Excess Net Cash Resources—Update

School food authorities (SFA) participating in federal School Nutrition Programs must observe both state and federal limitations on the use of nonprofit school food service account funds. This management bulletin (MB) supersedes MB SNP-06-2020 on Excess Net Cash Resources (NCR), by increasing the existing NCR limitation from three months to six months average operating expenditures.

Limits on Net Cash Resources

Federal regulations state that SFAs must limit their NCR to an amount that does not exceed three months of average operating expenditures for its nonprofit food service account (cafeteria fund), or other amount established by the California Department of Education (CDE). NCR are defined as all monies that are available; or have accrued to, an SFA’s cafeteria fund, less cash payable. Monies may include, but are not limited to, cash on hand, cash receivable, earnings on investments, cash on deposit; and the value of stocks, bonds, or other negotiable securities.

In an effort to provide flexibility to SFAs affected by various natural disasters and recovery from the COVID-19 pandemic, beginning July 1, 2022, the CDE is increasing the NCR limitation to six months average operating expenditures, until further notice. This means that SFAs that had six months or more excess NCR at fiscal year end, will be required to enter into a budget agreement with CDE by December 31 of the following fiscal year.

SFAs should closely monitor and calculate their NCR throughout the school year. The CDE created Form SNP-57 NCR Calculator and instructions which are available in the Download Forms section of the Child Nutrition Information and Payment System to assist with the calculation. If SFAs have a balance in excess of six months, they must contact the Resource Management Unit (RMU) by email at SNPBA@cde.ca.gov to obtain an approved budget agreement and spend down the excess funds.

Federal regulations require the CDE to ensure that SFAs are in compliance with the requirements to limit NCR. The RMU annually reviews data from SFA’s prior year Unaudited Actuals submitted to the CDE School Fiscal Services Division. If excess NCR are identified, the RMU will contact these SFAs to initiate a budget agreement. The RMU will continue to monitor all active budget agreements annually until compliance with NCR is met.

If SFAs fail to comply with NCR requirements, the CDE may require SFAs to make improvements to the food program. In addition, the CDE may make adjustments in the Child Nutrition Programs rate of reimbursement if the SFA continues to be out of compliance with NCR.

Cafeteria Equipment Reserve

Cafeteria fund reserves, also known as cafeteria equipment reserves or deferred maintenance are not allowed. California Education Code (EC) Section 38102 allowed this in the past, however, Senate Bill 81 repealed this section of EC in the 2013–14 regular session.

Additional Cafeteria Fund Guidance and Resources

Due to the complexity of cafeteria fund oversight, the CDE Nutrition Services Division (NSD) has issued a series of MBs about the laws and regulations governing revenues accruing to and expenditures made from cafeteria funds and accounts. Additional MBs regarding allowable and unallowable expenditures from the school food services cafeteria funds and accounts can be found on the CDE Cafeteria Fund Guidance web page at https://www.cde.ca.gov/ls/nu/sn/cafefundguide.asp.

Contact Information

If you have any questions regarding this subject, please contact the RMU by email at SNPBA@cde.ca.gov.