Revolving Fund

A revolving fund is a fund or account that funds an organization's continuing operations without any fiscal year limitation, because the organization replenishes the fund by adding money to replace the money that was spent from the account. Revolving funds have been used to support both government and non-profit operations.

In the case or revolving funds for a government project whose budget goes through annual parliamentary or other legislative appropriations that relate to a fiscal year, the unspent balance may lapse after the close of the fiscal year. In many cases, the lapsed fund balance is restored the next year by an reappropriation of that balance in next year's appropriation.

Within federal and state governments, laws establish revolving funds. When a revolving fund is established for carrying out specific activities, the fund will collect user payments for goods or services furnished by the government agency, and any costs of those activities are paid out of the same fund. In theory, if user fees are set correctly to recover costs, the balance in the revolving fund will bounce back to its initial level over time.

In the United States, revolving funds became popular during the 1930s when many of the large Government corporations were founded. Although the number of funds in recent decades has not grown, revolving fund for older government institutions continue to be used.