In general, hospital districts are expected to exercise sound judgment in the exercise of their business affairs. Failure to do so would mean that the commissioners, superintendent, and other officers of the district were breaching their fiduciary obligations under common law standards. Failure to fulfill this obligation might subject these officers to liabilities or result in the voiding of actions taken by the district. To the extent that such sound judgment includes the use of specific administrative systems and practices, hospital districts are well advised to assure that these are part of their administrative routines. The bulk of these general fiduciary requirements are common to all hospitals and other health care institutions and are beyond the scope of this manual. However, most, if not all, of these general procedural requirements should be identified in the process of conducting the audit described at the end of the chapter.

There are also some specific statutory requirements related to financial administration which hospital districts must comply with.

While any prudent hospital district would use a budgeting process, a bare bones hospital district budget is also required by statute:

Each district must develop a proposed budget by November 1st of each year and file it in the records of the commission. Notice of the filing and the date of the hearing on the budget must be published once a week for two consecutive weeks in a newspaper printed and of general circulation in the county. A hearing on the budget must be held on or before the fifteenth day of November, and the commissioner board must adopt the final budget by resolution after this hearing. One purpose of this budget is to generate a document to be used in the development of tax needs and rates by county officers. The hearing must include consideration of possible increases in property tax revenues. [RCW 84.55.120, 84.52.025] Another purpose of the budget is to establish authorization for the district to expend funds. The budget must be revised, if necessary to ensure expenditures remain within the established budget.

Practical Consideration

The budget required by statute is essentially directed at generating the level of tax receipts required by public hospital districts. Because of the variation in other revenue sources for a public hospital district and the fact that a budget used for management control should be much more detailed than this basic budget required by statute, hospital districts might wish to use two budget documents. While the totals and key sub-totals of the budget used at public hearing should match the more detailed management budget, this double budget approach provides a great deal more flexibility for district management.

If a district under-estimates its expenditures for the budget required by statute, the public hospital district must amend it by resolution of the board to reflect the expenditures. The adoption of amendments by the board of commissioners will be of great value to the superintendent by showing, as a matter of public record, that commissioners are aware of the necessary changes and have acted to approve them.

Receipt and disbursement of funds is managed by the district treasurer. See Chapter Two, Section E for a complete discussion of responsibilities and issues.

Local governments such as PHDs are allowed to participate in state wide custody contracts negotiated by the state treasurer which will obtain the most advantageous rate and terms from a single financial institution for custodial banking services.