Following the town’s decision this week not to relinquish its charter, the state comptroller’s office announced Thursday Mason will be under its financial control effective March 28.
“The Tennessee Comptroller’s Office is exercising its authority to supervise the financial affairs of the Town of Mason in an effort to improve the West Tennessee town’s fiscal condition,” comptroller Jason Mumpower said in a press release, noting he believes Mason’s citizens and taxpayers deserve an accountable government that is capable of providing services and improvements to the community.
On Feb. 8 he visited the town and announced due to the two decades of financial mismanagement the town’s finances would come under the comptroller’s management or it could relinquish its charter and be managed by the Tipton County government.
How’d they get here?
In the release Mumpower detailed the issues that led Mason to this point which includes late audits, findings with audits, a deficit in the general fund, illegal interfund transfers, and issues with its water and wastewater systems.
Audits late for 20 years straight
The town has submitted its audits late every year since FY 2001, there were unauditable financial statements in 2014 and 2016, there’s an incomplete audit for FY 2020 (the draft has been submitted) and the audit for FY 2021, which ended on June 30, 2021, is three months late.
Issues with accounting practices
The last five audits have a combined 84 findings, which means issues with the statements or policies and procedures. There were 25 findings in 2016 alone and 16 findings in the recently-submitted FY 2020 draft audit.
The state can’t approve Mason’s budgets
The comptroller’s office hasn’t approved Mason’s budget since FY 2019, which was July 1, 2018-June 30, 2019, and the general fund has spent more than its taken in for the last four years.
Growing General Fund deficit
The general fund deficit has grown by 280% since FY 2016:
FY 2016: –$126,659
FY 2017: –$134,819
FY 2018: –$250,310
FY 2019: –$415,230
FY 2020: –$481,620
They owe the utility fund $585K
The town has continued to improperly borrow from its water, sewer, and gas funds to supplement the general fund. The comptroller’s office said this has been ongoing since FY 2007 and Mason has failed to complete two five-year corrective repayment action plans (in 2013 and 2016). The General Fund owes the utility funds more than a half a million dollars.
FY 2017: $226,495
FY 2018: $452,143
FY 2019: $649,541
FY 2020: $584,723
That’s a 158% increase in four years.
Water and wastewater repairs will cost more than $50M
According to the comptroller, the town recently had its water and sewer infrastructure reviewed for current and future needs and it cannot fund necessary improvements. It is estimated the wastewater system will required $40.3 million and the water system $12.9 million to make the necessary improvements and support anticipated growth.
What happens now?
Mumpower sent Mason a letter Thursday explaining what happens now that their financial affairs are under the state’s supervision.
Providing the comptroller with financial information
The corrective action plan says by March 25 the town will need to provide to the comptroller budgets for each fund as of March 1, the last three months of bank statements, contact information for their financial officers, lists of grants and planned projects, list of current and proposed employees and contractors with salary information, and lists of all contracts for contracted employees. They are also required to open and maintain separate bank accounts for water/sewer, sanitation, gas, general, and state street aid funds.
Beginning repayment to utility fund
The repayment of restricted monies will begin on April 4. The comptroller said the town will repay the balance owed to its utility fund in 27 months, which is the end of FY 24 in June 2024. They will use the most recent audit data and updated as more information is available.
The monthly payments will be $22,145 and will have to be made before any other expenditures.
Submitting weekly expense approval requests
Beginning March 28, the town will have to submit weekly expense approval requests, including planned financial transfers between accounts, and monthly bank statements for every account.
The comptroller’s office said the everything involving taxpayer funds must be reviewed and approved by the comptroller prior to spending, all new contracts or contract extensions must be approved prior to execution, and grant applications requiring local matches for funding and all planned and new purchases must be approved as well.
Mumpower said his decision is consistent with similar actions taken by his office in other Tennessee communities, like the East Tennessee city of Jellico. After three years, in 2018 they were able to regain a good financial standing.
“The citizens and taxpayers of Mason deserve a financially sound government,” said Comptroller Mumpower. “By closely supervising the town’s finances, we will put Mason on a path toward fiscal responsibility.”
The Comptroller’s division of Local Government Finance will continue its direct supervision over the town government for as long as it takes for Mason to improve its financial condition and demonstrate that it is capable of managing a balanced budget with strong internal controls.