Sunday, March 17, 2019

Reserve Fund:
An amount of money set aside annually within the budget of a Town, not to exceed 5 percent of the tax levy for the preceding year. In a Town, the Finance/Advisory Committee can authorize transfers from this fund for extraordinary and unforeseen expenditures. Other uses of the fund require budgetary transfers by Town Meeting.

For instance, if a fire truck of the town has a pump break down requiring replacement and there is no money in maintenance budget to cover this, that could be an acceptable use of this fund.

Certified Free Cash:

Free Cash - (Also Budgetary Fund Balance) Funds remaining from the operations of the previous fiscal year which are certified by DOR’s Director of Accounts as available for appropriation. Remaining funds include unexpended free cash from the previous year, receipts in excess of estimates shown on the tax recapitulation sheet, and unspent amounts in budget line-items. Unpaid property taxes and certain deficits reduce the amount of remaining funds which can be certified as free cash. The calculation of free cash is made based on the balance sheet, which is submitted by the community’s Auditor, Accountant, or Comptroller. Typically, a community will attempt to maintain a free cash balance of between 3 and 5 percent of its total budget as a hedge against unforeseen expenditures, to insure there will be an adequate reserve to prevent sharp fluctuations in the tax rate, and to prevent expensive short-term borrowing. (Maintenance of an adequate free cash level is not a luxury but a necessary component of sound local fiscal management. Credit rating agencies and other members of the financial community expect municipalities to maintain free cash reserves; judgments regarding a community’s fiscal stability are made, in part, on the basis of free cash.)


Overlay - (Overlay Reserve or Reserve for Abatements and Exemptions) An account established annually to fund anticipated property tax abatements and exemptions in that year. The overlay reserve is not established by the normal appropriation process, but rather is raised on the tax rate recapitulation sheet.

Overlay Surplus - Any balance in the overlay account of a given year in excess of the amount remaining to be collected or abated can be transferred into this account (See Overlay). Within ten days of a written request by the chief executive officer of a town or city, the assessors must provide a certification of the excess amount of overlay available to transfer. Overlay surplus may be appropriated for any lawful purpose. At the end of each fiscal year, unused overlay surplus is “closed” to surplus revenue; i.e., it becomes a part of free cash.

Override - A vote by a community at an election to permanently increase the levy limit. An override vote may increase the levy limit to no higher than the levy ceiling. The override question on the election ballot must state a purpose for the override and the dollar amount. (See Underride.)

Override Capacity - The difference between a community’s levy ceiling and its levy limit. It is the maximum amount by which a community may override its levy limit.

Underride - A vote by a community to permanently decrease the tax levy limit. As such, it is the exact opposite of Override.

No comments:

Post a Comment