Earlier this month, Cherry Bekaert’s Government & Public Sector professionals attended the annual North Carolina Government Finance Officers Association (NCGFOA) Spring Conference, which provided ample networking opportunities and informative updates.
In addition to GASB updates and North Carolina legislative changes, attendees joined informative sessions about the current state of the economy and how to make dreams a reality. Opportunities to meet with clients in a less structured environment allowed for relationships to be strengthened and expertise to be shared regarding the current issues heavily impacting the industry.
Merging Ethics and Artificial Intelligence
Data shows that most industries, including government, do not have enough education or training around generative artificial intelligence (GenAI) and employees may be using it without any concrete guidance.
Jonathan Kraftchick, Partner, Cherry Bekaert Assurance Services, delivered an engaging presentation on ethics, including considerations for AI usage and the importance of developing a written policy when utilizing automation technologies.
Another session delivered by the University of North Carolina (UNC) School of Government dove deeper into generative AI in local governments and gave informative real-life examples of when AI usage has worked and when it has fallen short. The session also covered how governments need to be careful with the information they allow AI tools to access.
Discussing Budgeting Myths
The UNC School of Government provided a discerning presentation on key requirements for adopting a legal budget in North Carolina as required by General Statute 159.
The presentation offered a reminder that expenditures must be adopted by “department, function or project” and cannot be adopted by only total expenditures of a fund (G.S. §159-13). Another key requirement to note is that local governments can allow for changes between “department, function or project” within a fund, but only a budget office may be given the authority to do this. The CFO cannot make these changes unless they are also the budget officer of the local government and allocation changes must be made by the budget officer before year-end (G.S. §159-15).
Additionally, while a local government may account or report any solid waste functions within its general fund, the local government cannot include solid waste within the general fund for budgeting purposes and a separate budget is required for such services.
Other key takeaways include:
- Pre-audit and pre-disbursement requirements must be presented on the purchase order or contract and check, respectively. Including it on an invoice would not be in accordance with GS §159.
- The levy of property taxes must be included in the original budget ordinance (G.S. §159-13).
- Any fee schedules should not be part of the original budget ordinance but rather part of a separate ordinance.
Reviewing GASB Updates
The NCGFOA welcomed Paulina Haro, Senior Project Advisor at the Governmental Accounting Standards Board (GASB), to discuss current and future GASB projects. Paulina provided insights from the GASB directly to local governments on questions that have arisen from the implementation of GASB 100.
She also provided a high-level overview of GASB 101, 102, 103 and 104, which North Carolina governments will implement for fiscal years ending June 30, 2025, and beyond.
Additionally, she shared her thoughts on current projects such as revenue and expense recognition and the digital taxonomy, as well as the unknowns surrounding requirements the federal government will implement on digital transparency.
Highlighting Local Government Commission Deadlines
The Local Government Commission has changed its audit contract deadline to six months after year end, giving governments more flexibility to complete their financial and compliance audits.
While the longer due date allows for more flexibility, local governments should know any audit received after December 31 will be considered late and require an amended contract. There is no further grace period allotted as was the case when the due date was October 31.
Forecasting Economic Trends
Current conditions have led to more uncertainty in economic predictions when compared to previous conference predictions. While unemployment rose statewide, some of those numbers were driven by a rise in unemployment throughout western North Carolina due to the devastation caused by Hurricane Helene.
It was noted that unemployment around 2.5% – 3% is considered normal turnover and often not related to those unemployed with no job opportunities or not seeking employment.
The forecast currently has sales tax at an overall 1% increase year over year, which will likely be viewed an increase or decrease depending on the county and municipality. The expectation is that sales tax will be flat through the end of the fiscal year. When discussing federal interest rates, professionals were not optimistic that the interest rate would be cut further in 2025 and there is a possibility it may need to be increased.
Providing Hurricane Helene Relief
A focus of the general assembly is to provide relief funding for those affected by Hurricane Helene. The legislature has approved approximately $1 billion in funding, and the governor is aiming to get approval on an additional $1 billion in funding. These additional funds will be adjacent to the relief funding, but more specifically for housing and revenue loss due to the natural disaster.
North Carolina has been awarded over approximately $1.4 billion in Community Development Block Grant Disaster Relief (CDBG-DR). Governments should be careful to avoid duplication of funds, as disaster recovery often has insurance proceeds, Federal Emergency Management Agency (FEMA) funding and other grants. CDBG-DR funds should be used after other funds are exhausted, and governments must be vigilant to ensure funds received in total do not exceed the costs incurred.
The “Managing CDBG — Guidebook” is available online and a great resource to ensure governments are following all uniform grant guidance requirements as they relate to subawards.
Your Guide Forward
For those who are new to federal grants or may need someone to look over potential shortfalls in uniform grant guidance compliance requires, please contact us. Cherry Bekaert’s Government & Public Sector (GPS) team has a deep understanding of government business and the complex challenges state and local governments and public sector organizations face.
We help government and public sector organizations transform and modernize to meet industry challenges and to work in new ways. Using a digital environment with data-driven practices can increase the efficiency and effectiveness of operations and teams, allowing a better focus on their mission and delivering results to constituents.
