Policy 6022

Preamble: Building Long-Term Fiscal Health through Cash-on-Hand Management

When the La Center School District Board of Directors actively pursues policies, procedures, and guidance to maintain a strong financial position, the long-term educational stability, operational continuity, and community trust will be the outcomes.  

In alignment with the guidance from the Washington State Auditor’s Office (SAO), the La Center School Board of Directors will maintain an Ending Fund Balance (EFB) equal to a minimum of 45 days (12.3%) and a maximum of  60 days (16.4%) of the total General Fund for any given fiscal year.  The EFB can be found in the Budget Status Report for the La Center School District. 

Understanding that it may take 5-8 years to reach the 45 day (12.3%) threshold, budgets will be crafted with the intent of steady progress toward this goal. Annual budget targets during this period will prioritize a positive trajectory towards the goal of 45 days (12.3%) while ensuring that essential instructional services are not compromised. Flexibility is granted to the Superintendent and Board to adjust the pace of restoration based on state funding levels, enrollment fluctuations and emergency capital needs.

This metric reflects the number of days (percent of general fund budget) the District could continue normal operations using available cash and investments if no additional revenues were received. According to SAO benchmarks, maintaining at least 60 days (16.4%) of cash on hand is a sign of strong financial health for a public school district. The La Center Board of Directors believes there are systemic barriers within the state of Washington to achieving the expected 60 days (16.4%) and, therefore, established the minimum at 45 days (12.3%).

Purpose

The purpose of this policy is to maintain a prudent EFB that supports operational stability, protects the District from unforeseen revenue shortfalls, enables timely payroll and vendor payments, and positions the District to take advantage of opportunities without compromising educational services.

This approach aligns with generally accepted accounting principles (GAAP), Governmental Accounting Standards Board (GASB) Statement No. 54, and applicable state statutes (RCW 28A.505).

Fund Balance Definition

Ending Fund Balance will be calculated by subtracting Total Expenses from Total Revenues (including taxes) plus monies in Targeted Savings Account buckets.  

Policy Overview

The Board recognizes that the EFB may vary, even wildly, throughout the fiscal year.  The Board directs the Superintendent or their designee to manage expenses in a way, throughout the fiscal year, that is in alignment with the budgeted EFB.  

If an annual budget is proposed by the Superintendent that shows an EFB that is less than 45 days (12.3%), the budget must be accompanied by a detailed plan to get the EFB to the 45-day (12.3%) threshold.  The Board acknowledges that certain fiscal environments may require a 5-8 year duration to achieve full restoration of the Ending Fund Balance. This plan shall establish annual incremental milestones to ensure steady progress toward the 45-day (12.3%) threshold without jeopardizing the district’s educational goals. 

Restricted Savings Account (RSA)

In the normal course of budgeting for annual District expenses, things like regular maintenance, technology purchases, etc., will be accounted for.  

Sometimes, unplanned expenses (Ex, A/C unit failure, roof failure, etc.) will be incurred.  Those expenses are expected to be funded by maintenance or other General Fund budget lines.  

Outside of these regular planned/unplanned expenses, the District will have known long-term planned expenses (some examples include but are not limited to; ELA Curriculum Purchase, Technology, end-of-life track repair/replacement, end-of-life vehicle replacement, etc.). 

For these long-term planned and unplanned expenses, the District will set up a Restricted Savings Account (RSA) in the accounting Chart of Accounts.  The EFB will include any dollars in the RSA.  The RSA will be presented in the annual budget process and shall never be zero dollars.  Because the monies in the RSA accounts are targeted for expenditures and projects, the Superintendent must seek Board approval for spending this money on items outside of the scope previously approved.  Board approval will come from a public Board meeting and shall be approved by a majority vote of the Directors.  

Legal References:
RCW 28A.320.070 – School district as self-insurer; authority
RCW 28A.505 – School Districts’ Budgets
RCW 28A.505.130 – Budget requirements for balancing estimated expenditures

 

Cross References:
6020 – System of Funds and Accounts
6040 – Expenditures in Excess of Budget

 

Discretionary 2.11
La Center School District
Adoption Date: 3.24.26