DOR Certifies Everett’s ‘free Cash’ At over $5.4 Million: City’s Conservative Spending Plan and Sound Fiscal Practices Sets the Pace

According to Mayor Carlo DeMaria, the Massachusetts Department of Revenue (DOR) has once again certified Everett’s unexpended fund balance, also known as free cash, at more than $5.4 million for the 2014 fiscal year, which ended on June 30, 2014.

It marks the second consecutive year that Everett has shown free cash balances of more than $5.4 million, which is an indication that the city’s budget forecasting continues to conservatively estimate annual revenue, while sound spending policies ensure that city departments do not overspend their budgets.

The unexpended fund balance, or free cash, is the difference between what the city budgets in a given fiscal year and what it actually spends. Contributing factors to free cash are higher than estimated revenues and lower than budgeted spending in a given fiscal year.

Through sound budget management policies, departments that do not spend all of their annual budgets, turn those funds back to the city at the end of the fiscal year. For instance, if a department has an unfilled position for a portion of the year, but budgeted to have that position funded for the entire year, the difference reverts to free cash.

Additionally, if certain revenue items, such as license fees, or tax collections exceed their estimated amounts, the additional revenue also reverts to free cash.

Over the course of the last several year, DeMaria explained, the city has instituted budget and spending policies with its department heads, which have resulted in many department’s operating more efficiently and led to unexpended funds that become free cash.

Diligent collection efforts, in particular in the motor vehicle excise taxes, license and permit fees and meals taxes from local restaurants, were also cited as major contributors to the free cash amount.

Mayor DeMaria also noted the recent adoption of Financial Reserve Policies will likely mean that up to fifty-percent of the certified free cash will be diverted to various reserve accounts, including 15-percent into the city’s Stabilization Fund, 15-percent to the Other Post-Employment Benefits (OPEB) Trust Fund and 20-percent to the Capital Improvement Account, to fund investments in the city’s infrastructure.

1 comment for “DOR Certifies Everett’s ‘free Cash’ At over $5.4 Million: City’s Conservative Spending Plan and Sound Fiscal Practices Sets the Pace

Leave a Reply

Your email address will not be published. Required fields are marked *