How do we improve a free cash or reserves position?
A community may improve its free cash and financial reserves through prudent financial
planning and development of sound financial policies. The community could also establish
policies to build its free cash balance such as conservatively estimating local receipts and
aggressively pursuing the collection of receivables. Since free cash is an available fund that
might not be generated in the next fiscal year, it is usually not used to fund recurring
operating expenses.

A formal reserve policy will allow the community to establish a practice of appropriating
money to legal reserves for future needs. Appropriations to reserves should be considered
annually as a part of the budget process and appropriations from reserves should be made for
unanticipated or capital costs, not regular operating expenses.

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?