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Unreserved and Reserved Fund Policy

Unreserved and Reserved Fund Policy

Sno-Isle Libraries Board of Trustees Policy

Purpose

Washington State Law (RCW 27.12.210) authorizes the Board of Trustees to undertake all actions necessary for the orderly and efficient management and control of Sno-Isle Libraries’ finances. In accordance with the Budgetary, Accounting and Reporting System for Library Districts (BARS), all beginning and ending cash and investments must be classified as either “Unreserved” or “Reserved”.
This policy establishes guidance for the establishment and administration of Sno-Isle Libraries’ reserved and unreserved cash and investments.

Scope

The use of reserved and unreserved funds is an essential element of comprehensive fiscal planning and risk management. Resources are routinely retained to address anticipated and unanticipated economic circumstances. Such economic circumstances include, but are not limited to:

  • Cash flow requirements
  • Economic uncertainties including downturns in the local, state or national economy
  • Local emergencies and disasters
  • Loss of a major revenue source
  • Significant anticipated or unanticipated operating or capital expenditures
  • Uninsured losses
  • Future capital needs or projects

Sno-Isle Libraries will classify all cash and investments as “unreserved” unless specific restrictions on the use of the resources are imposed by the Board of Trustees or external party. Cash and investments with a specific purpose or use restriction imposed on them will be classified as “reserved”.

Implementation

Guidelines
Funds may be established from time to time by the Board of Trustees as required to manage financial risk and achieve short and long-term financial objectives. Funds will be designated by the Board of Trustees as either “Unreserved” or “Reserved”.

  1. Unreserved cash and investments will be managed within either the General Operating Fund or Reserve Fund. Additions and withdrawals to the Reserve Fund will typically be directed by the Board of Trustees through the adoption of the annual budget and may be adjusted during the course of a year by this governing body. All investment earnings from the Reserve Fund will be credited to the General Operating Fund, unless otherwise directed by the Board of Trustees.
  2. Reserved cash and investments are limited in use to a designated purpose as defined by the Board of Trustees or interlocal agreement through a binding formal action (resolution) and requires a similar formal action to remove them. Transfers and disbursements of Reserved cash and investments must comply with all restrictions established at inception. Investment earnings from Reserved investments will be retained within the named fund provided there are no terms or conditions stipulated in a resolution or interlocal agreement directing alternative treatment.

Reserved Funds
The Board of Trustees has established the following Reserved funds. Transactional activities involving these funds are currently governed by the terms and conditions specified within respective annexation and/or interlocal agreements.

  • Darrington Partial County Library District Reserve Fund
  • Edmonds Library Building Fund
  • Mill Creek Library Building Fund
  • Lake Stevens Library Building Fund
  • Lynnwood Library Building Fund

The establishment of new Reserved funds must be authorized by the Board of Trustees though a binding formal resolution.

Unreserved Funds
The Board of Trustees has established two Unreserved funds – the General Operating Fund and the Reserve Fund. The General Operating Fund is used to support the daily operations of the Library. The Reserve Fund will be used for purposes as established by the Board of Trustees from time to time.

The Board of Trustees has established the following accounts within the Reserve Fund.

  • The Emergency Reserve is established to provide adequate cash during unforeseen events that may substantially disrupt library operating cash flow. The account balance will be targeted at 60 to 90 days of budget operating expenditures excluding collection expenditures. The balance of this reserve will be reviewed for sufficiency as part of the annual budget process.
  • The Executive Director or designee may authorize withdrawals from the Emergency Reserve account upon notifying the Board of Trustees of the declared emergency condition.
  • The Self-Insurance Reserve is established to mitigate risk of extraordinary self-insured medical claims, legal claims and settlements, or other uninsured liabilities. The account balance will be reviewed for sufficiency during the annual budget process.
    The Executive Director or designee may authorize withdrawals from the Self-Insurance Reserve account as follows:

    • For claims or settlements with employees or former employees, the Executive Director may authorize payment up to $25,000 on any single claim. Any payment exceeding this amount must be authorized by the Board of Trustees.
  • For all other claims or settlements, the Executive Director may authorize payment up to $100,000 on any single claim. Any payment exceeding this amount must be authorized by the Board of Trustees.
  • The Unemployment Compensation Reserve is established to mitigate the risk of self-insurance for unanticipated unemployment costs. The balance of this reserve will be reviewed for sufficiency as part of the annual budget process. Additions and withdrawals from this fund other than as approved in the adopted budget must be authorized by the Board of Trustees.
  • The Levy Rate Stabilization Reserve is established to manage variability in annual property tax revenues and cost of providing library services. The balance of this reserve will be reviewed as part of the annual budget process. Additions and withdrawals from this fund other than as approved in the adopted budget must be authorized by the Board of Trustees.
  • The Vacation & Sick Pay Liability Reserve is established to mitigate a potential liability should the library be required to pay employees for the value of their accumulated vacation and sick pay. The balance of this reserve will be maintained at not less than 60% of the year-end estimated vacation and sick pay liability as annually reported on the Schedule of Liabilities (Sch. 09) to the State Auditor’s Office. The Executive Director will recommend periodic adjustments to the Board of Trustees as part of the annual budget process. Additions and withdrawals from this fund other than as approved in the adopted budget must be authorized by the Board of Trustees.
  • The Building Reserve is established for construction or major maintenance that is essential towards providing safe and welcoming community library facilities for customers and employees or safeguards library assets from further damage or loss. This reserve may be utilized to fund projects such as new facility development and building and grounds improvements as authorized by the Board of Trustees.
  • The Equipment Reserve is established for investments in technology or vehicle acquisitions. This reserve may be utilized to fund technology lifecycle refresh projects, new vehicle acquisition, or other projects. Additions and withdrawals from this fund other than as approved in the adopted budget must be authorized by the Board of Trustees.
  • The Land Acquisition Reserve is established for funding costs of securing or otherwise purchasing real property, acquiring land options, or as “bridge financing” in support of real property acquisition(s). Additions and withdrawals from this fund other than as approved in the adopted budget must be authorized by the Board of Trustees.

Annual Evaluation and Adjustment of Financial Reserve Amounts
The Executive Director or designee will provide the Board of Trustees with an annual summary of all Reserve Fund account balances and recommendations for any proposed changes to Reserve Fund amounts. The Board of Trustees will consider such changes, if any, in conjunction with the review and adoption of the annual Sno-Isle Libraries’ budget; however, changes may be considered at any Board of Trustees meeting.

Policy History

Date approved: 10/2019
Next review date: 10/2023
Adopted: 2012

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