Net Cash Resources and Excess Fund Balances
End of Year Fund Balance (Net Cash Resources)
Any positive balance remaining in the nonprofit food service account at the end of the school year must be carried over to the next school year as the beginning balance in the nonprofit food service account. Any negative balance in the account at the end of the year must be cleared by funds from non-federal sources, such as the general fund. A school food authority cannot carry a negative fund balance (Net cash resources) into the next school year. A negative fund balance exists when all net cash resources have been depleted, and the resulting negative balance constitutes a liability to the organization.
Excessive Fund Balance
To maintain the nonprofit status required for the food service account, the fund balance (net cash resources) of the account must not exceed three month's average expenditures at any time. The Excessive Balance (Net Cash Resources) Calculation Chart provides an explanation and examples of how to determine if the SFA has an excessive fund balance.
Resolving an Excess Fund Balance
If an excess fund balance occurs, the SFA must immediately take steps to reduce its net cash resources or have an ecceptable plan for using surplus net cash resources. Since program funds must be used only for program purposes, excess net cash resources must be reduced by improving the quality of food served or purchasing needed supplies, services, or equipment.
A plan must be submitted to the Child Nutrition Program Administration and provide the following:
- Explanation of how the SFA will reduce the fund balance (net cash resources) to an acceptable level within one year by improving the quality of food served or by purchasing needed supplies, service, or equipment.
- Explanation of what the SFA will do to ensure that an excessive fund balance (Net cash resources) will not occur in the future.
Special Guidance - Fund Balance
Allowing net cash resources to build up in the food service account for an extended period to save for a future project is unallowable. If the proposed expenditure project is a construction project, construction projects are typically not allowable.
Helpful Links - Net Cash Resources and Excess Fund Balances