Internal Controls: Who Is Authorized to Open a Bank Account and to Deposit and Disburse Public Funds?

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. (The county finance department maintains accounts at another local bank.) Sheriff Taylor routinely deposits into the account monies his office receives from various fundraisers, as well as unsolicited donations. He also deposits into this account proceeds received from the federal government pursuant to its ICE Asset Forfeiture Program. (The monies from the federal drug program are earmarked and must be used for law enforcement purposes.) Both the sheriff and deputy sheriff keep meticulous records of all transactions involving the bank account. They ensure that all monies deposited into the account are spent for the appropriate purpose. And both sign all checks on the account for internal control purposes. There has never been any indication of improper handling of the funds by the sheriff’s office.

Pursuant to its annual independent audit of the county’s financials a new auditor discovers the sheriff’s office’s bank account. The auditor finds nothing wrong in the handling of the funds in the account, but he questions whether the sheriff’s office has legal authority to maintain the account. Sheriff Taylor explains that the office has had the account for over twenty years and no one has ever questioned its propriety. He further maintains that the sheriff is an independently elected official and therefore not subject to all the same rules as other county departments. According to Sheriff Taylor, the only thing the law requires is that all the funds are accounted for and spent properly.

Unfortunately for Sheriff Taylor the law actually requires a little bit more. The Local Government Budget and Fiscal Control Act (LGBFCA) prescribes detailed rules and procedures regarding the receipt, management, and disbursement of all public funds. See G.S. Ch. 159, Art. 3. Read more »

Closed Session Minutes and General Accounts Under the Public Records Law

North Carolina’s open meetings and public records laws contain the core transparency requirements for local governments. They’re so often considered together that they can be thought of as first cousins, or even siblings. But they’re not twins, and the North Carolina Supreme Court has made clear that their requirements must be considered independently.  (“The Public Records Act and the Open Meetings Law are discrete statutes, each designed to promote in a different way openness in government.” News and Observer v. Poole, 330 N.C. 465, 478 (1992).) There is one place in the General Statutes, however, where the two statutes come together in an important way. That place is G.S. 143-318.10(e), the subsection in the open meetings law that deals with the status of minutes and general accounts, and creates a limited exception allowing them to be withheld from public access. This post describes three questions to consider in applying this exception to the public records law. Read more »

Serving Alcohol at City or County Events: What are the Rules?

Every now and then a city or county wants to serve beer and wine, or maybe even mixed drinks, at an official event. It might be a retirement party in the council chambers or perhaps a reception for a new citizens committee or a visit by a delegation from a sister city. Sometimes someone else, say a local business group, is using city or county space for its own meeting and wants to make beer and wine available to the participants. Is there any prohibition on alcohol use on city or county property?

The answer is no. There is no prohibition, and for the most part it is okay have alcohol at city or county events, and on city and county property. But exactly what you can do depends on the kind of alcohol. The answers are simpler for beer and wine than for hard liquor. Read more »

What Didn’t Happen

For those of us who work with local taxes, the most important news out of the General Assembly this summer was what didn’t happen.

The legislature did not create any major new property tax exemptions.  The long-awaited overhaul of the registered motor vehicle property tax system was not postponed (again) beyond July 2013.  The seemingly annual threat to eliminate or radically revise local privilege license taxes did not gain traction.  Despite support from the governor, a bill that would have authorized both state and local taxation of internet sweepstakes died in committee.

Even relatively minor changes to local tax provisions were abandoned during the short session that focused mostly on the state budget.  For example, one bill would have required a local property tax collector to release the tax lien on a subdivided parcel regardless of whether current taxes on the parent parcel were unpaid.  The existing provision in GS 105-362 law gives collectors the option of releasing those liens. The bill died in committee.

Read more »

2012 Emergency Management Legislative Wrap-up: Big Changes Ahead

During the 2012 Session, the North Carolina General Assembly enacted significant legislation that completely reorganized and updated the state’s emergency management statutes, extended the legal length of law enforcement and emergency management vehicles, and created the criminal offense of terrorism.  What do these legislative actions mean for North Carolina emergency managers and local governments? Read more »

Prohibition on Certain Contingent Fee Audit Contracts

UPDATE OCTOBER 2015: During the most recent legislative session, the General Assembly enacted S.L. 2015-109, which removed the sunset provision and thereby made the prohibition on the contingent fee audit contracts described below permanent.

In 1993, the North Carolina Supreme Court held that it did not violate public policy for a county to enter into a contingent fee contract with a private audit firm to assist the county tax assessor in discovering certain personal property subject to taxation. See In the Matter of The Appeal of Philip Morris U.S.A., 335 N.C. 227, 436 S.E.2d 828 (1993). (Under the terms of the contract, the county paid the audit firm 35 percent of the taxes owed on property the audit firm discovered, including any penalties. The audit firm received no compensation if it did not discover any property subject to taxation). In so holding, the court found clear statutory authority in G.S. 105-299 for a county to engage private entities to assist a tax assessor in performing the assessor’s duties. And the court deferred to the legislature’s decision, at the time, not to place any restrictions on allowable compensation methods for such services.

Fast forward almost twenty years and this time the legislature has addressed the issue, seemingly coming to a different conclusion. It enacted two bills this past session that, assuming they are not vetoed by the Governor, will effectively prohibit local governments from engaging a private person or entity on a contingent fee basis to assist in discovering real or personal property for purposes of taxation or to otherwise assist in the determination of a taxpayer’s tax liability. The prohibition begins on July 1, 2013, and, at least for now, extends only until July 1, 2015. Read more »

Can We Continue this Zoning Hearing?

The county board of commissioners is holding a public hearing on a controversial rezoning. The hearing has been going on for an hour and there are many interested citizens waiting to speak. The board chair knows the agenda for the meeting following the hearing is packed with a number of other important items that will generate a good deal of board discussion. She thinks it might be prudent to call a halt to the rezoning hearing this evening and continue with additional citizen comments at the board’s next meeting. Can the board do that? If so, would the county have to go to the expense of additional mailed and published notice of the continued hearing?

The city council is conducting a hearing on a special use permit application. One of the witnesses the applicant planned to have testify is unable to attend the hearing. The applicant appears and asks that the hearing be continued to the next meeting so that the witness can attend. Is the council required to extend the hearing? Or suppose neighbors opposed to a special use permit application present some interesting, relevant testimony about potential negative impacts of the project. One of the council members suggests it would be useful to have staff investigate that question and report back at the next meeting. Can the hearing be continued to allow that? Or to make matters even more complicated, suppose the council has closed the hearing on a special use permit application and in the midst of council deliberations a member suggests reopening the hearing to get more evidence on a question that arose during the deliberations. Can that be done?

In many instances the board making a zoning decision conducts a hearing, discusses the matter, and then votes on it in the same meeting. But it is also not uncommon that the board wants to consider continuing a zoning hearing. This can generally be done, but the board must be careful how it is done. Read more »