Chapter 15:
Accounting and Financial Reporting
Last Revised on
February 18, 2025
15.0 Introduction
The North Carolina Local Government Budget and Fiscal Control Act (LGBFCA) sets forth requirements for fiscal control that provide a framework for ensuring accountability in a local government’s accounting and financial operations. As noted in Chapter 1, this act comprises Article 3 of Chapter 159 of the North Carolina General Statutes (G.S.). This chapter focuses primarily on the specific accounting and financial reporting requirements, which are equally applicable to county and municipal governments.
15.1 The Accounting System
An accounting system exists to supply information. It provides a county’s or a municipality’s manager and other officials with the data needed to ascertain financial performance and to plan and budget for future activities with projected resources. The accounting system is also an essential part of internal control procedures.
The governing board of a unit depends on accounting information in making its budgetary and programming decisions and in determining whether they have been carried out. This kind of information is also valuable to outside organizations. The investment community and bond-rating agencies rely on it to assess a local government’s financial condition. In counties and municipalities where bonds have recently been issued, the local government is often required to provide various types of annual financial information to meet continuing disclosure requirements. State regulatory agencies, such as the Local Government Commission (introduced in Chapter 1), review data generated by the accounting systems to determine whether counties and municipalities have complied with the legal requirements regulating accounting and finance. Federal and state grantor agencies use the information to monitor compliance with the requirements of the financial assistance programs they administer. The media and the public depend on the information to evaluate a local government’s activities.
County and municipal accounting practices are formed in response to the general statutory requirements set forth in G.S. 159-26, the generally accepted accounting principles (GAAP) promulgated nationally by the Governmental Accounting Standards Board (GASB). In North Carolina, the rules and regulations of the LGC, as well as the local government’s own needs and capabilities, directly impact its accounting practices.
15.1.1 Statutory Requirements
G.S. 159-26 requires that each county and municipality maintain an accounting system, which must do the following:
- Show in detail its assets, liabilities, equities, revenues, and expenditures.
- Record budgeted as well as actual expenditures and budgeted or estimated revenues as well as their collection.
- Establish accounting funds as required by G.S. 159-26(b) and GAAP. A fund is a separate fiscal and accounting entity having its own assets, liabilities, equity, revenues, and expenditures/expenses. Government activities are grouped into funds to isolate information for legal and management purposes. The types of funds that are set forth in G.S. 159-26(b) and by GAAP for use by counties and municipalities are defined in Section 3.1 of Chapter 4: Chart of Accounts.
- Use the modified accrual basis of accounting. Basis of accounting refers to criteria for determining when revenues and expenditures/expenses should be recorded in an accounting system. It should be noted that while the LGBFCA requires the use of the modified accrual basis of accounting, it also requires that financial reporting be in conformity with GAAP. [G.S. 159-26(c)]. Enterprise, internal services, and certain fiduciary trusts primarily follow accrual accounting standards for reporting in accordance with GAAP. Annual financial reports for local governments must demonstrate compliance with legal requirements (i.e., the LGBFCA) and report on operations in conformity with GAAP. Therefore, enterprise, internal service, and certain fiduciary trust funds must also be reported on an accrual basis in the governmental entity’s annual financial report. The modified accrual basis requires that expenditures be recorded when a liability is incurred (time of receipt) for a good or service provided to a local government. The expenditure should be recorded then, usually before the funds are disbursed. This type of accounting also requires that revenues be recorded when the revenues are measurable and available. Measurable means that they can be reasonably estimated, and available means that they will be received within the current fiscal year or soon enough thereafter to be able to pay liabilities of the current fiscal year. In practice, for various reasons some revenues are recorded when they are received in cash. For example, in North Carolina, property tax revenues are generally recorded on a cash basis because taxes receivable are not considered to be collectible soon enough after the year’s end to meet the availability criterion. Permits and fees also are recorded on a cash basis because they are not considered to be measurable at year’s end. However, certain revenues collected after the fiscal year ends, but soon enough thereafter to pay liabilities outstanding as of June 30, would be reflected as revenue for the year ending June 30 because they would be considered measurable and available. For example, the monthly sales tax payments received by counties and municipalities in July, August, and September are recorded by most local governments as revenue for the year ending June 30 because the payments can be measured; they are directly related to sales that occurred during the previous fiscal year (i.e., the July distribution is related to the previous April’s sales, the August distribution is related to the previous May’s sales, and the September distribution is related to the previous June’s sales); and they are received soon enough after June 30 to be able to pay liabilities at the fiscal year’s end. The modified accrual basis of accounting helps keep financial practices on a prudent footing: expenditures are recorded as soon as the liabilities for them are incurred, and some revenues are not recorded until they have actually been received in cash. In addition, this basis enhances the comparability of financial reporting for municipalities and counties and reduces the opportunity for manipulation of financial information.
- Record encumbrances represented by outstanding purchase orders and contractual obligations that are chargeable against budgeted appropriations. An encumbrance is created when a contract that will require a county or a municipality to pay money is entered into or when a purchase order is issued. Although the LGBFCA does not explicitly mention any exceptions, in practice, expenditures for salaries and wages, fringe benefits, and utilities are usually not encumbered. Salaries, wages, and fringe benefits are not encumbered because they generally are budgeted at the full amounts expected for all positions, and this significantly reduces the risk of over-expenditure. Utilities expenditures are normally not encumbered because the amounts are generally not known in advance. An encumbrance exists as long as a contractor or supplier has not delivered goods or services and the contract or purchase order is outstanding. While this is the case, the local government is not yet liable to pay for the goods or the services and has not yet incurred an expenditure for them. G.S. 159-26(d) requires that a local unit’s accounting system record encumbrances as well as expenditures. This recognizes that an encumbrance is a potential liability, and once a purchase order is filled or a contract fulfilled, a liability for payment is created and an expenditure is incurred. Although this requirement applies only to counties with more than 50,000 citizens or municipalities with more than 10,000 citizens, nearly all counties and municipalities record encumbrances in their accounting systems.
15.2 Generally Accepted Accounting Principles for Governments
Governmental accounting, as a branch of general accounting practice, shares basic concepts and conventions with commercial accounting. However, because of major differences in the governmental environment, a distinct set of national accounting and financial reporting principles has evolved in this field. They are promulgated by the GASB. Established in 1984, the GASB is responsible for the establishment of GAAP for state and local governments. The GASB succeeded the National Council on Governmental Accounting, which had formerly established GAAP for government entities. Although the GASB at its creation accepted the existing NCGA pronouncements, it has actively set forth standards in areas of accounting and finance that the NCGA did not formally consider. Likewise, it has updated and modified most of the guidance initially accepted. (About the GASB).
The LGC plays a key role in defining and interpreting accounting standards and procedures for local governments in North Carolina. It issues rules and regulations that interpret state statutes and national professional standards, and it provides advice about requirements and improvements in accounting and financial reporting practices. The commission’s staff has focused much attention in recent years on annual financial reports, working closely with local officials and the state’s public accounting profession to keep local government accounting systems up to date with the increasingly more rigorous reporting and disclosure standards promulgated by the GASB.
15.2.1 Minimum External Financial Reporting Requirements
Counties and municipalities in North Carolina are required to prepare annually external basic financial statements and required supplementary information (RSI) that are prepared in accordance with GAAP. [G.S. 159-34(a)]. The basic financial statements as defined by GAAP include the following elements:
Government-wide financial statements
The government-wide financial statements report on financial information for governmental and business-type activities. The accrual basis of accounting is used for the reporting of both activities. Government-wide reporting is designed to provide an overview of the governmental entities’ activities and is like private-sector reporting. There are two financial statements prepared at this level – the statement of net position and the statement of activities.
Fund financial statements
The fund financial statements report on the financial activities of the governmental entity’s funds. The fund types were defined in Section 3.1 of Chapter 4: Chart of Accounts. There are three broad categories of funds – governmental, proprietary, and fiduciary. The governmental category comprises the general fund and any special revenue, debt service, capital projects, and permanent funds. The proprietary category includes the enterprise and internal service funds. The fiduciary category reports any pension trust, investment trust, private-purpose trust, and custodial funds. The governmental funds are reported on the modified accrual basis of accounting and both the proprietary and fiduciary categories are reported on the accrual basis of accounting (similar to the private sector).
The governmental fund statements are comprised of a balance sheet and a statement of changes in revenues, expenditures, and changes in fund balances (e.g., the operating statement). The proprietary fund statements include a statement of net position, a statement of revenues, expenses, and changes in net position (e.g., the operating statement), and a statement of cash flows. The fiduciary fund statements include a statement of fiduciary net position and a statement of changes in fiduciary net position.
Comprehensive set of note disclosures
The note disclosures provide details supporting the aggregated information reported on both the government-wide financial statements and the fund financial statements. The primary disclosures, but certainly not an exhaustive list, include a description of the structure of the reporting entity, details about the entity’s deposits and investments, capital assets, long-term obligations, pension and other post-employment benefit plans, and general information about certain balance sheet and operating statement elements.
RSI including the Management’s Discussion and Analysis (MD&A)
RSI is information required to be included in certain circumstances in addition to the basic financial statements. However, the auditor performs limited audit procedures and ascertains that the information is properly included. The RSI that all governmental entities will have to include is the MD&A. The MD&A should analyze the government’s financial activities for the current year compared to the prior year. This analysis should be easily readable and based on known facts and conditions.
Other RSI that may be included with some entities’ financial reports include schedules, statistical data, and other information that the GASB believes are an essential part of financial reporting information but are not included in the basic financial statements.
15.3 The Annual Comprehensive Financial Report
Many local governmental entities choose to prepare an annual comprehensive financial report (ACFR). ACFRs are not required by GAAP or by state statute, but they are useful to certain external users of a government’s financial statements. These reports go above and beyond the minimum external reporting requirements and provide useful financial and non-financial data about a local government. An ACFR contains three primary sections: introductory, financial, and statistical. A fourth section consisting of the compliance or single-audit reports and schedules may be included, but this is not required. If a local government does not prepare an ACFR, the entity will provide the independent auditor’s report, as well as the basic financial statements and RSI that were described in Section 15.2.1.
Introductory Section
The introductory section of an ACFR includes the transmittal letter, which is primarily an overview of the report, a brief introduction of the local government, and the official transmission of the report to external users; an organizational chart; and a list of principal elected and nonelected officials. The transmittal letter should provide useful information to members of the public and the business community who may not be aware of all the local government’s functions and services.
Financial Section
The financial section of an ACFR contains financial statements, which present information in various formats and levels of detail. The financial section includes the financial statements required by GAAP, known as the basic financial statements (see Section 15.2.1), as well as financial presentations in greater levels of detail that often are used to exhibit budgetary compliance or to provide opportunities for more detailed analysis. The detailed financial information is included in the financial section following the detailed note disclosures, as well as any additional RSI.
An independent auditor’s opinion is the first item in the financial section of an ACFR. The opinion should be printed on the auditor’s letterhead, further emphasizing that it is not a representation made by the unit’s management. The next presentation in the financial section is the MD&A, a written summary and overview of the local government’s financial condition and the ways in which its financial condition has changed during the year. Governmental entities are required to prepare an MD&A even if they are not preparing an ACFR.
The basic financial statements are presented after the MD&A. As noted earlier, these statements represent the minimum information required in the external financial statements to be in accordance with GAAP. The basic financial statements are described in Section 15.2.1.
The notes to the financial statements immediately follow the government-wide and fund financial statements and are considered an integral part of the basic financial statements. The content and form of the notes are prescribed by GAAP. Through written advisory memoranda and illustrative financial statements interpreting GAAP, the LGC guides local officials and their independent auditors on the content of the note disclosures. These disclosures contain significant information for anyone attempting to interpret the financial statements and understand the finances of a local government entity.
Statistical Section
The statistical section of an ACFR follows the financial section. It includes multi-year information on the financial trends of a government, its revenue and debt capacity, relative demographic and economic information, and various operating information. The statistical section is considered an invaluable tool for bond-rating agencies and potential investors and creditors. Generally, the statistical tables in this section include ten years’ worth of comparative data. In a few cases, the comparisons are not for a complete ten years but are comparisons of the current year with nine years prior, thus exhibiting a ten-year spread.
Certificate of Achievement
A growing number of counties and municipalities have chosen to prepare an ACFR and have earned the Certificate of Achievement for Excellence in Financial Reporting, awarded by the Government Finance Officers Association (GFOA) of the United States and Canada to recognize outstanding achievement in governmental financial reporting. While all North Carolina local governments issue basic financial statements, those winning the Certificate of Achievement provide full disclosure above and beyond the minimum standards set by GAAP and relate current financial conditions and performance to past financial trends. Approximately five thousand local governments in the United States participate in the Certificate of Achievement program, which offers a tremendous resource to help local governments continually improve their financial reporting.
15 Accounting and Financial Reporting
Sample Ordinances and Policies
There are currently no sample ordinances or policies for this chapter.
15 Accounting and Financial Reporting
Implementation Tools
There are currently no implementation tools for this chapter.
15 Accounting and Financial Reporting
LGC Memos
Statistical Information on Electric System Operations
Other Postemployment Benefits Accounting and Reporting Issues
Accounting for Long-Term Revolving Loans
Operation of and Accounting for Discretely Presented Component Units, Including...
Proper Accounting Treatment for Cost Allocations
15 Accounting and Financial Reporting
Finance in Fives
There are currently no Finance in Five videos for this chapter.
15 Accounting and Financial Reporting
Blog Posts
Total Posts: 113
The Religious Exemption from Property Taxes
October 18, 2023 4:13 pm
The religious exemption created by G.S. 105-278.3 may produce more difficult questions than the rest of the Machinery Act combined. This post summarizes the religious exemption’s legal requirements and tries to answer some of those thorny eligibility questions. Ownership and Use Requirements
Local Government Budgeting for Specific Expenditures, Projects, or Contracts
May 26, 2023 3:11 pm
It’s budget season, which triggers perennial issues related to the budgeting process and substance of the annual budget ordinance. Some of these are addressed in past posts. This year I’ve had several inquiries about how specific a budget appropriation can be. Examples include the following:
Notices and Public Participation in the Budgeting Process
May 18, 2015 1:21 pm
Budget season is in full swing for most local governments across the state. Managers, budget officers, department heads, and others are busy compiling expenditure requests and identifying potential revenue sources to balance the budget for the fiscal year that begins on July 1. Elected officials in many jurisdictions have been actively involved in setting policy and funding priorities for the unit. They are preparing to make difficult choices as to which projects and services to undertake, and which initiatives to postpone or even abandon.
Top Ten Questions about the Local Public School Budgeting Process
May 6, 2010 12:06 pm
UPDATE August 2013: For updated information on the public school funding dispute resolution process, click here. In my last post, I reviewed the constitutional and statutory framework for county funding of local school administrative units (public schools).
FAQs on Adopting the Budget Ordinance
June 14, 2012 11:47 am
Local governments across the state are scrambling to finalize and adopt their budgets before July 1. This post provides a brief overview of the applicable procedural requirements and addresses frequently asked questions about the budgeting process.
Impending Changes to Bonding Requirements for Finance Officers: Prepare Now For January 1, 2023 and Beyond
November 23, 2022 8:00 am
Since 2005, the Local Government Budget and Fiscal Control Act (“LGBFCA”) has required finance officers of units of local government and public authorities in North Carolina to provide to their respective entities a “faithful performance bond with sufficient sureties in an amount not less than fifty thousand dollars.” G.S. § 159-29(a); S.L. 2005-238, Sec.
Local Government Support for Privately Owned Affordable Housing
May 16, 2022 3:51 pm
By most accounts, the need for affordable housing across North Carolina is massive. According to 2019 census data, over a million North Carolina households are “cost burdened,” meaning they spend more than 30% of their income on housing. Almost half of those are “severely cost burdened,” meaning they spend more than 50% of their income on housing. What can local governments do to address the need for more affordable housing?
American Rescue Plan Act: Aid for Small Businesses and Nonprofits with ARP/CLFRF
October 4, 2021 9:57 am
The American Rescue Plan Act of 2021 (ARPA) is a wide-ranging law that provides federal funding in areas ranging from child care to higher education to community service to relief for shuttered venues to a restaurant revitalization fund.
Revenue-Neutral Rate Calculations for Multi-County Municipalities
April 1, 2021 11:27 am
Time for a North Carolina geography quiz! In which counties are these cities located: Chapel Hill, Durham, and Raleigh?
How Interim Budgets Might Impact Tax Collections
May 14, 2020 11:29 am
Interim budgets may provide breathing room for local governments wary of setting their 2020-2021 property tax before they know the full extent of how the COVID-19 pandemic will affect the state and local economies. But interim budgets are not without consequences.
Changes to County/School Dispute Resolution Process
June 26, 2018 2:53 pm
As detailed here and here, if a local school board believes that it has not received sufficient funding from the county for the fiscal year, for either capital or operating expenses, the local school board may initiate a dispute resolution process.
North Carolina Municipalities Authorized to Fund Schools
June 26, 2018 12:59 pm
In North Carolina, the majority of funding (approximately 63 percent in aggregate, according to the 2018 Highlights of the North Carolina Public School Budget) for public school operations derives from the state income tax and sales tax proceeds, as appropriated by the state legislature.
Statutory Internal Controls
December 20, 2017 4:52 pm
Recent high-profile examples of alleged misappropriation and embezzlement of public funds, and other fraudulent activity, by local government officials across the state should prompt all local governments to examine their internal control systems. Internal controls are processes designed to safeguard the assets of the unit. Although the exact nature of internal controls will vary significantly from government to government, due to differences in size, resources, and organizational structure, all local government entities need to take steps to ensure the proper safeguard of public funds.
Legal and Business Reasons Why Downtown Development Programs Should Involve Secured Loans—Not Grants
September 19, 2017 11:37 am
Dr. Blaine Beeper is a retired hospital administrator who was recently elected to council in the Town of Bushwood. Dr. Beeper thinks he has figured out how to jumpstart revitalization of Bushwood’s historic downtown. He proposes for the Town to offer annual cash grants to any owner who redevelops a commercial property within the downtown. Dr.
State and Local Government Financial Data Transparency Law
March 17, 2016 9:35 am
A provision in the state budget, Section 7.17 of S.L. 2015-241, set new transparency requirements related to certain financial data of state agencies, counties, municipalities, and local school administrative units. The law mandates full compliance by April 1, 2016. But what does it actually require?
New Law Modernizes Preaudit and Disbursement Processes
September 24, 2015 10:02 am
Effective October 1, 2015, local governments, public authorities, and school units are subject to new preaudit and disbursement processes (assuming the Governor does not veto H44).
Richmond County Board of Education v. Cowell: Clear Proceeds of Improper Equipment Offense Surcharge Belongs to Public Schools
September 17, 2015 5:36 pm
As part of the Justice Reinvestment Act of 2011, the legislature enacted G.S. 7A-304(a)(4b), which assesses a $50.00 surcharge on any individual convicted of an improper equipment offense. Improper equipment offenses are generally defined in G.S. Ch. 20, Art.
Transferring Money from an Enterprise Fund: Authority, Limitations, and Consequences
June 5, 2015 8:06 am
As local governments finalize their budgets, many governing boards are wrestling with difficult decisions over how to raise sufficient revenues to cover estimated expenses during the upcoming fiscal year. G.S. 159-8 requires a governing board to adopt a balanced budget ordinance, whereby estimated revenues plus appropriated fund balances equal appropriations.
Public School Funding Dispute Resolution Process Revisited
May 15, 2015 1:59 pm
In Union County Board of Education vs. Union County Board of Commissioners, ___ N.C. App. ___, No. COA14-633 (Apr.
Determining Local Board of Elections Director’s Salary
March 16, 2015 3:00 pm
A county’s board of commissioners is required to provide “reasonable and adequate funds necessary” to support the functions of the county board of elections, “including reasonable and just compensation of the director of elections.” G.S. 163-37.
Special Purpose Local Governments and Public Authorities
February 10, 2015 10:10 am
North Carolina is a non-home rule state, which means that its local government entities are created by, and derive all their authority from, the General Assembly. The General Assembly has created a relatively flat local government structure. Almost all governmental responsibilities have been vested in two general-purpose governments—counties and municipalities (cities, towns, villages).
Expending Funds After the End of the Fiscal Year
October 2, 2014 4:20 pm
It is May 2015 and several of Procrastination Village’s staff members are frantically ordering supplies and equipment to spend down remaining budget appropriations by the end of the 2014-15 fiscal year. As of May 1, the parks and recreation department has $1500 remaining in its budget for supplies. (The village board makes budget appropriations by function code within each department. The total appropriation for parks and recreation department supplies for the year was $10,000.) Department staff members place an order for t-shirts for upcoming soccer leagues totaling $1498.
Allocating Operating Monies Among Local School Unit Funds: Local Current Expense Fund vs. Fund 8
June 10, 2014 9:53 am
The majority of funding for North Carolina’s public schools comes from the State. Each county, however, is required to annually fund most capital expenses and at least some operating expenses of its local school administrative unit(s). Questions often arise as to whether, and how, a county can direct its appropriations to specific operating expenditures.
Disbursing Public Funds
May 23, 2014 1:35 pm
G.S. 159-28 is often referred to as the “preaudit statute,” but it actually prescribes two distinct legal processes—the preaudit process and the disbursement process. The statute envisions that most local government expenditures will be subject to both processes.
Budgeting Under “Tag & Tax Together”
February 27, 2014 11:35 am
It’s almost budget time again for local governments across North Carolina, and tax collectors need to be involved. Collectors have the responsibility of estimating the property tax collection rate for the current fiscal year (2013-2014), which is the maximum collection rate a local government may use when budgeting property tax revenues for the coming fiscal year (2014-2015). For more details, see this post.
When May NC Local Governments Pay an Economic Development Incentive?
December 17, 2013 1:00 pm
News outlets regularly report about the latest company that was lured to North Carolina through the payment of a cash economic development incentive by a local government and the state.
Daily Deposit Requirement
January 14, 2013 10:47 am
It is summer camp registration time at Fun City’s parks and recreation department. Department staff members are processing hundreds of registrations each day. That also means that the department is receiving hundreds of dollars in daily cash, checks, and credit card payments. The parks and recreation department collects registration payments throughout the year, but the volume is exponentially greater during the two- to three-week period of summer camp registration.
Capital Reserve Funds Revisited
October 29, 2012 12:08 pm
In a recent post, I discussed two ways through which a local government may save money over time to fund capital projects. The first is through fund balance and the second is by establishing a capital reserve fund. I received several follow-up questions about capital reserve funds that may be of interest to local government officials, including the following:
Accountability Requirements for Certain Entities that Receive Appropriations from Local Governments
September 7, 2012 12:38 pm
As discussed in a previous post, local governments have broad authority to appropriate monies to private entities (including nonprofits, corporations, associations, and individuals). The monies, however, must be expended by the private entities only on projects, services, or activities that the local government could have supported directly.
Internal Controls: Who Is Authorized to Open a Bank Account and to Deposit and Disburse Public Funds?
July 26, 2012 4:17 pm
Sheriff Andy Taylor holds a fundraiser to raise money for, and promote awareness of, his office’s drug abuse resistance education (D.A.R.E.) program. The office raises approximately $5,000 in cash and checks from the fundraiser (selling Aunt Bee’s famous pies) and Sheriff Taylor promptly deposits these funds into a bank account that he has opened at the Bank of Mayberry. The bank account is in the name of the sheriff’s office, and the sheriff and his deputy, Barney Fife, are the only individuals authorized to deposit or withdraw funds from the account.
Local Government Authority to Loan Money
May 10, 2012 3:32 pm
It is quiz time again. Which of the following (if any) loan transactions are authorized under North Carolina general law? a. A group of citizens has formed a softball league. The local league plans to host a large softball tournament as a fundraiser to support its activities. It lacks the resources to front the costs of the tournament, though. The citizens approach the city council for a $5,000 loan. They intend to repay the city from proceeds generated by the tournament. b. A local ABC board wishes to make some capital improvements to one of its stores.
Finance Officer Fidelity Bonds: When Are Multiple Bonds Required?
January 12, 2012 12:52 pm
Prudence serves as a finance officer for a North Carolina county. As a condition of her initial (and continued) employment Prudence is required to obtain and maintain a “true accounting and faithful performance bond” with coverage of up to $50,000. (The county pays the annual premium on the bond.) Recently, the county agreed to handle the finances for the local tourism development authority (TDA). The TDA is a public authority that was created by resolution of the county’s governing board, as authorized by a local act of the General Assembly.
Amending a Newly Adopted Budget Ordinance Before July 1
June 13, 2011 9:32 pm
After a contentious and stressful budget season, Carolina County’s governing board adopts its annual budget ordinance on June 13, 2011. The budget reflects tough decisions by the board about how to allocate limited resources among competing priorities.
Altering Local Elected Officials’ Compensation During the Fiscal Year
December 9, 2010 10:19 am
Newly elected (or re-elected) local officials were sworn-in all over the state on Monday night. As the newly constituted boards settle in and prepare to govern, questions typically arise about the extent to which a board may alter its unit’s budget to reflect new priorities and policies (and, perhaps, new economic realities).
Levying the Property Tax: Earmarking Tax Revenue for Specific Purposes
January 21, 2010 10:38 pm
UPDATE August 2013: Note that if a local unit’s governing board adopts multiple tax rates to support its general fund activities, the board is not legally bound by those designations.
A Look at North Carolina’s Constitutional Public Purpose Requirement
January 7, 2010 11:28 am
In a post describing the recently enacted legislation that (potentially) authorizes North Carolina local governments to establish revolving loan funds or impose special assessments in order to finance energy efficiency improvements and distributed generation renewable energy sources permanently affixed to private property, I indicated that one (of many) complicating factors is determining whether or not such “energy financing” programs satisfy the public purpose clause of the North Carolina Constitution.
Local Governments, Public Authorities, and the Red Flags Rule: Does it Apply?
October 12, 2009 10:46 am
UPDATE August 2013: For more recent information on this topic click here. Jill Moore recently blogged about the applicability of the federal Red Flag Rules to local health departments and the appropriate responses by those departments to prevent or mitigate identity theft.
Amending the Budget Ordinance—
August 3, 2009 9:47 am
Anxieties are running high among many local government officials as they await the adoption of the State’s budget to learn the fate of local revenue sources.
American Rescue Plan Act Coronavirus State and Local Fiscal Recovery Fund: Reimbursements
June 30, 2023 8:31 am
As detailed in previous posts, North Carolina counties and municipalities received funding from the American Rescue Plan Act of 2021 Coronavirus State and Local Fiscal Recovery Fund (ARP/CSLFRF). This federal grant funding has afforded local governments opportunities to make transformational investments in their communities.
American Rescue Plan Act Coronavirus State and Local Fiscal Recovery Fund: Preparing for the Audit
June 21, 2023 12:30 pm
As detailed in previous posts, all NC counties and municipalities received federal grant funding from the American Rescue Plan Act of 2021 Coronavirus State and Local Fiscal Recover Fund (ARP/CSLFRF). There are detailed expenditure guidelines, and compliance and reporting requirements for these grant funds. A local government’s auditor plays an important role in monitoring compliance with these requirements and flagging any issues during the annual audit process.
American Rescue Plan Act of 2021: New (Fewer) Compliance Requirements for Revenue Replacement Expenditures
September 1, 2022 5:38 pm
As detailed in previous posts, the American Rescue Plan Act of 2021 Coronavirus State and Local Fiscal Recovery Funds (ARP/CSLFRF) allows local governments to spend their allocations on eligible projects within four major expenditure groupings:
Using American Rescue Plan Coronavirus State and Local Fiscal Recovery Funds to Contract with Other Governments, Nonprofits, or Other Private Entities: Subawards
July 26, 2022 5:43 pm
As detailed in previous posts, NC local governments are receiving significant funding from the federal American Rescue Plan Act Coronavirus State and Local Fiscal Recovery Funds program (ARP/CSLFRF). The availability of these funds presents many opportunities but also poses challenges for local governments navigating the myriad compliance requirements.
American Rescue Plan Act of 2021: Spending Revenue Replacement Funds on Salaries and Benefits
June 3, 2022 11:53 am
UPDATED August 2022: On July 27, 2022, US Treasury amended its Final Rule FAQs to exempt expenditures in the Revenue Replacement category from some Uniform Guidance provisions. Those changes are reflected in the updated post below.
American Rescue Plan Act of 2021: Reporting “Program Income” (Including Sample Policy)
March 2, 2022 1:20 pm
Update: We finally have sample UG policies and other implementation tools ready to share. Kara Millonzi’s blog post contains links to, and brief explanations of, the different policies and tools. We may update these policies or draft additional guidance as Treasury releases new information.
Expending ARP/CSLFRF Funds for Local Government Employee Salary, Benefit, and Other Payroll Costs OUTSIDE of Revenue Replacement (For Local Governments with OVER $10 Million Allocation Only)
February 22, 2023 8:32 am
The American Rescue Plan Act of 2021 Coronavirus State and Local Fiscal Recovery Fund (ARP/CSLFRF) program provides significant funding to all North Carolina counties and municipalities. As detailed in previous posts, this federal grant program groups allowable expenditures of these funds in four main categories:
American Rescue Plan Act of 2021 (ARP): State Law Authority To Expend ARP Funds
June 19, 2021 12:58 pm
Update: On January 6, 2022, the U.S. Department of the Treasury issued the Final Rule, which governs the eligible uses of Coronavirus State and Local Fiscal Recovery Funds (“SLFRF”) under the American Rescue Plan Act (“ARPA”). The Final Rule makes several key changes to the Interim Final Rule, including expanding the eligible uses of CSLFRF and easing the administrative burden for some program requirements.
2023 Updates to System Development Fee Law
October 25, 2023 2:10 pm
As discussed in previous posts, the system development fee (SDF) law, G.S. Ch. 162A, Art. 8, allows a local government utility provider to assess certain costs of developing and maintaining its water and/or wastewater systems on new development that benefits from those systems.
American Rescue Plan Act Coronavirus State and Local Fiscal Recovery Fund: Preparing for the April 30, 2023 Project & Expenditure Report
April 11, 2023 4:04 pm
As discussed in previous posts, all NC counties and municipalities received funding from the American Rescue Plan Act Coronavirus State and Local Fiscal Recovery Fund (ARP/CSLFRF). These are federal grant funds that come with eligibility restrictions, compliance requirements, and reporting obligations. The primary reporting vehicle is the Project & Expenditure Report.
Raising the Federal Micro-Purchase Threshold: Self-Certification for Units of Local Government in North Carolina
April 23, 2021 10:30 am
On August 13, 2020, the Office of Management and Budget (“OMB”) published revisions to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 C.F.R.
Procuring Single Audit Services under the Uniform Guidance (2 C.F.R. Part 200)
January 12, 2022 2:40 pm
With the passage of the American Rescue Plan Act of 2021 (“ARPA”), almost all cities and counties in North Carolina received distributions of Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) from the U.S. Department of the Treasury (“Treasury”) to assist with pandemic recovery efforts.
Design-Build Contracting in North Carolina Using Coronavirus State and Local Fiscal Recovery Funds
April 14, 2022 12:06 pm
The U.S.
Internal Control in Financial Management: Understanding the Basics
November 1, 2023 3:58 pm
Headline: City finance employee embezzles public money. While the facts may differ, the story underlying this all-too-common headline is usually one in which a trusted employee slowly pockets money by writing checks or electronically transferring funds to a personal bank account until the fraud is eventually uncovered. How did this happen? Citizens want to know. They look to the governing board for answers—we elected you and entrusted you to protect us.
Amending the Budget Ordinance—
August 3, 2009 9:47 am
Anxieties are running high among many local government officials as they await the adoption of the State’s budget to learn the fate of local revenue sources.
Local Governments, Public Authorities, and the Red Flags Rule: Does it Apply?
October 12, 2009 10:46 am
UPDATE August 2013: For more recent information on this topic click here. Jill Moore recently blogged about the applicability of the federal Red Flag Rules to local health departments and the appropriate responses by those departments to prevent or mitigate identity theft.
A Look at North Carolina’s Constitutional Public Purpose Requirement
January 7, 2010 11:28 am
In a post describing the recently enacted legislation that (potentially) authorizes North Carolina local governments to establish revolving loan funds or impose special assessments in order to finance energy efficiency improvements and distributed generation renewable energy sources permanently affixed to private property, I indicated that one (of many) complicating factors is determining whether or not such “energy financing” programs satisfy the public purpose clause of the North Carolina Constitution.
Levying the Property Tax: Earmarking Tax Revenue for Specific Purposes
January 21, 2010 10:38 pm
UPDATE August 2013: Note that if a local unit’s governing board adopts multiple tax rates to support its general fund activities, the board is not legally bound by those designations.
Top Ten Questions about the Local Public School Budgeting Process
May 6, 2010 12:06 pm
UPDATE August 2013: For updated information on the public school funding dispute resolution process, click here. In my last post, I reviewed the constitutional and statutory framework for county funding of local school administrative units (public schools).
Altering Local Elected Officials’ Compensation During the Fiscal Year
December 9, 2010 10:19 am
Newly elected (or re-elected) local officials were sworn-in all over the state on Monday night. As the newly constituted boards settle in and prepare to govern, questions typically arise about the extent to which a board may alter its unit’s budget to reflect new priorities and policies (and, perhaps, new economic realities).
Amending a Newly Adopted Budget Ordinance Before July 1
June 13, 2011 9:32 pm
After a contentious and stressful budget season, Carolina County’s governing board adopts its annual budget ordinance on June 13, 2011. The budget reflects tough decisions by the board about how to allocate limited resources among competing priorities.
Finance Officer Fidelity Bonds: When Are Multiple Bonds Required?
January 12, 2012 12:52 pm
Prudence serves as a finance officer for a North Carolina county. As a condition of her initial (and continued) employment Prudence is required to obtain and maintain a “true accounting and faithful performance bond” with coverage of up to $50,000. (The county pays the annual premium on the bond.) Recently, the county agreed to handle the finances for the local tourism development authority (TDA). The TDA is a public authority that was created by resolution of the county’s governing board, as authorized by a local act of the General Assembly.
Local Government Authority to Loan Money
May 10, 2012 3:32 pm
It is quiz time again. Which of the following (if any) loan transactions are authorized under North Carolina general law? a. A group of citizens has formed a softball league. The local league plans to host a large softball tournament as a fundraiser to support its activities. It lacks the resources to front the costs of the tournament, though. The citizens approach the city council for a $5,000 loan. They intend to repay the city from proceeds generated by the tournament. b. A local ABC board wishes to make some capital improvements to one of its stores.
FAQs on Adopting the Budget Ordinance
June 14, 2012 11:47 am
Local governments across the state are scrambling to finalize and adopt their budgets before July 1. This post provides a brief overview of the applicable procedural requirements and addresses frequently asked questions about the budgeting process.
Internal Controls: Who Is Authorized to Open a Bank Account and to Deposit and Disburse Public Funds?
July 26, 2012 4:17 pm
Sheriff Andy Taylor holds a fundraiser to raise money for, and promote awareness of, his office’s drug abuse resistance education (D.A.R.E.) program. The office raises approximately $5,000 in cash and checks from the fundraiser (selling Aunt Bee’s famous pies) and Sheriff Taylor promptly deposits these funds into a bank account that he has opened at the Bank of Mayberry. The bank account is in the name of the sheriff’s office, and the sheriff and his deputy, Barney Fife, are the only individuals authorized to deposit or withdraw funds from the account.
Accountability Requirements for Certain Entities that Receive Appropriations from Local Governments
September 7, 2012 12:38 pm
As discussed in a previous post, local governments have broad authority to appropriate monies to private entities (including nonprofits, corporations, associations, and individuals). The monies, however, must be expended by the private entities only on projects, services, or activities that the local government could have supported directly.
Capital Reserve Funds Revisited
October 29, 2012 12:08 pm
In a recent post, I discussed two ways through which a local government may save money over time to fund capital projects. The first is through fund balance and the second is by establishing a capital reserve fund. I received several follow-up questions about capital reserve funds that may be of interest to local government officials, including the following:
Daily Deposit Requirement
January 14, 2013 10:47 am
It is summer camp registration time at Fun City’s parks and recreation department. Department staff members are processing hundreds of registrations each day. That also means that the department is receiving hundreds of dollars in daily cash, checks, and credit card payments. The parks and recreation department collects registration payments throughout the year, but the volume is exponentially greater during the two- to three-week period of summer camp registration.
When May NC Local Governments Pay an Economic Development Incentive?
December 17, 2013 1:00 pm
News outlets regularly report about the latest company that was lured to North Carolina through the payment of a cash economic development incentive by a local government and the state.
Budgeting Under “Tag & Tax Together”
February 27, 2014 11:35 am
It’s almost budget time again for local governments across North Carolina, and tax collectors need to be involved. Collectors have the responsibility of estimating the property tax collection rate for the current fiscal year (2013-2014), which is the maximum collection rate a local government may use when budgeting property tax revenues for the coming fiscal year (2014-2015). For more details, see this post.
Allocating Operating Monies Among Local School Unit Funds: Local Current Expense Fund vs. Fund 8
June 10, 2014 9:53 am
The majority of funding for North Carolina’s public schools comes from the State. Each county, however, is required to annually fund most capital expenses and at least some operating expenses of its local school administrative unit(s). Questions often arise as to whether, and how, a county can direct its appropriations to specific operating expenditures.
Disbursing Public Funds
May 23, 2014 1:35 pm
G.S. 159-28 is often referred to as the “preaudit statute,” but it actually prescribes two distinct legal processes—the preaudit process and the disbursement process. The statute envisions that most local government expenditures will be subject to both processes.
Expending Funds After the End of the Fiscal Year
October 2, 2014 4:20 pm
It is May 2015 and several of Procrastination Village’s staff members are frantically ordering supplies and equipment to spend down remaining budget appropriations by the end of the 2014-15 fiscal year. As of May 1, the parks and recreation department has $1500 remaining in its budget for supplies. (The village board makes budget appropriations by function code within each department. The total appropriation for parks and recreation department supplies for the year was $10,000.) Department staff members place an order for t-shirts for upcoming soccer leagues totaling $1498.
Special Purpose Local Governments and Public Authorities
February 10, 2015 10:10 am
North Carolina is a non-home rule state, which means that its local government entities are created by, and derive all their authority from, the General Assembly. The General Assembly has created a relatively flat local government structure. Almost all governmental responsibilities have been vested in two general-purpose governments—counties and municipalities (cities, towns, villages).
Determining Local Board of Elections Director’s Salary
March 16, 2015 3:00 pm
A county’s board of commissioners is required to provide “reasonable and adequate funds necessary” to support the functions of the county board of elections, “including reasonable and just compensation of the director of elections.” G.S. 163-37.
Notices and Public Participation in the Budgeting Process
May 18, 2015 1:21 pm
Budget season is in full swing for most local governments across the state. Managers, budget officers, department heads, and others are busy compiling expenditure requests and identifying potential revenue sources to balance the budget for the fiscal year that begins on July 1. Elected officials in many jurisdictions have been actively involved in setting policy and funding priorities for the unit. They are preparing to make difficult choices as to which projects and services to undertake, and which initiatives to postpone or even abandon.
Transferring Money from an Enterprise Fund: Authority, Limitations, and Consequences
June 5, 2015 8:06 am
As local governments finalize their budgets, many governing boards are wrestling with difficult decisions over how to raise sufficient revenues to cover estimated expenses during the upcoming fiscal year. G.S. 159-8 requires a governing board to adopt a balanced budget ordinance, whereby estimated revenues plus appropriated fund balances equal appropriations.
Public School Funding Dispute Resolution Process Revisited
May 15, 2015 1:59 pm
In Union County Board of Education vs. Union County Board of Commissioners, ___ N.C. App. ___, No. COA14-633 (Apr.
Richmond County Board of Education v. Cowell: Clear Proceeds of Improper Equipment Offense Surcharge Belongs to Public Schools
September 17, 2015 5:36 pm
As part of the Justice Reinvestment Act of 2011, the legislature enacted G.S. 7A-304(a)(4b), which assesses a $50.00 surcharge on any individual convicted of an improper equipment offense. Improper equipment offenses are generally defined in G.S. Ch. 20, Art.
New Law Modernizes Preaudit and Disbursement Processes
September 24, 2015 10:02 am
Effective October 1, 2015, local governments, public authorities, and school units are subject to new preaudit and disbursement processes (assuming the Governor does not veto H44).
State and Local Government Financial Data Transparency Law
March 17, 2016 9:35 am
A provision in the state budget, Section 7.17 of S.L. 2015-241, set new transparency requirements related to certain financial data of state agencies, counties, municipalities, and local school administrative units. The law mandates full compliance by April 1, 2016. But what does it actually require?
Statutory Internal Controls
December 20, 2017 4:52 pm
Recent high-profile examples of alleged misappropriation and embezzlement of public funds, and other fraudulent activity, by local government officials across the state should prompt all local governments to examine their internal control systems. Internal controls are processes designed to safeguard the assets of the unit. Although the exact nature of internal controls will vary significantly from government to government, due to differences in size, resources, and organizational structure, all local government entities need to take steps to ensure the proper safeguard of public funds.
Legal and Business Reasons Why Downtown Development Programs Should Involve Secured Loans—Not Grants
September 19, 2017 11:37 am
Dr. Blaine Beeper is a retired hospital administrator who was recently elected to council in the Town of Bushwood. Dr. Beeper thinks he has figured out how to jumpstart revitalization of Bushwood’s historic downtown. He proposes for the Town to offer annual cash grants to any owner who redevelops a commercial property within the downtown. Dr.
North Carolina Municipalities Authorized to Fund Schools
June 26, 2018 12:59 pm
In North Carolina, the majority of funding (approximately 63 percent in aggregate, according to the 2018 Highlights of the North Carolina Public School Budget) for public school operations derives from the state income tax and sales tax proceeds, as appropriated by the state legislature.
How Interim Budgets Might Impact Tax Collections
May 14, 2020 11:29 am
Interim budgets may provide breathing room for local governments wary of setting their 2020-2021 property tax before they know the full extent of how the COVID-19 pandemic will affect the state and local economies. But interim budgets are not without consequences.
Revenue-Neutral Rate Calculations for Multi-County Municipalities
April 1, 2021 11:27 am
Time for a North Carolina geography quiz! In which counties are these cities located: Chapel Hill, Durham, and Raleigh?
Budgeting for American Rescue Plan Act Funds
June 16, 2021 2:32 pm
As detailed here and here, the federal American Rescue Plan Act (ARP) provides si
Raising the Federal Micro-Purchase Threshold: Self-Certification for Units of Local Government in North Carolina
April 23, 2021 10:30 am
On August 13, 2020, the Office of Management and Budget (“OMB”) published revisions to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 C.F.R. Part 200) (the “Uniform Guidance”). Among other things, the revisions to the Uniform Guidance allow some non-Federal entities to raise, via annual self-certification, the generally applicable micro-purchase threshold of $10,000 to a “higher threshold consistent with State law.”
American Rescue Plan Act: Aid for Small Businesses and Nonprofits with ARP/CLFRF
October 4, 2021 9:57 am
The American Rescue Plan Act of 2021 (ARPA) is a wide-ranging law that provides federal funding in areas ranging from child care to higher education to community service to relief for shuttered venues to a restaurant revitalization fund.
Local Government Support for Privately Owned Affordable Housing
May 16, 2022 3:51 pm
By most accounts, the need for affordable housing across North Carolina is massive. According to 2019 census data, over a million North Carolina households are “cost burdened,” meaning they spend more than 30% of their income on housing. Almost half of those are “severely cost burdened,” meaning they spend more than 50% of their income on housing. What can local governments do to address the need for more affordable housing?
Design-Build Contracting in North Carolina Using Coronavirus State and Local Fiscal Recovery Funds
April 14, 2022 12:06 pm
The U.S. Department of the Treasury has stated in its Interim Final Rule and Final Rule applicable to Coronavirus State and Local Fiscal Recovery Funds (“Fiscal Recovery Funds”) that, with few exceptions, the procurement standards contained in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 C.F.R. Part 200) (the “Uniform Guidance” or “UG”) apply when a recipient or subrecipient of Fiscal Recovery Funds uses these monies to purchase goods or services. These procurement standards require a unit of local government receiving Fiscal Recovery Funds to abide by procurement procedures that are consistent with state law, locally adopted rules, and 2...
Impending Changes to Bonding Requirements for Finance Officers: Prepare Now For January 1, 2023 and Beyond
November 23, 2022 8:00 am
Since 2005, the Local Government Budget and Fiscal Control Act (“LGBFCA”) has required finance officers of units of local government and public authorities in North Carolina to provide to their respective entities a “faithful performance bond with sufficient sureties in an amount not less than fifty thousand dollars.” G.S. § 159-29(a); S.L. 2005-238, Sec.
Local Government Budgeting for Specific Expenditures, Projects, or Contracts
May 26, 2023 3:11 pm
It’s budget season, which triggers perennial issues related to the budgeting process and substance of the annual budget ordinance. Some of these are addressed in past posts. This year I’ve had several inquiries about how specific a budget appropriation can be. Examples include the following:
The Burial Property Exemption
August 8, 2024 10:00 am
As a child of the 80’s, questions about the Machinery Act’s treatment of burial grounds immediately bring to mind the classic horror movie Poltergeist. (TL;DR for younger readers: don’t buy a house built on an old cemetery.) I don’t have any great ideas about how to deal with malevolent ghosts. But I do have thoughts on how to apply the revised exemption for private burial property that took effect starting with the 2022 tax year.
Local Government Budgeting Options when Revenue Streams are Uncertain
June 15, 2013 12:00 am
Each local government and public authority is required to adopt an annual budget ordinance that recognizes estimated revenues, authorizes expenditures, and levies tax(es) for the forthcoming fiscal year. The Local Government Budget and Fiscal Control Act (LGBFCA), G.S. Ch. 159, Art. 3, requires, among other things, that the budget ordinance be balanced. A budget ordinance is balanced when “the sum of estimated net revenues and appropriated fund balances is equal to appropriations.” The law requires an exact balances; it permits neither a deficit nor a surplus. And G.S. 159-13 mandates that estimated revenues include “only those revenues reasonably expected to be realized in...
County Commissioners’ Control Over Local Board of Elections’ Employees
July 21, 2011 12:00 am
A county’s board of commissioners (BOC) has the power and responsibility to “develop() and direct() the fiscal policy of the county government.” G.S. 153A-101. The board adopts the annual county budget ordinance, as well as capital project ordinances, and has much discretion in allocating funds among the various county government activities. There are some limits to this authority, though. This is because county governments are highly decentralized. Although a BOC serves as a county’s general governing body, it shares authority over many governmental functions with other elected county officials and other semi-autonomous boards and agencies. This shared authority gives rise to tensions,...
County Tax Collection Obligations for Motor Vehicles Under the “Tag & Tax Together” Program
August 19, 2013 12:00 am
On September 1, the state’s Tag & Tax Together program formally launches statewide. All N.C. vehicle owners will be required to pay property taxes owed on their vehicles at the same time they register those vehicles each year with the Division of Motor Vehicles. The joint payment system actually went live in July, meaning vehicle owners with September renewals can already pay their taxes and registration fees simultaneously via the DMV website.
Financing Capital Projects—Part I: “Saving” through Fund Balance and Capital Reserve Funds
October 7, 2012 12:00 am
UPDATE August 2013: For more information on capital reserve funds, click here. Blight City has fallen on hard times. Its population has declined significantly since the 1990s, due in large part to the shuttering of two large manufacturing plants. Emblematic of the city’s decline is its central downtown area. Once a vibrant community center, it is now comprised mainly of run-down, vacant buildings. Recently, however, a mid-sized micro-brewed root beer company purchased one of the old manufacturing plants (located just outside the city’s downtown) and began operations. It employs 200 people and plans to double its workforce over the next two...
S.L. 2020-3 (SB 704) Makes (Limited) Changes to Budget Process
May 7, 2020 12:00 am
In response to COVID-19, the legislature adopted two comprehensive bills that touch on a variety of areas, including a few local government finance-related issues. One of those issues is the annual budget ordinance adoption process. This post explains the normal process and details the recent (limited) legislative changes.
The N.C. Constitution’s Uniformity Clause
June 9, 2011 12:00 am
Given the dire economic news of late, it’s no surprise that the General Assembly and local governments are trying to get creative with local property taxes. Consider the suggestion from one county to levy a more progressive property tax, with one rate for real property valued less than $1,000,000 and a much higher rate for more valuable properties. How about a property tax exclusion available only in larger counties that might more easily absorb the reduction in tax revenues?
If We Can’t Collect a Fee, Can We Just Say No? Use of Impact Fees and Adequate Public Facility Regulatory Requirements
October 12, 2010 12:00 am
UPDATE September 2013: The North Carolina supreme court subsequently ruled that counties do not have statutory authority to impose school impact fees. That 2012 case is discussed here. The population of Partition County has grown dramatically over the past several decades. The county has struggled to keep up with provision of public facilities to serve this growth. While the rate of growth has slowed in the past few years, the schools are still substantially overcrowded in the northern half of the county, where most of the growth has occurred. The schools there have modular temporary classrooms on site and most of these...
Should North Carolina Bet Big on Sports Gambling?
November 11, 2021 12:00 am
[UPDATES: June 2023: H347 is signed into law by Governor Cooper, authorizing on-line sports gambling to begin within 1 year and levying an 18% tax on gambling revenue. March 2023: a sports gambling bill was filed in the NC House that would charge license fees of $1 million every five years and a 14% tax on gambling revenues. June 2022: A bill to legalize on-line sports gambling in North Carolina failed by a single vote. Sponsors of the bill promise to revisit the issue in the General Assembly’s next session.] Just three years ago, sports betting was legal in just three states. Today you...
Subdivision Performance Guarantees
February 7, 2014 12:00 am
So the county granted initial approval for a large residential subdivision. Now, after completing some (but not all) of the roads and infrastructure, the developer wants final plat approval so she can close on the first round of lot sales. This may be practical—the cash flow from early lots may support the subsequent infrastructure—but it relies upon a developer’s promise to follow through with adequate remaining improvements. What if the improvements are not built to standard? What if the economy tumbles and the developer goes bankrupt? What becomes of those expensive infrastructure needs?
A New Interpretation of the Preaudit Requirement
November 8, 2012 12:00 am
UPDATE August 2013: The Court of Appeals reaffirmed this new interpretation in May 2013. Click here for more details. In July 2008, the Jones County Department of Social Services (JCDSS) entered into an oral services contract with a medical transportation services company. The contract was for one year. It was renewed annually in July of 2009, 2010, and 2011. JCDSS terminated the contract in November 2011. The company sued for breach of contract. JCDSS subsequently filed motions to dismiss the case, arguing that no valid contract existed. The trial court denied the motions. On appeal, however, the North Carolina Court of Appeals reversed the...
Court of Appeals Reaffirms New Interpretation of Pre-audit Requirement
May 23, 2013 12:00 am
In Executive Medical Transportation, Inc. v Jones County Department of Social Services, 735 S.E.2d 352 (NC Ct. App. 2012), disc. rev. den’d, 737 S.E.2d 378 (N.C. 2013), the North Carolina Court of Appeals held that an oral agreement between a medical transport company and the county was void because the agreement did not include a written preaudit certificate. As I discussed here, the court interpreted G.S. 159-28(a) (commonly referred to as the preaudit requirement) to require that all contractual agreements that obligate a local government or public authority to pay money within the current fiscal year include a preaudit certificate. This holding effectively requires that...
New Law Modernizes Preaudit and Disbursement Processes–Part II
September 24, 2015 12:00 am
Effective October 1, 2015, local governments, public authorities, and school units are subject to new preaudit and disbursement processes. In S.L. 2015-246, the legislature modified G.S. 159-28 (applicable to local governments and public authorities) and G.S. 115C-441 (applicable to school units) to address common issues faced by local units in implementing the preaudit and disbursement requirements, particularly with respect to electronic transactions. (The changes do not apply to ABC Boards, which will continue to be subject to the existing preaudit and disbursement requirements under G.S. 18B-702.) This post summarizes the changes to the disbursement process. Click here for a discussion of the new preaudit provisions.
New Law Modernizes the Preaudit and Disbursement Processes — Part I
June 25, 2015 12:00 am
In recent years local governments and public authorities (collectively, local units) have struggled to comply with the statutory preaudit (G.S. 159-28(a)) and disbursement (G.S. 159-28(b) & (d)) processes, in particular when making web-based purchases, or when using credit cards, purchase cards, and fuel cards. In 2013 the North Carolina Court of Appeals made compliance even more difficult when it interpreted the provisions of G.S. 159-28(a) to require that all obligations subject to preaudit be in writing. See Howard v. County of Durham, 748 S.E.2d 1 (NC Ct. App. 2013), disc. rev. den’d, 367 N.C. 238 (N.C. 2013); Executive Medical Transportation, Inc. v Jones County Department...
The Perils of Preauditing P-Cards (and Other Electronic Payment Methods)
October 11, 2013 12:00 am
A county ambulance crew member calls Fiona, the county finance officer, at 9pm on Sunday night. The crew just responded to their third call of the night and he needs to refuel the ambulance. Fiona grabs a copy of the county’s budget ordinance and a printout of current expenditures and encumbrances and rushes out the door to meet the ambulance crew at a gas station several miles from her home. When Fiona arrives the crew member gives her an estimate of the amount of gas needed. Fiona notes the current per-gallon price and calculates the total cost to be $72.65. She quickly...
Five Criteria to Consider When Thinking About Taxes
April 17, 2023 12:00 am
Taxes are a necessary aspect of any modern society, as they provide the government with the resources needed to provide public goods and services such as infrastructure, healthcare, education, and security. However, not all taxes are created equal, and policymakers must take into account various criteria when designing and implementing tax policies. In this blog post, we will discuss five tax criteria: economic efficiency, equity, adequacy, feasibility, and transparency.
So, Your Jurisdiction is Thinking of Starting a Revenue Manual…
October 12, 2021 12:00 am
Consulting and updating your revenue manual is the first step of the administrative process for revenue forecasting. At least, that is what I say when I teach revenue forecasting. Of course, when I then turn to the course participants and ask how many of them have revenue manuals in their jurisdiction only one or two raise their hands. In fact, there are some years when no one raises their hand.
Mirror, Mirror on the wall, How much revenue will we generate this fall?
February 27, 2017 12:00 am
Yup, you guessed it, today’s blog post is on revenue forecasting! My current blog series is about some of the non-legal finance issues that are out there and revenue forecasting, while required by law, is a really important one! There are many people that are involved with revenue forecasting in local governments. While many outside of government may just assume that there is some accountant or budget wonk sitting in a back room who is somehow magically able (or has some very scientific formula) to predict how much money is going to be coming in next year, we know better.
The Bank Reconciliation: A Key Internal Control in Financial Management
April 8, 2024 12:00 am
What if I said there’s a process that, when regularly performed, provides the following benefits: (1) increased accuracy in financial reporting, (2) early fraud detection, and (3) less time spent preparing for the annual financial audit—would you believe me? It probably sounds too good to be true. But, luckily, it’s not. Such a process exists—it is the bank reconciliation process.
2018 System Development Fee Law Changes
June 26, 2018 1:08 pm
In the 2017 legislative session, the General Assembly specifically authorized all local government utility providers to charge upfront fees for water and wastewater services. The legislation, however, limited the types of upfront charges that could be assessed on new development within the unit’s territorial boundaries. A prior post summarized the new law and detailed the new procedural requirements for adopting upfront water or wastewater charges. This post details changes the legislature made to the law during the 2018 legislative session.
Legislative Commission Empowered to Examine, Evaluate, and Investigate Local Governments, Public Authorities, and Their Private Contracting Parties
October 16, 2023 8:32 am
North Carolina local governments and public authorities (collectively “local units”) are subject to oversight by the State in various ways. The Local Government Commission monitors the fiscal health of all local units, sets rules for financial management and audit compliance, and has the authority to impose additional interventions under certain circumstances. Other state agencies set rules and provide compliance and performance oversight of particular local units, often related to State grants or other funding.
The Religious Exemption from Property Taxes
October 18, 2023 4:13 pm
The religious exemption created by G.S. 105-278.3 may produce more difficult questions than the rest of the Machinery Act combined. This post summarizes the religious exemption’s legal requirements and tries to answer some of those thorny eligibility questions. Ownership and Use Requirements
Total Posts: 113