Bill Summary – FastDemocracy

H.B. 508
                         GENERAL ASSEMBLY OF NORTH CAROLINA
                                                                                          Apr 8, 2021
                                     SESSION 2021                                   HOUSE PRINCIPAL CLERK
     H                                                                                            D
                                  HOUSE BILL DRH40288-MT-133
     Short Title:   Education Funding Transparency.                                          (Public)
     Sponsors:      Representative Clampitt.
     Referred to:
                                   A BILL TO BE ENTITLED
 AN ACT TO INCREASE TRANSPARENCY AND ACCOUNTABILITY IN LOCAL
     EDUCATION FUNDING BY MODIFYING THE UNIFORM BUDGET FORMAT TO
     INCLUDE INFORMATION ON EXPENDITURES FROM LOCAL FUNDS BY
     PROGRAM REPORT CODE AND OBJECT CODE, REQUIRING THE
     SUPERINTENDENT TO DESCRIBE PROJECTED EXPENDITURES FROM LOCAL
     FUNDS BY PROGRAM REPORT CODE AND OBJECT CODE, PERMITTING LOCAL
     BOARDS OF EDUCATION TO SUBMIT TO COUNTY COMMISSIONERS
     PROJECTED EXPENDITURES FROM LOCAL FUNDS BY PROGRAM REPORT CODE
     AND OBJECT CODE, PERMITTING COUNTY COMMISSIONERS TO ALLOCATE
     LOCAL FUNDS BY PROGRAM REPORT CODE, REQUIRING THE ANNUAL
     INDEPENDENT AUDIT OF ACCOUNTS OF A LOCAL SCHOOL ADMINISTRATIVE
     UNIT TO INCLUDE A COMPARISON OF BUDGETED AND ACTUAL
     EXPENDITURES BY PROGRAM REPORT CODE AND OBJECT CODE, REQUIRING
     THE ANNUAL INDEPENDENT AUDIT REPORT TO BE FILED WITHIN THIRTY
     DAYS OF ITS COMPLETION, AND REQUIRING A LOCAL SCHOOL
     ADMINISTRATIVE UNIT TO REPORT THE RESULTS OF THE ANNUAL
     INDEPENDENT AUDIT TO THE STATE BOARD OF EDUCATION WITHIN SIXTY
     DAYS OF ITS COMPLETION.
 The General Assembly of North Carolina enacts:
            SECTION 1. G.S. 115C-426 is amended by inserting a new subsection to read:
     "(c1) The uniform budget format shall include space for local school administrative units
 to provide information on expenditures from local funds, including personnel and operating
 expenses of individual schools, by program report code and object code. For the local current
 expense fund, the uniform budget format shall include a way of distinguishing expenditures
 supported by county appropriations from other local funds."
            SECTION 2. G.S. 115C-427(a) reads as rewritten:
     "(a) Before the close of each fiscal year, the superintendent shall prepare a budget for the
 ensuing year for consideration by the board of education. The budget shall describe projected
 expenditures from local funds by program report code and object code and comply in all respects
 with the limitations imposed by G.S. 115C-432. For the local current expense fund, the budget
 shall distinguish between projected expenditures that would be supported by county
 appropriations or other local funds."
            SECTION 3. G.S. 115C-429 reads as rewritten:
 "§ 115C-429. Approval of budget; submission to county commissioners; commissioners'
            action on budget.
                                  *DRH40288-MT-133*
     General Assembly Of North Carolina                                                     Session 2021
      (a)     Upon receiving the budget from the superintendent and following the public hearing
 authorized by G.S. 115C-428(b), if one is held, the board of education shall consider the budget,
 make such changes therein as it deems advisable, and submit the entire budget budget, including
 projected expenditures from local funds by program report code and object code, as approved by
 the board of education to the board of county commissioners not later than May 15, or such later
 date as may be fixed by the board of county commissioners. For the local current expense fund,
 the budget shall distinguish between projected expenditures supported by county appropriations
 or other local funds. At the time of submission of the budget, the board of education shall also
 submit to the board of county commissioners in writing the academic performance of the schools
 in the local school administrative unit, including the school performance grades of each school,
 any schools identified as low-performing or continually low-performing or included on the
 Innovative School District qualifying, watch, or warning list, and efforts by the local board of
 education to improve those identified schools' performance. The local board of education shall
 present the academic performance information at a public meeting upon the request of the board
 of commissioners.
      (b)     The board of county commissioners shall complete its action on the school budget on
 or before July 1, or such later date as may be agreeable to the board of education. The
 commissioners shall determine the amount of county revenues to be appropriated in the county
 budget ordinance to the local school administrative unit for the budget year. The board of county
 commissioners may, in its discretion, allocate part or all of its appropriation by purpose, function,
 function, program report code, or project as defined in the uniform budget format.
      …."
              SECTION 4. G.S. 115C-433(b) reads as rewritten:
      "(b) If the board of county commissioners allocates part or all of its appropriations
 pursuant to G.S. 115C-429(b), the board of education must obtain the approval of the board of
 county commissioners for an amendment to the budget that (i) increases or decreases
 expenditures from the capital outlay fund for projects listed in G.S. 115C-426(f)(1) or (2), or (ii)
 increases or decreases the amount of county appropriation allocated to a purpose or function
 purpose, function, or program report code by twenty-five percent (25%) or more from the amount
 contained in the budget ordinance adopted by the board of county commissioners: Provided, that
 at its discretion, the board may in its budget ordinance specify a lesser percentage, so long as
 such percentage is not less than ten percent (10%)."
              SECTION 5. G.S. 115C-447(a) reads as rewritten:
      "(a) Each local school administrative unit shall have its accounts and the accounts of
 individual schools therein audited as soon as possible after the close of each fiscal year by a
 certified public accountant or by an accountant certified by the Local Government Commission
 as qualified to audit local government accounts. The auditor who audits the accounts of a local
 school administrative unit shall also audit the accounts of its individual schools. The auditor shall
 be selected by and shall report directly to the board of education. The audit contract shall be in
 writing, shall include all its terms and conditions, and shall be submitted to the Secretary of the
 Local Government Commission for his or her approval as to form, terms and conditions. The
 terms and conditions of the audit contract shall include the scope of the audit, and the requirement
 that upon completion of the examination the auditor shall prepare a typewritten or printed report
 embodying (i) financial statements and his or her opinion and comments relating thereto. thereto
 and (ii) a comparison of budgeted and actual expenditures by program report code and object
 code. The financial statements accompanying the auditor's report shall be prepared in conformity
 with generally accepted accounting principles. The auditor shall file a copy of the audit report
 with the Secretary of the Local Government Commission, the State Board of Education, the board
 of education and the board of county commissioners, commissioners no later than 30 days after
 completion of the audit and shall submit all bills or claims for audit fees and costs to the Secretary
 of the Local Government Commission for his or her approval. It shall be unlawful for any local
     Page 2                                                                         DRH40288-MT-133
     General Assembly Of North Carolina                                                    Session 2021
 school administrative unit to pay or permit the payment of such bills or claims without this
 approval. Each officer, employee employee, and agent of the local school administrative unit
 having custody of public money or responsibility for keeping records of public financial or fiscal
 affairs shall produce all books and records requested by the auditor and shall divulge such
 information relating to fiscal affairs as he or she may request. If any member of a board of
 education or any other public officer, employee or agent shall conceal, falsify, or refuse to deliver
 or divulge any books, records, or information, with an intent thereby to mislead the auditor or
 impede or interfere with the audit, he that person is guilty of a Class 1 misdemeanor.
     The State Auditor shall have authority to prescribe the manner in which funds disbursed by
 administrative units by warrants on the State Treasurer shall be audited."
             SECTION 6. G.S. 115C-451 is amended by inserting a new subsection to read:
     "(a1) No later than 60 days after completion of an audit administered pursuant to
 G.S. 115C-447, a local school administrative unit shall report the results of the audit to the State
 Board of Education, including the comparison of budgeted and actual expenditures by program
 report code and object code. The Department of Public Instruction shall post the information on
 its website, categorized by local school administrative unit, in order to enhance transparency."
             SECTION 7. This act is effective when it becomes law and applies beginning with
 budget ordinances adopted after June 30, 2021.
     DRH40288-MT-133                                                                              Page 3
Statutes affected: 
Filed: 115C-426, 115C-427, 115C-429, 115C-433, 115C-447, 115C-451
Edition 1: 115C-426, 115C-427, 115C-429, 115C-433, 115C-447, 115C-451