Policy Memo 185

DOH-CACFP: Number 185 (03/16)

TO: All CACFP Sponsoring Organizations

FROM: Dwight LaDu, Director, Child and Adult Care Food Program

SUBJECT: Excess Fund Balance in Nonprofit Food Service Programs

Purpose and Scope

This policy memo defines the amount that constitutes an excessive balance in nonprofit food service program funds, and provides sponsors with guidance to reduce their excess funds.

Background Information

CACFP is required to evaluate the budgets of all sponsors participating in the Program. These budgets must demonstrate that the institution is managing CACFP funds according to the requirements of 7 CFR Part 226, 2 CFR Part 200, and the U.S. Department of Agriculture, Food and Nutrition Service (FNS) Instruction 796-2, Revision 4.

All sponsors agree to operate a nonprofit food service. Nonprofit food service includes all food service operations conducted by the institution principally for the benefit of enrolled children and adults in care. All Program reimbursement funds are used solely for the operation or improvement of the food service. Sponsors are required to maintain an accounting system that documents all aspects of the food service, and identifies any funds retained. Food service account activity must be monitored to determine nonprofit food service status for all sponsors. The institution cannot transfer excess funds to non-Program operations.

CACFP defines an excessive nonprofit food service fund balance as an amount that exceeds three month's average reimbursement. Sponsors must be able to verify where this excess revenue is retained. If a sponsor's balance exceeds this excess balance threshold, they must submit a corrective action plan.

Corrective Action Plan

The corrective action plan must specifically address:

  1. how the sponsor will expend the majority of the reimbursement each month by improving or expanding the food service to prevent the accumulation of excess funds and
  2. the specific steps that will be taken to decrease the current excess of revenue over expenses, including specific purchases and costs.

A CACFP nutritionist can assist sponsors in identifying acceptable expenditures to address the fund balance. If CACFP approves an acceptable corrective action plan, the sponsor has six months to implement the plan and reduce the excessive nonprofit food service fund balance to three month's average reimbursement or less.

If the sponsor does not submit an acceptable corrective action plan or does not reduce the balance to three month's average reimbursement or less within six months, CACFP will determine that the sponsor is seriously deficient in their operation of CACFP, which may lead to termination and disqualification from the Program.

If at any time, CACFP determines that any part of the reimbursement has been spent on unallowable costs, the institution will be required to refund that amount to the non-profit food service account.

If you have any questions regarding this policy, please contact Sheri Alberti at 1-800-942-3858 option 2.