BRADENTON, Fla. - Audits of Tennessee’s 95 counties show that many have done well managing resources through difficult economic times, though some continue to struggle financially.
Revenues for all county governments totaled $11.65 billion for the fiscal year that ended June 30, 2011, while total expenditures were $12.14 billion.
Counties spent $490 million more than they received in general and operating revenues, according to the audit review by Tennessee Comptroller Justin Wilson.
Audit results revealed deficits totaling $110.29 million in governmental funds and $83.24 million in enterprise and internal service funds in 14 counties.
There were also outstanding cash shortages of more than $900,000 in 41 counties in fiscal 2011.
“County governments have seen sluggish growth in revenues over the last five years as expenditures have exceeded revenues in each year over this time period,” Wilson said. “This trend indicates that either debt was increasing during the same time period, or fund balances were decreasing, or both.”
County debt also rose by $1.41 billion, as spending increased between 2007 and 2011.
“This indicates that many county governments are deferring debt principal payments and other obligations to future years,” Wilson said.
Tennessee’s counties have avoided the bankruptcy crisis seen around the nation as a result of the economic downturn, he said.
While it is not clear that Tennessee counties can file for Chapter 9 bankruptcy because there is no specific statute authorizing the relief, Wilson said insolvency remains a concern because of the “substantial” increase in long-term debt and liabilities for health-care costs.
In addition to the fact that state law does not deal with bankruptcy, he said there are no provisions that would trigger state control, supervision, or receivership of defunct local governments.
“Tennessee state law does provide a means to aid local governments in financial distress, which may help avoid the need for more serious actions, such as bankruptcy,” Wilson said.
In other audit findings, Wilson’s review discovered that the “vast majority” of findings and adverse opinions were reported in counties without centralized systems of accounting, budgeting, and purchasing, even though such systems are required by state law.
Only 21 of 95 counties had operational audit committees as recommended by the comptroller’s office as a best practice.
“The repetitive nature of the comptroller’s reported audit findings indicates that counties are either unwilling or unable to address these problems or deficiencies,” the review said.
“The purpose of an audit committee would be to facilitate the discussion about and correction of audit findings and to deal with emerging issues such as a reported fraud.”
As the economy continues to recover from the economic downturn, county governments will still be faced with many fiscal challenges.
“Local officials must prepare budgets with fewer revenues to fund rising demands for resources in areas such as education, social services, health, and public safety,” the report says.
Despite ongoing challenges because of the slow-growing economy, the report recommends counties ensure the essential health of government finances by upgrading their financial management systems.
“We will continue to encourage local governments to eliminate repeat audit findings, establish audit committees, and to adopt a centralized financial management system,” the report concludes.
