Tennessee begins its next budget cycle today, but state financial officials have yet to fully close the books on the fiscal year that ended last summer.
That isn’t normal, said Comptroller Justin Wilson, Tennessee’s chief auditor of state and local governments.
And the delay could put some of the federal dollars the state is angling for in jeopardy if the situation isn’t rectified soon, he told the Joint Fiscal Review Committee Tuesday in Nashville.
“We are not doing what we’re legally required to do,” said Wilson.
The State of Tennessee is obligated to share an audited budget with the federal government each year. But because the state switched to a new accounting system for closing out the 2008-09 fiscal year, officials said ironing out the final numbers is taking longer than expected.
They’re now five months behind schedule.
“The state hasn’t completed its audit on that last year, and without an audit, the feds deem that to be technically missing,” said Mark Norris, Republican majority leader in the Tennessee Senate. “And If your audits are missing, bad things can happen if you’re a recipient of federal funds.”
Particularly worrisome to Norris is how the delay might affect Tennessee’s bond rating and whether the $501 million in “Race to the Top” education grants might get held up.
“We’ve been told that it’s not a big deal, that it’s not a problem. But it’s become a problem,” said Norris.
Federal officials sent a letter on May 5 to the Tennessee Student Assistance Corporation saying the U.S. Department of Education may “suspend the payment of account maintenance fees, default fees and claims to an entity that does not submit its audit within the required time period.”
TSAC responded three weeks later, saying the audit still wasn’t ready.
“The audit you are requesting is not yet available,” read the letter signed by TSAC Executive Director Richard Rhoda. “The Comptroller’s office currently anticipates completion of the audit of the state’s financials in July with the single audit to follow thereafter.”
Since then, Department of Finance and Administration Commissioner David Goetz says his department has finished crunching the numbers on that budget cycle. The department forwarded the documents to the Comptroller’s office two weeks ago for further examination.
Goetz also maintained that Tennessee being delinquent in wrapping up the 2008-09 budget year shouldn’t hurt either the state’s bond rating or access to the Race to the Top grant.
“The federal government wants to see that the books are being kept appropriately,” he said. “This is not something we try to hide. There’s no problem here except in just the reconciliation in the processing that we’ve had to do. We’re working our way through those issues.”
Comptroller Wilson said he so far hasn’t heard that Race to the Top dollars will be withheld, “but there are inquires from the federal government to say, ‘Why haven’t you done this?’ It’s an issue.”
The budget year began on July 1, 2008 and ended on June 30, 2009. The finance department normally would have closed the books by December 31, 2009, giving the comptroller’s office until March of 2010 to audit the budget records.
The comprehensive annual financial report should be done in 30 to 45 days, said Wilson.
However, other delays could still pop up, he said.
“It’s like, ‘Tell us what’s in the box,’ and you hadn’t opened the box. We just don’t know,” said Wilson, who added that his department has already discovered reporting errors.
Because officials are still closing out the books on 2008-09, Wilson said he expects the state will ultimately delay wrapping-up the 2009-2010 budget year as well. It ended June 30.
“I do not want to do a sloppy job in order just to get the paper in,” he said.