N.C. Counties and Municipalities Missing Deadlines on Financial Reporting

State law requires all 100 counties and 551 municipalities in North Carolina to file an Annual Financial Information Report — a full accounting of each local government’s financial status — by Oct. 31 with the state Treasurer’s office. A review of county and municipal data on the Treasurer’s website shows that seven counties and dozens of municipalities missed the deadline to file their audited financial statements due on Oct. 31, 2009, the latest year for which data are available.

Meantime, 53 municipalities have failed to file an AFIR for two or more years, and several have not filed a report for six years, dating back to 2004.

It’s unclear what penalties, if any, local governments face if they miss the deadline. Heather Strickland, deputy director of communications for State Treasurer Janet Cowell, said local governments failing to submit audited financials by Oct. 31 receive written follow-ups from staff and that “staff encourage them to complete and submit all reports.”

The State and Local Government Finance Division of the state Treasurer’s office is charged with providing oversight and technical support to local governments in financial matters, including local government debt and fiscal and accounting practices. Carolina Journal made multiple attempts to speak with a division official about specific details of AFIR reporting, but was unable to do so.

The Treasurer’s office doesn’t release AFIR data until nearly a year after it receives the reports, so the audited statements on its website are for the prior fiscal year. Fiscal Year 2010 AFIR reports will not appear until 2011.

A note on the website states that the financial data for counties and municipalities were last updated on March 12 and June 11, 2010, respectively.

With many North Carolina cities and counties facing severe fiscal crises, taxpayers increasingly are questioning the cost of government and whether services being provided truly are necessary.

The failure to report also is an issue of transparency and accountability, said Michael Lowrey, a John Locke Foundation policy analyst who compiles JLF’s annual report By the Numbers: What Government Costs in North Carolina Cities and Counties. By the Numbers is in its 12th year of publication. One source Lowrey uses is AFIR reports. And he notes an increasing number of delinquent cities and counties.

“Many North Carolinians think they understand what their government is doing, but By the Numbers tells the real tale,” Lowrey said. “Some towns follow odd business models, making it easy for staff to hide the true cost of government from the taxpayers, but this report catches these oddities.” To produce the report, Lowrey examines property taxes, sales taxes, and total local government collections of all taxes and fees for counties and municipalities.

“Some towns get most of their revenues from fees instead of property taxes,” Lowrey said, and “this model distorts the cost of government by making it appear the city or county has a low tax burden.”

Lowrey cited the example of one town that gets most of its revenue from building permits and another from huge impact fees. “The bottom line is, whether it’s fees or taxes, that’s revenue for the government,” said Lowrey.

CJ contacted some of the cities and counties that missed deadlines or remain delinquent in filing AFIR reports.

Graham County did not submit data for 2007 and 2008. The state received the 2009 AFIR on March 9, 2009, but has not yet reviewed it. Rebecca Garland, Graham County’s finance manager, told CJ the county had fallen behind because its finance officer had left and the county had trouble finding a qualified replacement. Garland says she’s completed three past-due audits in one year.

“I’m not aware of any fine for missing a filing deadline,” said Garland, “but a county or city cannot issue debt unless its audits are up to date. Being delinquent can also lower the bond rating.”

Garland said state officials often insist on some line items being submitted, even without the audits being completed, to prevent the withholding of state funds earmarked for local governments.

Kimberly Honeycutt, budget analyst for Harnett County, said its 2009 report was late because the county had lost its finance officer. She was surprised to learn that the state website shows only partial data for 2009. Harnett County residents do have access to audited financial reports for the past several years on the county’s website.

Many municipalities that have not filed reports for multiple years have small populations, some with fewer than 100 residents. Repeat offenders include Gatesville, Greenevers, Hot Springs, Princeville, and Whitakers.

Officials in smaller communities emphasized that a lack of personnel and financial resources contributes to untimely reporting. The auditor for one community said the state has changed the AFIR forms and older ones are no longer on the website, adding to the delay in filing reports.

Karen McMahan is a contributor to Carolina Journal.