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.