Shelby County commissioners approved an amended resolution providing more oversight of the county’s cash flow policy during their Monday, Oct. 6, meeting.
Commissioner Michael Whaley’s resolution seeks to coordinate payments from the fund balance with the ups and downs of property tax revenues. It passed 11-0 on its first vote.
Money from the account is used to pay the county’s monthly operating bills, such as employee salaries and rent. Currently, payments are based on the fund balance amount.
Members want stricter oversight and a more flexible payment system. An Oct. 1 quarterly report from the county’s finance team revealed the fund balance had dipped to $17 million. The state requires a minimum balance of $20 million.
“What we are really trying to get at with this is the forecast at a more detailed level at where we are going based on current obligations,” Whaley said.
Edmund Ford Jr. kicked off Monday’s discussion by introducing an amendment that built upon the four points in Whaley’s proposal. It was introduced as an add-on item Wednesday, Oct. 1 — the same day the finance report was released.
Along with tweaking the fund balance policy to include cash flow, Whaley’s proposal called for implementation by the county finance department, installment-based payments, and measures to replenish the fund balance.
Ford’s amendment strengthened the resolution by requiring a minimum cash flow reserve to be maintained in the balance. Forecasts will be modified to identify shortfalls.
It also requests “triggers” and “criteria” for short-term borrowing. Payments on loans should also be based on forecasts. Also, borrowing can only be used if the shortfall is “temporary.” The money must be repaid at the next influx of revenue.
Ford was added as a co-sponsor.
To support implementation, Shelby County Administration and Finance Director Audrey Tipton asked commissioners to clarify when payments are scheduled on resolutions of $500,000 or greater. Those would not go through until enough revenue had been collected.
“If the resolution is of a certain amount, the cash should not be expended until after we’ve collected more cash in order to pay that,” Tipton said.
The fund balance shortfall occurred during the late summer months when revenues typically flow in more slowly. Property tax collections don’t begin until the first Monday in October. According to Tipton, the bulk of revenue from property taxes arrives in January.
“The explanation for a negative fund balance is because we have not collected all of the cash at certain points of the year,” Tipton explained.
Ford dismissed that rationale. He attributed the lack of funds to budget season “politics.” He said that when he and Whaley led budget efforts from 2019 to 2021, fund balance problems didn’t typically occur. And if they did, they were quickly addressed.
After reviewing past correspondence from the comptroller, Ford noted the problems have only emerged over the last five years. He added that the state’s top fiscal official is aware of the issue now, which could lead to more state oversight in the future.
“There’s enough blame to go around, whether it’s the 11th floor, finance, this body,” Ford said. “We are now at the mercy of making sure that the next budget is approved by the comptroller. We can’t go back and fix this one. He’s already stated it was too late.”
Commission Chairwoman Shante Avant added an amendment requiring monthly reports from the finance department so members can keep a closer eye on the books, particularly during the beginning of the fiscal year. The proposal replaced a couple of Ford’s bullet points that requested quarterly reports.
“It would be helpful on a monthly basis, especially July, August, September, this first sort of half of the year to really dig into that forecast. That way, we look at the obligations we know we have — salaries, benefits — we know we have those,” Whaley agreed.
Once again, Tipton cautioned that revenues may not match projections during the proposed monthly updates.
“When we receive the final cash receipts report, it is on the 10th of the following month. Once we close the books, you’ll see it monthly, but it’s still going to be high,” Tipton said.
Avant acknowledged there would be a “time lag.” Both Ford and Whaley agreed to the amendment.
