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Definition of Excess Fund Balance


Nutrition Services Division Management Bulletin
Purpose: Policy, Beneficial Information

To: Child and Adult Care Food Program

Number: NSD-CACFP-07-2011

Attention: Food Program Director

Date: September 2011

Subject: Definition of Excess Fund Balance in Nonprofit Food Service Programs

Reference: Title 7, Code of Federal Regulations Part 226.7(g); United States Department of Agriculture Food and Nutrition Service Instruction 796-2, Revision 3 part VI (D)

This Management Bulletin (MB) defines the amount that constitutes an excessive balance in nonprofit food service program funds, and provides institutions with guidance to reduce their excess funds.

Background

Pursuant to Title 7, Code of Federal Regulations (7 CFR) Part 226.7(g), the California Department of Education, Nutrition Services Division (NSD) is required to evaluate the budgets of all institutions participating in the Child and Adult Care Food Program (CACFP). These budgets must demonstrate that the institution is managing CACFP funds according to the requirements of 7 CFR parts 226, 3015, 3016, and 3019, and the U.S. Department of Agriculture, Food and Nutrition Service (FNS) Instruction 796-2, Revision 3.

As part of the requirements defined in FNS Instruction 796-2, Revision 3, the NSD must “determine what constitutes an excessive nonprofit food service program balance and the corrective actions an institution must take to reduce an excess balance.”

Definition of Excess Balance

The NSD defines an excessive nonprofit food service program fund balance as an amount that exceeds three months average expenses for the food service program. If an institution’s accounting system shows a profit for the food service program, that profit cannot at any time be greater than three months average expenses.

If an institution’s profit does exceed this excess balance threshold, the institution must develop a corrective action plan for proper use of excess funds. Pursuant to FNS Instruction 796-2, Revision 3, excess funds must be used to benefit program participants through improvement or expansion of the nonprofit food service program.

Corrective Action Options

The following are examples of acceptable methods to increase expenditures and reduce an institution’s excess fund balance:

If you have any questions regarding this MB, please contact the CACFP specialist assigned to your agency in the Child Nutrition Information Payment System (CNIPS). You will find a list of contact information for specialists in the Download Forms section of the CNIPS. You can also contact the Help Desk at 800-952-5609, option 6.

Questions:   Nutrition Services Division | 800-952-5609
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