taylor, Urban Outfitters entice you to share your data
Fortune
Retail chains and large department stores are teaming up with tech startups to get consumers' data. So far, they say, customers don't mind.
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Gap's plan to win you back: Fix the fashion
The Washington Post (tiered subscription model)
Gap's plan for a comeback largely is centered a simple premise: It needs to make more desirable, fashionable clothes.
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Reynolds American completes Lorillard acquisition
CSP
Reynolds American Inc. has completed its $25.9 billion acquisition, first announced in July 2014, of Lorillard Inc., as well as related divestiture transactions. As a result of the acquisition, Lorillard is a wholly owned subsidiary of Reynolds American, and former Lorillard shareholders will own approximately 15% of Reynolds American's common stock.
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TRENDING ARTICLES
Missed last week's issue? See which articles your colleagues read most.

    Bird flu leads to cheaper chicken in US (The Associated Press via CNBC)
We can never thank our veterans enough (The Washington Post)
A secretive trade group is regulating what's in your food (The Huffington Post)
No store left behind: Turning around your high-shrink locations (NRF)
Inhofe, Mikulski praise passage of amendment protecting commissary benefits (Inhofe.Senate.gov)

Don't be left behind. Click here to see what else you missed.


C-STORE NEWS


CrossAmerica to acquire One Stop convenience-store chain
CSP
CrossAmerica Partners LP has entered into a definitive agreement to acquire the One Stop convenience-store network based in Charleston, West Virginia.
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New Convenience Store Roundup for May 2015
CSP
This edition of New C-Store Roundup features new convenience-store openings, sales, acquisitions and store closings with listings for the month of May 2015.
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How CVS' acquisition of Target's pharmacies could threaten C-stores
CSP
In a deal that will affect both the convenience-store and drug-store channels, CVS Health Corp. and Target Corp. have announced that they have entered into a definitive agreement for CVS Health to acquire Target's pharmacy and clinic businesses for approximately $1.9 billion.
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Infographic: Tips for C-stores to 'leverage their locale'
CSP
Convenience-store shoppers' needs vary depending on whether they are shopping in the city versus the suburbs, according to General Mills Convenience & Foodservice, which conducted a survey to learn more about usage and desired offerings among urban, suburban and rural convenience-store shoppers.
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Career, corporate moves at Circle K, Gate, Pantry, Pilot Flying J, RaceTrac, 7-Eleven, more
CSP
The staff of CSPedia, CSP Business Media's online encyclopedia of convenience-store chains, gathers news and insights and updates the listings for the nearly 500 retailers in its database on a daily basis. CSPedia delivers a monthly summary of these reports, often news not yet announced publicly, to its subscribers. Here is a collection of some of the news and people updates from May 2015.
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MWR NEWS


North Carolina: The rest of the story: Pool's closure leaves swimmers hot
The Fayetteville Observer
Jeers to Fort Bragg's Morale, Welfare and Recreation aquatics department.
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Missouri: FMWR ready to make summer sizzle with family activities
Fort Leonard Wood Guidon
As much as your kids will tell you they can't wait for summer, the words "I'm bored," inevitably cross their lips — sometimes sooner than you think. While children enjoy the freedom that comes with summer, they still like to have a little structure to their fun. Children of all ages have the opportunity to participate in a variety of healthy, fun and educational activities this summer with Family, Morale, Welfare and Recreation. Following are activities that will help your Family take full advantage of summer.
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Missouri: Volunteers give back more than $2 million in service
Fort Leonard Wood Guidon
The U.S. Army Volunteer Corps presented a ceremonial check for $2,251,055 to Col. Andy Herbst, U.S. Army Garrison Fort Leonard Wood, Missouri, commander and Command Sgt. Maj. Tyson Goolsby, USAG Fort Leonard Wood command sergeant major. The check, presented at the annual Installation Volunteers Corps Recognition Awards Ceremony June 11 at Pershing Community Center, represented the monetary value of services volunteers provide to the installation.
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