May 4, 2008 Hamblen County Audit 2007 Is Available

The most recent audit of Hamblen County Government can be accessed at the State Comptroller's website. If you don't want to maneuver through the Comptroller's website, here is the direct link to the Hamblen County audit.

Good news in one major area.

Hamblen County Government's unreserved General Fund balance is up to just over $2,300,000. This is a major improvement from the unreserved General Fund balance of $83,000 FY 2003. A healthy Fund Balance is extremely important. It is sometimes called the county's "rainy day fund" or "savings account" for emergency needs.

There is a lot of history behind the Fund Balance reaching a low point in 2003 and then gradually increasing over the next four years. Explaining how the county ended up with a dangerously low FY 03 fund balance is simple. The county was spending more than it took in and doing so by pulling from its find balance/savings account.

When I took office on September 1, 2002, the previous commission had already approved the FY 03 budget.

My first major proposal to the new (2002-2006) commission was to have state auditors come in and perform Hamblen County's annual audit. This proposal passed in October 2002.

The reasoning behind this proposal was two-fold. First, the state auditors would charge approximately $13,000 for the annual audits where the private auditors had been charging $31,000. That meant an immediate $18,000/year savings! Over the past five audits (2003-2007) this one change has resulted in a savings of $90,000 to the county.

Second, I felt a fresh set of eyes should go over the books. I had observed that the county had been spending down its fund balance over a 10-year period, and I had also noticed several questionable financial transactions in previous audits.

The state auditors' first audit of Hamblen County involved FY 2003. When the 2003 audit was presented to the audit committee and county commission in the spring of 2004, there were 29 findings of irregularities and/or violations of state law--more than any other county in the state.

In addition to the findings, one of the most distressing revelations in the FY 03 audit was that more money was spent out of the general fund than was taken in (again). This time the problem was so serious that money from other funds and sources had to be dumped into the county's general fund just to keep the general fund afloat and to keep it from being declared officially "broke."

The public was never officially informed of this dire situation because the auditors had allowed the county to switch the money around and close out certain funds and dump that money into the general fund to keep it from ending in the red.

Even with all the dumping of money into the general fund in FY 03, the unreserved/ available general fund balance as of June 30, 2003, was at its lowest point in recent history--a dangerously low $83,000.

That is why I was always pushing to build up the fund balance and to encourage commissioners to think about the long-term consequences of various spending proposals during the four years that I served.

It was a slow 4-year climb out of a low-point of $83,000 (2003) to a fund balance of over $2.3 M (2007). Hopefully, the new commissioners will keep their budgets on an even-keel and maintain healthy fund balances.

Next, a bit of bad news.

After 10 years, nothing has been paid toward the principal of the $40 million debt on the
1998 School Construction bonds. Of course, this is not a surprise for regular readers of this blog.
The 1998 School Construction debt was set up for a lengthy period of "interest-only payments." Now 10 years and many millions of interest-only payments later, the county taxpayers still owe the whole $40 million principal and will still be paying out lots more interest for many more years!

The Audit Committee of the Hamblen County Commission will meet to review the audit.