Managers and Utilities Learn About Tennessee's New Internal Controls Requirement

A new requirement recently passed by the Tennessee General Assembly requires all local government entities, including utilities whether operating as a fund within a city or county or as a stand-alone utility, to establish its own internal controls system or policies. Since this includes municipal electric utilities, TMEPA is working to get our members up to speed on this requirement. To help do that, TMEPA hosted a training and informational session on the new state requirement on September 9, led by Jerry Durham from Division of Local Government Audit of the Comptroller’s Office.

 

Most utilities are well run with dedicated employees, who work in a culture of doing what is best for the utilities and its customers. Managers, office employees, and lineman interact often, whether it’s going to church together, socializing together, or simply growing a close friendship over decades of working together. Because of this most utility employees grow to trust one another, believing they can depend on each other to do the right thing. This trust and atmosphere of working together is what makes the utility industry one of the most dedicated in the country, and keeps essentials service like electric service going.

 

The session from Mr. Durham discussed that while utilities should set up internal controls to comply with state law, it’s also just a good idea to have one to help prevent the possibility of issues in the future. Even employees with sterling reputations  can steal given an opportunity and motivation, which is often unknown until a perpetrator is caught. A utility with an internal controls system protects the utility from possible theft or fraud, and it removes temptation from employees as well. Even some of the best of us make bad decision with other people’s money, and proper internal controls can help "nip it in the bud" before it happens.

 

To help local governments and utilities become compliant with the new requirement there are several resources available. The place to start is the state comptroller's own internal controls manual. Among many things the manual discusses how each utility is required to document in writing the five components of an Internal Control System:  a)  Control Environment;  b)  Risk Assessment;  c)  Control Activities;  d)  Information and Communication;  and e)  Monitoring. The Comptroller's Office has also put together some helpful spreadsheets that separate duties and responsibilities, and utilities can be change them to reflect how a utility works. MTAS also has an internal controls manual for municipal government. You can visit here, where a PDF of Mr. Durham's presentation is available along with an audio recording of the session.

 

TMEPA is happy to help any utility as it works to develop it internal controls system.