A New Resource to Help Review Core Financial Compliance Obligations

North Carolina law imposes a wide range of financial management duties on local governments (including public authorities). Some of those duties are assigned specifically to the finance officer. Others belong to the budget officer or governing board. Many are shared. Together, these responsibilities form the legal framework for how public money is budgeted, received, obligated, disbursed, and accounted for.

The legal requirements behind that work are spread across multiple statutes, administrative rules, and Local Government Commission (LGC) guidance. That can make it difficult to step back and evaluate whether a unit’s financial practices align with all the underlying legal requirements.

A new Statutory Compliance Checklist (link below) is intended to help with that. The checklist was developed by School of Government faculty, in collaboration with local government finance professionals, at the request of staff from the LGC. It is intended as a practical resource for local governments and auditors to help review core financial compliance obligations and improve understanding of the statutory framework governing local government financial administration.

The checklist is being released in draft form for FY 2026–27. During this pilot year, the goal is to encourage use of the tool as part of a broader effort to improve understanding of legal requirements, strengthen internal financial practices, and identify areas where additional guidance or clarification may be helpful. Feedback will be gathered from local government officials, auditors, LGC staff, and other stakeholders before the tool is finalized.

The discussion below explains what the checklist covers, how the different parts of the resource are intended to work together, how local governments and auditors might use it in practice, and what its limits are.

What is the Checklist?

The checklist is a structured review tool focused on a set of core financial compliance areas under the Local Government Budget and Fiscal Control Act, G.S. Chapter 159, Article 3, and related statutes and LGC rules.

It covers several foundational areas of local government financial administration, including:

• Cash management, such as bank reconciliations, official depositories, insurance and collateralization, daily deposits, and investments;
• Budgeting, including annual budget ordinances, project ordinances, amendments, debt service, and cost allocations;
• Tax administration, including property tax levy calculations and certain sales tax allocation and earmarking requirements;
• Obligation and disbursement fiscal controls, including preaudit and disbursement compliance; and
• Personnel-related requirements, such as finance officer appointment and bonding requirements.

For each item, the checklist asks: Was this requirement met throughout the fiscal year? Answering that question often requires reviewing procedures, records, and legal standards that can be easy to overlook in day-to-day operations.

More Than a Checklist

The checklist itself is only one part of the resource.

Appendix A provides detailed guidance for each checklist item. It explains what a “yes” answer means, identifies the actions necessary to satisfy the requirement, and highlights the types of records that should exist to document compliance. This makes Appendix A both a practical reference guide and a training resource.

Appendix B provides suggested audit procedures for selected compliance areas. It is intended to help guide review of certain statutory requirements and promote greater consistency in how those areas are evaluated across local government audits. During the pilot year, its primary purpose is to support auditors in working with local government officials to identify compliance issues early, improve understanding of legal requirements, and strengthen financial practices before problems become more significant.

How the Checklist Can Be Used

For local governments, the checklist may be useful in several ways. It can serve as part of an annual internal review before audit season, a training resource for new finance staff, a transition tool during turnover in finance or management positions, or a way to identify gaps in documentation or internal processes. It also may be useful as a board education tool to help governing board members better understand their own financial responsibilities and where those responsibilities overlap with staff.

Because many of the underlying duties are shared, the checklist will often be most useful when reviewed collaboratively by the finance officer, budget officer, and governing board leadership.

For auditors, the checklist may serve as a statutory reference point when planning and performing compliance work. One goal of the resource is to encourage greater consistency in how certain legal requirements are reviewed across engagements, particularly in areas where the statutory obligations are highly specific or may not always receive focused attention.

Especially during this pilot year, the checklist is intended to support a more collaborative approach—helping auditors and local governments work together to identify areas for improvement, clarify expectations, and strengthen compliance practices over time.

Training Opportunities

Several training opportunities are planned over the coming year to introduce the checklist and walk through its requirements in more detail. These will include both general overview sessions and more focused discussions of specific provisions through upcoming Finance Office Hours.

The North Carolina League of Municipalities also plans to offer training on the checklist, and the resource is expected to be incorporated into future finance and budget conference sessions.

In addition, the checklist will be integrated into the School of Government’s new Fundamentals of the Fiscal Control Act course. The first offering of that course will take place in Asheville, with a simultaneous Zoom option, on August 3–5, 2026. The course will provide a more in-depth look at the legal framework governing local government financial administration, including the compliance areas covered in the checklist. Registration for that course is available here.

What the Checklist Does Not Do

It is important to be clear about the limits of the tool. The checklist does not identify every legal obligation that applies to a local government or public authority. It does not cover every accounting requirement, audit standard, grant condition, procurement rule, or program-specific operational requirement. Instead, it focuses on a narrower set of core statutory compliance areas that often carry significant legal or financial consequences if overlooked.

It also is not intended to be a “gotcha.” A “No” answer does not necessarily indicate a major violation or audit finding. It may simply identify incomplete documentation, inconsistent implementation, or an internal process that needs to be strengthened. The purpose of the checklist is to encourage review, improve understanding of legal requirements, and support stronger financial administration.

Checklist Pilot Period

As stated above, the checklist is being released as a draft resource for FY 2026–27. During this pilot year, feedback will be gathered on both its substance and usability from local government officials, auditors, LGC staff, and other stakeholders. That feedback will help shape the final version, with the goal of creating a practical, reliable resource that supports stronger compliance, improves understanding of statutory responsibilities, and promotes sound stewardship of public funds.