Free Cash is the term used for the portion of a community’s fund balance that is available for appropriation by Town Meeting. It may also be used to reduce the tax rate. The balance in Free Cash increases when actual collected revenues are in excess of budgeted revenues, and/or when actual expenditures are less than appropriated expenditures. The balance in Free Cash is reduced when it is appropriated by Town Meeting. It is also reduced by property tax receivables and any deficits.
The balance in our Free Cash account must be certified annually by the Department of Revenue (DOR) before any funds can be appropriated.
Andover’s policy is to use Free Cash for nonrecurring or emergency expenditures, for capital and equipment purchases or for appropriation to a stabilization fund, and to maintain the combined balance of Free Cash and the Stabilization Fund at 3%-7% of General Fund revenues. Free Cash is not to be used to balance operating budgets.
Funding for private warrant articles approved at Town Meeting that are not integrated into the Town’s financial forecasting and budget must be funded, typically from Free Cash. Depending on the amount of the requested appropriation, approval of these articles may reduce Free Cash balances below our recommended policy levels.