In 1987, the Tennessee General Assembly passed the Wastewater Facilities Act (T.C.A. § 68-221-1001 et seq.), which authorizes the state to intervene in the financial affairs of publicly owned wastewater utilities that are in financial distress. In 1997, the Act was amended to extend similar authority over financially troubled water systems that are not already combined under the same fund as their sewer systems. In 2023, the Legislature consolidated the two oversight boards previously charged with these responsibilities into a single entity, now known as the Tennessee Board of Utility Regulation.

In Tennessee, the Comptroller of the Treasury establishes the accounting and auditing standards and procedures that local governments, including utilities, must follow. Local governments must adhere to these prescribed standards, and the Comptroller’s oversight ensures that their accounting practices meet statutory requirements and audit expectations.