An Overview for County Officials CTAS County Officials Orientation Program August 23, 2018
Institutional Framework Scores The score is based on the average of four scored areas or subfactors: Predictability: the extent to which a local government can forecast its revenues and expenditures on an ongoing basis Revenue and expenditure balance: the extent to which local governments have the ability to finance the services they provide Transparency and accountability: the overall institutional framework s role in encouraging the transparency and comparability of relative financial information Systemic support: the extent to which local governments receive extraordinary support from a state government when the local government is under extreme stress
Institutional Framework Scores Only three states out of the 50 states scored very strong overall Tennessee!!! Maryland North Carolina
Sandi Thompson, Director Sheila Reed, Assistant Director Lori Barnard, Senior Financial Analyst Steve Osborne, Senior Financial Analyst Ron Queen, Senior Financial Analyst
Local Financial Management Budgets Debt Investments Corrective Action Plans Pension and OPEB Ø Funding Policies for Non-TCRS Defined Benefit Pension Plans Ø OPEB Trust Agreements Certificate of Public Purpose and Necessity (CPPN) Review of Asphalt Plans Fiscal Distress
Do you have guidance for counties? Accessible online: http://comptroller.tn.gov/sl/ Budget Guidance Ø Annual budget documents Ø Continuation Budget Guidance Ø Frequently Asked Questions Debt Guidance Ø Procedure Guide Ø Note Resolution Forms Ø SRF/TLDA Policy and Guidance Investment Guidance State Funding Board Guidelines
What is a budget? Legal document Policy document Financial Plan Means for accountability and transparency
Why a budget? State law requires the governing body of each county and metropolitan government to annually appropriate monies before expenditures can be made. State law requires adoption of a balanced annual budget to appropriate spending each fiscal year. State law also requires that a balanced budget be maintained throughout the fiscal year.
What is required? Each year, all of Tennessee s counties, including metropolitan governments, are required to file legally adopted budget resolutions and other supporting schedules with our office. Budget approval is required for all counties with debt outstanding. Ø Only two counties in Tennessee do not have debt outstanding.
What does OSLF look for in budget reviews? Balanced Budget Detailed Budget Agrees with Appropriation Resolution Revenue Forecasts Debt Service Payments Cash Flow Forecasts Cash Balances Fund Balances
When should we adopt our budget? June 30 Budget Calendar Continuation Budget Authority
Remember: If you fail to plan, you plan to fail.
What is a Debt Management Policy? Four Basic Principles (Wilson Doctrine) Ø Understand the transaction; Ø Explain to citizens what is being considered; Ø Avoid conflicts of interest; and Ø Disclose costs and risks. A Debt Management Policy should be designed to: Ø Promote better financial decisions; Ø Provide clear objectives for staff; Ø Demonstrate strong financial management practices to credit rating agencies; and Ø Distinguish policy decisions from transaction decisions. (Source: comptroller.tn.gov/sl/debtmanagement.asp)
Does OSLF approve all county debt? Approval is required for: Ø Notes Bond Anticipation Notes (BANs) Capital Outlay Notes (CONs) Tax and Revenue Anticipation Notes (TRANs) Ø Public Building Authority (PBA) Loan Agreements Ø Interfund Loans Three-year CONs, TRANs, BANs Ø Balloon Indebtedness Ø Negotiated Sale of Refunding Bonds
Does OSLF approve all county debt? A Report from OSLF is required for Refundings Ø A Plan of Refunding (the Plan ) is submitted to our office. Ø The Plan is not approved by our office. Ø We review the Plan and issue a report summarizing the refunding transaction. Ø The report will be presented at the County Commission meeting where the bond authorizing resolution will be considered for adoption. Ø The purpose of the report is to provide transparency of the transaction to local officials and citizens.
Does OSLF approve all county debt? We do not approve the following new money debt instruments Ø General Obligation Bonds Ø School Bonds (Title 49) Ø Revenue Bonds Ø Capital Leases
Report on Debt Obligation (Form CT-0253) Required disclosure for ALL debt issues Must be filed with the County Commission and OSLF no later than 45 days after the issuance of the debt Describes the nature and details of the transaction Ø Type of Debt Ø Interest Costs Ø Cost of Issuance Ø Structure Ø Continuing Disclosure Requirements See: comptroller.tn.gov/sl/pubdebt.asp
Statutory Requirement Officials are required to invest all idle county funds (TCA 5-8-301). Ø Bond proceeds Ø Sales of assets, settlements, other infrequent occurrences, and Ø All other idle funds
Investment Committee (TCA 5-8-302) Ø Develop investment policies and procedures Ø Authority to designate the types, amounts, and maturity of investments Investment Policies Ø Restrictions on funds being invested Ø Match investment maturities with cash flow requirements
Investment Principles Safety Liquidity Return
Authorized Investments (TCA 5-8-301) Deposits insured by the Federal Deposit Insurance Corporation Ø Interest Bearing Checking Accounts Ø Ø Ø Savings Accounts Money Market Depository Accounts Certificates of Deposit TN Local Government Investment Pool (TCA 9-4-701) TN Intermediate-Term Investment Fund (TCA 9-4-608) US Treasury Bills, Note, and Bonds Bonds of the State of Tennessee Municipal Bonds Repurchase Agreements Prime Banker s Acceptances Prime Commercial paper Tennessee Valley Authority Obligations (TCA 35-3-119) Public Housing Authority Obligations (TCA 35-3-115)
Tennessee State Treasurer s Office Local Government Investment Pool (LGIP) Intermediate Term Investment Fund (ITIF) LGIP and ITIF: Ø Invest any size deposits Ø Withdraw funds at any time (exception: amounts over $500,000 require one day s notice) Ø Return is frequently higher than other available investments DIFFERENCE Ø The average maturity of LGIP is 90 days Ø The average maturity of ITIF is 3 years
What type of investments does OSLF approve? Counties must receive approval from our office prior to making any investments with a maturity longer than five years (TCA 5-8-301). Investments in repurchase agreements must receive approval from our office (TCA 5-8-301).
What does OSLF consider for investment approval? Cash Flow Analysis Is there surplus cash? Type of Investment Is it authorized by state law? Other requirements Investment Committee, Investment Policies, Credit Rating, etc. - Have other statutory requirements been met?
Remember: Invest idle funds. Use only Authorized Investments. Put safety of funds first. Know your investment policies. Consider cash flow requirements. Some investments need prior OSLF approval: Ø Investments with a maturity > 5 years Ø Investments in repurchase agreements When in doubt, give us a call.
Fiscal Distress Ø Detection Ø Corrective Action Plans Filings: Ø Pension and OPEB Funding Policies for Non-TCRS Defined Benefit Pension Plans OPEB Trust Agreements Oversight: Ø Certificate of Public Purpose and Necessity (CPPN) Ø Asphalt Plant Financial Feasibility Oversight Committee
Things go wrong Chris Isaak
What is it? From an accounting perspective: Is there substantial doubt about a county s ability to continue as a going concern for 12 months beyond the financial statements date? From our perspective: Will a county have enough cash to pay its bills today and in the future?
How do we detect it? We Look for Financial Stress Indicators Early Detection Ø Budgets Ø Debt Requests Ø Any Other Report/Approval Requiring Analysis After the Fact Ø Review of Financial Statements Ø Defaults Ø Other
Tennessee s Institutional Framework Budget Oversight Debt Oversight Audits and Financial Reporting Training and Certifications Technical Assistance Fraud, Waste and Abuse Fiscal Distress Pensions and OPEB Investments and Deposits Feasibility Plans
What prompts a corrective action plan? Deficit fund balances Improper interfund balances Improper use of restricted monies Continued use of TRANs
Local Finance Team Phone Email Sandi Thompson, Director 615.401.7872 Sandi.Thompson@cot.tn.gov Sheila Reed, Assistant Director 615.401.7906 Sheila.Reed@cot.tn.gov Lori Barnard, Senior Financial Analyst Entities (A-F) Steve Osborne, Senior Financial Analyst Entities (G-N) Ron Queen, Senior Financial Analyst Entities (O-Z) 615.747.5347 Lori.Barnard@cot.tn.gov 615.747.5343 Steve.Osborne@cot.tn.gov 615.401.7862 Ron.Queen@cot.tn.gov Kathy Palmer, Local Government Technician 615.747.5376 Kathy.Palmer@cot.tn.gov