Revolving Fund rates are established based on an approved operating budget and are set in an attempt to balance by year end. What is the typical end-of-year balance target?

• A. Surplus
• B. Deficit
• C. Balanced with carryover
• D. Zero

Answer: (D)

The idea behind revolving fund rates is to cover the ongoing operating costs within the year, using revenues to balance the year’s activities. The typical end-of-year target is zero because the fund should reflect only the current year’s transactions and not retain excess cash. A surplus would mean unspent funds that aren’t needed for the year and should usually be returned or reallocated; a deficit would indicate revenues fell short of expenses; carrying a carryover balance would reserve funds for the next year, which isn’t the standard goal in this setup. Ending the year with zero ensures the fund resets each year and starts fresh with the budgeting and rate-setting for the next cycle.