City Council 12-15-09

Here’s the definition of Free Cash from the State – Sorry for the messy cut-and-paste but I’m not awake enough to put in my own words. The second paragraph puts it best.

“DEFINITION OF “FREE CASH”:

A city, town or district’s free cash represents the amount of a community’s funds that are unrestricted and available for
appropriation. These available funds, once certified, may be used to support supplemental appropriations during the
year or at the Annual Town Meeting to fund next years budget. Available funds are certified by the Director of
Accounts as of July 1 each year. Chapter 59, Section 23 of the Massachusetts General Laws requires that the Director of
Accounts certify the”. . . amounts of available funds on hand on . . July the first . . .” These available funds are best
known as “free cash” and may only be used after certification by the Bureau of Accounts.

Simply put, free cash is a community’s unrestricted available funds that may be used as a funding source for
appropriations. Free cash is generated when the actual operating results compare favorably with the budget.
Specifically, free cash is generated when actual revenue collections are more than budget estimates, and when
expenditures and encumbrances (unpaid bills and orders) are less than appropriations, or both.
Free cash provides communities with a certain flexibility in that it is the major source of funding for any supplemental
appropriation after the annual budget has been adopted and a tax rate set.
Free cash can only be used after the- certification process is complete. For example, the July 1, 1985 certified amount
may be used to fund supplemental appropriations voted during fiscal year 1986 or applied as a revenue source to
support the fiscal year 1987 budget which is voted in the Spring of 1986.”