What is free cash and how is it generated?
A community’s free cash is the amount of unrestricted funds available from the previous
fiscal year’s general fund operations that can be appropriated upon certification by the
Director of Accounts. Free cash is certified based upon the June 30 balance sheet submitted
by the town accountant/city auditor. The treasurer must also submit the Quarterly
Reconciliation of Treasurer’s cash report, which reconciles with the balance of the
accountant, for free cash to be certified.

Free cash is generated when the actual operations of the fiscal year compare favorably with
the budget. Simply put, it results when revenue collections are greater than estimated
receipts, and expenditures and encumbrances (committed funds not yet expended) are less
than appropriations. It is reduced by illegal deficits, overdrawn grant accounts and deficits in
other funds.

Show All Answers

1. What is free cash and how is it generated?
2. How do we improve a free cash or reserves position?
3. When can we appropriate free cash?
4. What should a capital improvement plan include?
5. Why would we want an enterprise fund?