The District's ability to fulfill its mission for the benefit of current and future students depends on sound fiscal management and the maintenance of adequate financial reserves. Reserves are critical to the financial health of the colleges and the district and to preserve future flexibility. This policy establishes the framework for reserves including size, use and funding, as well as oversight and reporting requirements.

Seattle Colleges will establish targets to maintain sufficient financial reserves to ensure responsible long-term fiscal management, advance priorities, and to mitigate current and future risk. Seattle Colleges will define, build, maintain, use, and replenish reserves in accordance with strategic plans, these policies, and standards. To distinguish between unencumbered liquidity and reserves that are designated for a specific use, Seattle Colleges will account for and report unrestricted net assets in the designations defined by this policy.

The reserve will be established from existing balances or by creating surpluses by generating more revenue than expenditures in a fiscal year. Non-operating budgets with deficits at the end of any fiscal year must be zeroed out by the end of the next fiscal year. Deficit balances may not be carried forward beyond one fiscal year without specific approval of the Chancellor.

The creation of a District operating reserve will ensure sufficient funds available for working capital, be available to deal with fluctuations in revenue or expenditures, and provide opportunities to fund non-recurring expenses, such as program start-up costs or equipment purchases. The status of the District reserve will be reported to the Board of Trustees on an annual basis as a part of its year-end financial reports.

General Policy
Seattle Colleges reserves shall be adopted by resolution by the board of trustees as part of the district's annual budget plan. All expenditures drawn from reserve accounts shall require prior approval from the Chancellor or designee, unless previously authorized for expenditure within the district's annual budget, approved by the board of trustees.

Ancillary and Auxiliary Fund Reserves
The district will maintain a reserve for each of its ancillary or auxiliary funds to provide for adequate cash flow, multi-year planning, and operating contingencies. Reserve levels for these funds are established through a phased, multi-year approach, as outlined in the procedure.

Capital and Debt Reserves
The district will maintain, as necessary, a local capital account to manage facilities needs that are not funded or are underfunded by the state.

The district will maintain, as necessary, a Debt service designated reserves to fulfill legal requirements associated with that debt and provides an emergency funding source should the district be unable to meet the required debt service obligation.

Contingency Fund
The district will establish and maintain an annual contingency fund equal to three (3) percent of the operating budget expenditures to cover revenue shortfalls, unplanned but necessary expenditures, or operating changes that occur outside of the planned annual budget.

The Contingency Fund will be established beginning in Fiscal Year 2028 (FY28) and maintained annually thereafter. These funds will be maintained in a separate account and are in addition to the Operating Reserves described in this policy.

Operating Reserves
The district will maintain an operating reserve to provide for such items as adequate cash flow, emergencies, budget contingencies, multi-year planning or capital commitments. Seattle Colleges establishes a long-term target operating reserve equal to twenty-five (25) percent of the District’s operating budget expenditures, with a goal of achieving this target by the year 2034.

To support this objective, the District will utilize a phased, multi-year approach to building and sustaining the operating reserve, including incremental reserve targets (benchmarks) established in procedure. The Chancellor or designee is responsible for developing and maintaining a multi-year financial plan to support progress toward the target reserve level, consistent with this policy.

Companion Document : Pro
Adoption Date : 1978/01/16
Revision Date : 2026/07/09