Bill Summary for H 205 (2023-2024)

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Summary date: 

Feb 27 2023

Bill Information:

View NCGA Bill Details2023-2024 Session
House Bill 205 (Public) Filed Thursday, February 23, 2023
Intro. by Penny, Winslow.

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Bill summary

Section 1

Amends GS 115C-442 to bar appointment as a finance officer of a board of education if the person is unable to obtain a fidelity bond in the amount required by the statute. Current law requires a fidelity bond of at least $50,000. Changes the fixed amount to instead require the greater of (1) $50,000, or (2) an amount equal to 10% of the board's total annually budgeted expenditures included in the initial annual budget resolution, up to $1 million. Details calculation of total expenditures. Applies to bonds purchased or renewed on or after January 1, 2024.

Sections 2 through 6

Amends GS 143-318.10, which provides for open meetings of public bodies, to specify that the term public body includes any of the public entities listed whether established by the Constitution or otherwise. Additionally amends GS 132-1, which defines public records of agencies of the State or its subdivisions, to specify that agencies of the State and its subdivisions includes every public body subject to Article 33C, GS Chapter 143, as amended.

Amends GS 147-13 to require the Governor to convene the Council of State (Council) whenever statutes call for the concurrence, advice, discretion, opinion, or consent of the Council. Requires the Council's proceedings, rather than the Council's advice and proceedings, to be entered in a journal. Deems the Council's convening subject to the open meetings laws of Article 33, GS Chapter 143, and requires the minutes required thereunder to include the journal required by this provision. Makes language gender neutral and makes technical changes. Effective January 1, 2024.

Requires the Council to adopt rules establishing parliamentary procedure by October 1, 2023, including the method for introduction and considering of resolutions and posting the journal and minutes online. Deems Mason's Manual of Legislative Procedure to apply to meetings after that date if the Council fails to adopt such rules, and makes the Governor responsible for posting minutes and the journal within 10 business days of each Council meeting. Further requires the Council to review relevant administrative rules for compliance and conformity with the General Statutes, as amended by Sections 2 through 5 of the act, and initiate any necessary amendments by October 1, 2023. 

Specifies that the above provisions clarify and restate the intent of existing law.

Section 7

Enacts GS 153A-54, requiring every member of a county's governing board to complete at least six hours of financial management education if either (1) the Local Government Commission (LGC) is exercising statutory authority and assumed control of the county's financial affairs, or (2) the count was on the most recently published Unit Assistant List issued by the Department of State Treasurer (Department). Defines the scope of governing members subject to the requirement. Lists five requirements of the financial management education required, including that the education must be provided by the LGC, the League of Municipalities, the Association of County Commissioners, the UNC School of Government, or other qualified sources at the choice of the board, subject to LGC approval.

Section 8

Enacts GS 159-6.1 as follows. States policy encouraging reporting to an appropriate authority any evidence of State or local government fiscal and debt management violations, fraud, misappropriation, or gross mismanagement, waste or abuse of authority, free from intimidation or harassment. Prohibits employers or other persons from taking action against an employee or reporting person because the employee, person or their agent reports or plans to report any of the described activities related to fiscal and debt management, so long as the employee does not know or have reason to believe that the report is inaccurate. Also prohibits other employees of the employer from retaliating against such an employee. Establishes a right of action for damages, injunction, or other remedies against the person who committed the violation within one year after the alleged violation. Provides for remedies a court may order, including reinstatement and payment of back wages or payment. Requires awarding attorneys' fees if a permanent injunction is granted, and treble damages plus costs and attorney's fees for a finding of willful violation. Specifies that a person can discharge or take unfavorable action against an employee that has engaged in activity protected under the new statute if the person proves by a greater weight of the evidence that it would have taken the same action in the absence of the protected activity. 

Sections 9 through 13

Amends GS 159-18, authorizing local governments and public authorities to establish a capital reserve account (was, fund) by resolution (no longer also allowing for establishing the account by ordinance). Specifies that the account can be established in the general fund or in any public enterprise fund. Makes conforming changes to the statute, GS 159-19, GS 159-21, and GS 159-22.

Amends GS 159-20, now authorizing a governing board to make appropriations to the capital reserve account in its annual budget ordinance (replacing the authority for funding the account by appropriations from any other fund within the limitations of GS 159-13(b)). Adds a new requirement for the budget officer to annually include in the budget information submitted to the governing board with the proposed budget a report of the estimated ending balance for the current fiscal year in each capital reserve account, along with allocations to each purpose identified in the resolution establishing the account and an estimate of the expected expenditures from each account during the budget year.

Amends GS 159-22 to more specifically require a withdrawal resolution authorizing an appropriation from a capital reserve account to an appropriate appropriation within the fund the account is associated with pursuant to GS 159-13(a) (was, to an appropriate appropriation in one of the funds maintained under GS 159-13(a)). 

Section 14

Adds the following new content to GS 159-34 relating to local governments' annual audit requirements. Requires the LGC to provide notice of warning to units that have failed to submit an annual audit within nine months of the unit's fiscal year end. Details notice requirements, including making the notice available on the Department's website. Provides for noncompliance within 12 months of the unit's fiscal year to be deemed consent to the withholding of a portion of its sales tax distributions. Allows for a unit to notify the LGC within 45 days of receipt of the warning notice of intention to appeal, with the unit then scheduled to appear at the LGC's next regularly scheduled meeting. Provides for calculation of the quarterly sales tax distributions that may be withheld for failure to comply with the annual audit reporting requirements within 12 months of the unit's fiscal year, at a rate of 150% of the cost of the required annual audit under an executed audit contract or of the actual fee for the most recently filed audit report if no contract was executed for the current year audit.

Directs the Secretary of Revenue (Secretary) to withhold distributions under GS 105-486 and GS 105-501 upon quarterly written notice from the LGC. Provides for withholding the amount in subparts if the withholding exceeds 5% of the unit's monthly general fund budget. Requires the total amount to be withheld and any schedule of withholding to be provided by the LGC in its notice to the Secretary. Requires withholding to begin at least 45 days after the Secretary receives notice from the LGC. Provides for release of funds once the required reports are filed with the Secretary, reviewed for compliance and accepted by the Secretary, and the LGC notifies the Secretary to release the funds, which must be within 30 days of the filing. Requires the Department of Revenue to release the funds in the unit's first scheduled distribution that is at least 45 days after the earlier of two years from the date of notification for the funds to be withheld, or the date the Secretary receives LGC notice that a compliant report was filed and accepted by the Secretary. 

Effective January 1, 2024, and applies to audits for fiscal years ending on or after June 30, 2023. 

Section 15

Enacts GS 159-38.1, authorizing local governments and public authorities to establish a fund balance reserve account in the general fund or in any public enterprise fund for the purpose of maintaining appropriate case reserves and an adequate fund balance. Details six criteria of fund balance reserve accounts, including requiring adoption of a fund balance policy and establishment of the fund by board resolution. Also provides criteria for fund appropriations, withdrawals, and accounting. 

Section 16

Revises the scope of GS 159B-39, which authorizes uses of revenue from electric power rates, to now make the statute applicable to cities and towns that are members of a municipal power agency (previously listed specific cities and towns that are members of the NC Eastern Municipal Power Agency). 

Section 17

Amends GS 160A-17.2, which authorizes counties and municipalities to enter into an interest-free loan agreement with the US Department of Agriculture or an authorized intermediary, subject to LGC approval. Requires securing the loan only by pledging a security interest in the collateral being financed to that specific county or municipality (previously permitted pledging a security interest in an escrow account funded with loan proceeds, or a certificate of deposit). Prohibits pledging a security interest for repayment of or liability for loans entered into under the statute by any other county or municipality. No longer specifies deposit and certificate requirements. Makes technical and conforming changes.

Section 18

Makes technical changes to the tile of Part 3A, Article 5, GS Chapter 160A.

Enacts GS 160A-89, enacting requirements for members of governing boards of cities relating to financial management education identical to those enacted for members of county governing boards in new GS 153A-54.