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Municipal Technical Advisory Service (MTAS)

Internal Accounting and Reporting

Reference Number: MTAS-581
Reviewed Date: 10/25/2022

T.C.A. § 9-3-401 et seq., known as the Local Government Modernization Act of 2005, requires that local government accounting and reporting comply with generally accepted accounting principles. Penalties or restrictions may be assessed at the discretion of the comptroller’s office for noncompliance with the act. What this means for governments is they must follow accounting standards established by the Governmental Accounting Standards Board (GASB). In order to record the new fund balances in the internal accounting system new account numbers must be established. Depending on the type of software used in each government this may have to be done with assistance from software vendors. MTAS recommends that governments consult with their software vendors and independent auditors prior to making any adjustments to fund balance in the accounting system. It may be necessary to create a separate spreadsheet or file to reclassify fund balances and maintain supporting documentation for your classification decisions and make the fund balance adjustments at year end. The recommended municipal chart of accounts can be located on the MTAS website at Municipal Chart of Accounts.

Use of this numbering system is strongly encouraged by the Comptroller of the Treasury, Division of Local Government Audit in the Audit Manual.

"The fund account numbers were developed by the Municipal Technical Advisory Service in conjunction with the Comptroller of the Treasury. They have been designed to be incorporated into the accounting system developed and used by the Local Government Data Processing Corporation. Municipalities that do not use the accounting system developed by the Local Government Data Processing Corporation should endeavor to maintain reasonably comparable account names (Tennessee Comptroller of the Treasury, 2021)." The full audit manual may be found on the State of Tennessee's website: FinalCopyof2021AuditManual.pdf.