HOLLOW ROCK, Tenn. (Sept. 22) — Representatives from the Comptroller’s office visited Hollow Rock to lay out the state of the town’s finances and warn that the audit backlog has become a crisis, and the clock is running out.
Auditor Issues
Lori Cantrell, a contract audit review specialist with the Local Government Audit Division of the Comptroller’s Office, told Aldermen that ATA, the town’s auditing firm, has requested to rescind its contract. In making that request, the firm explained that the town has not provided financial information for fiscal years 2025 and 2026.
“The town has made no progress in providing any financial information to our firm for the periods in question,” Cantrell quoted from the auditor’s statement. “Additionally, no expected timeline has been provided for submitting the requested information. At this point, the town will have to find a different auditor.”
“Hiring a different auditor will not resolve the underlying problem,” Cantrell told the board. “Regardless of which firm does the audit, the financial records have to be complete, reconciled, and ready to be audited.”
Pattern of Delays
Cantrell said the 2022 audit was 509 days late. The 2023 audit was 417 days late. The 2024 audit was 602 days late. The fiscal year 2025 audit is already 265 days past due and the books for that year have not yet been closed.
She said the law requires books to be closed within 60 days of the fiscal year end.
“These are significant delays,” Cantrell said, “and this has become a continuing issue rather than an isolated occurrence.”
She outlined four findings from the 2024 audit, all of which are expected to repeat.
Expenditures have exceeded the approved budget in violation of state law, a finding that has recurred since 2022. The town does not employ a Certified Municipal Finance Officer as required by state law. The accounting records were not closed within 60 days of the fiscal year end. The town’s utility operations still lack the required cybersecurity plan.
Potential Consequences
Without an approved budget, the town cannot issue debt, meaning it cannot borrow money for projects like paving or infrastructure repairs.
Some grants may also require a current audit or approved budget to qualify.
Cantrell also noted that a law passed last year gives the comptroller the authority to withhold up to 15 percent of the town’s state shared revenue, including sales tax, if the town has two or more late audits past December 31. She said that option is a last resort, but it has been used before.
“As long as you’re working toward it and keeping them informed, they won’t do that,” she said. “But it has happened.”
The CMFO certification deadline is December 31, 2026. If the town does not have a certified officer or a contracted CPA firm acting in that role by then, the same revenue withholding provision applies.
The Good News
Adam Tschida, a financial analyst from the Division of Local Government Finance, offered a more encouraging picture of the town’s overall financial health, at least as of the 2024 audit, the most recent data available.
Hollow Rock’s cash on hand stands at 254 percent of annual expenditures, meaning the town has roughly two and a half years of operating cash available without any new revenue coming in.
The town can cover its liabilities ten times over with cash on hand. Debt stands at just 1.3 percent of assessed value. And the town ran a surplus of approximately 23 percent in fiscal year 2024.
“Based on your 2024 audit, your financial metrics are actually pretty good,” he told the board. “You’re probably healthier than the average city.”
He did warn that without a current audit, no one truly knows where things stand today.
His recommendations to the board included adopting a budget calendar, an audit calendar, and a policy requiring regular status updates on both at each board meeting.
“As a governing body, it is your job to make sure that the budgets are sent to our office, and it’s your job to make sure that the audit is on time,” he said. “You may not be the ones in the weeds doing the budgeting, but as a board, you have a responsibility to have policies in place and ask enough questions to know the status of these items.”
Paving Approved
In other business, the board voted to approve a paving bid covering portions of Betty Street, Spring Street, and Smith Street. Due to cost constraints, only sections of each street will be paved.
Mayor Ronnie Webb said the town plans to return each year and do additional portions as funding allows.
The proposed upgrade to the county’s Tennessee Advanced Communications Network radio system, which would cost approximately $18,000, was tabled to the October 20 meeting.
Hollow Rock’s Board of Mayor and Aldermen meets the third Tuesday of each month at 7 p.m. at Town Hall.
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