(Raleigh, N.C.) – After years of imprudent financial practices, the towns of Spring Lake and Scotland Neck passed responsible budgets this week, prompting State Treasurer Dale R. Folwell, CPA, to praise their action and to applaud the Local Government Commission’s (LGC) financial accountability agreement system that played a role in the turnaround.
“This is a big step in the right direction, and is the type of headway we like to see,” Treasurer Folwell said. He chairs the LGC, which is staffed by the Department of State Treasurer’s State and Local Government Finance Division. Both towns are on the Unit Assistance List (UAL), a type of watch list for troubled local government units suffering from financial issues involving the general fund or water and sewer funds, internal control deficiencies and other concerns such as failure to submit annual audits.
“We are very pleased with the actions of the towns’ governing bodies in finding out what’s right, getting it right and now, hopefully, keeping it right for the taxpayers of their communities,” said Treasurer Folwell. “Their constituents pay property taxes with the expectation that essential services they require will be provided with a high degree of governance, transparency and competence from their elected representatives.”
If the towns continue to show progress they could be removed from the UAL, which is the goal of the financial accountability agreements. One key to that happening is their ability to comply with the budget spending constraints, which has been a shortcoming in the past.
The LGC voted at a June 22 emergency meeting to issue a notice of warning to Spring Lake, stating that the commission was prepared to take over control of the town’s finances if the Board of Aldermen did not pass a responsible budget with realistic revenue and expenditure estimates. Spring Lake has an ongoing history of budget deficits, longstanding fiscal disarray and now an investigation into missing money by State Auditor Beth Wood.
The Board of Aldermen passed a budget at a meeting on June 28 that met with approval of LGC staff for compliance with the Local Government Budget and Fiscal Control Act. That negated the need to assume control of the town’s financial affairs.
Scotland Neck also has had budgetary problems, overestimating revenues, overspending and a lack of current record keeping. There is no full-time town administrator at present. The town’s part-time finance officer is filling the administrator’s slot on a temporary basis. LGC staff advised town commissioners in early June that the budget they crafted for the 2021-22 fiscal year was unacceptable.
Town officials worked with LGC staff and the N.C. League of Municipalities to revise the budget, which LGC staff deemed one of the town’s best budget documents in years. Town commissioners passed the spending plan on June 29.
Financial accountability agreements are a new strategy developed by LGC staff. They are an interim step government units on the UAL can take to avoid state takeover of their finances. The agreements list a governing board’s responsibilities, define LGC staff responsibility and outline what materials and documents the units must provide to LGC staff for review.
“We don’t have enough staff, sufficient time or, in some instances, the expertise to tackle the growing number of local governments in need of assistance without adopting fresh approaches,” Treasurer Folwell said. “The financial accountability agreements give us one more tool in our tool box to help steer local governments in the right direction before more drastic action becomes necessary.”