Municipalities

Cash Flow and Revenue Forecasting

ANNUAL BUDGET MEMO

To:                   Budget Contact
From:              Betsy Knotts, Director
                         Division of Local Government Finance
Date:               January 25, 2022
Subject:          Fiscal Year 2023 Annual Budget Memo for Tennessee Municipalities

Thank you for partnering with us as we work together to promote fiscal responsibility in Tennessee’s local governments. Timely budget adoption is foundational to the budget process and ensures your municipality begins the fiscal year with a sound financial spending plan.

Last year our office recognized 98 of Tennessee’s 342 municipalities for, among other criteria, adopting a balanced budget on or before June 30 and submitting the budget to LGF@cot.tn.gov within 15 days of adoption tncot.cc/budgetcertificates. That’s more than a 20% increase from the prior year. We look forward to even more municipalities joining that number for fiscal year 2023.

What's New for 2023

Please be alert to the following changes as you begin this year’s budget process.

·         Statutory Filing Date: A complete budget submission must be filed with our office no later than August 31^st to receive approval. Pursuant to state law, local governments may not borrow money until they have an approved budget, or as otherwise provided for in a manner approved by our office (Tenn. Code Ann. § 9-21-404).

·         Budgetary Basis: The annual budget should be adopted on the same basis of accounting as required by generally accepted accounting principles (Tenn. Code Ann. § 9-21-403).

·         Budget Submission: Budgets for legally separate entities that result in a financial benefit or burden to your local government should now be included as part of the budget submission. Additionally, the projected ending cash balance threshold that results in the submission of a cash flow forecast for operating funds has increased from 10% to 15%.

·         Budget Manual: Our office recently published the “Tennessee Budget Manual for Local Governments” to provide uniform guidance for the annual budget process: tncot.cc/budget- manual

·         Instructional Videos: We have updated and added additional instructional videos at the following link: tncot.cc/budget.

Municipal Water and Sewer Utility Systems

Please also note, pursuant to Tenn. Code Ann. § 68-221-1016, municipalities with water and sewer utility systems are required to fill out an annual information statement before the beginning of your fiscal year. Please visit tncot.cc/utilityinfo to fulfill this requirement.

Required Documents for Budget Submission

Prior to the beginning of each fiscal year, all municipalities in Tennessee must adopt a budget ordinance and email it, with other required documents as described below, to LGF@cot.tn.gov within 15 days following adoption.

·         Cover letter on the municipality’s letterhead;

o   Complete contact information should be included and at a minimum, email addresses for the:

§  Mayor;

§  City/Town Manager, as applicable; and

§  Finance Director or equivalent position;

·         Signed/certified copy of the appropriation ordinance (and tax levy ordinance, if separate);

·         Detailed budgets for all funds including enterprise funds and school funds, as applicable;

o   Include estimated beginning fund balances and cash balances for each fund at July 1, 2022, and ending balances at June 30, 2023.

·         Copy of the annual adopted budget for any entity that results in a financial benefit or financial burden to your local government;

·         Budget Summary Schedule;

·         Cash Flow Forecast Schedules for:

o   Operating funds with a budgeted ending cash balance less than 15% of annual expenditures or an ending cash balance in the prior year audit less than 15% of annual expenditures;

o   Any fund that received proceeds from TRANs for the past two consecutive years; and

o   All operating funds if the prior year audit has not been issued/is late.

·         Schedule of Outstanding Debt and Budgeted Debt Service, as applicable; and

·         Revenue forecasts for property and sales tax in fiscal year 2023, when applicable.

Further information concerning budgeting requirements, a budget submission checklist, budget manual, and excel schedules may be found on our website at: tncot.cc/budget.

Please send the complete package to: LGF@cot.tn.gov.

If you need any assistance with your submission, you may contact your analyst. For hands-on assistance in preparing and adopting your budget, please contact the Municipal Technical Advisory Service (MTAS) or the State Department of Education - Section of Local Finance.

NOTE: Please do not include debt approval requests with your budget submission.

Checklist

Budget Schedules

Budget Ordinance

Utility Documents

Budget Assistance and Information

     Government Finance Officers Association (GFOA)

     Municipal Technical Advisory Service (MTAS)

     Tennessee Department of Education Office of Local Finance

Revenue and Economic Information

     MTSU Business & Economic Research Center

     Tennessee Comptroller of the Treasury Division of Property Assessments

     Tennessee Department of Economic and Community Development

     Tennessee Department of Revenue

     UT Center for Business and Economic Research

Tennessee Laws, Rules and Regulations

     Tennessee Code Annotated

     Tennessee Public and Private Acts

     Tennessee Rules and Regulations