Free Cash Analysis

Section I - Financial Summary: Free Cash Analysis

The Division of Local Services (DLS) defines free cash as “the remaining, unrestricted funds from operations of the previous fiscal year, including unexpended free cash from the previous year.” DLS must certify free cash before the Town can appropriate it.

To generate appropriate levels of free cash, the Town Administrator will propose budgets with conservative revenue projections, and department heads will carefully manage their appropriations in order to produce excess income and budget turn backs. The Town shall set a goal of managing its budget such that annual free cash balances are certified in the range of five to seven percent (5-7%) of the annual general fund operating budget.

To the greatest extent possible, the Town will limit its use of free cash to funding one-time expenditures (such as capital projects, snow and ice deficits, or emergencies) and capital reserves.

The Town shall set a goal of maintaining its minimum year-end unappropriated free cash balance in the range of two to two and a half percent (2-2.5%) of the annual general fund operating budget. The Town will appropriate the excess above this target range to build reserves or to offset unfunded liabilities.