Policy No.: 100.011
Resolution No.: RR104-22
Date Approved: 12/12/2022
Supersedes the following Resolutions & Policies: RR94-05

 

Policy

(Approved by the Board of Park Commissioners.)

Purpose:

The Metropolitan Park District of Tacoma (Metro Parks Tacoma) is accountable to its citizens for its use of public dollars. The establishment and maintenance of wise financial policies enables Metro Parks Tacoma’s officials to protect public interest and ensure public trust.

This Comprehensive Financial Management Policy incorporates past financial practices in defining the current policies to be used by Metro Parks Tacoma to meet its immediate and long term service goals and operate in a financially prudent manner. The individual policies contained herein serve as general guidelines for both the financial planning and internal financial management of Metro Parks Tacoma.

Comprehensive Financial Management Policy Outline:

I. Purpose

II. Policy Objectives

III. Financial Planning Policy

IV. General Budget Policy

V. Capital Improvement Planning & Budgeting Policy

VI. Cash Policy

VII. Expenditure Policy

VIII. Revenue Policy

IX. Investment Policy

X. Accounting, Auditing, & Financial Reporting Policy

XI. Debt Management Policy

XII. Current Budget Resolution

XIII. Policy Changes

Policy Requirements:

Section I.

The Board of Park Commissioners is charged with establishing the policy direction for Metro Parks Tacoma under Washington State law. Sound business practice and good government dictates that the Board establishes policies regarding the fiscal activities of Metro Parks Tacoma in accordance with applicable local, state, and federal laws and regulations.

Section II.

The objectives of the Comprehensive Financial Management Policy are as follows:

A. To guide the Board of Park Commissioners and management policy decisions having significant fiscal impact.

B. To set forth operating principles to minimize the cost of government and financial risk.

C. To employ balanced and fair revenue policies to provide adequate funding for desired programs.

D. To maintain appropriate financial capacity for bonded indebtedness for present and future needs.

E. To promote sound financial management by providing accurate and timely information on Metro Parks Tacoma’s financial condition.

F. To protect Metro Parks Tacoma’s credit rating and provide for adequate resources to meet the provisions of Metro Parks Tacoma’s debt obligations.

G. To ensure the authorized and legal use of financial resources through an effective system of internal controls.

H. To promote cooperation and coordination with other governments and the private sector in the financing and delivery of services.

Section III. Financial Planning Policy.

Financial Planning Policy. Metro Parks Tacoma (MPT) shall develop and update biennially a financial forecast for the General Fund and Enterprise funds that estimates fund resources and uses for the three biennia beyond the current biennium. This forecast will provide MPT’s decision makers with an indication of the long-term fiscal impact of current policies and budget decisions. It is the goal of MPT to achieve a strong financial condition with the ability to:

• Adjust to local and regional economic impacts
• Adjust efficiently to the community’s changing service requirements
• Effectively maintain and improve MPT’s infrastructure

A. To this end, the forecast should differentiate between revenue associated with one-time economic activities and revenues derived as a result of base economic growth. MPT financial planning should ensure the delivery of core services by assuring adequate reliance on ongoing resources in order to support continued MPT services during economic downturns.

B. The financial planning and subsequent budgeting for all funds will be based on the following principles:

1. Revenues should be budgeted in a conservative manner that allows for the greatest probability of collection. Expenditures should be budgeted to include all normally foreseeable costs.
2. Revenues should be forecast to consider comparable market rate factors, competition from other service providers, and will exclude one time resources. The expenditure forecast should include inflationary projections, and should include use of resources available from the state forecasting as well as economic forecasting available for Pierce County.

Section IV. General Budget Policy.

A. Budget Development Policies

1. These comprehensive financial management policies will be updated during each biennial budget cycle.
2. MPT will adopt a 24-month balanced budget. The balanced budget means budgeted expenditures will not exceed the estimated available resources of beginning fund balance plus new revenues for the budget period. Although revenue estimates are made only at the fund level, expenditure budgets are prepared at the department level for the purpose of administrative control. The adopted budget is for a 24-month fiscal period with annual financial reporting against the entire biennial budget.
3. The intent of the budget is that one-time as well as routine expenditures be financed with current resources.
4. The MPT budget will be developed with consideration given first to ongoing mission-led programs before adding new programs.
5. MPT will conduct public hearings to request public input to the budget process.
6. New proposals for ongoing services must be economically feasible, that is, revenue funding sources must be identified to cover continued maintenance and operations support.
7. Reinvestment in capital assets is a necessity to a going concern. Budget consideration must be given to the varying life cycles of assets and therefore must include major repair and replacement of capital assets.
8. The budget includes all anticipated resources and outlays for the biennium, including those funds for which appropriated budgets are not required. The budget will include estimates of the biennial portion of the continuing appropriations.

B. Reserve Levels. Adequate reserve levels are a necessary component of MPT’s overall financial management strategy and a key factor in measuring MPT’s financial strength.

1. MPT will strive to maintain a fund balance sufficient to meet its seasonal cash flow needs and allow for unexpected expenditures and/or revenue declines. A target of not less than 5% nor more than 10% of general fund biennial expenditures will be designated as fund balance for cash flow related to the cyclical nature of some revenues, such as property tax receipts. To reduce the fund balance to less than 5% or to increase it above 10% shall require a super-majority approval of the entire Board of Park Commissioners.

C. Basis of Budgeting. It is the intent of MPT to budget each fund on the basis of accounting used for financial reporting, full accrual or modified accrual.

1. In full accrual, revenues are budgeted when expected to be earned, expenses are budgeted when the related liability is expected to be incurred.
2. In modified accrual, revenues are budgeted in the period in which they are anticipated to be both measurable and available to finance expenditures of the fiscal period. “Available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are budgeted when the related liability is expected to be incurred.

D. Budget Amendments & Adjustments. The budget may be adjusted or amended during the biennium in order to address unanticipated needs, emergencies, or changes in work plan. Adjustments or amendments will occur through a process coordinated by Management & Budget.

1. Adjustments. The budget is adopted at the fund level with allocations made for administrative control. Reallocation of existing appropriations does not change the budget “bottom line.” From time to time there may be a need to shift allocations between line items, programs or even departments. If a category requires additional budget authority to cover unanticipated or increased costs, departments are encouraged to determine if a reallocation can be made from existing appropriation authority. As long as the total fund budget is not changed, the adjustment can be done administratively using the following procedures:

a. Adjustments between line items in a program can be authorized by the department director (ex: between Supplies and Advertising).

b. Adjustments between divisions within a department can be authorized by the department director if under $35,000, and authorized by the executive director if over $35,000 (ex: between Aquatics and Adult Athletics).

c. Adjustments between departments in a fund can be authorized by the executive director (ex: between Point Defiance Zoo & Aquarium and Northwest Trek, or between Management & Budget and Recreation & Community Services).

d. Adjustments between funds require Board approval.

2. Amendments. Formal amendment of the budget is required when a fund’s total budget changes. The change can either be when existing budget authority is moved between funds or when new budget authority is needed, such as MPT receiving additional grant funding. The amendment is done by Board-approved resolution and amends the expenditure appropriation and the related funding source.

Section V. Capital Improvement Planning and Budgeting Policy.

Capital Improvement Planning and Budgeting Policy. Capital improvement planning and budgeting polices will be accomplished by a separate policy adopted by the Board of Park Commissioners.

Section VI. Cash Policy.

A. The department of Management & Budget will develop, maintain, and constantly seek to improve cash management systems which ensure the accurate and timely accounting, investment, and security of all cash assets. Management & Budget will periodically update written cash handling procedures and distribute them to all departments.

B. Ongoing operations are funded from ongoing revenues. Accounting funds experiencing temporary cash deficits may obtain Board-approved interfund loans at interest rates determined by current outside investments.

Section VII. Expenditure Policy.

A. The Management and Budget Department will maintain a system for monitoring MPT’s budget performance. This system will provide the Board with quarterly financial information at the fund level, and will provide the Executive Director and department directors with monthly information at the fund and department level.

B. Department heads are responsible for managing their budgets within the total appropriation for their department. Expenditures will also be within current resource projections.

C. Purchase of goods and services will be accomplished by a separate Purchasing Policy adopted by the Board of Park Commissioners.

D. Payroll costs are authorized by budget adoption. Emphasis will be placed on improving individual and work group productivity rather than adding to the work force. MPT will invest in technology and other efficiency tools to maximize productivity.

E. Compensation planning and budgeting will focus on the total cost of compensation which includes all costs for salary, health care benefits, pension contributions, training costs, and other benefits of a non-salary nature.

F. The Director of Management & Budget will develop a cost allocation plan which addresses inter-fund and intra-fund charges for services between funds and departments. The estimated direct and indirect costs of service will be budgeted and charged to the fund receiving the service. Interfund service fees charged to recover these costs will be recognized as revenue to the providing fund. A review of the method for determining the amount of the interfund assessment will be made during the biennial budget development process.

Section VIII. Revenue Policy.

A. To the extent possible, a diversified and stable revenue system will be maintained to avoid impacting services due to short-run fluctuations in any one revenue source. Metro Parks Tacoma will seek to avoid dependence on temporary or unstable revenues to support ongoing services.

B. Metro Parks Tacoma will seek to avoid dependence on federal or state grants to support ongoing services. All potential governmental grants shall be analyzed for matching requirements. Acceptance of grants should support MPT’s core and priority programs and services. Grants may be rejected if expenditure of local matching funds cannot be justified or if program continuation is not economically feasible without continued grant support.

C. Metro Parks Tacoma will develop a comprehensive list of fees and charges and shall consider cost recovery levels for differing service deliveries. This will be accomplished by a separate Pricing & Cost Recovery Policy adopted by the Board of Park Commissioners.

D. Revenue estimates for biennial budget purposes should be conservative yet realistic.

E. Deficit financing and borrowing to support on-going operations should not be used.

F. MPT must be sensitive to the balance between the need for services and MPT’s ability to raise fees, charges, and taxes to support those services.

G. A separate policy entitled Golf Course Capital Surcharge Policy will provide direction on the purpose and use of those surcharge funds.

Section IX. Investment Policy.

A. It is the policy of Metro Parks Tacoma to invest public funds in a manner which will provide maximum security with the highest investment return while meeting the daily cash flow demands of MPT and conforming to all state and local statutes governing the investment of public funds.

B. Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. The standard of prudence to be used by investment officials shall be the “prudent person” standard and shall be applied in the context of managing an overall portfolio.

C. The primary objectives, in priority order, of MPT’s investment activities shall be:

1. Safety: Safety of the principal is the foremost objective of the investment program. Investments of MPT shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio.
2. Liquidity: MPT’s investment portfolio will remain sufficiently liquid to enable the District to meet all operating requirements that might be reasonably anticipated.
3. Return on Investment: MPT’s investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account MPT’s investment risk constraints and the cash flow characteristics of the portfolio.

D. The Board of Park Commissioners has established an Investment Committee by resolution (RR37-05). The investment committee is authorized to develop procedures to administer the distribution of investment interest earnings.

E. Per RCW 35.61.180, Pierce County is the ex-officio treasurer of MPT. Investment policies of Pierce County are consistent with the above policies, and county procedures exist to ensure compliance with these policies.

Section X. Accounting, Auditing, and Financial Reporting Policy.

A. For accounting and financial reporting, MPT will follow generally accepted accounting principles (GAAP) for local governmental entities as set forth by the Governmental Accounting Standards Board (GASB).These principles include:

1. Maintaining an accounting system adequate to provide all of the data needed to allow for the timely preparation of financial statements for the entire financial reporting entity in conformity with GAAP;
2. Hiring, training, developing, and retaining accounting staff with the knowledge and capability to produce GAAP financial statements and other related financial management documents;[1]
3. Issuing timely[2] financial statements for the entire financial reporting entity in conformity with GAAP as part of an annual comprehensive financial report; and

B. MPT will also follow budgeting, accounting and reporting requirements of the Washington State Auditors Office.

1. Budget Monitoring & Reporting: After the budget has been approved, it is the responsibility of the governing board, chief financial and administrative officer, and department directors to see that services are delivered within limits provided in the budget.
2. MPT will closely monitor the progress of actual revenues and expenditures through the year and identify any variances that might cause the District to result with a significant surplus or deficit.
3. MPT will prepare and make available to management and the governing board on a quarterly basis financial reports to include:

a. Statement of Net Position

b. Statement of Revenue

c. Statement of Cash Flow

d. Budget to actual reports detailing significant variances of sources and uses of funds as a management tool.

C. MPT’s annual financial statements will be audited in accordance with state statutes and bond requirements.

Section XI. Debt Management Policy.

A. The amount of debt issued by MPT is an important factor in measuring financial performance and condition. Proper use and management of borrowing can yield significant advantages. From a policy perspective, debt can be used as a mechanism to equalize costs of needed improvements to both present and future citizens and as a way to reduce the costs of substantial public improvements.

B. The following policies apply to the issuance and repayment of debt:

1. The Board of Park Commissioners approval is required prior to issuance of debt.
2. MPT will comply with all statutory debt limitations imposed by the Revised Code of Washington (RCW).
3. The Director of Management and Budget, or designee, has the authority to act as debt manager in the duties of debt issuance and related repayment activities.
4. MPT will use the services of a legally certified and credible bond counsel in the preparation of all bond representations.
5. A financial advisor may be used to provide MPT with objective advice and analysis on debt issuance.
6. A fiscal agent will be used to provide accurate and timely securities processing and timely payment to bondholders. As provided by chapter 43.80 RCW, MPT will use the fiscal agent appointed by the state.
7. An underwriter will be used for all debt issued in a negotiated or private placement sale method. The underwriter is responsible for purchasing negotiated or private placement debt and reselling the debt to investors.
8. MPT will generally issue its debt through a competitive process but may use a negotiated process.
9. MPT will not use long-term debt to support current operations.
10. Long-term borrowing will only be used for capital improvements that cannot be financed from current revenues.
11. Short-term borrowing (one year or less) will only be used to meet the immediate financing needs of a project for which long-term financing has been secured but not yet received.
12. The issuance of bonds shall be financed for a period not to exceed a conservative estimate of the asset’s useful life, or a maximum of 20 years.
13. MPT will seek to maintain or improve its bond rating through financial policies, budgets, and forecasts.
14. MPT may use refunding bonds where appropriate, when restructuring its current outstanding debt. A debt refunding is a refinance of debt typically done to take advantage of lower interest rates. Unless otherwise justified, such as a desire to remove or change a bond covenant or restructure debt repayment due to cash flow needs, a debt refunding will require a present value savings of five percent of the principal amount of the refunding debt being issued.
15. MPT will use bond proceeds pursuant to the bond resolutions, contracts, and Internal Revenue Codes applicable to government bonds. MPT will maintain a system of recordkeeping and reporting to meet and satisfy calculations necessary for yield restriction requirements and arbitrage rebate requirements on the District’s tax-exempt bonds.
16. The Management & Budget Director shall be responsible for providing annual disclosure information to established national information repositories and for maintaining compliance with disclosure statements as required by state and national regulatory bodies.

C. MPT shall develop and maintain a capital planning process such as the strategic plan for consideration and adoption by the Board of Park Commissioners as part of the budget process. Coordination and review of the debt requirements shall be performed by Management & Budget staff who will analyze the timing of debt, calculation of debt outstanding, debt limitation calculations and compliance, impact on future debt burdens, and current revenue requirements.

D. Prior to issuance of debt, MPT will prepare revenue projections to ensure there is adequate revenue to make principal and interest payments.

E. Debt Repayment. MPT shall pay all interest and repay all debt in accordance with the terms of the bond resolutions. The maturity of bonds issued should be the same or less than the expected life of the project for which the bonds were issued.