Tennessee normally spends about seven months closing out each budget year, but officials say a string of glitches implementing a new accounting system knocked the state off schedule.
State agencies ended up taking twice the time they normally do to close out the 2008-09 budget year — and Comptroller Justin Wilson said he’s worried the next round of financial audits may also face delays.
“That’s a matter of some concern to me,” he told TNReport.
As of this month, the state has officially finished all audits and paperwork associated with closing up the budget books. The process, which was supposed to be completed by March, lasted 14 months.
Not only do late audits send red flags to Washington administrators keeping an eye on the state’s federal spending, but they also force the Legislature to make decisions based on what could be inaccurate financial reports, said Senate Republican Leader Mark Norris.
This year, said Norris, “we held our nose and passed our budget without it.”
“The bad news is it’s of little use to us now,” he said, adding that lawmakers had to “fly blind” because they didn’t, with certainty, know how much money was in the state’s reserves.
This month, Wilson completed the final two documents required to finish out the budget year, an exercise that was supposed to have been competed in March.
One piece examines state government from top to bottom and is called the Tennessee Comprehensive Annual Financial Report, CAFR. The other, called the Single Audit Report, addresses how the state handles federal money.
Washington officials expected the Single Audit document in March. When they hadn’t received it in May, the U.S. Department of Education sent a letter warning Tennessee that it may withhold payment for fees and claims if the state fails to turn an audit.
According to the Department of Finance and Administration the federal government never went through with that threat.
The budget year began on July 1, 2008 and ended on July 30, 2009. The state’s finance department normally would have closed the books by Dec, 31, 2009, giving the comptroller’s office until March of 2010 to audit the budget records.
Wilson said he doesn’t know whether the state can realistically get back on schedule this year when closing the books for the 2009-10 budget year.
Norris says he’s not surprised.
“That’s sort of the domino effect. They were seven months behind on this and now it puts them further behind in closing last year’s books,” he said.
The Collierville Republican, who blamed Democratic Gov. Phil Bredesen’s administration for the delays, said he worries that the state’s delinquency status could cause a drop in the state’s bond rating or force the state to reconsider issuing some federal funds.
Department of Finance and Administration Commissioner David Goetz told TNReport in July that the bonding authorities were all up to speed on the state’s problems with its accounting system and said he didn’t expect them to lower Tennessee’s rating.
Goetz, the governor’s budget director, agreed that the new Edison accounting system may have given the state trouble.
“However, problems we experienced over the past year have led to improvements in operations,” he wrote in a letter to Wilson (pdf). “We have established an aggressive schedule to complete the CAFR for FY10 by Dec. 31, 2010. If successful, that would return the closing process to its normal schedule.”
“The Edison system replaces more than 20 major outdated and inflexible legacy systems that were 15- to 30-years old,” he added.
But Wilson said more work needs to be done.
“The ultimate success or failure of Edison depends upon the extent to which the agencies accept and utilize the advantages and recognize the pitfalls of the system,” he said in his own eight-page letter, adding that the state needs to learn from the experience to prevent the large changes from crippling state government.