Failure to understand the legal requirements and procedures applicable to County banking and finance procedures has recently lead to significant misunderstanding regarding the signing of checks issued by Hamilton County. The purpose of this correspondence is to clarify this misunderstanding.
For many years, County finances were administered pursuant to a “Warrants Payable” system. Because this system was outdated, in the late 1990s, the State Comptroller’s Office encouraged all Counties in Tennessee to discontinue issuing Warrants Payable and move to County checking accounts. In response, the Hamilton County Trustee at that time, Bill Nobles, made the decision to transition from the Warrants Payable system to the preferred bank checking system. Although the change was authorized pursuant to T.C.A. § 67-5-210, it also required the approval of both the State Comptroller of the Treasury and the local County Commission.
In transitioning to a County checking account as encouraged by the State Comptroller, Hamilton County had the following three options pursuant to T.C.A. § 67-5-210:
(1) List Certification Method. This method requires each department, including the county mayor, a department head, director of accounts and budgets, and a director of finance, to submit a list by fund to the county trustee of the checks being issued showing the date of the check, check number, payee and amount. The county trustee verifies the department’s fund balance and certifies that funds are available or will be available in the "check clearing account" for payment of those checks. The county trustee then transfers funds from the "county master account" to the "check clearing account." The county trustee may develop a procedure for emergency certification by the county trustee in circumstances where such would be reasonable, in which event the county trustee must be provided with a written document for certification by the end of the next business day;
(2) Check Signing/Validation Method. This method requires each department, including the county mayor, department heads, director of accounts and budgets, and directors of finance, to submit a list to the county trustee of checks being issued showing the date of the check, check number, payee and amount. The county trustee verifies the department’s fund balance. The county trustee signs or validates each check if sufficient funds are or will be available and makes any necessary transfer of funds from the master account to the check clearing account;
(3) Combination Method. The method outlined in (1) may be followed for some offices and departments, and the method outlined in (2) followed for other offices and departments in the discretion of the county trustee;
When Hamilton County transitioned to a County checking account system, Mr. Nobles chose the Combination Method described above, which is a combination of options (1) and (2). That method was submitted to and approved by both the state comptroller and the local County Commission, and remains in use in Hamilton County today.
Most of the confusion relating to the signing of checks arises from the false belief that the county trustee can issue and sign checks for any purpose he or she chooses. However, as explicitly stated in T.C.A. § 67-5-210 quoted above, the trustee’s only authority and responsibility with respect to issuing and/or signing a check is to determine and certify whether the necessary funds are available in the applicable account. The county trustee has no authority whatsoever to determine how county funds are spent. Furthermore, neither does the county mayor. As explained by the County Technical Assistance Service, only the local County Commission can determine how County funds are spent. According to CTAS:
“No county funds may be expended unless authorized ("appropriated") by the county legislative body. T.C.A. § 5-9-401. This appropriation procedure is a phase of the annual budgeting process that begins in January and usually ends in July with the approval of the budget.”
Although the county trustee and/or the county mayor may sign checks issued by Hamilton County, neither the trustee nor the mayor has any authority to determine how County funds are spent; that authority lies solely with the County Commission. The trustee’s job is specifically limited to determining whether the necessary funds are available in the applicable account for expenditures authorized by the County Commission.
Jackie Ware