October 31, 1999

To the Citizens of Nashville and Davidson County, Tennessee:

We are pleased to submit the comprehensive annual financial report of the Metropolitan Government of Nashville and Davidson County, Tennessee (the Government) for the fiscal year ended June 30, 1999. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the management of the Government. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds, account groups, and component units of the Government in accordance with generally accepted accounting principles (GAAP). All disclosures necessary to enable the reader to gain an understanding of the Government's financial activities have been included.

The Government is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act of 1984 and U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Information related to this single audit, including the schedules of federal and state financial assistance, findings and recommendations, and independent auditors' reports on the internal control structure and compliance with applicable laws and regulations, are not included herein but are reported separately.

In conformity with generally accepted accounting principles, as set forth in Governmental Accounting Standards Board (GASB) Statement No. 14, The Financial Reporting Entity, this report includes all funds and account groups of the primary government and all component units. For purposes of this report, the primary government includes all departments and agencies of the Government which are not separate legal entities, including the Department of Water & Sewerage Services and the Metropolitan Board of Education. The component units include those separate legal entities whose relationships with the primary government meet the criteria for inclusion defined in GASB Statement No. 14. General Hospital and Bordeaux Hospital, previously enterprise funds of the Government, were transferred to the Hospital Authority, a separate legal entity created in March 1999 to operate both hospitals, and are reported in that component unit of the Government.

The comprehensive annual financial report is presented in three sections: introductory, financial, and statistical. The introductory section includes this transmittal letter, a description of the form of government, the Government's organizational chart, a list of principal officials, and an organizational chart for the Government's Finance Department. The financial section includes the general purpose financial statements and the combining, individual fund, and individual account group financial statements, schedules, and required supplementary information, as well as the independent auditors' report on the financial statements and schedules. The statistical section includes selected financial and demographic information, generally presented on a multi-year basis.

ECONOMIC CONDITION AND OUTLOOK

Metropolitan Nashville - Davidson County is located in middle Tennessee at the hub of many air, rail, and highway transportation routes. The Government provides a full range of services. These services include police and fire protection; solid waste management; construction and maintenance of highways, streets, and infrastructure; traffic regulation and control; parking; health and social services; public housing; recreational and cultural activities; public libraries; planning and zoning; water and sewerage services; administration of justice; and general administrative services.

The local economy is a well-balanced blend of financial, agricultural, wholesale, retail, manufacturing, and service industries. The local mix of these industries roughly reflects the national economy, with no single industry being predominant in the region. Computer technology, automotive, medical, private educational, private prison management, insurance, banking, publishing, telecommunications, and entertainment companies all find a home in Nashville. With a rich economic, social, and cultural environment, the city consistently scores high in national rankings of preferred business locations, best places to live, and favorable environments for the creation and development of businesses.

The Nashville Metropolitan Statistical Area (MSA) economy has been slightly healthier than the national economy, with above-average growth in employment and personal income and below-average unemployment rates. Prospects for continued employment growth and low unemployment are excellent. However, economic growth (including employment and population) in Davidson County itself has been slowing and recently has been lower than that of the surrounding MSA counties.

The Government's two biggest locally generated revenue sources are sales and property taxes. The property tax base has shown moderate growth, and Nashville continues to have the lowest effective property tax rate of the four major Tennessee cities. The Government has no income tax.

MAJOR INITIATIVES

The Government continues to emphasize delivery of focused public services in a way that provides maximum efficiency, effectiveness, and value to the citizens of Nashville. The Government's major initiatives for fiscal year 1999, for fiscal year 2000, and for the future are discussed below.

FOR FISCAL YEAR 1999: Substitute budget ordinance SO98-1237 adopted a balanced budget totaling $1,065,432,594 in the six budgetary funds.

Projected revenue from a tax increase was budgeted to meet specific educational needs of the community. The overall goal of the budget was to assure that the Government's ability to provide services was not impaired, given revenue projections.

Highlights of the fiscal year 1999 budget include the following.

• Schools - New debt service funding was included to support capital improvements needed to achieve unitary status and end the 43-year-old desegregation lawsuit that resulted in court-ordered busing. This unitary status will enable the Board of Education to provide our children with a quality education while returning to neighborhood schools. The debt service for these improvements is being funded by a $.12 property tax rate increase.

• Other Capital Improvements - Debt service funding was added for an art museum and for infrastructure improvements by transferring $.01 of the property tax rate from the GSD General Fund to the GSD Debt Service Fund.

• Justice - Local support of the Federal "COPS Ahead" grant for new police officers was increased, and funding was added for a police consultant and a crime coordinator, as recommended in a Crime Commission report. Additionally, funding was provided for two new General Sessions Courts, including additional funding for the resulting expenditure increases for the Public Defender, the District Attorney, and the Criminal Court Clerk. A new Circuit Court was funded by the State. During the fiscal year, the Sheriff's Office budget was increased with a supplementary appropriation from undesignated fund balance to cover additional expenditures related to an increase in the jail population.

• Hospitals - The Hospital Authority entered into a three year management agreement with Vanderbilt University Medical Center to operate General Hospital. The agreement stipulates that Vanderbilt will be paid 50% of any operating surpluses, as defined by the agreement, which is to be used to benefit General Hospital. The budget held the General and Bordeaux Hospitals' subsidies to the same level as last year.

• Health - The Health Department budget was decreased by $800,000 as a result of the department's mission being refocused on its public health core. The budget reduced funding for regional health teams that were begun in the prior year.

• Other Public Service Operations - Supplemental funding for the Metropolitan Transit Authority (MTA) was included as a permanent part of its annual operating budget, and funding for Public Works was increased to meet the requirements of the revised permit system for street closures, excavations, obstructions, and meter occupancy. Additionally, funding was provided for the new Pruitt Branch of the Public Library.

• Information Systems - Funding was provided for Information Systems to prepare for "Year 2000" compliance and conversion needs.

• General Funding - A 3% across-the-board pay increase was funded for Metropolitan employees (the second year of a three-year pay improvement plan), but general increases normally provided to departments to allow for inflation were eliminated, resulting in departmental efficiencies saving $1.3 million.

• Contributions - The budget eliminated most contributions to non-profit agencies, except where a service is directly rendered to Metro.

FOR FISCAL YEAR 2000: Substitute budget ordinance SO99-1676 adopted a balanced budget totaling $1,094,343,670 in the six budgetary funds.

Due to a slowing of our revenue growth, each department was requested to submit a budget reflecting a 5% reduction from fiscal year 1999. Salary and fringe benefit improvements were then added to fund the third year of planned pay plan increases for employees. The administration and the Council made numerous changes in departmental budgets from the fiscal year 1999 budget. The more significant changes include the following.

• Schools - With the approval of the Metropolitan Council, the Metropolitan Board of Education was allowed to use $5.8 million of its undesignated fund balance in order to balance its budget. The budget will continue the basic instructional services provided in the previous fiscal year and will provide all of its employees with a 3% salary increase. With this appropriation, the undesignated fund balance of the General Purpose School Fund is expected to stay below 5% of the fund's budget; the fund balance is to be restored within the next three years.

• Economic Development - Budgeted property tax increment refund payments include funds to make economic and community development incentive grants to the Industrial Development Board to encourage the location of Fortune 500 companies and the creation of new jobs within Davidson County. The budget also reflects phasing out operations of the Port Authority, with remaining administrative activities being handled through the Mayor's Office.

• Mass Transit - The local subsidy to MTA was increased to help maintain service with minimum rate increases, and funds were provided to the Regional Transit Authority to continue the Murfreesboro-to-Nashville "Relax and Ride" shuttle.

• Emergency Management - Funds were included for the Office of Emergency Management (OEM) to implement a telephone warning system for flood prone areas in Metro and to enhance multi-agency coordination during major emergencies.

• Justice - The Juvenile Court budget included funds to cover additional costs related to a new management contract for the juvenile detention center. Funds were added to the Sheriff's Office budget to support increased prisoner populations, which is partly funded by state reimbursements. Additionally, funding was increased for prison health contract services provided by the Health Department, and full-year funding was provided for courts that were added in fiscal year 1999.

• Health - Funds were added to support animal control enhancements.

• Libraries - Funds were included to support opening the Bordeaux and Hermitage library branches and to provide for four months of training to take place prior to opening the Madison and Green Hills library branches later in fiscal year 2000. The operating expenses of the new main library and five new branches are not presently funded, and the approximate additional expenditures of $5,000,000 will be funded in future years.

• Recreational and Cultural Activities - Funds were included to expand the operation of the Ice Rink, the Antioch Community Center, and the Warner Park Learning Center. Funds for additional ground maintenance responsibilities at the stadium, Adelphia Coliseum, and the east bank Greenways were also included, as well as increased funding to support the Government's contract with Powers Management to operate the Gaylord Entertainment Center.

• Public Works - In the GSD, funds were added to support contract increases for satellite cities, fly ash handling, and school cleanup refuse disposal. In the USD, funds were added to support contract increases in refuse collection, street lighting, and the vacant lot program.

• Social Services - The budget provided for a contribution to the Nashville/Community Resource Center, which facilitates the donation of goods and volunteer time to Middle Tennessee's nonprofit agencies. Funds were also added to support a pay plan increase for the lowest paid employees of the Metropolitan Action Commission (MAC).

• Information Systems - The department's fund balance was reappropriated to support the completion of Year 2000 compliance projects. The funds were originally appropriated in the fiscal year 1999 budget, and the unspent portion of the original appropriation is being carried over to fiscal year 2000.

• Insurance and Reserves - The budget Increased by $381,000 in the GSD for stadium insurance, property value increases, and tort liability increases and increased by $32,000 in the USD for vehicle and property insurance increases.

Details of all improvements included in the fiscal year 1999 and 2000 budgets are described in the three-volume annual Operating Budget books and in the Budget in Brief booklets published by the Department of Finance, Division of Budgets.

FOR THE FUTURE: In coming years, the Government's agenda will focus on efforts to:

• Resolve various issues surrounding solid waste management and stormwater management while achieving the most efficient, effective, and equitable ways to meet state and federal mandates;

• Continue to expand our growing greenways system;

• Continue to promote Nashville as a national and international tourist destination by facilitating private and public tourism infrastructure and enterprises; and

• Maintain justice system improvements that have helped to reduce Nashville's crime statistics.

These issues will be successfully resolved by the ongoing cooperation of business, government, citizens groups, and other involved parties. The Government's budget continues to stress sound financial management and efficiency, effectiveness, and equity in public services. It remains committed to building a future in which all citizens of Davidson County can enjoy economic prosperity and a quality lifestyle.

FINANCIAL INFORMATION

INTERNAL CONTROL STRUCTURE: Management of the Government establishes and maintains an internal control structure designed to ensure that the assets of the Government are protected from loss, theft, or misuse and to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived, and (2) the valuation of costs and benefits requires estimates and judgments by management.

BUDGETARY CONTROLS: The Government maintains budgetary controls in order to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the Government's governing body, the Metropolitan Council. Activities of the General Fund, General Purpose School Fund and the General Purposes and School Purposes Debt Service Funds are included in the annual appropriated budget. The Government maintains an encumbrance accounting system to provide management with information regarding obligations against appropriations. Beginning in fiscal year 1999, budgetary compliance is based on expenditures during the period (GAAP), rather than expenditures and encumbrances (non-GAAP). The annual appropriated budget for the General Purpose School Fund continues to measure expenditures and encumbrances against appropriations (non-GAAP). Encumbrances outstanding at June 30, 1999 are reported as reservations of fund balance for subsequent year expenditures.

SINGLE AUDIT: As a recipient of federal and state financial assistance, the Government is responsible for ensuring that an adequate internal control structure is in place to ensure compliance with applicable laws and regulations related to those programs. As part of the Government's single audit, tests are performed to determine the adequacy of the internal control structure, including that portion related to federal and state financial assistance programs, as well as to determine that the Government has complied, in all material respects, with applicable laws and regulations. The results of the Government's single audit for fiscal year 1999, including any reported instances of weaknesses in the internal control structure or any violations of applicable laws and regulations, are reported separately.

GENERAL GOVERNMENT FUNCTIONS AND GENERAL FUND BALANCE: The following schedule summarizes revenues and other financing sources for general governmental fund types of the primary government (General Fund, special revenue funds and debt service funds) for fiscal year 1999, and the amounts and percentages of increase or decrease in relation to prior year revenues. Certain amounts related to a bond refunding have been omitted for comparability purposes.

Revenues and Other Financing Sources	1999 Amount	Percent of Total	Increase (Decrease) from 1998	Percent Increase (Decrease)
Property taxes Local option sales tax Other taxes, licenses and permits Fines, forfeits and penalties Revenues from the use of money or property Revenues from other governmental agencies Commissions and fees Charges for current services Compensation for loss, sale or damage to property Contributions and gifts Miscellaneous Operating transfers in Operating transfers from component units	$ 446,996,907 224,998,258 99,700,346 14,752,409 13,199,081 333,827,725 14,577,828 46,838,049 2,904,571 7,213,169 1,743,260 70,662,061 6,207,107	34.82 17.53 7.77 1.15 1.03 26.01 1.14 3.65 0.23 0.56 0.13 5.50 0.48	$ 21,003,733 7,846,940 (5,967,525) 1,229,158 (108,155) 26,207,459 161,145 110,745 441,133 518,353 296,085 6,686,602 3,579,865	4.93 3.61 (5.65) 9.09 (0.81) 8.52 1.12 0.24 17.91 7.74 20.46 10.45 136.26
	$ 1,283,620,771	100.00	$ 62,005,538

Some of the more significant changes from the prior year are discussed below.

• Major sources of revenue to the Government continue to be property and local option sales taxes, which represent 52.4% of total governmental revenues. Property tax revenue increased $21 million (4.9%) due to continued growth in the tax base. Local option sales tax revenues increased $7.8 million (3.6%). Although the rate remained unchanged, improvement came from an increase in retail sales during the fiscal year.

• Revenues from other governmental agencies increased by $26.2 million (8.5%) due to increased funding received for the Local Law Enforcement Block Grant of 1998, the "COPS Ahead" program, and disaster relief for a tornado in 1999.

• Operating transfers in showed a $6.7 million increase due to an increase in the transfer to the General Fund 4% Reserve Fund, made possible by increased revenues. Additionally, in fiscal year 1999 we began accounting for grants in special revenue funds with the local match being transferred from the General Fund. Operating transfers from component units increased $3.6 million due to a transfer from the Emergency Communications District for debt service on communication equipment.

Governmental policy continues to recognize that local revenue sources must be the foundation for providing basic public services rather than uncertain federal and state sources. To this end, the Government seeks balanced diversity, equity, and efficiency in local revenue systems to better accommodate future changes. However, state law limits the revenue options available to local governments in Tennessee.

The following schedule summarizes expenditures and other uses for general governmental fund types of the primary government for the fiscal year ended June 30, 1999, and the amounts and percentages of increase or decrease in relation to prior year expenditures. Certain amounts related to a bond refunding have been omitted for comparability purposes.

Expenditures and Other Financing Uses	1999 Amount	Percent of Total	Increase (Decrease) from 1998	Percent Increase (Decrease)
Current:    General government    Fiscal administration    Administration of justice    Law enforcement and care of prisoners    Fire prevention and control    Regulation and inspection    Conservation of natural resources    Public welfare    Public health    Public library system    Public works, highways and streets    Recreational and cultural    Employee benefits    Miscellaneous Schools and special programs Debt service Capital Outlay Operating transfers out Operating transfers to component units	$ 24,269,182 18,309,022 39,563,106 147,489,469 68,780,838 6,849,852 292,287 16,519,502 27,388,492 9,882,149 36,271,472 27,709,921 41,326,087 5,821,492 500,168,595 104,832,282 68,108,787 72,432,992 58,302,645	1.90 1.44 3.10 11.57 5.40 0.54 0.02 1.30 2.15 0.78 2.85 2.17 3.24 0.46 39.25 8.23 5.34 5.68 4.58	$ 1,356,109 2,734,024 3,249,770 8,289,827 1,318,138 663,374 14,418 984,104 (325,507) (453,228) (7,304,314) 199,897 7,553 (747,695) 3,131,371 7,531,184 39,370,569 (34,157,443) 36,313,452	5.92 17.55 8.95 5.96 1.95 10.72 5.19 6.33 (1.17) (4.39) (16.76) 0.73 0.02 (11.38) 0.63 7.74 137.00 (32.05) 165.14
	$ 1,274,318,172	100.00	$ 62,175,603

Some of the more significant changes from the prior year are discussed below.

• Fiscal Administration increased $2.7 million (17.6%) primarily due to increased operational costs for the Assessor of Property, which were related to the implementation of a new land assessment system.

• The $3.2 million (8.9%) increase in the Administration of Justice is primarily due to increased federal funding of the Local Law Enforcement Block Grant and similar programs aimed at reducing crime rates.

• Law enforcement and care of prisoners increased $8.3 million (6%) due to the increased funding in the COPS Ahead Grant and similar programs aimed at reducing crime rates.

• Public Works, highways, and streets decreased $7.3 million (16.8%), returning to normal levels after the increases resulting from cleanup of tornado damage in 1998. The costs associated with the tornado of 1999 were accounted for in a special revenue fund.

• The $7.5 million (7.7%) increase in debt service expenditures was attributable to the timing of principal payments on some of the more recent debt issues.

• Capital Outlay increased by $39.4 million (137%) due to the costs associated with the construction of the NFL stadium. The stadium was completed in 1999 and put into service.

• Operating transfers out remained relatively unchanged in total. The change in reporting General Hospital and Bordeaux Hospital as enterprise funds of the primary government to reporting them as part of the Hospital Authority, a component unit, caused a $37 million shift between the types of transfers.

FUND BALANCES: As a result of the year's operations, the combined ending fund balance for all general governmental funds of the primary government was $270.3 million. Of this total, the undesignated fund balance of the General Fund aggregated $32.3 million as compared to $31.3 million the previous year and $39.6 million on June 30, 1997. At June 30, 1999, the Government reserved $11 million of General Fund fund balance for fiscal year 2000 operations.

The Government will continue to monitor its spending patterns for both new and existing programs in order to hold current and future increases in expenditures within reasonable and affordable levels.

CAPITAL PROJECTS: The Government maintains and annually revises a six year capital improvements program which reflects current project priorities, identifies funding sources, and recognizes future projects. This program results in a prudent use of resources based on proper capital cost amortization and the ability to fund operating costs from available operating revenues. Capital outlay expenditures of $219.8 million were incurred in fiscal year 1999; $151.7 million accounted for in capital project funds and $68.1 million accounted for in special revenue funds.

At June 30, 1999, authorized but unissued general obligation bonds totaled $9.75 million, and general obligation notes authorized but not executed totaled $30.9 million.

DEBT ADMINISTRATION: At June 30, 1999, the Government had a number of debt issues outstanding. These issues included $1.039 billion of general obligation bonds and $669.2 million of revenue bonds. Bonds are not issued to cover operating costs. The debt of the Government is being maintained at realistic levels in relation to underlying financial capacity and defined need for public facilities and improvements. The Government continues to maintain excellent bond ratings.

General Obligation Bond Ratings

Moody's Investors Service ............Aa2

Standard & Poor's .........................AA

During the year, the Government issued $187.5 million of General Obligation Public Improvement and Refunding Bonds.

At June 30, 1999, the ratio of net general long-term debt (defined as gross debt less debt service monies available and less debt to be repaid from sources other than property taxes) to assessed valuation and the amount of net debt per capita were as follows:

Amount of Net General Long-Term Debt $899,721,240

Ratio of Debt To Assessed Valuation 8.26%

Net Debt per Capita $1,661.54

ENTERPRISE OPERATIONS: There are four enterprise operations of the Government - the Department of Water and Sewerage Services, the Nashville Convention Center, the Board of Fair Commissioners, and Farmers Market. Combined total assets at June 30, 1999 and operating revenues for the fiscal year were $1.58 billion and $167.3 million, respectively. The Department of Water and Sewerage Services is the largest enterprise fund operation with more than 96% of total enterprise fund assets and a net income of $39.5 million for the year ended June 30, 1999. The Department provides water and sewer services to customers on a self-supporting basis utilizing a rate structure designed to produce revenues sufficient to provide for debt service, operating expenses, and adequate working capital. The strong commercial, industrial, and residential growth in the metropolitan area has necessitated ongoing expansion of the water and sewer system. Property, plant and equipment of the system has increased from $220 million in 1976 to $1.18 billion in 1999.

PENSION TRUST FUNDS: The pension system of the Government covers substantially all full-time employees. It consists of one pension plan that is open to new members and five pension plans that are closed to new members but are still used by some employees of the former City of Nashville, the former Davidson County, and the Board of Education.

After recognizing contributions from other funds, employees, and the State of Tennessee, the General Fund is responsible for amounts necessary to fund the Metropolitan Employees' Benefit Trust Fund (which includes Division A, the closed plan, and Division B, the open plan) and the following four closed plans:

The County plan - Davidson County Employees' Retirement Fund
The County Education plan - Employees' Pension and Insurance Fund
The City plan - Closed City Plan Fund
The City Education plan - Teachers' Civil Service and Pension Fund

After recognizing contributions from employees and the State of Tennessee, the Board of Education is responsible for funding the Metro Education plan - The Teachers' Retirement Plan Fund. The total assets of all pension funds were $1.5 billion at June 30, 1999.

COMPONENT UNITS: The Government has one blended component unit and nine discretely presented component units. The Sports Authority of the Metropolitan Government of Nashville is the blended component unit. The financial activities of the Sports Authority are included in the special revenue, debt service, and capital projects fund types and in the General Fixed Assets and General Long-term Debt Account Groups.

Discretely presented component units have been categorized as governmental types and proprietary types based on their primary source of funding. Governmental type component units, which derive their funding primarily from other governments and donations, include the Metropolitan Development and Housing Agency and Nashville Public Television Council, Incorporated. Proprietary type component units, which derive their funding primarily from user fees, include the Hospital Authority, the Electric Power Board, the Metropolitan Transit Authority, the Nashville Thermal Transfer Corporation, the Metropolitan Nashville Airport Authority, the Emergency Communications District, and the Industrial Development Board. A brief discussion of the largest governmental type and proprietary type component units follows.

The Metropolitan Development and Housing Agency (MDHA) provides low income housing for the people of Nashville and Davidson County, administers many programs of urban renewal for the city, and administers several programs for the primary government, including the airport noise mitigation project, the arena project, the NFL stadium project, and the downtown library construction project. They receive 94.2% of their total revenues of $223 million from other governmental agencies, including the U. S. Department of Housing and Urban Development. This component unit accounts for 100% of the total assets and 98.6% of the total revenues of the governmental type component units.

The Electric Power Board controls and manages the electric distribution system. It is the sole distributor of electric power within the boundaries of the Government (533 square miles). In addition, its service extends to minor portions of six surrounding counties. It accounts for 50% of the assets and 82.8% of the operating revenues of the proprietary type component units.

CASH MANAGEMENT: Cash temporarily idle during the year was primarily invested in demand deposits, certificates of deposit, obligations of the U. S. Treasury, commercial paper, and the State of Tennessee Local Government Investment Pool. Investments are made either directly or through the Metro Investment Pool. Investments in the pension trust funds also include common stocks and corporate bonds.

The Government's investment policy is to preserve principal, minimize credit and market risks, and maintain adequate liquidity while maximizing the rate of return on its portfolio. The investment policy encourages conservative, low risk investments and does not permit more risky methods, such as leverage, to enhance investment returns. The majority of the cash deposits are held by financial institutions participating in the bank collateral pool administered by the State of Tennessee, thus ensuring that they are collateralized. Earnings continue to be realized as a result of the banking service agreement, which in part provides for the daily investment of demand deposit balances.

The primary government earned income from investments of $205.7 million for the year ended June 30, 1999.

RISK MANAGEMENT: The Government continued to operate a risk management program, which was initiated in 1978. As part of its comprehensive plan, resources are being accumulated in various internal service funds to meet potential losses. Accepted risk control techniques, including employee accident prevention training, have been implemented to minimize potential liability losses. In addition, the Government has elected to come under the Tennessee Tort Liability laws in order to limit its potential liability.

OTHER INFORMATION

CHANGE IN ADMINISTRATION: The June 30, 1999 organization charts included in the Comprehensive Annual Financial Report reflect Philip Bredesen as mayor of the Metropolitan Government of Nashville and Davidson County. On September 21, 1999, Bill Purcell was sworn in as the new mayor.

INDEPENDENT AUDIT: Section 6.15 of the Metropolitan Charter requires an annual audit of accounts and other evidences of financial transactions of the Government and of its departments, offices, and agencies by independent certified public accountants. The audit is performed by a firm chosen by a three-member audit board consisting of the Vice-Mayor, the Chairman of the Budget and Finance Committee of the Metropolitan Council, and the Chairman of the Metropolitan Board of Education. This requirement has been complied with; the independent auditors' report on the general purpose financial statements and the combining, individual fund, and individual account group financial statements and schedules are included in the financial section of this report.

AWARDS: The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Government for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 1998. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports.

In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized CAFR and conform to program standards. The CAFR must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. The Government has received a Certificate of Achievement for the last seventeen years. We believe this report continues to conform to the Certificate of Achievement program requirements, and we are submitting it to the GFOA.

The GFOA presented a Distinguished Budget Presentation Award to the Government for its annual budget for the fiscal year beginning July 1, 1998. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communications device. The award is valid for a period of one year only. We believe the current budget continues to conform to program requirements, and we are submitting it to the GFOA.

ACKNOWLEDGMENTS: Many individuals and organizations throughout the Government assisted in preparing this CAFR. To each of them we gratefully express our sincere appreciation for their dedicated contributions.

Finally, we appreciate the support of the Metropolitan Council in the continued financial management of the Government.

Sincerely,

Bill Purcell, Mayor
David L. Manning, Director of Finance