Every year, the Local Government Commission (LGC) reviews the audited financial information of North Carolina local governments and public authorities. That review goes beyond whether the auditor issued an unmodified (clean) audit opinion. The LGC also looks for signs of financial problems and weaknesses in the systems used to manage public money.
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Water and wastewater services play a vital role in helping communities grow and thrive. When these systems are planned carefully and aligned with growth strategies, they allow local governments to manage population increases and support long-term community and economic development. But building and maintaining this infrastructure is expensive. Smaller or economically challenged communities often struggle to cover the costs, and even fast-growing areas can find it hard to keep up. Local governments face large upfront costs to build or expand systems, and they must also budget for regular maintenance, repairs, and compliance with state and federal regulations. These financial pressures can make it harder to extend services to new areas and may lead to higher rates for current customers.
It is common for North Carolina counties and municipalities to seek out state or federal grants and loans to help fund local projects. These external funding sources can be essential to getting work done, especially in communities with limited local revenue options. But there is an important legal constraint that local officials must keep in mind: local governments may accept state or federal grants and loans only for activities they are otherwise authorized by law to undertake. In addition, once a grant or loan is accepted, the local government must comply not only with the specific program rules and requirements imposed by the granting agency, but also with state law requirements related to budgeting, contracting, disbursement, and financial management. Both sets of rules apply, and compliance with one does not excuse noncompliance with the other.
Local governments regularly need to purchase vehicles and other relatively small capital assets. Common examples include police cruisers, fire trucks, sanitation vehicles, radios, technology systems, heavy equipment, and sometimes land or facility improvements. These projects often cost more than can be paid from current revenues, but they are not large enough to justify issuing bonds.
Procurement cards (p-cards), credit cards, fuel cards, and other electronic payment methods can make local government, public authority, and local school administrative unit (collectively, local unit) purchasing more efficient. They allow employees and officials to purchase through online vendors, obtain fuel while working in the field, respond to emergencies, and handle other transactions for which the traditional purchase-order process may be cumbersome.
Local governments in North Carolina are beginning to encounter a practical challenge in collecting cash payments as pennies become harder to obtain. The United States Mint has stopped producing new pennies, and many of the pennies already in circulation are not returning through banks. As fewer coins circulate, banks are increasingly unable to meet penny requests in change orders. Citizens/customers who do not already have pennies may also have difficulty locating them. (Although I may be able to personally support the State’s penny needs for quite some time based on the stashes in various bags and couch cushions.)
Last year I wrote about the practical challenges local government entities face as the United States stopped producing pennies. At the time, North Carolina law provided little guidance on how local units should handle cash transactions when exact penny change was unavailable.
Internal audit is a periodic review of whether a local government’s financial policies and internal controls are being followed in day-to-day operations. It generally involves looking at a sample of transactions, observing how key financial processes work, documenting compliance with established procedures, and evaluating their effectiveness.
The death of a utility customer presents a unique set of legal and practical challenges for local government utilities. Because utility service is based on a contract between the utility and the customer, that contract ends when the customer dies—leaving no one legally responsible for unpaid charges or ongoing service. Charges incurred before death may be recoverable from the customer’s estate, if one is opened. But charges incurred after death generally cannot be collected unless someone lawfully establishes a new account.
The Town of Tamperville, NC disconnects a customer’s water service for nonpayment. Two weeks later, a staff member reviewing usage data notices something unusual. Water is being used at the property, even though service has not been restored. A technician visits the site and finds the meter lock cut and the water illegally turned back on. Consistent with its fee schedule, the town charges the customer a $150 “meter tampering penalty.” It adds this amount to the customer’s account.