Transferring Excess Funds between Child Nutrition Programs

This management bulletin provides guidance on the allowability of transferring excess funds in the Child Nutrition Programs (CNP), i.e., the Child and Adult Care Food Program (CACFP), School Nutrition Programs (SNP), and Summer Food Service Program (SFSP). This bulletin also includes a definition of excess funds for each program. This management bulletin supersedes the California Department of Education (CDE) Nutrition Services Division (NSD) Management Bulletin CNP-11-2018.

Background

U.S. Department of Agriculture (USDA) Policy Memorandum SP 06-2014, CACFP 03-2014, SFSP 06-2014: Available Flexibilities for CACFP At-risk Sponsors and Centers Transitioning to SFSP (November 12, 2013) states:

SFSP funds may be used to support any Federal Child Nutrition Program. A sponsor’s excess funds from either CACFP or SFSP may be used in its operation of either program, or any other CNP. For example, if, at the end of the school year, excess reimbursement from CACFP at-risk afterschool operations exists, those funds may be allocated towards allowable costs in SFSP [FNS Instruction 796-2, Financial Management–Child and Adult Care Food Program].

However, USDA SFSP administrative guidance to the CDE requires sponsors to first exhaust their SFSP funds on their summer meal operations to ensure a robust summer program before allocating excess SFSP funds to another CNP.

The following federal and state regulations and guidance on transferring funds in CNP still apply:

NSD Management Bulletin SNP-27-2015, CACFP-07-2015: School Food Authorities (SFA) Revenue and Expenditure requires SFA participating in both the SNP and the CACFP to track their respective revenues and expenditures separately.

Title 7, Code of Federal Regulations (7 CFR), Section 210.14(a), Nonprofit Food Service specifies that all revenues must be used solely for the operation or improvement of a food service program. As a result, program operators may not transfer excess funds to nonprogram operations.

California Education Code Section 38101(d), states “Charges to, or transfers from, a food service program shall indicate when the charge or transfer was made and shall be accompanied by a written explanation of the purpose of, and basis for, the expenditure.”

Defining Excess Funds in Child Nutrition Programs

The term “excess” is used differently in various federal guidance. The NSD uses the term “excess funds” to describe excessive balances in any of the CNP accounts. Unused reimbursements—revenues in excess of expenditures—are referred to as net cash resources (NCR), reserves, or operating capital.

SNP: Per 7 CFR, Section 210.14(b), program operators shall limit their NCR to an amount that does not exceed three months’ average expenditures in the nonprofit school food service account. Any amount over this limitation is considered excessive.

CACFP: As required by the Food and Nutrition Services Instruction 796-2, Revision 4, the NSD must “determine what constitutes an excessive nonprofit food service program balance.” The NSD uses the same definition as the SNPs to define an excessive balance for the CACFP—an amount that exceeds three months’ average expenses.

SFSP: Per clarification on the final rule for Simplification of Cost Accounting and Other Actions to Reduce Paperwork in the SFSP, effective July 31, 2018, the CDE is required to ensure that a program operator’s unused reimbursements do not exceed one month’s average expenditures for sponsors only operating during the summer and three month’s average expenditures for sponsors operating CNPs throughout the year.

Transferring Funds From Child and Adult Care Food Program or Summer Food Service Program to Other Child Nutrition Programs

Although it is highly encouraged to use excess funds to improve or expand the nonprofit school food service for the benefit of program participants within that program, or allocate these as start-up funds for the following year, excess funds in the CACFP or SFSP may also be used for allowable costs related to other CNPs operated by the agency. Note, program operators with excess funds in the CACFP or the SFSP may transfer funds only for costs that are allowable within the CNP that receives the transferred excess funds.

Here are two examples to better illustrate program operators with excess funds:

• A program operator with excess funds in the SFSP transfers excess funds to the SNP for the purchase of a transport van for the SNP. Unlike the SFSP, the purchase of a vehicle is allowable in the SNPs (with prior approval from the CDE). In this example, then, the transfer of the excess funds from the SFSP to the SNP is permitted.

• A program operator with excess funds in the CACFP transfers excess funds to the SFSP for the purchase of equipment used solely for the SFSP. Since equipment purchases for the SFSP are unallowable regardless of the original funding source, this transfer of excess funds from the CACFP to the SFSP is prohibited.

In order to help ensure the transaction meets allowability and documentation requirements, program operators should first contact the NSD Specialists for the programs involved. This can be done as part of the budget approval process.

Transferring Funds From School Nutrition Programs to other Child Nutrition Programs

There is no guidance regarding the transfer of excess funds from the SNPs. In the absence of guidance or regulations, such transfers are unallowable.

However, it is possible for program operators to use SNP funds to purchase items of cost, such as equipment, for use in the operation of more than one CNP. For example, equipment needed for the SNPs and the CACFP could be paid solely from SNP funds.

As a best practice, it is recommended that equipment being purchased for use in more than one program be prorated between all programs benefitting from the equipment.

Program Requirements

Program operators should note the following:

• SNP and CACFP operators must track the respective revenues and expenditures of each program separately.

• The transactions only apply to excess funds as previously defined, not to NCR.

The NSD encourages CNP Operators to evaluate all programs regularly to avoid unnecessary financial support from nonfederal funding sources, i.e., the General Fund.

Contact Information

If you have any questions regarding this subject, please contact your CACFP Specialist.

The CACFP Specialist Contact List is located in the CACFP Child and Adult Food Care Program Contact List. You can also contact the CACFP Office Technician (OT) by email at CACFP@cde.ca.gov.