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Federal Way Council strengthens reserve fund policy
The Federal Way City Council unanimously approved a strengthening of the city’s reserve fund policy during its June 3 meeting, setting a higher bar for the city’s savings plans.
The policy is described as a “stand-alone formal policy” in the city’s documentation regarding the policy.
Ade Ariwoola, the city’s finance director, explained the reasoning for this change, saying it meets a higher level of diligence as recognized by Government Finance Officers Association, along with providing other benefits to the city.
“It helps us know when we reach the goal [of a minimum savings amount],” Ariwoola explained. “I think it will also help with our credit rating, because if we establish a reserve, and are able to [surpass] it, that is part of good management. I think it will also help us deal with future uncertainties, because if we set this fund aside for emergencies, we know, when those things happen, we have money to deal with it.”
The approved measure will set the general reserve fund amount at $9 million, or more than 17.1 percent, which is beyond the 16.67 percent the Government Finance Officers Association recommended, Ariwoola noted.
For other funds under the city’s control, the amounts would vary. Some funds, such as the city’s fleet management fund, or information technology fund, would be determined by the city’s inventory, Ariwoola said.
“If we have 10 vehicles in there today, and $500,000 is adequate for those number of vehicles [then the reserve fund policy is being met],” Ariwoola said. “Tomorrow, if that number increases, instead of having to come back to you, the best practice is to set [the reserve fund amount] based on the volume of assets in the fund.”
Ariwoola added this policy takes the reserve fund out of the budgeting process, essentially, and that he and his team would not bring a budget before the Council “if it violates this policy.”
According to documents provided by the city, the policy would set aside approximately $38.1 million across 30 separate funds (not including the aforementioned asset-based funds). To learn more, visit www.cityoffederalway.com.