Bill Summary – FastDemocracy

FILED SENATE
                                                                                         Mar 13, 2023
                          GENERAL ASSEMBLY OF NORTH CAROLINA
                                                                 S.B. 299
                                      SESSION 2023           PRINCIPAL CLERK
     S                                                                    D
                               SENATE BILL DRS45146-MCf-101
     Short Title:   Reimburse Late Audit Costs with Sales Tax Rev.                              (Public)
     Sponsors:      Senators Barnes and Johnson (Primary Sponsors).
     Referred to:
                                      A BILL TO BE ENTITLED
 AN ACT TO INCREASE COMPLIANCE BY COUNTIES AND MUNICIPALITIES THAT
      FAIL TO TIMELY SUBMIT AN ANNUAL AUDIT REPORT.
 The General Assembly of North Carolina enacts:
              SECTION 1. G.S. 159-34 is amended by adding four new subsections to read:
      "(e) The secretary shall provide a notice of noncompliance to each county or municipality
 that fails to submit an annual audit report as required under subsection (a) of this section within
 nine months of the county or municipality's fiscal year end. The notice shall be sent to the
 governing board by first-class mail at the county or municipality's primary mailing address. The
 notice shall be issued within 30 days following nine months after the county or municipality's
 fiscal year end. A county or municipality that fails to comply with the notice of noncompliance
 and to complete the annual audit required under subsection (a) of this section within 12 months
 of its fiscal year end shall be deemed to have given consent to the withholding of a portion of its
 sales tax distributions, as provided in subsection (g) of this section.
      (f)     Upon receiving a notice of noncompliance under subsection (e) of this section, a
 county or municipality may notify the secretary in writing that it plans to appeal the action and
 the county or municipality will be scheduled to appear before the Commission at its next
 regularly scheduled meeting. The written notice shall state the basis for the appeal and include
 any evidence to support the appeal. The Commission shall establish guidelines outlining specific
 criteria that would warrant a successful appeal. If a county or municipality appeals prior to the
 secretary taking action to withhold under subsection (g) of this section, the secretary must delay
 withholding if the Commission determines that the county or municipality has provided sufficient
 evidence that the failure to provide a copy of their annual audit report is due to circumstances
 within the guidelines established by the Commission. If the county or municipality appeals after
 the secretary takes action to withhold under subsection (g) of this section, the secretary must
 notify the Secretary of Revenue to release any funds withheld under subsection (g) of this section
 if the Commission determines that the county or municipality has provided sufficient evidence
 that the failure to provide a copy of their annual audit report is due to circumstances within the
 guidelines established by the Commission.
      (g)     A county or municipality that fails to file a copy of its annual audit report with the
 secretary within 12 months of its fiscal year end may have a portion of its sales tax distributions
 withheld. The total cumulative amount that may be withheld is an amount equal to one hundred
 fifty percent (150%) of the cost of the required annual audit as indicated in the audit contract
 between the county or municipality and its external auditor for the audit report, if such a contract
 has been executed, or one hundred fifty percent (150%) of the actual fee for the most recently
 filed audit report if a contract has not been executed for the current year audit.
                                  *DRS45146-MCf-101*
     General Assembly Of North Carolina                                                    Session 2023
      The Secretary of Revenue must withhold from the county or municipality's distribution under
 G.S. 105-486, and from the county or municipality's distribution under G.S. 105-501 if
 necessary, the amount required to be withheld upon written notification to do so from the
 secretary. The notifications must be made on a quarterly basis. The amount to be withheld is five
 percent (5%) of one-twelfth of the county or municipality's annual general fund budget as it was
 adopted at the beginning of the fiscal year in which the withholding begins until the total
 cumulative withholding amount is reached. The total cumulative amount to be withheld and any
 schedule of withholding shall be provided by the secretary in its notification to the Secretary of
 Revenue. The Secretary of Revenue shall begin withholding from the county or municipality's
 first distribution of sales and use tax that is at least 45 days after they receive notification from
 the secretary.
      (h)     When the report required under subsection (a) of this section has been filed with the
 secretary, reviewed to ensure compliance with the requirements of this section, and accepted by
 the secretary or an appeal was successful under subsection (f) of this section, the secretary must
 notify the Secretary of Revenue within 30 days to release the funds. The Department of Revenue
 must release the funds in the county or municipality's first scheduled distribution of sales tax that
 is at least 45 days after the earlier of the following:
              (1)     Two years from the date of notification for the funds to be withheld.
              (2)     The date the Secretary of Revenue receives notification from the secretary that
                      either (i) a report complying with the requirements of this section was filed
                      and accepted by the secretary or (ii) the county or municipality has
                      successfully appealed action taken under subsection (g) of this section."
              SECTION 2. The Local Government Commission must establish and make available
 the guidelines required under G.S. 159-34(f) prior to the Secretary of the Local Government
 Commission sending out a notice of noncompliance under G.S. 159-34(e). The Commission may
 establish the guidelines required under G.S. 159-34(f) prior to January 1, 2024, however, the
 guidelines may not become effective until on or after that date.
              SECTION 3. Section 1 of this act becomes effective January 1, 2024, and applies to
 audits for fiscal years ending on or after June 30, 2023. The remainder of this act is effective
 when it becomes law.
     Page 2                                                                        DRS45146-MCf-101
Statutes affected: 
Filed: 159-34
Edition 1: 159-34
Ratified: 159-34
SL 2023-59: 159-34