A district can also create Special Reserve Funds that allow the school board to set money aside for various reasons, including anticipated expenses such as benefits for retired employees. The district retains the right to transfer that money—at will—back to the fund or funds it came from.

Some districts also establish separate proprietary and fiduciary funds. Proprietary funds track enterprise activities for which the district charges a fee to external users. For example, a district could provide professional development services to teachers outside the district and charge for that. Fiduciary funds are assets the district holds on behalf of others, such as pension funds for employees. These cannot be used to support district programs.

Each fund is self-balancing and has its own financial statement with a beginning balance, list of revenues and expenditures, and ending balance. The balances for all funds are shown on a district’s financial report. A district can temporarily borrow from one fund to supplement another. However, it generally must repay such loans by the end of the same fiscal year. (If the loan is made within 120 days of the end of the fiscal year, it does not have to be repaid until the following year.) In general, the California School Accounting Manual recommends that a district transfer funds as little as possible in order to simplify financial record keeping and reporting.