Townsend Releases Fiscal 2025 Annual Report: Strengthening Fiscal Oversight
Townsend, Tenn. — The City of Townsend has released its annual financial report for the fiscal year ended June 30, 2025. While the municipality maintains a stable net position, auditors highlighted critical areas for improvement in financial management and budget compliance.
Audit Findings
The independent audit identified two primary areas of concern:
- Material Weakness in Financial Oversight (Finding 2025-001): Auditors found that from July 2020 through February 2024, internal controls over the cash disbursement process were insufficient. This included inadequate documentation for purchases, lack of oversight on credit card expenses, and failures in properly securing cash or issuing pre-numbered receipts. Additionally, an investigation by the Tennessee Comptroller of the Treasury uncovered misappropriations by a former City Manager totaling $3,954, which have since been repaid.
- Budget Overspending (Finding 2025-002): Expenses in both the State Street Aid Fund and the Drug Fund exceeded their budget appropriations, violating state statutes.
In response, the City is implementing a new financial management software system featuring a purchasing module to mandate purchase orders and real-time oversight. Staff have also been retrained on cash handling and deposit protocols.
Notable Items in Notes
Key disclosures from the financial notes include:
- Restatement: The City implemented GASB 101 regarding compensated absences, which required restating the beginning fund balance and net position as of June 30, 2024.
- Pension Plan: The City participates in the Tennessee Consolidated Retirement System (TCRS). As of the June 30, 2024 measurement date, the City reported a net pension liability of $80,801.
- Defined Contribution Plan: Since 2020, the City has offered a 401(k) plan, matching up to 3% of employee compensation.
Assets
As of June 30, 2025, the City reported total assets of $2,752,447. This includes:
- Current Assets: $1,084,472.
- Capital Assets (Net): $1,667,976, comprised of land, buildings, vehicles, and equipment.
Debt and Leases
The City continues to reduce its long-term financial obligations:
- Long-Term Debt: The City retired $40,000 in principal during the year, leaving $84,000 in outstanding General Obligation Capital Outlay Refunding Notes.
- Leases: The City holds a vehicle lease with a remaining balance of $66,754 as of June 30, 2025, having paid down $20,797 during the fiscal year.
Revenue
General revenue for the year totaled $1,367,314. The City’s primary revenue sources include:
- Local Sales Tax: $991,436.
- Wholesale Beer Taxes: $98,241.
- Intergovernmental Revenue: $150,860.
- Proceeds from Sale of Capital Assets: $69,236.
Summary of Municipal Health
Townsend’s fiscal health remains stable, with total assets exceeding liabilities by $2,657,814—an increase of approximately 1% over the prior year. The General Fund’s unassigned fund balance of $770,129 represents 50% of general fund expenditures, signaling strong fiscal discipline to handle future emergencies. While the municipality faces challenges regarding internal controls and budgetary compliance, management has taken immediate steps to modernize financial systems to address these findings.