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Posted on: October 19, 2022

Amesbury Certifies $4.6 million in Free Cash for FY23

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Mayor Kassandra Gove is pleased to announce the recent certification of free cash for the City of Amesbury in the amount of $4,695,302.00. 

Free cash is one component of the city’s reserves. Reserves also include stabilization funds, reserve funds, and retained earnings. The balance in free cash increases when actual collected revenues exceed budgeted revenues or when actual expenses are less than appropriated expenses or a combination of the two. Conversely, the balance is reduced from property tax receivables, deficits, and appropriations. It is always a goal to preserve a portion of free cash so that the succeeding year's calculation can begin with a positive balance. 

Amesbury’s policy is to limit the use of free cash for nonrecurring or emergency expenditures, for capital and equipment purchases or for appropriation to a stabilization fund. The city strives to follow Massachusetts Division of Local Services (DLS) best practices, which recommends a city’s reserves total 5-10% of the operating budget. Amesbury’s 2023 certification brings it into compliance with those recommendations, increasing the reserves percentage from 3.88% to 7.67%. This is an important achievement for the City as free cash plays a role in achieving and maintaining a strong credit rating which has further financial impacts.

As part of the free cash certification process, the DLS prepares a proof. Proving free cash is accomplished by identifying the financial events that impact free cash and calculating a total. These are obtained or derived from the combined balance sheet, combining statements, and supporting documentation submitted for both the current and the previous free cash certifications. Once the Free Cash proof is completed, it must be within 85% to 115% of the calculated free cash.  When preparing the FY22 proof, it was determined that this calculation was outside of the range and resulted in an FY22 certification reduction in the amount of $978,488.00. These funds were then certified as part of the FY23 free cash. Additionally, the City has not used any of last year’s $1,978,854 free cash. Together this surplus with the FY22 carry forward result in a FY23 free cash total of $4,695,302.00.

 Amesbury’s CFO, Marisa BatistaFree_CAsh2-02 said, “The increase in free cash reflects the City’s conservative budgeting practices and administration efforts in managing the financial impacts created by the pandemic, such as controlling spending and maximizing available federal and state reimbursements.  This level of free cash gives the City greater financial flexibility and makes us compliant with DLS best practices to have reserves within 5-10% of the operating budget.”

“Amesbury has struggled in the past with its free cash balance. For many years, its numbers have been low for a city of this size. The city is now in a position of financial stability that our citizens deserve. Increasing our financial reserves is like an individual adding to their savings account. It’s a safety net, it’s a sign of stability, and the creditors like to see it. Now we need to maintain it.”, said Mayor Kassandra Gove.”

Additionally, Mayor Gove said, “We have operated under a very conservative budget, working hard to control budget increases while making manageable investments in our infrastructure, and see an increase in our reserves. This reconciliation of funds allows us to be better prepared for the unexpected.”  

About Division of Local Services 

The Division of Local Services is responsible for ensuring fairness and equity in local property taxation, overseeing local accounting and treasury management, interpreting state laws that affect local governance, distributing monthly local aid to cities, towns, and school districts, maintaining a comprehensive municipal finance data warehouse, and providing municipal financial management consulting services and training. 

Information about DLS can be found in the state website at: https://www.mass.gov/orgs/division-of-local-services

 

 

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