Welcome to the State Budget Manual, which serves as a guide to state agencies in discharging their duties under the State Budget Act and other applicable laws and regulations.
There are 10 chapters to the Manual, plus a Glossary. Use the Table of Contents to navigate to the section you would like to review.
Or use Ctrl+F (Command+F on Mac) to do a keyword search of the entire manual.
For more resources, contact a budget analyst on our staff.
- 2.1 Governor's Authority for Budget Preparations
- 2.2 General Requirements of State Budgeting
- 2.3 Role of the Office of State Budget and Management (OSBM)
- 2.4 Governors Recommended Budget
- 2.5 Process for Developing the State Budget
- 2.6 Transition from Ratified to Certified Budget
- 2.7 Strategic Planning
- 2.8 Systems Supporting the Budget
- 3.1 Governor’s Authority for Budget Execution
- 3.2 Certification of the Budget
- 3.3 The Total State Budget by Source of Funds
- 3.4 Structure of the Budget
- 3.5 Establishment of a Budget or Fund Code
- 3.6 General Provisions for Budget Execution
- 3.7 Base Budget Execution
- 3.8 Revising the Operating Budget
- 3.9 Budget Allocation Process
- 3.10 Information Technology Budget Policies & Procedures
- 3.11 Capital Improvement Budget Policies & Procedures
- 3.12 Contingency and Emergency Fund
- 3.13 Federal Fund Budget Policies & Procedures
- 3.14 Intra State and Non-state Funds
- 3.15 Disbursement of Directed Grants
- 3.16 Miscellaneous Transactions
- 5.0 Purpose
- 5.1 Travel Reimbursement or Payment
- 5.2 Travel Policies for State Employees
- 5.3 Travel Policies for Members of State Boards, Commissions, Committees, and Councils (Other than Licensing Boards and Members of the General Assembly)
- 5.4 Travel Policies for Licensing Boards (Other than State Employees)
- 5.5 Travel Policies for Non-State Employees
- 5.6 Travel Policies for Agency Committees Not Established by G.S. 143B-10(d)
- 6.1 Unemployment Compensation Accounts and Payments
- 6.2 Safety Shoe Allowance for State Employees
- 6.3 Internal Business Controls for Telephone and Mobile Devices
- 6.4 Attracting and Retaining an Exceptional Workforce
- 6.5 Dual and Secondary Employment
- 6.6 Conditions and Limitations on Contractual Services Expenditures
- 6.7 Limitations on Accepting & Offering Honoraria
- 6.8 Conditions & Limitations on Moving and Relocation Expenditures
- 6.9 Procedure for Moving and Payment
- 6.10 Severance
- 9.1 Municipal Population Estimates Overview
- 9.2 Definitions
- 9.3 Key Obligations for Municipalities
- 9.4 Meeting Obligation Procedures & Deadlines
- 9.5 Special Federal Censuses and Other Census Corrections
- 9.6 Special Local Censuses
- 9.7 Requirements for Newly Incorporated Municipalities
- 9.8 Appeals Process
- 10.1 Analysis of Rules
- 10.2 Overview of a Regulatory Impact Analysis
- 10.3 Requirements Prior to Publishing Proposed Permanent Rule Changes
- 10.4 Regulatory Impact Analysis Requirements
- 10.5 What Are the Requirements for Rules Agencies are Readopting
- 10.6 What Are the Requirements for OSBM to Review Certain DHHS Temporary Rules
- 10.7 Submission, Review, and Approval Process
- 10.8 When to Re-submit Analysis for OSBM Approval
- 10.9 Annual Report on Rules with Economic Impact
- 10.10 Definitions
North Carolina Constitution empowers the Governor to "prepare and recommend to the General Assembly a comprehensive budget of anticipated revenues and proposed expenditures of the State for the ensuing fiscal period. The Constitution of North Carolina also provides that the budget as enacted by the General Assembly shall be administered by the Governor."
The State Budget Act provides that the Governor is Director of the Budget. As such, the Director has responsibility to prepare and recommend the state budget, and the Director's powers extend to all agencies, institutions, departments, bureaus, boards, and commissions of the State of North Carolina. The Governor may -- and does -- delegate certain powers and authorities of the Governor as Director of the Budget to the Office of State Budget and Management (OSBM) (G.S. 143C-2-1(a)).
OSBM prepares the Budget Manual for the State of North Carolina for use by agencies in the preparation and administration of their budgets. The Manual is a guide to agencies in discharging their duties under the State Budget Act and other applicable laws and regulations. It is the responsibility of department heads and their staffs to acquaint themselves with the Manual.
Any exceptions to the policies stated in the Manual, if not expressly delegated, must be approved by OSBM. These policies may be superseded by OSBM directives or agency policies as long as they conform to the basic principles of the Manual.
All revisions and supplements to the Manual will be issued through the State Budget Director. OSBM expects agency officials and their staffs to adhere to the most current version of the Manual which can be found on OSBM’s website. For the purposes of auditing of records prior to April 1, 2021, auditors may reference the prior version of the State Budget Manual.
2.1 Governor's Authority for Budget Preparation
North Carolina operates under a biennial (two-year) budget, beginning on July 1 of each odd-numbered year, with annual updates to the second year of the enacted budget. The sessions of the General Assembly in odd-numbered years are known as long sessions. The sessions in even-numbered years are known as short sessions, when the General Assembly meets to adjust the biennial budget enacted during the previous long session.
2.1.1 Constitutional Authority
North Carolina Constitution Article III, Sec.5(3) empowers the Governor to "prepare and recommend to the General Assembly a comprehensive budget of anticipated revenues and proposed expenditures of the State for the ensuing fiscal period." The Constitution of North Carolina also provides "that the budget as enacted by the General Assembly shall be administered by the Governor."
2.1.2 Statutory Reference
North Carolina General Statute 143C-2-1 provides that the Governor is Director of the Budget. As such, the Director has responsibility to prepare and recommend the state budget, and the Director's powers extend to all agencies, universities, departments, bureaus, boards, and commissions of the State of North Carolina. The Governor may -- and does -- delegate certain powers and authorities of the Governor as Director of the Budget to Office of State Budget Management (OSBM) (G.S. 143C-2-1(a)).
2.2 General Requirements of State Budgeting
2.2.1 Information to Support State Budgeting
State agencies and non-state entities (defined in G.S. 143C-1-1(d)(24) and (d)(18)) are required to submit to the Director any information about their activities or fiscal affairs in the form and at the time required by the Director (G.S. 143C-2-1(b)). The Director is also charged with coordinating efforts to gather and analyze data to support state budgeting (G.S. 143C-2-2).
2.2.2 All Agencies Included in Budget
All state agencies are included in the Governor's Recommended Budget. The legislative and judicial branches are required to provide to the Director a financial needs estimate for the upcoming fiscal period (G.S. 143C-3-1 and G.S. 143C-3-2), and all other state agencies are required to submit budget requests for the upcoming fiscal period (G.S. 143C-3-3). All are required to submit information in accordance with the schedule prescribed by the Governor and using the NCFS Chart of Accounts. Budget requests are submitted in accordance with OSBM’s budget instructions.
2.2.3 University of North Carolina Unified Request
The University of North Carolina Board of Governors is required to submit to the Governor a unified budget request for all universities (G.S. 143C-3-3(b)). This request includes requests for repairs and renovations funds, capital funds, and information technology. The unified request shall be divided by budget code and may be submitted separately from the remainder of the request, at the direction of the Board of Governors.
The specific purpose/program codes created for the university system pursuant to G.S. 116-35, 116-36, 116-36.1, 116-36.2, 116-36.4, 116-36.5, 116-36.6, 116-37, 116-44.4, 116-68, 116-220, and 116-235 are exempt from budget development requirements, with the exception of requirements related to Article 8 concerning Capital, of Chapter 143C of the General Statutes. These funds shall be governed and accounted for by those statutes unless a conflict arises with Article 8. In that case, Article 8 should be followed.
2.2.4 Non-State Entities
Non-state entities requesting state funds are required to submit budget requests to the Director or a designated agency, pursuant to G.S. 143C-3-4. If an agency is designated to receive such requests, the agency must evaluate the request and forward its evaluation to the Director in accordance with procedures established by the Director.
2.2.5 Governmental and Proprietary Funds Included in Budget
Pursuant to G.S. 143C-3-5(d), the Governor's Recommended Budget includes recommended expenditures of state funds from all Governmental and Proprietary funds. These (and other) fund types are defined in G.S. 143C-1-3. University funds exempted in G.S. 143C-1-3(c) shall not be included.
2.2.6 Block Grant Plans
Pursuant to G.S. 143C-7-2, the agency head that receives and administers federal block grant funds must annually prepare and submit the agency's block grant plan to the Director. The Director establishes a time and procedure for submitting plans. These timelines and procedures for submitting block grant plans are typically handled outside the budget instructions, often through memorandum to state agency heads and chief fiscal officers. The Director submits block grant plans to the General Assembly as part of the Governor’s Recommended Budget.
2.3 Office of State Budget and Management Role
OSBM’s role in budget development is to define the budget process and to prepare and present the Governor's budget recommendations. OSBM considers factors that impact the budget when creating this financial plan, which reflects state priorities and balances needs with available resources. OSBM provides technical assistance and analysis to state agencies in developing budget requests as well as to the Governor and other decision-makers in prioritizing requests and in final recommendations.
2.4 Governor’s Recommended Budget
The Governor’s Recommended Budget is comprised of funds to operate existing or new government programs and funds for capital improvements. In developing the Governor's Recommended Budget, the budget (and the development process) is considered in three parts: 1) the base budget, 2) the change budget, and 3) the capital improvement budget.
Below is a summary explanation of each component.
2.4.1 Base Budget
The base budget is the part of the State budget necessary to continue current service levels, including adjustments for mandated rate increases such as Social Security, program annualization, operation of new facilities, salary annualization, and automatic rate increases for existing facility leases. The base budget should also reflect the removal of nonrecurring items from the previous fiscal biennium and the correct level of receipt-supported activities. Agencies submit base budget changes to OSBM through the Integrated Budget Information System (IBIS). See Section 2.8 for more on IBIS.
The base budget is prepared jointly by OSBM budget execution analysts and appropriate agency personnel. The base budget development process begins with agencies reviewing the Worksheet I report in IBIS. The Worksheet I report includes prior year actual expenditures, current year certified and authorized budgets, and recommended base budget adjustments for the biennium under request. The budget is constructed in line-item detail using the NCFS Chart of Accounts. Agencies adjust the Worksheet I report through budget revisions and Worksheet I forms in IBIS. OSBM budget execution analysts review and approve any necessary and authorized changes to the Worksheet I report. The final approved Worksheet I report becomes the base budget for the following biennium.
2.4.2 Change Budget
The change budget includes establishing new and/or pilot programs, expanding existing programs, reducing or eliminating existing programs, and changes to salaries and/or benefits for teachers and state employees. Throughout the change budget phase of budget development, agencies may make recommendations and/or the Governor may explore options to realign funding, identify efficiencies, and/or eliminate funding for certain programs, resulting in budget decreases or reductions.
Agencies submit change budget requests to OSBM on the Worksheet II form, which is available in IBIS. Within the Worksheet II form, agencies should develop a business case for their requests using data and evidence where possible, which OSBM analysts will use to evaluate these requests.
Other examples of change budget requests include:
- Enrollment adjustments for public schools, community colleges, and the University of North Carolina.
- Inflationary adjustments to categories of ongoing operational expense (e.g. utilities and information technology contracts).
- Requests to fund programs previously supported by federal and/or private grants that have expired.
- Increases to support additional persons being served by a state program and/or higher per capita cost to provide that service (e.g. Medicaid enrollment).
- Nonrecurring requests for large or costly equipment or equipment replacement.
- Information technology (IT) projects.
Information Technology Budget Requests
In addition to providing information in change budget requests, pursuant to G.S. 143C-3-3(e), agencies other than the General Assembly and the Administrative Office of the Courts requesting significant state resources for the purpose of acquiring or maintaining information technology must provide the following:
- A statement of need for IT and related resources, including expected improvements to program or business operations, and a review and evaluation of that statement by the State Chief Information Officer (CIO).
- A statement of requirements for state resources and an evaluation of that statement by the State CIO that takes into consideration the State's current technology, opportunities for technology sharing, requirements of Article 15 of Chapter 143B of the General Statutes, and any other factors relevant to the analysis, and in cases of an acquisition, an explanation of the method by which the acquisition is to be financed.
- A statement by the State CIO providing viable alternatives, if any, for effectively and economically meeting the agency's needs in an economical and efficient manner.
- A statement setting forth requirements for State resources, together with an evaluation of those requirements, including expected improvements to programmatic or business operations by the Secretary that takes into consideration the State's current technology, technology-sharing opportunities, General Statute requirements, and any other relevant factors. For acquisitions, an explanation of the method by which the acquisition will be financed.
Pursuant to G.S. 143C-3-5(b)(4), the Governor must also submit, as part of the Budget Support Document, the biennial State Information Technology Plan (described in G.S. 143B-1330(b)) for consistency in facilitating the goals outlined in the Governor’s Recommended Budget.
2.4.3 Capital Improvement Budget
Capital improvements are defined as real property acquisitions, new construction, rehabilitation of existing facilities, and repairs and renovations (G.S. 143C-1-1). These types of expenditures are accounted for in the capital budget code(s) of an agency or university.
Establishing a capital improvement project requires approval of the General Assembly regardless of funding source. Requests to establish capital projects must be submitted through the biennial capital budget process.
In the following circumstances, the Director of the Budget may authorize capital improvement projects outside of the biennial budget process:
- To address an emergency that threatens public health and safety;
- For a state agency advance planning project;
- For a university or National Guard project funded entirely from non-General Fund sources and after reporting to the Joint Legislative Commission on Governmental Operations.
Capital Improvement Needs Estimate (Budget Requests)
The capital budget development process begins when state agencies and the University Board of Governors submit their six-year capital needs estimates to the Director of the Budget by September 1 of even-numbered years (G.S. 143C-8-4). Agencies submit their needs estimates on Worksheet III forms (the first year of the six-year needs estimate in this form is considered an agency’s official budget request). Department of Transportation non-building infrastructure is not included in this process. Detailed procedures for submitting a Worksheet III are outlined in OSBM’s budget instructions.
Capital improvement needs estimates are requested in two parts: Repair and Renovations and New Capital Projects. New Capital Projects include new construction, land acquisitions, and major rehabilitation of existing facilities. (G.S. 143C-3-3).
Repair and Renovation requests must include:
- A description of current deficiencies and proposed corrections with a review and evaluation of that proposal prepared by the Department of Administration;
- An estimate of project costs;
- A certification of project feasibility by the Department of Administration as described in G.S. 143-341 (OC-25);
- An identification of any receipts available to support the project;
- Requests may be by a specific, discrete project or by classes of projects across the agency or division as outlined in G.S. 143C-8-13; and
- Any other information requested in budget instructions.
New Capital Projects must include:
- An estimate of space needs and other physical requirements with a review and evaluation of that estimate prepared by the Department of Administration;
- An estimate of project costs and cash flow requirements approved by the Department of Administration;
- A certification of project feasibility by the Department of Administration as described in G.S. 143-341 (OC-25);
- An identification of any receipts available to support the project;
- An estimate of maintenance and operating costs, including personnel, for the first five years of operation;
- An estimate of revenues to be derived from the project for the first five years of operation; and
- Any other information requested in budget instructions.
Six-Year Capital Improvement Plan
On or before December 31 of even-numbered years, the Director of the Budget is required to transmit a six-year capital improvement plan to the General Assembly (G.S. 143C-8-5). The agencies' needs estimates are used to develop the Capital Improvement Plan, which schedules the State’s long-term capital expenditures, recommends a financing plan, and integrates debt management principals. Capital projects are prioritized based on capital improvement needs criteria that includes but is not limited to:
- preservation, adequacy and use of existing facilities;
- health and safety considerations;
- operational efficiencies; and
- projected demand for governmental services (G.S. 143C-8-3).
Like the needs estimate, the Capital Improvement Plan is prepared in two parts. The Repair and Renovations part of the Capital Improvement Plan must identify projects in agencies’ priority order and specify the means of financing. The New Capital Projects part of the capital plan must contain:
- estimates of real property acquisition, construction, or rehabilitation costs;
- means of financing;
- an estimated schedule to complete the project; and
- a schedule of any debt service obligations.
Recommended Capital Improvement Budget
After OSBM review and executive approval of the capital improvement budget requests, the Director of the Budget recommends the Capital Improvement Budget to the General Assembly. Capital projects recommended in the first year of the six-year Capital Improvement Plan are known as the Recommended Capital Improvement Budget and require additional supporting information in a Budget Support Document (G.S. 143C-8-6).
Required information for Repairs and Renovation requests and New Capital Projects requests includes:
Repairs and Renovations
- Project description and justification;
- Detailed cost estimate;
- Estimated cash flow schedule over the life of the project;
- Estimated construction schedule through completion;
- Identified means of financing;
- Estimated maintenance and operating costs, including personnel, for the first five years of operation (if there is no increase in expenditures because the recommended project would replace an existing building, then the level of expenditures for the previous five years of operation shall be included).
New Capital Projects
- Statement of need;
- Detailed cost estimate to include acquisition, planning, design, site development, construction, contingency, and other related costs;
- Estimated maintenance and operating costs, including personnel, for the first five years of operation;
- Estimated revenues derived from the project for the first five years of operation.
Short Session Capital Budget Development
The six-year Capital Improvement Plan is updated after the long session of the General Assembly to reflect actual capital authorizations. Agencies are invited to submit Worksheet IIIs for capital needs that have emerged since developing the capital plan. These Worksheet IIIs and the capital plan developed for the long session are used to develop the Recommended Capital Improvement Budget for the following short session of the General Assembly.
2.5 State Budget Development Process
North Carolina operates under a biennial (two-year) budget, with annual updates to the second year of the enacted budget. According to the NC Constitution, total state expenditures for the fiscal period covered by the budget shall not exceed the total of receipts during that fiscal period and the surplus remaining in the State Treasury at the beginning of the period. Thus, the budget enacted by the General Assembly must be balanced and must include two fiscal years beginning on July 1 of each odd-numbered year (G.S. 143C-4-1).
NC's Constitution (Article II, Sec. 11(1)) requires a session of the General Assembly in odd-numbered years, which have become to be known as long sessions. In 1973 the General Assembly began having annual sessions, meeting in short (reconvened) sessions in even-numbered years, known as short sessions, to adjust the biennial budget enacted during the previous long session.
OSBM emphasizes a budget process that, while operating on a two-year cycle, is much broader in scope and focused on long-term outcomes.
Key steps in the budget development process are:
- Distributing budget instructions to state agencies for submitting budget requests.
- Developing agency requests.
- Preparing the Governor's Recommended Budget.
- Releasing the Governor's Recommended Budget.
- Legislative review and passage of the final state budget.
The OSBM website provides additional information on developing the state budget.
2.5.1 Instructions to State Agencies for Submitting Budget Requests
In the fall of even-numbered years, OSBM develops and issues budget instructions to state agencies and universities for making budget requests for the upcoming biennium. The instructions lay out procedures for preparing base, change, and capital budgets for that biennium. These state budget concepts or components are discussed in Section 2.4. In late fall/early winter of odd-numbered years, OSBM also develops and issues short session change budget instructions to state agencies and universities for making updates and changes to the biennial budget.
Budget instructions generally include:
- Timeline and deadlines for submitting base budget adjustments and change budget requests;
- Forms and job aids;
- Guidance on allowable adjustments or changes;
- Requirements for data and evidence or other supporting information; and
- Requirements for proposed special provisions or statutory changes.
Instructions also include information about the Governor's policy priorities and, if pertinent, limitations on budget growth.
OSBM’s Budget Instructions can be found at https://www.osbm.nc.gov/budget/budget-instructions.
2.5.2 Budget Growth Limitations
Legislative restrictions are placed on growth in the size of the General Fund operating budget in G.S. 143C-4-6 and on the number of permanent positions budgeted in G.S. 143C-4-7. OSBM considers these limitations in developing the Governor’s budget recommendations.
2.5.3 Developing Agency Budget Requests
As an initial step in the budget process, agencies develop strategic plans to provide the context for long-term policy formation and budgetary decision-making. Agencies submit their strategic plans in the spring of odd-numbered years with the option to submit an updated plan in the spring of even-numbered years.
As directed by G.S. 143C-3-5, the Governor is required to develop a biennial budget for the upcoming biennium that sets forth goals for improving the State with recommended expenditure requirements, funding sources, and performance information. Change budget requests must clearly support goals in an agency’s strategic plan. See Section 2.7 for more on Strategic Planning requirements.
Agencies are encouraged to have each division or unit prepare the initial division-level budget for the programs that they operate. Agencies are also encouraged to conduct their own internal budget meetings to refine and prioritize budget requests. This prioritization should be informed by their strategic plan.
Emphasis in this process should be placed on:
- Developing prioritized requests for new or increased funding for operations and capital improvements;
- Identifying areas of potential cost savings through productivity increases or program modifications;
- Identifying realignments of existing resources; and
- Identifying and preparing program measures or plans for evaluation, if appropriate.
OSBM budget analysts work with agency and university campus budget officers regarding acceptable levels for base budgets as well as providing technical assistance and guidance in developing change budget requests. Budget analysts can also assist agencies experiencing unusual growth that will affect their budgets or in areas related to meeting mandates within budgetary limits.
2.5.4 Preparing the Governor’s Recommended Budget
As an initial step, OSBM develops revenue projections and works with the Fiscal Research Division of the General Assembly to finalize a consensus revenue projection for the upcoming biennium or fiscal year. OSBM also develops tax policy recommendations to determine the funding levels available to support the State’s biennial budget. The Governor makes decisions about spending priorities and the total size of the Recommended Budget.
2.5.5 Executive Review
Executive review of the budget begins after an agency submits its budget requests to OSBM. OSBM reviews and evaluates agency budget requests for adherence to budget preparation guidelines, technical accuracy, and funding needs. Budget analysts resolve questions and concerns with agencies and make any necessary changes for accuracy and completeness. OSBM, the Governor, or Governor’s appointee may meet with senior departmental managers during this process.
The final Governor’s Recommended Budget results from meetings between the Governor and OSBM staff. At these meetings, the Governor and his staff work with OSBM staff to finalize economic and revenue forecasts and make decisions regarding all budget components (base, change, and capital improvements). Balancing the budget may require significant reductions in the base budget; limiting the expansion of programs, capital improvement projects, or other budget requests; or making changes to state tax structures.
2.5.6 Governor's Recommended Budget – Required Elements
The Governor submits budget recommendations to the General Assembly at each regular session.
In odd numbered years, the Governor’s recommendations include(G.S. 143C-3-5):
- The Governor’s Recommended Budget, which must distinguish:
- Base budget requirements;
- Program reductions and eliminations;
- Program expansions;
- New programs;
- All proposed capital projects in the context of the Six Year Capital Improvements Plan; and
- Funds needed to support enrollment increases in public schools, community colleges, and the university system are included as part of the change budget.
- A Budget Support Document, which includes:
- A detailed base budget constructed for each budget code and program using the Chart of Accounts and include parallel columns displaying the most recent prior year actual expenditures and receipts; the certified and authorized budgets for the preceding state fiscal year; program base budget requirements, receipts, and appropriation for each year of the biennium under request; and proposed increases and decreases.
- Accurate projections of receipts, expenditures, and fund balances.
- Detailed information on recommended capital improvements expenditures.
- Change budget recommendations and proposed expenditures with the existing or proposed appropriations to support them.
- A List of budget adjustments made during the prior fiscal year pursuant to G.S. 143C-6-4 that are included in the proposed base budget for the upcoming fiscal year.
- A Current Operations and Capital Improvements Appropriations Act that establishes the appropriation amounts for each year of the biennium under request in the Governor’s Recommended State Budget.
- A biennial State Information Technology Plan as outlined in G.S. 143B-1330.
- A statement of General Fund, Highway Fund and Highway Trust Fund availability on which the budget is based (G.S. 143C-3-5(e)).
In even-numbered years, the Governor recommends adjustments to the second year of the enacted budget, which may include program eliminations or reductions, program expansions and new programs, and capital improvements. All recommended adjustments to the enacted budget must be supported by required documentation. Recommended changes are presented as amendments to the enacted state budget and are incorporated in a recommended Appropriation Act(s).
Short session budget adjustments may include changes needed due to economic and inflationary changes or program operating requirements, such as increases to reflect changes in the enrollment or population served by public schools, prisons, and entitlement programs.
2.5.7 Budget Message
G.S. 143C-3-5(f) requires that the Governor's published budget recommendations be accompanied by a budget message that explains the budget’s goals and important features, estimated revenue availability, reasons for changes from the previous biennium or fiscal year, and anticipated funding sources for major increases in the base and change budgets. The budget message shall also include a fiscal analysis for the upcoming five-year period.
2.5.8 Required Timeline When Administrations Change
G.S. 143C-3-5(g) states that for years in which there is a change in gubernatorial administration, the incumbent Governor shall complete budget recommendations, develop the budget message, and deliver them to the Governor-elect by December 15.
2.5.9 Release of the Governor's Recommended Budget
Once the Governor’s Recommended Budget is finalized, OSBM submits the budget and supporting information to the General Assembly. At this stage of budget development, the goal is to ensure that the Governor’s Recommended Budget is fully understood by all interested parties, particularly the public and the legislature. The Governor's Recommended Budget is the starting point for legislative consideration of the budget.
The Governor and Budget Director formally present the Recommended Budget along with the budget message during the opening days of the General Assembly's annual session.
2.5.10 Legislative Review and Passage of the Final State Budget
Legislative review begins once the Governor’s Recommended Budget is presented. It is traditionally subdivided according to the General Assembly's appropriations committee structure for both House and Senate. Each subcommittee reviews a portion of the budget according to subject matter. House and Senate committees may meet separately or jointly during the appropriation process.
Subcommittees during past sessions have included:
- Health and Human Services
- Agriculture, Natural and Economic Resources
- Justice and Public Safety
- General Government
- Capital Improvements
- Information Technology
In addition to the Appropriations Committee, budget bills are referred to the Finance Committee and committees on Pensions and Retirement. Budget bills may be referred to these committees before or after the Appropriations Committee meetings. The Finance Committee is responsible for developing tax recommendations and revenue proposals and considering their impact on ensuring sufficient financing for the State's programs. The House and Senate each have a committee that deals with pensions and retirement and changes to state retirement rates.
Traditionally, each legislative chamber reviews the Governor's Recommended Budget including the base, change, and capital improvement budgets. The final appropriation package is based on the recommended base budget plus adjustments (increases or decreases) approved by the General Assembly. The appropriation package is presented in appropriation bill(s) and an accompanying committee report to the House and Senate. If the House and Senate adopt different versions of the appropriation bill, a conference committee is appointed to negotiate the differences. The revised appropriation bill is then presented to the House and Senate for ratification.
G.S. 143C-5 spells out legislative rules for enacting the State Budget. The General Assembly is required to approve the Current Operations Appropriations Act by June 15 in odd-numbered years (long session), and by June 30 in even-numbered years (short session). G.S. 143C-5-4 describes procedures if the General Assembly does not enact a budget by these dates.
Typically, the legislative review and approval process results in a budget that reflects a combination of the Governor's budget recommendations and legislative priorities. The Governor has the authority to veto the legislatively approved (ratified) budget.
2.6 Transition from Ratified to Certified Budget
G.S. 143C-1-1 defines the Certified Budget as the budget as enacted by the General Assembly including adjustments made for:
- Distributions to state agencies from statewide reserves appropriated by the General Assembly,
- Distributions of reserves appropriated to a specific agency by the General Assembly, and
- Organizational or budget changes directed by the General Assembly but left to the Director to carry out.
Once the General Assembly ratifies the budget and it is signed into law by the Governor, it becomes the State’s spending plan against which actual revenue collections and expenditures are monitored. As Director of the Budget, the Governor certifies to each state agency the amount appropriated to it for each program and each object code from all governmental and proprietary funds as enacted in the state budget or any other acts impacting the state budget.
OSBM certifies the budget on behalf of the Governor. Agencies work with OSBM budget development analysts to prepare the certified budget in IBIS. Once the budget prepared in IBIS aligns with the State budget passed into law, OSBM issues a certified budget for each State agency. The certified budget for each State agency shall follow the format of the Budget Support Document as modified to reflect changes enacted by the General Assembly (G. S. 143C-6-1(c)).When the certified budget is an agency operating budget, a Certified BD 307 is issued. When the capital budget is certified, a Certified BD 306 is issued. OSBM then transfers this certified budget information from IBIS to the North Carolina Financial System (NCFS).
OSBM sends out a certification memo with instructions each year to guide the process. Certification Instructions can be found in the Budget Memos section of OSBM’s website: https://www.osbm.nc.gov/budget .
2.7 Strategic Planning
Strategic planning is a long-term, future-oriented process of assessment, goal setting, and decision-making. A strategic plan sets the course for what an agency will do over the next two to five years and how it will achieve its desired results. At its core, strategic planning is about influencing the future rather than preparing or adapting to it. An agency strategic plan helps improve public understanding of why an agency exists, what the agency does, the effectiveness of its services, and how an agency is seeking to improve. Ultimately, the plan is designed to improve funding, planning, and management decisions in state government.
OSBM issues a memo with instructions and strategic planning guidance each biennium. All agencies must submit their strategic plans in May of odd-numbered years with the option to submit an updated plan in the spring of even-numbered years. Even though strategic plans are submitted in the spring, they are still an integral part of the budget development process. Change budget requests must clearly support goals included in the agency’s strategic plan.
2.8 Systems Supporting the Budget
Two main systems support the State’s budget: IBIS and NCFS. The two systems interface nightly to ensure that both systems reconcile with each other.
IBIS is a centralized, web-based system for state government budgeting maintained by OSBM. IBIS assists the budget development process by providing agencies with the electronic forms for entering in their budget requests. Once the budget has been ratified, the Certified Budget is prepared in IBIS. Budget execution activities (discussed in Section 3 of the Budget Manual) are also carried out in IBIS.
Access to IBIS user guides and online tutorials are available through the OSBM website.
NCFS is an accounting system maintained by the Office of State Controller. NCFS is an accounting system that facilitates internal control over fiscal operations and provides a structure for recording accounting data to prepare standardized and meaningful financial statements and reports. G.S. 143B-426.39 assigns the responsibility for approving both new accounting systems and changes in existing systems to the Office of State Controller.
More information on NCFS is available on the Office of State Controller’s website: https://www.osc.nc.gov/state-agency-resources.
3.1 Governor’s Authority for Budget Execution
3.1.1 Constitutional Authority
The North Carolina Constitution, in Article III, Sec. 5(3), provides that the "budget as enacted by the General Assembly shall be administered by the Governor."
3.1.2 Statutory Authority
As provided in G.S. 143C-2-1(a), the Governor is the Director of the Budget. As Director, the Governor has the responsibility to administer the budget as enacted by the General Assembly. The Governor has delegated the authority to perform certain powers and duties of this role as the Director of the Budget to the Office of State Budget and Management (OSBM).
3.1.3 Role of OSBM Budget Execution
The role and function of OSBM is to formally certify the legislatively enacted budget and to administer the budget to ensure that appropriations are expended for the purposes for which they were authorized. This is accomplished through interpretation of legislation and other governing language and developing and issuing budget policies and procedures to assist agencies.
OSBM provides technical assistance and guidance to agencies in carrying out their delegated responsibilities related to budget execution.
OSBM also monitors and considers requests to make budget adjustments within the framework of the State Budget Act, other relevant state and federal legislation, and rules and policies. G.S. 143C-6-1(a) provides that all appropriations of state funds made to agencies and non-state entities shall only be expended for the purposes for which they were authorized as recommended by the Governor to the General Assembly, as amended and enacted by General Assembly. It further provides that the Governor is responsible for ensuring that appropriations are expended in strict accordance with the budget enacted by the General Assembly.
3.2 Certification of the Budget
As Director of the Budget, the Governor shall certify to each agency the amount appropriated to it for each program and each object code from all governmental and proprietary funds. The certified budget for each agency shall reflect the total of all appropriations enacted for each agency by the General Assembly in the Current Operations and Capital Improvements Appropriations Act, university Self-Liquidating Projects, and any other act affecting the state budget. The certified budget for each agency shall follow the format of the Budget Support Document as modified to reflect changes enacted by the General Assembly (G. S. 143C-6-1(c)). The budget development section at OSBM works with agencies to certify the budget after it is ratified (See Section 2.6, Transition from Ratified to Certified Budget)
3.2.1 Certified Budget
The certified budget, as defined in G.S. 143C-1-1(d)(7), is the budget as enacted by the General Assembly, including adjustments made for:
- Distributions to agencies from statewide reserves appropriated by the General Assembly,
- Distributions of reserves appropriated to a specific agency by the General Assembly, and
- Organizational or budget changes directed by the General Assembly but left to the Director to carry out.
The budget enacted by the General Assembly will be put into place for each agency through the budget certification process. Adjustments listed above may be accomplished on a Type 11 budget revision. Refer to Section 3.8 for additional information on budget revisions.
3.2.2 Authorized Budget
The authorized budget as defined in G.S. 143C-1-1(d)(1a), is composed of the certified budget plus allowable internal budget revisions (Type 14 budget revisions) and adjustments that must be approved by OSBM (Type 11 and Type 12 budget revisions). This is the working budget and is reflected on the monthly budget report NC Budget to Actual (701) Certified Report (RPTBE006) in NCFS. Refer to Section 3.8 for additional information.
3.3 The Total State Budget by Source of Funds
3.3.1 Definition of State Funds
In the execution of the budget, OSBM uses the following four categories to distinguish between state funding sources.
The General Fund is made up of tax revenues (non-transportation) such as individual income tax, sales tax, franchise tax, corporate tax, insurance premium tax, and other smaller tax revenue sources. In addition, the General Fund includes nontax revenues such as income from the State Treasurer’s investments, fees received from the court system, miscellaneous fees charged for state services, and Medicaid disproportionate share receipts.
Highway Funds/Highway Trust Funds
The Highway Fund/Highway Trust Fund is comprised of revenues from transportation-related activities. Highway Fund revenues include the highway related motor fuel tax, motor vehicle tax, motor vehicle registration fees, driver’s license fees, and nontax revenues such as income from the State Treasurer’s investments.
Departmental receipts come from a variety of agency activities and sources. Pursuant to G.S. 143C-1-1(d)10, departmental receipts are fees, licenses, federal funds, grants, fines, penalties, tuition, and other similar collections or credits generated by agencies in the course of performing their governmental functions, that are applied to the cost of a program administered by the agency or transferred to the Civil Penalty and Forfeiture Fund pursuant to G.S. 115C-457.1, and that are not defined as tax proceeds or nontax revenues. Departmental receipts may include moneys transferred into a fiscal year from a prior fiscal year.
Federal funds represent a significant portion of the budget and are a major source of revenue for the State. Examples include: Medicaid, highway construction, Community Development Block Grant, Child Nutrition in Public Schools, and WIC (Women, Infants and Children) Nutrition Program.
3.4 Structure of the Budget
A budget is defined by G.S. 143C-1-1(d)(3) as a plan to provide and spend money for specified programs, functions, activities, or objects during a fiscal year. Such budgets and associated financial transactions must be accounted for through the use of fund types as prescribed by the Governmental Accounting Standards Board (GASB), as detailed in G.S. 143C-1-3(a), and in accordance with the Budget Code Structure of the NCFS Uniform Chart of Accounts as prescribed by the Office of the State Controller (OSC). Additionally, G.S. 143C-3-5(d), which is consistent with the requirements of the North Carolina Constitution, Article 3, Section 5(3), states that all Governmental and Proprietary Funds, as described in G.S.143C-1-3, shall be included in the Governor’s recommended state budget.
Together fund types (budget code), purpose/program (budget fund code), and object/line item (account number) make up the budget structure.
3.4.1 Fund Types (Budget Codes)
OSBM, in consultation with OSC, assigns a five-digit budget code based on budgetary necessity. Pursuant to G.S.143C-1-3 the Controller assigns a fund type to each budget code as defined by GASB to ensure proper financial statement reporting. The Controller maintains a list of all budget codes and associated GASB fund types.
If an agency needs to establish a new budget code, please review Section 3.5.1.
The specific fund types (budget codes) created for the university system pursuant to G.S. 116-35, 116-36, 116-36.1, 116-36.2, 116-36.4, 116-36.5, 116-36.6, 116-44.4, 116-68, 116-220, 116-235 are exempt from all requirements of budget execution, with the exception of:
- Budget execution requirements of Article 8 concerning Capital, of Chapter 143C of the General Statutes, and
- Budget execution requirements which are required to ensure compliance with provisions of G.S.116.36.1.
These funds shall be governed and accounted for by those statutes unless a conflict arises with Article 8, then Article 8 should be followed. Even though these funds are non-state funds, exempt from Chapter 143C, and/or agency and trust funds as defined in G.S. 143C-1-3(a), they are not exempt from Budget Manual policies such as travel, personnel regulations, and any other budget policies based on General Statutes other than G.S. 143C.
3.4.2 Purpose or Program (Fund Code)
As defined by G.S. 143C-1-1(d)(23), a purpose or program is a group of objects or line items that support a specific activity outlined in a recommended or enacted budget. In NCFS, the purpose/program is defined by a six-digit budget fund code and several chart of account fields, including Agency Management Unit (AMU), Agency Program, Project, Funding Source, and Inter Fund. Only the budget fund code is required for all transactions, but some fields may be required for certain account groups. Additional chart fields should be used as necessary to define funding source, project, program, grant identifier, and other reporting needs.
If an agency needs to establish a new fund code, please review Section 3.5.1.
3.4.3 Object or Line Item (Account Number)
The object or line item (account number) describes the purpose of expenditure, the type of revenue received, or the balance sheet account required for Generally Accepted Accounting Principles (GAAP).
As outlined by G.S. 143C-1-1(d)(20), the object or line item is designated in the North Carolina Financial System Uniform Chart of Accounts prescribed by the Office of State Controller. Actual expenditures and receipts are to be recorded and reported according to the account numbers designated in NCFS at the appropriate expenditure or receipt account number level
A brief description of each group of expenditure and revenue accounts is outlined below.
Expenditure accounts contain eight digits. The first digit is “5.” The second digit denotes the account group. The last six digits represent detailed categories.
The following major account groups for expenditure/object of expenditure/line item are recognized, as defined by OSC Chart of Accounts.
- 51XXXXXX - Personal Services (salaries and benefits) -- Expenditures incurred for services rendered by permanent and temporary employees and the related fringe benefits.
- 5XXXXXX - Purchased Services -- Expenditures incurred for services required to ensure the ongoing operation of state government facilities and government services.
- 53XXXXXX - Supplies -- Expenditures incurred for the purchase of supplies or materials expected to be consumed within the normal course of operations.
- 54XXXXXX - Property, Plant, and Equipment -- This account class includes payments for acquiring legal ownership to real property, to construct additions to buildings, and to furnish buildings with equipment, furniture, furnishings, and machinery.
- 55XXXXXX - Other Expenses and Adjustments -- Expenditures incurred for other miscellaneous operational costs.
- 56XXXXXX - Aid and Public Assistance -- Allocations or distributions for some designated program, assistance, or special project.
- 57XXXXXX - Agency Reserves -- This account group includes agency reserves, which are defined as budgetary appropriations that are not available for disbursement until transferred to budgeted expenditure accounts. Actual expenditures should not be posted to the 57XXXXXX accounts;
- 58XXXXXX - Intragovernmental Transaction -- This account group consists of operating transfers, reimbursements, residual equity transfers and transfers of appropriations.
Revenue accounts contain eight digits. The first digit is “4.” The second digit denotes the account group. The last six digits represent detailed categories.
The following major account groups for revenue/object of revenue/line item are recognized, as defined by OSC Chart of Accounts.
- 41XXXXXX Tax Revenues -- Revenues generated from taxes levied in accordance with general statutes.
- 42XXXXXX Grants -- Revenues received from federal, state, local, or municipal governments, or private organizations to be used or expended for a specific purpose, activity, or facility.
- 43XXXXXX Investment Income (interest) -- Revenues derived from financial investments or loans made by the State, which includes interest earned for the use of financial resources over a period of time.
- 44XXXXXX Sales, Service and Rentals -- Revenue collected from the sale of services, rentals, or physical property.
- 45XXXXXX Fees, Licenses, and Fines -- Revenue collected for the issuance of fines, permits, licenses, or fees from licensed activity.
- 46XXXXXX Contributions and Donations -- Included are gifts, donations, and contributions received from private organizations and individuals.
- 47XXXXXX Miscellaneous -- Revenues from sources not classified elsewhere.
- 48XXXXXX Intra-Governmental Transactions -- This account group consists of operating transfers, residual equity transfers, and transfers of appropriations.
3.5 Establishment of a Budget Code or Budget Fund
3.5.1 Establishment of a Budget Code
An agency may request to establish a new budget code in support of a specific activity outlined in an enacted budget or in support of new programs funded from federal, local, state, or private agencies. Agencies should submit requests for new budget codes through the Integrated Budget Information System (IBIS). Refer to the “IBIS User Guide” for instructions.
An agency request for an interest-bearing budget code must include documentation of clear direction in law for an exception to G.S. 143C-1-4(a) ,which requires interest earned on all funds to be credited to the General Fund. OSBM will review budget code requests under policies established by OSBM, OSC, and DST. OSBM will notify agencies following this review.
3.5.1a Disbursing Accounts with State Treasurer
Agencies should request new disbursing accounts on the budget code form in IBIS. Disbursing accounts are available with the State Treasurer, as determined by OSC, for institutions, public schools, and certain designated departments. Disbursing accounts have funds credited to them only by the OSC when requested through the North Carolina Financial System.
3.5.2 Establishment of a Budget Fund, Number, and Title
Requests for new centers (purpose/fund code) should be submitted by the agency through IBIS. Refer to the “IBIS User Guide” for instructions.
OSBM has traditionally considered a "Budget Fund" to refer to a group of related programs or activities. OSBM will review the request under policies established by OSBM and OSC. OSBM will notify agencies following this review.
Note: In NCFS, The University of North Carolina “Purpose Code” will be now defined in the Agency Program segment of the account string to support cross-institutional reporting and analysis.
3.6 General Provisions for Budget Execution
When OSBM budget development certifies an agency’s budget, the certified and authorized budget will be identical. Once budget certification is finalized, OSBM and agencies may begin adjusting the budget to include repeat revisions and to reflect changes authorized by the General Assembly.
With the exception of internal budget revisions, OSBM approves revisions to both the authorized and certified budgets using its statutory authority and/or acting on behalf of the Governor under the Governor's Constitutional role and authority as Director of the Budget. As budget revisions are processed during the fiscal year, authorized changes to departmental budgets can be illustrated by comparing the certified and authorized budget.
The budget execution process includes the following:
- Review and approval of requests for budget adjustments,
- Review and approval of allotment requests,
- Quarterly and year end close out,
- Approval of year end carry forward,
- Review and approval of cost collection worksheets,
- Budget structure management, and
- Provide guidance and technical assistance on budgetary issues.
3.6.1 Authorizations for Budget Adjustments
G.S. 143C-6-4 outlines the appropriate circumstances when an agency may, upon approval of the Director of the Budget, exceed the certified amount for a line item by adjusting the authorized budget. Additionally, this statute specifies the limits placed on making transfers among line items and budget funds (purpose or programs).
Agencies may also have authority in session law or general statute that directs them or allows them to make certain budget adjustments throughout the fiscal year.
3.6.2 Budget Authority Prior to Expenditure of Funds
Budget revisions must be submitted and approved prior to any commitment and/or expenditure that would exceed the amount budgeted. Agencies should not overspend the authorized budget, and monthly expenditure reports should show no over-expended accounts. Pursuant to G.S. 143C-6-8, purchase orders, contracts, salary commitments, and any other financial obligations by agencies shall be subject to the availability of appropriated funds. OSBM will not consider any commitment as a determinant in the review of budget revisions.
For agencies and universities with internal systems, all budget revisions must be approved before they may be entered into an agency’s or university’s internal system. If the revision is entered without approval, the agency or university may be required to re-open the month the posting occurred and re-certify the month-end NC Budget to Actual (701) Certified Report (RPTBE006) in NCFS. Agencies and universities shall not make direct entries into NCFS to record or correct budget transactions.
3.6.3 Fund Availability
According to G.S. 143C-6-2(a), appropriations are maximum and conditional and can only be accessed and used by an agency when the funds are available on a statewide basis and are sufficient to support the use. Budget revisions are not allowed for the sole purpose of making it possible to expend all receipts and appropriations.
3.6.4 Refund of Expenditures
A refund of an expenditure is any funds returned to the State in the same year as the original payment was made due to an overpayment or because goods were returned to the vendor. Refunds of expenditures are not receipts. They are a decrease of expenditures and should be handled in accordance with policies established by OSC. Sales to students, employees, or patients are not considered refunds of expenditures, but are shown as receipts. It may be necessary to revise the budget, both in requirements and estimated receipts, to properly reflect these transactions.
3.6.5 Refund of Receipts
A refund of receipt occurs when the state disburses funds to an entity from which the funds were originally received and both transactions occur in the same state fiscal year. Refunds of receipts should not be handled as expenditures but rather as a decrease of receipts in accordance with policies established by OSC.
3.6.6 The University of North Carolina Management Flexibility Revisions (G.S. 116-30.2, G.S. 116-14(b1), and G.S. 116-30.3)
Universities or the NC School of Science and Math designated as Special Responsibility Constituent Institutions (SRCI) pursuant to G.S. 116-30.1 and the University System President are permitted by statute to move funds within a budget code at the discretion of the Chancellor or the President via a Type 14 budget revision. These are known as internal or "management flexibility" revisions. The University System is allowed to process any internal revisions under the parameters of Article 1 of Chapter 116 of the General Statutes. These statutes provide management flexibility in the movement of budget and use of funds.
Budget flexibility revisions in the university system must conform to the SRCI guidelines found in the University Policy Manual published by the University-System Office (UNC-SO). All budget codes within the University system are required to enter a Type 14 budget revision in IBIS to be aligned with the code’s internal system. This revision is required to be done no less than once a quarter.
Universities or NCSSM designated as special responsibility constituent institutions (SRCI) pursuant to G.S. 116-30.1 and the University System President are permitted by statute to carry forward up to 2.5 percent of the unexpended fiscal year-end General Fund appropriation (also known as "management flexibility carry forward"). These funds may be used for non-recurring purposes consistent with G.S. 116-30.3(f).
Universities may not budget or adjust receipts, distribute reserves, transfer appropriations to another budget code, or process any action that would impact the certified budget through a flexibility revision. These actions must be approved by OSBM. OSBM or University-SO can provide additional information.
University Management Flexibility Carry Forward for Capital (G.S. 116-30.3)
One exception may be allowed to the restriction that funds cannot be transferred between the capital and operating budgets. The Director of the Budget may grant requests from the Universities to transfer carry forward funds to a capital project under the following criteria:
- to establish a new capital project from carry forward funds after consulting with Governmental Operations, or
- to increase the cost of an existing capital project.
3.7 Base Budget Execution
The base budget, as defined in G.S. 143C-1-1,is the part of the state budget necessary to continue the current level of services when adjusted for mandated rate increases such as Social Security, annualization of programs and operation of new facilities, annualization of salaries, and automatic rate increases for existing facility leases. The base budget should also reflect the removal of nonrecurring items from the previous fiscal biennium and include the correct level of receipt-supported activities. Agencies submit these base budget changes to OSBM through IBIS.
The base budget is prepared jointly by the OSBM budget execution analyst and appropriate agency personnel. The starting point for the base budget development process is the agency review of the Worksheet I report found in IBIS. The Worksheet I report includes prior year actual expenditures, current year certified and authorized budgets, and recommended base budget adjustments for the biennium under request. The budget is constructed in line-item detail using the Uniform Chart of Accounts. Agencies adjust the Worksheet I report through budget revisions and Worksheet I forms through IBIS. OSBM budget execution analysts review and approve any necessary and authorized changes to the Worksheet I report. The final approved Worksheet I report becomes the base budget for the biennium.
3.7.1 Base Budget Preparation
Budget Revision Review
Agencies should review all revisions annually to ensure revisions are repeated or included in the development of the base budget as needed. See Budget Instructions for additional information and refer to the “IBIS User Guide” for technical assistance using IBIS.
Budget revisions prepared in the first year of a biennium and of a continuing nature should budget funds for both years. The two-year revision procedure applies to some position actions, adjustment of salary funds (excluding lapsed salaries), and some non-salary revisions. If the budget revision is designated "Recurring" in the code section, it will automatically be included in the base budget (Worksheet I report).
Budget revisions that continue actions from the second year to a new biennium are called repeat revisions. Repeat revisions are of a continuing nature and apply to some position actions, permanent salary adjustments, and several other expenditure accounts. Repeat budget revisions will have notation marking them as repeat budget revisions and will be automatically loaded into IBIS for use in the new biennium. A repeat revision completed after the base budget (Worksheet I report) is finalized should be repeated until it is included in the base budget for the next biennium.
Receipts of departments and institutions, collected by and spent by agencies, are included in the certified and/or authorized budgets of the agencies. The total requirements of each budget code are composed of departmental receipts and state appropriations from the General Fund or the Highway Fund.
When actual receipts are declining, agencies must consult with OSBM to revise the total requirements of the budget before making commitments that could exceed the availability of funds. After making any necessary adjustments, the “adjusted” budget becomes the base budget from which allotments of funds to departments and institutions are made.
3.8 Revising the Operating Budget
3.8.1 Revising the Certified Budget
- Distribution of statewide reserves appropriated by the General Assembly
- Distribution of reserves appropriated to a specific agency
- Organizational or budget changes directed by the General Assembly but left to the Director to carry out
Agencies must submit requests for revisions to the certified budget for any of these reasons to OSBM through IBIS as a Type 11 budget revision. All budget revisions changing the certified budget also change the authorized budget.
3.8.2 Revising the Authorized Budget
G.S. 143C-6-4 allows the certified budget to be over-expended in some circumstances. In these cases, the certified budget is not changed, but the authorized budget is revised through the budget revision process. Budget revisions are processed to adjust the authorized budget to meet changing requirements that cannot be shown in the certified budget.
Budget adjustments that transfer funds from operating accounts to the 1XXXXXX object class are not allowed, with the exception of receipt-supported positions when there are not additional receipts to budget.
Pursuant to G.S. 143C-6-4(g), transfers or changes within the authorized budget of the University system may be made as provided in Article 1 of Chapter 116 of the North Carolina General Statutes. Refer to Section 3.6.6 for further guidance.
Some changes to the authorized budget must be approved by OSBM through IBIS as a Type 12 budget revision. Agencies may process other changes internally as a Type 14 budget revision in IBIS. The distinctions between these revisions are outlined below. Type 12 and 14 revisions change the authorized budget but do not change the certified budget.
Pursuant to G.S. 143C-6-4(b), a revision to the authorized budget is permitted for the following:
- An object or line item within a purpose or program (budget fund), so long as the total amount expended for the purpose or program is no more than was authorized in the certified budget for the purpose or program.
- A purpose or program if the over-expenditure of the purpose or program is:
- Required by a court or Industrial Commission order;
- Authorized under G.S. 166A-19.40(a) of the Emergency Management Act; or
- Required to call out the National Guard.
- A purpose or program not subject to section (2) above, but only in accordance with the following restrictions:
- The over-expenditure is required to continue the purpose or programs due to complications or changes in circumstances that could not have been foreseen when the budget for the fiscal period was enacted;
- The scope of the purpose or program is not increased;
- A receipt-supported or time-limited position is created, as permitted by G.S. 143C-6-4;
- The over-expenditure is authorized on a nonrecurring basis; and,
- Total requirements for a state department shall not exceed their budget's requirements for the fiscal year by more than 3 percent without prior consultation with the Joint Legislative Commission on Governmental Operations.
The Director shall report quarterly, beginning October 31, to the Joint Legislative Commission on Governmental Operations on approved over-expenditures that qualify under items (2) and (3) as listed above (G.S.143C-6-4(c)). Agencies shall ensure the appropriate code(s) are included on all Type 12 budget revisions (refer to Section 3.8.5) as they will be used for this report.
Some situations in which the authorized budget would be revised with a Type 12 budget revision would be:
- Budgeting additional receipts, including new or increased grant funds,
- Realigning requirements and/or receipts between budget funds,
- Consolidating budget funds and/or budget codes,
- Realigning within or between budget funds that impact the grant-in-aid (6XXXXXX) or intra-agency transfer (8XXXXXX) object classes, or
- Establishing a new position.
3.8.3 Revisions for Governmental and Proprietary Funds
Budget revisions must be submitted for all Governmental and Proprietary Funds and approved by OSBM unless authorized under "Internal Budget Revision" procedures or University Management Flexibility in accordance with G.S. 116-14.(b1), 116-30.2, 116-30.3, and 116-30.3A. Governmental and Proprietary Funds, as defined by G.S. 143C-1-3, include federal funds unless prohibited by federal law. Pursuant to G.S. 143C-3-5.(d), all Governmental and Proprietary Funds will be presented to the General Assembly in the Governor’s Recommended Budget and certified by OSBM.
3.8.4 Revisions for Fiduciary Funds
Budget requests for fiduciary budget codes generally do not require OSBM’s approval. However, agencies must continue to:
- Maintain budgets.
- Process internal budget revisions (Type 14).
- Use the monthly report on the budget (NC Budget to Actual (701) Certified Report (RPTBE006) in NCFS) showing the certified, authorized, and actual expenditure columns. The University system should have information easily accessible and available in the form and at the time requested by OSBM.
- Submit requests to establish new positions to OSBM for approval.
The University system must account for each budget code using an approved methodology that is auditable at any time by OSBM, Fiscal Research, or the State Auditor.
3.8.5 Processing Budget Revisions
Agencies submit budget revisions to OSBM through IBIS. Agencies must use this system to process all revisions to their certified or authorized budgets. The process and procedures necessary to use IBIS have been incorporated into IBIS User Guides.
Agency requests to OSBM for budget revision approval must include the following items at a minimum:
- The effective date for positions (unless it is for the full fiscal year), budget revision reference number, specific subject of the revision request, budget code number, date submitted, fiscal adjustment requested, and a concise, yet complete, explanation and justification.
- All amounts budgeted must be related to the specific subject of the revision request. Do not combine multiple requests on the same budget revision.
- Completion of the Recurrence field, which designates the revision as recurring or non-recurring.
- Completion of the Codes field, which designates the type of action associated with the budget revision. These categories are required for Type 12 and 14 revisions and are described below. If a revision meets several of these categories, the revision should be designated under the category first appearing on this list.
- Statutory – This budget revision is to identify those that are authorized by NC General Statute. The specific statutory reference is required when this category is selected.
- Special Provision – This budget revision is to identify those that are authorized by a special provision enacted in the Appropriations Act. The specific special provision reference is required when this category is selected.
- Lapsed Salary - This budget revision is transferring lapsed salary and should not be included in the calculation of salary reserve. The revision must indicate if it is an appropriated or receipt supported lapsed salary.
- One-time Salary Change - This budget revision is a one-time salary change, such as a one-time bonus, and should not be posted with Salary Control transactions.
- Carry Forward – This budget revision is to budget all carry forward of funds from the prior fiscal year, including federal grant funds budgeted in a previous fiscal year that are carried forward or re-budgeted in the current fiscal year.
- New Grant – This budget revision is to identify those that are budgeting a new grant not currently included in the certified budget.
- Change to Existing Grant – This budget revision is to identify those that are increasing or decreasing a grant that is currently included in the certified budget.
- Over-realized Departmental Receipts – This budget revision is to identify those that are budgeting receipts that are realized in excess of currently certified levels.
- Realignment – This budget revision is to identify those that are transferring budget or positions between budget funds/purpose codes.
- Other – This category is to be used for any Type 12 or 14 revision that is not identified above.
Revisions must also adhere to the following guidelines, as applicable:
- Requirements, receipts, and appropriations for both years of the biennium shall be adjusted as appropriate.
- Lapsed salary transfers shall be prepared separately from other budget revisions, and separate revisions are required for General Fund, receipt, and cost allocated positions.
- If the budget revision concerns an information technology project as defined in Section 3.10 Information Technology Budget Policies and Procedures, provide project documentation from the Touchdown System. The Judicial Branch, General Assembly, individual community colleges, and University system are exempt from the IT regulations of Senate Bill 991. DIT resources are also available here.
3.8.6 Internal Budget Revisions
All internal adjustments must be made in IBIS through a Type 14 budget revision. Agencies must explain in the justification of the internal budget revision how the realignment or receipt adjustment complies with GS 143C-6-4(b)(3), which provides authority for the budget adjustments.
OSBM delegates authority to agencies to make nonrecurring changes to the authorized budget for:
- Realignments between expenditure account object classes 51XXXXXX to 55XXXXXX within a single budget fund/purpose.
- Adjustments of $5,000 or less to a revenue account.
Agencies may not circumvent the $5,000 limitation on adjusting receipt accounts by approving multiple internal revisions for what should be a single transaction. Requirements must be adjusted with receipts so there is no change to net appropriation or fund balance.
Agency budgets should not contain over-expended accounts; therefore, revisions must be processed prior to over-expenditure.
For guidance and restrictions on internal budget revisions that realign lapsed salary, see Section 3.8.7. The following adjustments are prohibited for internal budget revisions:
- Recurring adjustments
- Realignments that impose obligations on the State beyond the end of the fiscal biennium
- Realignments between budget funds/purposes
- Realignments between different funding sources (e.g., General/Highway Fund appropriated accounts cannot be realigned with accounts supported through receipts)
- Realignments from operating accounts (52XXXXXX to 55XXXXXX) to the personal services (51XXXXXX) object class
- Budget adjustments to a revenue account greater than $5,000
- Realignments or budget adjustments to revenue accounts that result in a change to net appropriation or fund balance
OSBM will monitor each agency’s internal budget revisions and may rescind the authority to budget internally if there is not strict adherence to the above restrictions.
Pursuant to G.S. 143C-6-4(g), the University system may make transfers or changes within the authorized budget as provided in Article 1 of Chapter 116 of the North Carolina General Statutes. Refer to Section 3.6.6. for further guidance.
3.8.7 Lapsed Salary Revisions (G.S. 143C-6-9)
Lapsed salary is the budgeted dollar amount not expended for salary and associated benefits during the period in which a position is vacant. Each agency is responsible for calculating lapsed salary funds generated and must be prepared to submit this information to OSBM upon request.
When a Type 12 budget revision may be used: Lapsed salary may only be used for the 51XXXXXX through 55XXXXXX object classes, subject to the restrictions below. Prior approval from OSBM is required for any transfers of lapsed salary between budget funds/purposes or transfers outside of the 531XXXXXX through 535XXXXXX object classes.
When a Type 14 budget revision may be used: For transfers within a fund/purpose and within the 51XXXXXX through 55XXXXXX object classes only, agencies are authorized to move lapsed salary within a budget fund/purpose using a Type 14 budget revision. OSBM will monitor these budget revisions and may rescind the authority to budget these funds internally if there is not strict adherence to the guidelines below.
Guidance on the use of lapsed salary funds include the following:
- Agencies may prospectively proactively budget up to 50 percent of their anticipated annual lapsed salary for a given fiscal year. Before budgeting, agencies should share their projections with their OSBM Analyst. Lapsed salary in excess of the first 50 percent projected may be expended once it has been generated.
- Agencies may move lapsed salary funds on a nonrecurring basis only, and the use of lapsed salary funds shall not impose obligations on the State after the end of the fiscal year.
- Lapsed salary can only be moved to accounts with a like funding source (e.g., lapsed salary generated through appropriated salary accounts cannot be moved to accounts supported through receipts).
- When lapsed salary is used for contractual services, the contract shall not extend beyond the fiscal year.
- Lapsed salary shall not be used to establish new positions (including time-limited positions), or to provide salary increases.
- The scope of a purpose/program shall not be increased through the use of lapsed salary.
- All lapsed salary revisions must have the Lapsed Salary code selected (refer to Section 3.8.5. for further information).
- Lapsed salary transfers shall be prepared separately from other budget revisions, and separate revisions are required for General Fund, receipt, and cost allocated positions.
Pursuant to Article 1 of Chapter 116 of the General Statutes, the University system may use its flexibility with generated lapsed salary funds. However, G.S. 143C-6-9 requires use of these funds be for one-time, nonrecurring expenditures. Refer to Section 3.6.6. for further guidance.
3.8.8 Salary and Position Revisions
Salary Reserve Revisions
Salary reserve is the dollar amount created when a position is downgraded or filled at a salary amount less than the amount at which it was previously budgeted (exclusive of hiring rate). Salary reserve can be used to increase the salary of other positions due to promotion and/or reclassification or filling a position at a salary higher than that at which the position was vacated.
An agency that proposes the use of salary reserve to create a new position or to change the funding source of an existing position shall submit a budget revision to the Director for approval. The Director shall review the request to ensure funds for the action are included in the amount appropriated to the agency. If approval is granted by the Director, OSBM will notify the agency and the Controller. The Controller shall not honor a voucher in payment of a payroll that includes a new position or a change in an existing position unless it has been approved by the Director.(G.S. 143-C-6-6(a)).
Salary reserve may be budgeted for recurring salary requirements, such as increasing the salary of other positions due to promotion, reclassification, or filling a position at a salary higher than that at which the position was vacated. OSBM has delegated the authority to agencies to use salary reserve, for the purposes outlined above, within a given budget fund/purpose without prior approval by OSBM. Salary reserve may be transferred from one budget fund/purpose to another only with prior approval of OSBM (Type 12 budget revision). The agency must submit the budget revision before initiating the salary adjustment in the Beacon system.
Transfer of salary reserve is allowed only to permanent salary lines of like funding source (i.e., General Fund to General Fund, Highway Fund to Highway Fund, receipts to receipts). Additionally, payments on behalf of employees for hospital-medical insurance, longevity payments, salary increments, legislative salary increases, required employer salary-related contributions for retirement benefits, death benefits, the Disability Income Plan, and Social Security for employees shall be paid from the General Fund or the Highway Fund, only to the extent of the proportionate part paid from the General Fund or Highway Fund, in support of the salary of the employee. The remainder of the employer's contribution requirements shall be paid from the same source that supplies the remainder of the employee's salary (G.S. 143C-6-6(b)). While the University system’s flexibility extends to salary reserve funds, universities must use them with like funding sources.
Salary Control is a feature of IBIS available to all agencies. Salary Control is a monitoring tool to prevent overspending of salary line items on an annual basis and to show the detail transactions to resolve salary related issues. Salary Control shows annualized budget for salaries and the current salary obligation for positions for each budget code, budget fund code, salary account code, and funding source. In addition to budget and salaries, Salary Control also maintains the authorized position (IBIS FTE) count and the HR position (Beacon FTE) count. See the “IBIS User Guide” for further instruction.
Establishing a New Position
When an agency creates a new position, the position detail tab on the budget revision must include the following information:
- Budget fund code,
- Expenditure account number,
- Funding Source,
- 8-digit position number,
- Annual salary, and
- Full time equivalent (FTE).
Agencies must also complete salary requirements when not using salary reserve within the fund/purpose and account to ensure that the budget revision is posted correctly in Salary Control. For university positions budgeted on a budget revision, the university must provide only the FTE increase/decrease information to accurately budget the initial FTE. The analyst may require additional position information.
The agency must submit the budget revision before OSBM can review the Personnel Change Requests (PCR) for new positions in the Beacon system.
Each agency is responsible for maintaining position control over salaries and salary reserve and maintaining an accurate number of positions.
OSBM is responsible for:
- Monitoring fiscal control over salaries and wages throughout state government, Monitoring the Salary Control feature in IBIS,
- Approving the establishment of new positions,
- Reconciling certifications,
- Helping agencies reconcile position counts and budgeted salaries, and
- Ensuring sufficient funds are budgeted for established positions.
Per G.S.143C-4-7, the total number of permanent positions established in agencies shall not increase in any fiscal year by a greater percentage rate than that of the State’s residential population. This requirement applies to the university system and all its entities. The University system, any special responsibility constituent institution/campus, or affiliated entity, shall provide any information requested by OSBM as necessary to ensure that the University system maintains full compliance with this statute. However, in accordance with G.S. 143C-6-6(c), the university is not required to receive OSBM’s permission to create positions within the existing authorized budget. It must only be able to produce data and/or reports in the form and at the time required to determine compliance with G.S. 143C-4-7.
3.8.9 Over-Realized Receipts Revisions
Agencies may submit a budget revision to use additional receipts on a one-year nonrecurring basis above those certified in Governmental and Proprietary Funds if they are necessary to maintain the anticipated level of services approved by the General Assembly. If the additional receipts are not for the above purpose, the General or Highway Fund appropriation must be reduced through the allotment process. Additional receipts cannot be used to expand services or programs and may be budgeted only when realized. Refer to Section 3.8.1 and Section 3.8.2. to determine when it is appropriate to budget additional receipts on a Type 11 vs. a Type 12 budget revision.
G.S. 116-30.3A limits all receipts realized by each the University system budget code to a maximum of 10 percent over and above the certified budget. The University System may budget these over-realized receipts on a Type 12 budget revision on a nonrecurring or recurring basis as appropriate.
G.S. 143C-6-1(b) requires that all receipts, including those of the University system, are budgeted in the budget fund from which the receipts were collected and appropriations made. A university will budget tuition in the campus’ unique budget fund designated for regular term resident and non-resident tuition using the agency program U001990 to maintain a consistent accounting of tuition receipts across the UNC System.
3.9 Budget Allocation Process
3.9.1 Allotment Process
Each quarter, agencies must submit to OSBM a request for an allotment of the estimated amount required to carry on the agency during the ensuing quarter. Allotments may be made on a more frequent basis as determined by the Director of the Budget. Pursuant to G.S. 143C-6-8, unless otherwise authorized by OSBM as provided by law, any and all purchase orders, contracts, salary commitments, and any other financial obligations by agencies, including the University system, shall be subject to the availability of state funds or non-state funds. When necessary, OSBM will modify allotment requests to ensure all agencies remain within their current available budget.
Agencies submit requests for an allotment for the General Fund and Highway Fund as directed by OSBM through IBIS. For more information on using the allotment form in IBIS, please refer to the “IBIS User Guide”.
The OSC has established specific allotment accounts based on the quarter in which an agency is making the request. The allotment account serves as the control for the requisition of funds and represents the maximum available for the quarter.
3.9.2 Allotment Request Format
Allotment requests should reflect the Department, Fiscal Period, Budget Code, Total Planned Requirements, Estimated Receipts, and Appropriation, unless otherwise directed by OSBM. Allotment requests should include planned requirements at the account group level (51XXXXXX to 58XXXXXX). Allotment requests should include estimated receipts, including federal, local, highway, and other. Refer to Section 3.4.3. for more information about expenditure and revenue accounts.
UNC is to submit allotment requests according to the following break-out unless they are instructed otherwise by their analyst:
- TOTAL PLANNED REQUIREMENTS
- Payroll (51XXXXXX)
- Financial Aid (56XXXXXX)
- TOTAL ESTIMATED RECEIPTS
- TOTAL REQUESTED APPROPRIATION
3.9.3 Revisions to Allotments
Agencies may submit a request to OSBM to change the authorized allotment. Details required for the initial allotment are also required for allotment revisions.
3.9.4 Requisitions for Funds
After the quarterly allotment is processed in IBIS, a requisition for funds is generated in the North Carolina Financial System (NCFS). Agencies gain access to the allotted funds once all NCFS entries are completed. Refer to Office of the State Controller website for NCFS entry details.
3.10 Information Technology Budget Policies and Procedures
Information technology or IT is defined as a set of tools, processes, and methodologies, including, but not limited to, coding and programming; data communications, data conversion, and data analysis; architecture; planning; storage and retrieval; systems analysis and design; systems control; mobile applications; and equipment and services employed to collect, process, and present information to support the operation of an organization. The term also includes office automation, multimedia, telecommunications, and any personnel and support personnel required for planning and operations. G.S. 143B-1320(a)(11)
3.10.1. Budget Procedures for IT Projects
Pursuant to G.S. 143C-1-2 (b)(iii), the unexpended, unencumbered balance of an appropriation for the implementation of information technology projects (IT) shall not revert until the project is implemented or abandoned.
To facilitate implementation of the above, each agency will be required to set up a budget fund within an existing 2XXXX budget code or establish a 2XXXX budget code if one does not currently exist at the agency. If a project has multiple subprojects tracked separately by DIT or the agency, the subprojects must be budgeted in separate budget fund codes or by utilizing other NCFS Chart of Account fields . Any new 2XXXX budget codes established for IT projects will be incorporated into the Worksheet I. If the IT project is completely supported by federal funds the agency can elect not to have the project moved to a 2XXXX budget code.
Use the following guidelines when creating the 2XXXX budgets:
- OSBM shall certify funds appropriated in the Appropriations Act for IT projects to an agency's General Fund code in an IT reserve. Agencies, with guidance from OSBM, shall transfer funds to the established 2XXXX budget code after certification. Alternatively, funds can be certified in a transfer account with a corresponding receipt certification entry in the 2XXXX budget.
- Agencies, with guidance from OSBM, shall transfer funds authorized from existing sources in the Appropriations Act for IT projects to the established 2XXXX budget code after certification.
- OSBM will approve transfers to the 2XXXX IT budget codes only for projects submitted in the Touchdown System
- Recurring funding for operations and maintenance of an implemented IT project shall not be transferred to a 2XXXX IT budget code. Agencies should pay normal operational funding from an agency’s normal operational budget.
All IT projects that exceed $500,000 in total requirements, excluding internal personnel costs, and for which state funds have not been appropriated must be submitted as an expansion request. This includes federal or grant funded projects. Agencies may seek an exception if they can document the project must be started prior to the legislative session in order to comply with state or federal law, rules or regulations. Approval by OSBM for new IT projects funded from existing appropriations that do not exceed $500,000 is contingent upon all funds being identified prior to initiation of the project.
In accordance with G.S. 143C-1-2(b), when a General Fund supported IT project is implemented and closed out or abandoned, the unexpended, unencumbered balance of the appropriation shall revert. Agencies shall use the following procedure to revert unexpended, unencumbered IT project appropriation:
- DIT certifies to OSBM and agency the project is implemented or abandoned.
- Agency submits a budget revision to revert the funds. Agency shall use the intergovernmental transfer out account, 58100001, to transfer to Budget Code 19050 (interfund 019050).
- Agency submits an electronic cash transfer in NCFS to department code 9000 within 30 days of the notification that the project is implemented or abandoned. In the NCFS justification field, the agency shall note the following:
- The transaction is for deposit in budget code 19050 to revert unexpended, unencumbered cash balance of a completed or abandoned IT project,
- The project name, and
- The year and appropriation bill the funds were appropriated by the General Assembly.
- Agency notifies OSBM analyst when the NCFS transfer to budget code 19050 has occurred.
3.10.2 Information Technology Rates and Fees
Under G.S. 143B-1321(a)(20), DIT is required to submit all rates and fees adjustments to OSBM for approval. Any rate or fee increases require OSBM approval. OSBM has delegated the authority to reduce existing rates or fees to DIT. Rate or fee reductions require only a report notifying OSBM of the change.
In accordance with G.S. 143B-1333, for any new or increased rates or fees, DIT shall electronically submit a schedule of all proposed changes to OSBM's budget development analyst for DIT. DIT must prepare these fees and rates by October 1 for approval by OSBM. OSBM shall ensure agencies have the opportunity to adjust their budgets based on any rate or fee changes prior to submission of those budget recommendations to the General Assembly. The approved Information Technology Internal Service Fund budget and associated rates shall be included in the Governor's budget recommendations to the General Assembly.
Any exceptions to these submittal/effective dates will require advance approval from OSBM. Under no circumstance shall there be a retroactive effective date for any new or increased rate/fee.
Supporting justification that must accompany the schedule of all proposed new or increased rates/fees includes the following:
- A description of the service;
- The methodology and supporting documentation for computing the proposed rate or fee change;
- The cost to provide the service compared to the anticipated revenue from the rate or fee change;
- An estimate of the fiscal impact for each DIT customer; and
- A market rate comparison of the fee or rate change from a minimum of three sources.
3.11 Capital Improvement Budget Policies and Procedures
3.11.1 Capital Defined
"Capital improvement projects" are defined as real property acquisitions, new construction, rehabilitation of existing facilities, and repairs and renovations (G.S. 143C-1-1). Capital projects with budgets greater than $100,000 must be accounted for in a 4-type capital budget code. The transfer of funds between capital and operating budgets is prohibited except in the case of University management flex carry forward. (Section 3.6.6.)
Agencies are authorized to use funds in the operating budget for independent repair and maintenance projects or equipment purchases less than $100,000. The use of operating funds for such purposes shall not be used as a supplement to any formal capital project.
The expenditure of funds from the operating or the capital budget for capital improvement projects is subject to laws governing review of plans and specifications, selection of architects, and public bid for construction projects. Refer to the Office of State Construction for a copy of the North Carolina Construction Manual.
3.11.2 Capital Project Funding
Capital improvement projects can be funded from several different sources:
- The General Fund
- The Highway Fund
- The Reserve for Repairs and Renovations
- Gifts or grants, including federal funds
- Income from the provision of services, such as dormitory receipts, parking receipts, health services receipts, recreation fees, and other sources of income
- Overhead receipts and trust funds
- Insurance proceeds
3.11.3 Establishing a Capital Improvement Project
Establishing a capital improvement project requires approval of the General Assembly, regardless of funding source. Requests to establish capital projects are submitted through the biennial capital budget process managed by the OSBM budget development team.
In the following circumstances, the Director of the Budget may authorize capital improvement projects outside of the biennial budget process:
- To address an emergency that threatens public health and safety
- For an agency advance planning project
- For a university project funded entirely from non-General Fund sources and after consultation with the Joint Legislative Commission on Governmental Operations.
For university projects, capital improvement requests are submitted from the University Board of Governors, in accordance with biennial budget instructions, as part of the Governor's budget recommendation to the General Assembly.
3.11.4 Advanced Planning and Construction
An agency begins the planning or the construction of an authorized capital improvement project during the fiscal year in which funds are appropriated. Pursuant to G.S. 143C-8-7, an agency may use non-general funds such as gifts, federal or private grants, excess receipts for advanced planning through the working drawing phase of capital improvement projects, upon approval of the Director of the Budget. However, university requests cannot be authorized by the Director of the Budget until reported to the Joint Legislative Commission on Governmental Operations.
Upon completion of advanced planning, OSBM can allow an agency to take up to an additional 12 months to begin construction depending on the circumstances. For any project not begun in this time frame, OSBM shall credit the unused funds to the Project Reserve Account (G.S. 143C-8-11).
If the following actions occur, authorizations for capital improvements projects shall lapse, unless granted an extension of up to an additional 12 months:
- The construction of a project does not begin during the first two fiscal years in which funds are appropriated.
- OSBM redirects funds appropriated for a capital improvement project in accordance with G.S. 143C-6-2.
3.11.5 Capital Project Cost Increase
An agency may increase the cost of a capital project after the approval of the Director of the Budget (G.S. 143C-8-8). The increase is reported to the Joint Legislative Commission on Governmental Operations. The increase may be funded by:
- Federal or private grants
- Special fund receipts
- Direct capital improvement appropriations to that agency
3.11.6 Capital Project Scope Increase
An agency may increase the scope of a capital project only if the General Assembly authorized the increase (G.S. 143C-8-9). The agency may decrease the scope of a capital project with a written request and approval by the Director of the Budget. The Director of the Budget may increase the scope of a university project funded entirely from non-General Fund sources after consultation with the Joint Legislative Commission on Governmental Operations (G.S. 143C-8-12).
3.11.7 Force Account Construction
An agency may desire to use its own personnel for labor in the capital project of some construction projects. This process is termed "force account construction" and OSBM has statutory authority to approve this procedure when the total cost of a project, including all indirect costs of labor, services, materials, supplies and equipment, does not exceed $125,000. OSBM also has statutory authority to approve force account construction for projects without limitation to the project cost as long as labor costs do not exceed $50,000 (G.S. 143-135).
3.11.8 Budgeting Capital Improvement Funds
Once the General Assembly or the Governor authorizes a new capital improvement project, OSBM will notify the agency either with:
- A Capital Improvement Certification,
- A budget revision after certification of the operating budget for State Capital and Infrastructure Funds (SCIF) and other appropriated receipt supported projects, or
- A letter
The Capital Improvement Certification (BD 306) is used when a new project is authorized by the General Assembly to be funded by General Fund appropriations, and will identify the project, the fiscal scope, and the capital improvement code.
For capital projects that have been authorized by the Governor, OSBM will notify the agency by letter. This letter will identify the project name, fiscal scope of the project, and the capital improvement code where the project should be established.
To establish a project, OSBM certifies the new capital project using IBIS. The agency then submits a budget fund code (project) request in IBIS. For further instruction on creating budget fund codes, see Section 3.5.2. OSBM will certify the budget in that new budget fund code in the Contingency Reserve account and the Capital Improvement Certification (BD 306) will show the approved certified budget.
Agencies enter the project information into NCFS. OSBM will send the Capital Improvement Certification report (BD 306) to the Office of the State Controller for entry in NCFS.
After the budget is certified, a budget revision is required to realign funds from the Contingency Reserve account into the proper expenditure accounts after design and construction contracts have been awarded.
Agencies and universities use the NC Capital Improvement Report (BD 725 report) to monitor and manage budget and expenditure activity in all capital budget codes. The BD 725 shows activity related to the certified budget, project allotments, and project expenditure data.
Projects funded by an appropriation from the State Capital and Infrastructure Fund (SCIF) will be established after the certification of the operating budget for the state. The Office of State Budget and Management will establish transfers of SCIF appropriation in Budget Fund 024001 with the OSBM Budget during certification.
Agencies and Campuses will submit a budget revision (Type 11) to establish SCIF Funded projects within their respective budget codes. Each project could be established in the budget fund year for which it was funded by the General Assembly. Projects that are receiving a supplement of funds may submit a budget revision to the existing project increase the existing project Budget Fund.
The SCIF may fund projects over multiple years. Agencies and campuses may establish a project with the current appropriated amount in addition to the intended appropriation amount provided within the Current Appropriations Act intended allocation schedule.
Agencies and Campuses must budget SCIF receipts from OSBM in order to identify the year of SCIF Funding. Agencies will use natural account 438S00001 and use funding source to identify SCIF Funding Year. Campuses will use natural account 42S00001 and use funding source to identify SCIF Funding Year.
OSBM will not establish a project that is intended to be funded outside of the Current Fiscal Year. Such projects will be established upon Appropriations Act passage for that year.
3.11.9 Capital Improvement Allotments
Allotment of project funds is required before any project spending can occur.
After a budget is established for a capital project, the agency selects a designer. This selection is coordinated with the Office of State Construction and the State Building Commission. Once the designer is approved, the agency submits the first allotment request for the project. This allotment requests the entire design fee for the project as approved by the Office of State Construction.
Unless the authority to do so is delegated by law to an agency, the Office of State Construction reviews submitted construction bids and certifies the low bids of qualified contractors. The Office of State Construction issues a letter to the agency head approving the award of construction contracts. This award letter also details the approved design fee, the construction contingency, and available funds for movable equipment. Before the letter of award is released, the Office of State Construction presents it to the Director of the Budget for approval of the availability of funds.
The agency initiates the second allotment request for the project. This allotment distributes the funds for all construction contracts, the balance of the construction contingency, and the movable equipment as reflected on the award letter. When OSBM approves the allotment, the funds are available for expenditure on the construction contracts and movable equipment.
3.11.10 Project Reserve Account
The Project Reserve Account is a reserve account in the capital project fund held by OSBM. If the amount of appropriation exceeds the amount encumbered for real property acquisition, planning, design, site development, construction, contingencies, and other related costs, the excess will be credited to the Project Reserve Account (G.S. 143C-8-10). Use of these funds will be reported to the Joint Legislative Commission on Governmental Operations.
Funds in this account can be used for:
- Emergency Repair and Renovations projects
- Project bids that have exceeded the amount appropriated when the original scope has not increased.
3.11.11 Closing-Out Capital Improvement Projects
After final payments have been made for construction and design contracts, and all movable equipment purchases have been completed, the project is ready to be closed. The agency budget officer is responsible for reviewing all active capital projects periodically and immediately closing those that are complete. The procedures for closing out a capital project differ depending upon how the project is funded.
Projects funded via direct appropriation from the General Assembly:
- The agency will move any remaining balances to a line item entitled "Transfer to Budget Code 19973."
- Once the funds have been moved to the transfer line, the agency is to submit an allotment for the Transfer to General Fund. Upon OSBM’s receipt of the approved allotment, a check is issued payable to the State Treasurer and submitted to the State Controller.
Projects funded via transfer from the Reserve for Repairs and Renovations:
- The agency will submit a budget revision decreasing the agency budget and transferring the appropriation to 4XX02. The XX included in the budget revision should correspond to the budget year in which the budget revision would occur.
- After approval from OSBM, remaining Repair and Renovation balances may be transferred to Repair and Renovation projects that experience cost overruns in other years.
Projects funded via self-liquidating sources:
- If a balance is shown on the monthly report in the unexpended balance of allotments account for the completed project, the agency should submit an allotment reverting the balance to an unallotted status.
- After the project balance is reverted to the unallotted status, the agency should submit a budget revision reducing the budget to an amount equal to actual expenditures, with a corresponding reduction in the receipt line-item.
- If the receipts have previously been deposited, the agency should complete a refund of receipts transferring the receipt back to its original source.
Projects funded via General Fund Supported Debt
- If a balance remains in a completed project, the agency will submit a budget revision to reduce authority to an amount equal to actual expenditures with a corresponding reduction in the receipt line-item.
Projects funded via State Capital and Infrastructure Funds
- If a balance is shown in a SCIF-funded project, the agency will submit a budget revision to transfer all remaining SCIF funds back to OSBM Budget Code 024001.
3.11.12 State Capital and Infrastructure Fund (SCIF)
The State Capital and Infrastructure Fund (SCIF) is a special fund within OSBM to fund new capital improvement projects and repair and renovations projects for agencies and universities, broad band projects, debt service, SCIF related personnel, and any other purpose as directed by the General Assembly (G.S. 143C-4-3.1). The SCIF is funded via a set appropriation by the General Assembly, specified by G.S. 143C-4-3.1(b)(1). The fund appropriation is intended to increase by 3.5% each year after FY 2025-26.
Unlike typical General Fund appropriations, SCIF funds are budgeted in expenditure and receipt accounts. OSBM and OSC establish a new receipt account each fiscal year to reflect an agency’s annual appropriation from the SCIF.
Allotment requests for SCIF funds should not exceed what an agency expects to spend within one quarter following the request.
3.11.13 General Fund Supported Debt (Bonds)
There are various types of debt, known as bonds, that the state can take on to fund capital projects. All types of General Fund supported debt must be approved by the General Assembly.
General obligation (GO) bonds also require a vote of the people for full approval. Debt service for GO bonds is provided from the General Fund and secured by the full faith and credit of the taxing authority of the State.
Limited obligation bonds are approved without a vote of the people, with debt service provided from the General Fund and secured by a security interest in the facility financed or other, similar real property. Certificates of Participation (COPs) is an example of this type of funding.
Revenue bonds are issued with the requirement that debt service is provided from income such as dormitory receipts, parking receipts, and other sources of income.
Legislative bonds do not require a vote of the people and are therefore limited to an amount not to exceed two-thirds of the amount of debt retired during the previous biennium. Debt service is provided from the General Fund and secured by the full faith and credit of the taxing authority of the State.
General Fund Supported Debt Guidelines Overview
Regardless of bond type, agencies and universities must follow all the applicable guidelines and procedures for the budgeting, spending, and maintenance of debt supported projects.
All funds from the sale of the General Fund-supported debt must be spent or obligated within three years from the date of sale - preferably within two years. Copies of all invoices must be kept for six years after the debt is repaid. For example, if the General Fund-supported debt has a 20-year amortization, all records of invoices must be kept on file for 26 years.
The proceeds from General Fund-supported debt are tax-exempt. Proceeds from General Fund-supported debt cannot be used to compensate or support the salaries of in-house facilities staff or other state employees for services related to completing the projects. To maintain the tax-exempt status, private uses of facilities funded from General Fund-supported debt are greatly restricted if the debt is outstanding.
Private use is defined as any direct or indirect use in a trade or business carried on by any person or entity other than governmental units. However, use as a member of the general public is not considered private use for this purpose.
Debt-Supported Project Management
Upon the approval of a new General Fund supported debt issuance, agency budget codes are set up by OSBM. Individual project codes (budget fund codes) must be set up by each agency. Agencies must prepare budget revisions to establish the total authorized budget for each approved debt supported project.
For each ongoing project, agencies must provide OSBM with an updated cash flow model at the beginning of every quarter.
Bond Requisition Allotment Process
General Fund supported debt funds are not immediately available to agencies upon budgeting each project. Funds are disbursed to agencies through the Bond Requisition Allotment process. Agencies may only requisition funds for actual invoiced expenses. Funds cannot be used to reimburse other projects or expenses unless written permission is granted from OSBM. The proposed reimbursement expenditures must be included in the Reimbursement Resolution authorized by the Department of State Treasurer.
Agencies will submit a Bond Requisition Allotment form in IBIS for each project to requisition and allot funds for outstanding invoiced expenses. Bond funds will only be drawn down from the Trustee on a bi-weekly basis per the Debt Proceeds Drawdown Schedule published by OSBM. The “Capital Bond Requisition Allotment Process Job Aid” provides more information and guidance on this process.
Issuing Payment to Vendors
All vendors of debt-supported capital projects must be set up to receive electronic payments. Any exceptions must be approved by the Office of the State Controller.
All funds must be spent within three days after the Trustee deposits the funds with the State Treasurer.
Any funds not expended and all refunds of expenditures must be immediately returned to the Trustee. Agencies should contact their OSBM capital budget analyst for guidance in these cases.
3.11.14 Repairs and Renovations Reserve Account
The Repairs and Renovations (R&R) Reserve is a restricted reserve in the General Fund. The State Controller shall reserve to the R&R Reserve Account one-fourth (1/4th) of any unreserved fund balance as determined on a cash basis, remaining in the General Fund (G.S.143C-4-3).
The funds in the R&R Reserve Account will be used only for the repair and renovation of state facilities and related infrastructure that are supported from the General Fund (G.S. 143C-4-3). Funds from the R&R Reserve Account can be used only for the following types of projects:
- Roof repairs and replacements
- Structural repairs
- Repairs and renovations to meet federal and state standards
- Repairs to electrical, plumbing, heating, ventilating and air-conditioning systems
- Improvements to meet requirements of the Americans with Disabilities Act
- Improvements to meet fire safety needs
- Improvements to existing facilities for energy efficiency
- Improvements to remove asbestos, lead paint, and other contaminants, including the removal and replacement of underground storage tanks
- Improvements and renovations to improve use of existing space
- Historical restoration
- Improvements to roads, walks, drives, and utilities infrastructure
- Drainage and landscape improvements
Funds from the R&R Reserve Account cannot be used for new construction or result in additional square footage of an existing facility unless required to comply with federal or state codes or standards.
Departments requesting funds from the R&R Reserve must submit an application to OSBM, in a form and manner requested by OSBM. Universities submit requests to and follow procedures established by the Board of Governors.
Agencies should list project requests in priority order. For each project, complete the R&R Request Worksheet and attach a copy of an approved Cost Estimate (OC-25). Copies of cost estimates (OC-25) previously prepared during the budget preparation process may be submitted if the estimated cost is still accurate. Projects without an approved cost estimate will not be eligible for funding. Only projects supported from general fund appropriations are eligible for funding from the Reserve.
NOTE: Information concerning the Facilities Condition Assessment Program (F-CAP) reports, energy efficiency improvements, and impact to the operating budget must be provided on the worksheet before a project can be considered for funding.
3.12 Contingency and Emergency Fund
Agencies are advised that the Contingency and Emergency (C&E) Fund has had a $0 balance since October 2019 and does not receive a recurring appropriation; thus it is unlikely that funds will be available from this source.
3.12.1 Procedures Relating to Requests for Contingency and Emergency Funds
Pursuant to G.S. 143C-4-4, the C&E Fund is established within the General Fund (Budget Code 19001). The General Assembly may appropriate a specific amount to this fund in the Current Appropriations Act or other appropriations bills. Notwithstanding any other provision of law, funds appropriated to the C&E Fund may be used only for expenditures required by a court or Industrial Commission order, to respond to events as authorized under G.S. 166A-19.40(a) of the Emergency Management Act, or for other statutorily authorized purposes or other contingencies and emergencies.
An agency may request an allocation from the C&E Fund by submitting a letter to the Director and providing any information required by the Director. If the Director approves the request, the Director shall present the request, together with a recommendation, to Council of State for its approval. If the Council of State approves the request, the Director shall submit a report to the Joint Legislative Commission on Governmental Operations.
Method of Allocation from the Contingency and Emergency Fund
Upon receiving the Council of State's approval of a request for funds, OSBM will notify the agency. The agency shall then submit a non-recurring Type 11 budget revision to OSBM for approval showing an increase in total requirements and a corresponding increase in appropriation by transfer from the C&E Fund.
After review and approval of the budget revision by OSBM, a journal entry will be assigned in IBIS and will interface overnight with the North Carolina Financial System at OSC.
3.13 Federal Fund Budget Policies and Procedures
All federal funds received directly from the federal government by any state agency are subject to provisions of the State Budget Act and shall be initially accounted for in a federal funds budget code (3XXXX), in accordance with the Budget Code Structure of the North Carolina Financial System Uniform Chart of Accounts as prescribed by OSC. The funds in the federal fund budget code will be transferred by the agency to the appropriate budget codes where the actual expenditures will occur. In accordance with G.S. 116-36.1, federal funds, including overhead receipts received by the University system, are permitted to be budgeted in university trust fund codes.
All recurring or otherwise anticipated federal funding shall be fully reflected in these operating codes for the regular biennial budget request. Anticipated federal funds include all funds that can be expected based upon previous funding levels, current federal grant award letters received by the agency, or applications for federal funds submitted by the agency. All anticipated federal funds must be accurately reflected each fiscal year. Federal receipts must be budgeted according to an agency’s internal federal spending plan.
If an agency's federal spending plan is adjusted during the fiscal year, any movement of federal funds between budget funds must be realigned with a Type 12 budget revision on a nonrecurring basis. Unless otherwise authorized in the current Appropriations Act, anticipated federal funds that are not fully reflected in the biennial request, but are instead budgeted during the fiscal year, must be budgeted with a Type 12 budget revision for a nonrecurring purpose, thereby adjusting the authorized budget only. Federal funds that are budgeted and not received will result in a decrease in agency requirements (expenditures) commensurate with the decrease in anticipated federal receipts.
Unless otherwise authorized in the current Appropriations Act, an agency can budget unanticipated receipts during the biennium on a nonrecurring basis provided the agency doesn’t increase the scope of a program. All federal funds shall be budgeted and accounted for in a manner that provides clear and complete information and accountability for both state and federal fiscal years.
Each agency receiving federal funds must develop procedures for internal coordination and fiscal review of all federal grant applications and formula grant plans. Procedures must comply with special provisions or statutes applicable to federal funds. These regulations apply to all federal funds budgeted by agencies except for university institutions.
3.13.1 Applications for Funds
Pursuant to G.S. 143C-7-1, an agency that submits an application for funds to the federal government or any other party (including another agency), must also provide a copy of the application to OSBM along with any related information required by OSBM. In lieu of submitting a hard copy of the application, agencies are required to maintain a copy of the application in their files for review by OSBM upon request. Additionally, agencies are required to submit the "Notification of Application for Grants/Awards” form that summarizes key information about the grant, such as identifying agency information, the purpose of the grant and grant period, total funds requested and the need for additional FTEs. An electronic copy of the form is due to the appropriate OSBM budget analyst at the time the agency submits the grant application to the funding entity. A copy of the form and detailed form instructions can be downloaded from the OSBM website.
Agencies that receive grant awards, either governmental or nongovernmental, outside of a traditional application process are still required to report the receipt of new and/or increased grant funds on the "Notification of Application for Grants/Awards" form.
All agencies that receive funds pursuant to an application must include in any related contract or other grant instrument a clause specifically stating that the expenditure of money deposited in the State treasury is subject to acts of appropriation by the General Assembly (G.S. 143C-7-1(b)).
The only exceptions to the application of grant funds requirements are for University system and its constituent institutions.
3.13.2 Requisition and Disbursement of Federal Funds
Agencies should deposit federal funds received directly from a federal agency in a federal fund budget code (3XXXX), either through deposit of a federal check or through the letter or credit voucher and deposit procedure. Disbursements from a federal fund budget (depository) code may be made only to a general, special, or other operating fund budget code. This may be done through a check/deposit procedure or through the NCFS electronic funds transfer system. The budget fund, account, and any other relevant NCFS Chart of Account fields should be noted in the transfer documents. Regular cash requisitions and disbursement procedures would apply to subsequent operating fund transfers. Agencies should comply with the policies and procedures established for the Cash Management Plan by OSC.
3.13.3 Special Reports on Federal Funds
OSBM may require information from agencies, including the University System, on federal fund grants, expenditures, indirect cost collections, and other areas relative to any federal funds. Agencies should maintain records indicating federal catalog numbers and titles, types or categories of grants, indirect cost rates, budget and expenditures by state and federal fiscal years, and any other information helpful in making requested periodic special reports on federal funds.
3.13.4 Cost Allocation/Indirect Cost Policy
It is the policy of the state to maximize the recovery of direct and indirect costs for administering and implementing federal grants. All agencies, including the University system, use a statewide indirect cost plan (SWCAP) and a state information processing services indirect cost plan (SIPS-CAP) to recover the state’s central service costs as allowable per the U.S. Office of Management and Budget (OMB) Circular A-87.
OSC prepares and gains approval from the federal government and distributes the central service cost plans. Each agency is responsible for integrating these central services costs into their costs plans to recover the optimum allowable indirect costs from its federal grants.
Individual cost plans are the responsibility of the agency. Agencies must prepare an indirect cost proposal at least annually covering all divisions and institutions that receive federal funds unless the cognizant federal agency specifies another time interval. All proposals should be reviewed by the chief fiscal officer and agency head to assure that:
- The correct amount of state government’s central services costs is included in the proposal.
- All allowable cost items are included.
- The indirect cost rates are within appropriate ranges and are at a maximum level.
OSBM may grant exceptions to the proposal development to any agency that demonstrates in writing the costs and procedures required to develop and implement indirect cost recovery are greater than the benefits derived. Factors that need to be considered include the amount and type of federal grants received, an estimate of the indirect cost rate, and an evaluation of the costs of any necessary accounting changes.
A cost allocation plan that directly accounts for overhead costs in recovering administrative costs from federal grants may be used instead of an indirect cost rate.
Pursuant to G.S. 116-36.1, the University system is permitted to retain all of its indirect costs in university trust funds but must be able to report on them at the time and in the form requested by OSBM.
3.13.5 Indirect Cost Proposals
Each agency or university shall prepare an indirect cost proposal annually unless the cognizant agency specifies another time interval. This proposal should be prepared in accordance with OMB Circular A-21.
A copy of the final negotiation agreement between the cognizant federal agency and the institution should be available for inspection. A summary explanation of any differences between the proposal and approved rates should accompany the agreement copy.
3.13.6 Indirect Cost to be Included in Federal Grant Requests
The chief fiscal officer will be responsible for assuring that full indirect costs are claimed on each federal grant or contract application, except those specifically excluded by OSBM. Department fiscal offers can submit requests for exemptions in writing to OSBM. Exemptions to claiming indirect costs in grant applications will be considered by OSBM on a case-by-case basis if either of the following circumstances can be demonstrated in writing by an agency:
- Federal statutory or administrative restrictions or prohibitions of indirect costs claims;
- Extraordinary circumstances exist that may jeopardize the agency’s best interest in negotiating for and receiving a federal grant.
All exemptions granted will be available for inspection at the agency or university, including those cases where indirect costs are formally foregone in the grant or contract application as a means of meeting cost sharing or matching requirements.
3.13.7 Budgeting Indirect Costs
Agencies must deposit all indirect costs (or overhead receipts) in an appropriate state budget code. OSBM must grant spending approval prior to the budgeting of indirect costs and overhead receipts. Indirect cost funds will be reverted to the General or Highway Fund unless OSBM grants the spending approval. The University system is permitted to budget these indirect costs along with the federal funds in their institutional trust funds but must report as required by OSBM.
3.13.8 Reporting Requirements
OSBM may need information on federal fund expenditures, indirect cost collections, and other areas relative to federal funds. Agencies should maintain records indicating federal catalog numbers and titles, types or categories of grants, indirect cost rates, budget and expenditure amounts by state and federal fiscal years, and any other information which would be helpful in making requested special reports on federal funds.
3.13.9 Budget Procedures for Handling Transfers Between Block Grants
Where federal block grants allow for the transfer of funds to other block grants, the procedures for transferring funds will be as follows:
- The need for additional funds must be established by the appropriate agency head, supported by an analysis of that need and the additional cost associated with it. Based upon the need for additional funds, the agency head will request of the Governor, as Director of the Budget, the transfer of funds from other block grants.
- The agency head will determine and report to the Governor if excess funds are available for transfer to other block grants. An analysis should accompany the report explaining why excess funds are available and why other related programs within the block grant do not require additional funds.
- The Governor will determine the need for the transfer of funds between block grants based on reports of additional needs and reports of excess funds.
Agencies must use appropriate budget procedures to transfer funds within a department or between departments.
3.14 Intra State and Non-state Funds
Any agency subject to the provisions of the State Budget Act receiving funds directly from a state grant from another division or department, or from non-state funding, will budget those funds to the appropriate general, special, or other funds budget code. All recurring or otherwise anticipated funding shall be fully reflected in these operating codes for the regular biennial budget. Any changes or receipt of unanticipated funds during the biennium shall be processed through the budget revision process and comply with applicable laws pertaining to the budgeting of unanticipated receipts. Agencies must budget and account for all funds in a manner that provides clear and complete information and accountability on a state fiscal year basis.
3.15 Disbursement of Directed Grants
3.15.1 Directed Grants Definition
Directed grants are nonrecurring funds allocated by a state agency to a non-state entity as directed by an act of the General Assembly (S.L. 2021-180, sec. 5.2). Unless a specific purpose is identified by the General Assembly, these funds are not restricted for a particular purpose but are meant to supplement the budgets of recipients while also being subject to state audit and applicable state laws. If a specific purpose is identified, Directed Grants can be expended only for the projects and purposes specified. Funds are certified to the agency administering the grant, as outlined in the legislation that appropriates the funds.
3.15.2 Directed Grants Notification to Recipient
After the appropriation is made, the agency should communicate with the recipient organization:
- The General Assembly has appropriated funds to the organization
- The purpose for which the funds are to be expended, if identified
- The reporting requirements under 09 NCAC 03M.0205
Correspondence should include:
- a W-9 or substitute W-9
- an electronic payment form / vendor verification form
- a contract that complies with 09 NCAC 03M.0703
In addition, recipients will need to submit the following to the administering agency
- a copy of the recipient’s conflict of interest policy (G.S. 143C-6-23.(b))
- a sworn statement of no overdue tax debts, as defined in G.S. 105-243.1 (G.S. 143C-6-23.(b)).
3.15.3 Directed Grants - Disbursements
Pursuant to G.S. 143C-6-23 and 09 NCAC 03M.0401, all administering agencies must enter recipient and award information in OSBM's Grants Management System prior to disbursing any state funds. Refer to https://www.osbm.nc.gov/stewardship-services/grants for information on accessing this system.
Once the administering agency receives and reviews the requested information as identified in Section 3.15.2, both the agency and the recipient will sign the grant contract. Upon receipt of the signed contract, the agency will disburse the funds to the grant recipient within a reasonable timeframe.
Pursuant to G.S. 143C-6-21 and section 5.2 of S.L. 2021-180, the Director of the Budget has discretion to disburse Directed Grants totaling more than $100,000 on a quarterly or monthly basis. Directed Grants of $100,000 or less shall be paid in a single payment unless provided otherwise by state or federal law. Disbursement of funds to a non-state entity that meets all applicable requirements shall begin as soon as practicable, but no later than 100 days after appropriation of the funds.
In addition, agencies administering directed grants shall report on a quarterly basis, beginning April 1, 2022, to OSBM and the appropriate subject area team at the Fiscal Research Division (FRD) at the North Carolina General Assembly on the status of funds disbursed for each Directed Grant until all funds are fully disbursed. At a minimum, the report should include the following:
- Date of the initial contact;
- Date the contract was sent to the entity receiving the funds;
- Date the administering agency received the fully executed contract back from the entity;
- Contract execution date (signed by both parties); and
- Payment date.
3.15.4 Directed Grants Subject to Matching Requirements
Directed Grants subject to a matching requirement should be disbursed and expended in accordance with G.S. 143C-4-5, non-state match restrictions.
3.15.5 Issuance of Warrants Requirements
Pursuant to G.S. 143B-426.40G, the appropriate agency will deliver all warrants issued for non-state entities to the entity’s legally designated recipient by United States mail or its equivalent, including electronic funds transfer.
3.16 Miscellaneous Transactions
3.16.1 Agency Procedures for Transferring the Clear Proceeds of Fines, Forfeitures and Penalties to the Office of State Budget and Management
Agencies, including the University System, must transfer receipts from civil fines, penalties and forfeitures to OSBM. Agencies must submit the total amount collected minus the OSBM approved cost of processing the fine/forfeiture.
Remittance of Civil Fines, Penalties, and Forfeitures
Pursuant to G.S. 115C-457.2, "the clear proceeds of all civil penalties and civil forfeitures that are collected by an agency and are payable to the County School Fund pursuant to Article IX, Section 7(b) of the Constitution shall be remitted to OSBM by the officer having custody of the funds within 10 days after the close of the calendar month in which the revenues were received or collected. Notwithstanding any other law, all such funds shall be deposited in the Civil Penalty and Forfeiture Fund. The clear proceeds of such funds include the full amount of all civil penalties, civil forfeitures, and civil fines collected under authority conferred by the state, diminished only by the actual costs of collection, not to exceed 20 percent of the amount collected."
The collection cost percentage to be used by an agency shall be established and approved by OSBM on an annual basis based upon the computation of actual collection costs by each agency for the prior fiscal year. More information on this report can be found in Section 8 of this Manual.
Appropriation and Transfer of Funds
"The General Assembly shall appropriate moneys in the Civil Penalty and Forfeiture Fund in the Current Operations Appropriations Act. These appropriations shall be made to the State Public School Fund for allotment by the State Board of Education, on behalf of the counties, to local school administrative units on a per pupil basis in accordance with Article IX, Section 7(b) of the North Carolina Constitution."
On or before 11:00 a.m. on the tenth calendar day of each month, agencies must initiate a "Request for Transfer of Funds Between Budget Codes" (AK22) to Budget Code 23005 through NCFS in the amount of the clear proceeds certified during the prior month.
For example: During August, an agency certifies collection of $1,000. The agency claims $10 to cover the collection cost based on the collection cost percentage approved by OSBM. On or prior to 11:00 a.m. on September 10th, the agency initiates a transfer to OSBM in the amount of $990. The transfer is recorded in NCFS as September activity.
NOTE: Agencies should email the "Fines, Penalties, and Forfeitures Deposit Documentation" form to the OSBM Business Office at firstname.lastname@example.org documenting the transfer.
For all transfers of fines, forfeitures, and penalties to OSBM, agencies must record an operating transfer out using account number 58030000 Fines/Penalties/Forfeitures Transfers in NCFS.
3.16.2 Unexpended, Unencumbered Balances
The unexpended, unencumbered balance of an appropriation reverts to the General Fund or special fund from which the appropriation was made; except that
- An appropriation to the General Assembly shall not revert unless otherwise provided by the Legislative Services Commission,
- An appropriation for a capital improvement project shall revert as provided by G.S. 143C-8-11(c), and
- An appropriation for the implementation of information technology (IT) projects shall not revert until the project is implemented or abandoned.
As used in this section, "unencumbered" means not obligated in the form of purchase orders, contracts, renovations in progress or salary commitments.
For specific University System exceptions, see Section 3.6.6.
3.16.3 Proceeds from the Sale of Equipment and other Surplus Property
Receipts from the sale of surplus equipment that are not budgeted may be recorded in a separate receipts line item. Receipts that are in excess of amounts budgeted in a certified General Fund budget code must be deposited as nontax revenue as directed by the Office of the State Controller.
Proceeds from the sale of equipment that was originally purchased through a General Fund budget code (including capital improvement codes) are subject to this provision. Special funds, including the Department of Transportation, public schools, and community colleges, are not subject to these regulations.
3.16.4 Net Proceeds from Sale, Lease or Rental of Land
G.S. 146-30 provides that the net proceeds from the sale, lease, rental, or other disposition of lands by an agency be deposited with the State Treasurer to be credited to the General Fund. The Wildlife Resources Commission, the Department of Agriculture and Consumer Services, the Department of Natural and Cultural Resources (State Parks), and the Department of Health and Human Services (Butner) are exempt from this provision.
- Such expenses incurred incident to that sale, lease, rental, or other disposition as may be allowed under rules and regulations adopted by the Governor and approved by the Council of State; and
- A service charge to be paid into the “State Land Fund.”
In the event the “net proceeds” amount cannot be accurately calculated using the above methodology, in limited circumstances an agency may retain an amount or percentage with prior permission from OSBM.
Any agency having funds derived from the sale, lease, rental, or other disposition of lands should draw a check or prepare an electronic fund transfer for the total of the net proceeds made payable to the State Treasurer and mail to the OSC. The OSC should receive these funds within five days of the agency’s receipt of the net proceeds.
3.16.5 Vending Operations
The vending facilities operated by agencies or operated on state property, are subject to the control of the State. The payments received, whether by contract, fixed or variable rate, a percentage basis, or gross or net profit, are state funds and the net proceeds are subject to appropriation by the General Assembly.
Receipts or payments from vending operations shall be deposited in the appropriate fund as determined by OSBM.
Expenditures of profits may be authorized by OSBM for the same type of expenditures as currently permitted by law from General and Highway Funds. Expenditures of profits should be as closely associated to the population or program surrounding the vending facilities as possible. Examples:
- Recreational equipment for inmates.
- Field trips for patients.
- Costs associated with operating the vending facility such as rental of space, utilities, and equipment.
Operation of Vending Facilities Supported from State General or Highway Funds
Vending facilities operated on state property supported General or Highway Funds are considered General or Highway Fund operations. Proceeds from vending facilities are to be deposited in agencies’ general or Highway Fund operating codes as a receipt, unless otherwise authorized by statute. All expenditures of profits must be authorized by OSBM by a budget revision.
Operation of Vending Facilities Supported from Other Funds / Institutional Trust Funds as Defined by G.S. 116-36.1
Universities that have facilities supported from institutional trust funds and which have vending operations in those facilities may retain proceeds from such operations in their trust funds. Proceeds from vending facilities shall be expended in accordance with G.S. 116-36.4. Universities must be able to report on vending proceeds at the time and in the form requested by OSBM.
Institutional Student Auxiliary Enterprises
Deposit proceeds from vending operations located in university facilities supported from institutional student auxiliary enterprises (housing, food, health, and laundry) into the appropriate special fund operating budget.
- Aid to the Blind: Article 3 of Chapter 111 of the North Carolina General Statutes - Operation of vending facilities on state property requires that agencies, upon request of the Department of Health and Human Services, give preference to visually handicapped persons in the operation of vending facilities on state property. It is the responsibility of each agency and institution to inform the Department of Health and Human Services of existing or prospective locations for vending facilities or coin-operated vending machines.
- National Guard Facilities: G.S. 127A-138(b) states that funds earned from vending machine commissions shall remain with National Guard units and the expenditure of these funds shall be in accordance with rules prescribed by the Secretary of the Department of Public Safety.
The State of North Carolina operates on a cash basis. Agencies should pay all bills when due to take advantage of discounts offered and protect the credit of the State. When bills are not paid within the time specified in the contracts made by the Division of Purchase and Contract, it becomes increasingly difficult to make favorable contracts for the State's needs. Early payments should not be made because it is an added cost to the State through loss of interest on deposited funds. (For additional policy information refer to the Office of the State Controller.
Discounts are due to be taken by a certain number of days after goods or materials are received in good and proper condition or by a certain number of days after invoices are received if determined to be in the best interest of the State. The level of interest rates should be a major consideration. Take discounts, if applicable, within the discount period. If discounts are taken, vendors are entitled to payment within this period. Most state contracts and purchase invoices provide for the discount period. These provisions are generally known to the state agencies.
Use the following guidelines to determine time for discounts offered:
- When final inspection and acceptance of supplies and materials are at the point of origin, time is computed from the date of delivery to the common carrier; or,
- When final inspection and acceptance of supplies and materials are at the destination, time is computed either from date of delivery to the destination, or from date the correct invoice is received, if such date is later than the date of delivery.
4.2 Closing Accounts at End of Fiscal Year
4.2.1 Liquidation of Obligations
The fiscal year ends on June 30th and all obligations should be liquidated by the end of the fiscal year. Agencies must make the required adjustments to various accounts at year end to accurately reflect accrued revenues and expenditures. OSBM will issue special memorandums annually designating the specific closing dates.
Allotments provide funds for the payment of salaries and other operating expenses as due. No commitments can be made that overdraw the allotment.
Agencies must make all state contracts for supplies and materials and equipment with definite times for payments. All invoices must be settled in accordance with the provisions of the contract under which the purchases were made.
Agencies must credit all expendable or on hand receipts in the State Controller's Cash Management accounts and in the State Treasurer's accounts to the allotment account of the fourth quarter for all deposits made up to and including June 30. Agencies must collect all amounts due the State and its agencies, applicable to the current fiscal year, by the end of June and deposit to the credit of the State Treasurer.
Agencies should record deposits of receipts made after June 30 applicable to the fiscal year just closed in the accounts to indicate receipt as of June 30.
- Mark deposit tickets appropriately to show that they belong to the period ending June 30.
- Show on receipts register as of June 30th (last workday).
- Do not record any receipts back into the previous (old) year that do not belong to that year.
- No receipts that belong to the year just closed should be held out and deposited to the credit of the new year. The Cash Management Act requires revenues to be deposited immediately, (the only difference is which day is recorded as the day of receipt - old year or new year).
4.3 Imprest Cash Funds
An imprest cash fund is a fixed sum of money used for making change in a cash receiving function. It is also used to meet emergency payments such as freight and express bills, with later reimbursement. Agencies can establish an imprest cash fund, using budgeted funds, by submitting a request to OSBM. OSBM also approves requests to increase existing imprest cash funds.
4.3.2 Process of Request
Agencies may submit a request to establish an imprest cash fund on a budget revision in the following manner (using line item numbers appropriate to the agency's budget):
Requirements Increase Decrease
|Imprest Cash Redeposit||$100.0
After OSBM approval, an agency may draw a warrant (or check) payable to Imprest/Petty Cash and the custodian of the fund and charge the amount to the expenditure line item Imprest/Petty Cash Fund. The warrant should be cashed and the proceeds placed in a manner appropriate for safekeeping and use.
In a cashier receipting operation, use the fund to make change. Store receipts with the cash funds during the business day. At the end of the day, remove the receipts from the drawer and deposit in the appropriate bank account. The amount remaining in the drawer should be the full amount of the fund (i.e., imprest amount such as $100 in example).
In a petty disbursing operation, pay due bills from the fund. Keep paid invoices (with customary number of copies) with the fund until reimbursed. At periodic intervals, replenish the fund by a warrant (or check) drawn to Imprest/Petty Cash Fund in the amount of specific invoices. Charge the warrant to appropriate line items determined by the nature of the invoices. Attach invoices covered by the warrant to the file copy of the warrant. The full amount of the fund must at all times remain constant and will therefore consist of cash and/or paid invoices for which cash was spent.
At the end of the fiscal year, the full cash amount of the fund should be restored to the pre-established level and redeposited to the allotment account by June 30th closing.
Reporting and accounting for imprest cash funds is similar to handling of other expenditures and receipts items.
4.4 Repayment of Money Owed to the State
4.4.1 State Employees and Certain Local Educational Entity Employees
All persons employed by agencies, city and county boards of education, and community college boards of trustees (employing entities subject to G.S. 143 Article 60) who owe money to the State and whose salaries are paid in whole or in part by state funds must make full restitution of the amount owed as a condition of continuing employment (G.S. 143-553(a)).
The employee is allowed reasonable time to make the repayment. Employment shall be terminated if the employee ceases to make payments or discontinues a good faith effort to make repayment.
An employee has the right, under G.S. 143-554, to appeal the termination to the State Human Resources Commission according to the normal appeal and hearing procedures provided by Chapter 126 of the General Statutes.
4.4.2 Public Officials
As stated in G.S. 143-557, "If after investigation under terms of this Part an appointing authority determines the existence of a delinquent monetary obligation owed to the State by a public official, he shall notify the public official that his appointment will be terminated 60 days from the date of notification unless repayment in full is made within that period."
The appointing authority shall allow the public official, if he/she is financially unable to make payment in full, to continue his/her appointment as long as an attempt to repay the obligation is made in good faith.
G.S. 143-559 states "Whenever a representative of any employing entity as defined by this Part has knowledge that a legislator owes money to the State and is delinquent in satisfying this obligation, this information shall be reported to the Legislative Ethics Committee... for disposition."
4.4.4 Collection of Outstanding Debts
OSBM and employing entities should follow these procedures for the collection of outstanding debts from public officials and employees:
- Employing entities should submit a list of names and Social Security numbers of individuals with past due accounts owed to the State to OSBM. Employing entities should not include individuals with past due accounts when satisfactory provisions have been made for repayment. (Responsibility of agency collecting the outstanding debt)
- OSBM will compare the list with lists of individuals who are members of the Teachers and State Employees Retirement System or who are on a central payroll. (OSBM responsibility)
- OSBM will provide notice, to the agency collecting the outstanding debt, of any individuals on the lists who are employed by an agency, Community College system, or by a city or county Board of Education. (OSBM responsibility)
- Upon receiving this notice, the agency collecting the outstanding debt should notify the employing entity of the individual with a past due account and state:
- the individual's name, amount of money owed, and for what reason the money is owed;
- that a written notice has been sent to the employee stating that full restitution of the amount owed is a condition of continued employment;
- that the employee must obtain and provide written evidence from the agency owed that a satisfactory arrangement for payment has been agreed upon; and
- that the employee has been given a reasonable time period to accomplish (c) above.
- If the employee does not provide this evidence, steps must be taken to terminate employment unless the employee is pursuing administrative or judicial remedies. (Responsibility of agency collecting outstanding debt and employing entity.)
4.4.5 Set-off Debt Collection Act
Chapter 105A of the General Statutes authorizes the Department of Revenue to assist claimant agencies, per request, in the collection of qualifying delinquent accounts. The Department will identify those entitled to individual income tax refunds of at least $50, and upon receipt of a final certification of the debt from respective claimant agency, set-off the applicable amount.
Periodically, the Department will remit to the respective claimant agencies the net proceeds collected, defined as the gross proceeds collected less the collection assistance fees provided in G.S. 105A-13. The Department will include a transmittal statement reconciling the amount of the remittance with the gross proceeds collected per individual set-off so that the claimant agency can credit the debtor's obligation with gross proceeds collected as required by G.S. 105A-14(b).
Claims for set-off must be filed with the Department of Revenue in accordance with the provisions of Article 1 of Chapter 105A and the rules and procedures set by the Department as authorized under G.S. 105A-16.
The policies in this section provide uniform guidance to state agencies, universities, and component units (hereafter, “agencies”) regarding allowable expenses and reimbursements for travel on official state business. The travel rates and reimbursement amounts found in this chapter generally represent minimum standards.
Agencies are encouraged to develop internal policies and procedures specific to their operational needs and circumstances. Internal travel policies should be comprehensively reviewed and updated on a periodic basis, consistent with this chapter. Agency management is responsible for implementing a system of controls to ensure proper oversight, compliance, and accountability with travel policies. Statutory regulations for transportation and subsistence allowances are contained in G.S. 138-5, 138-6, and 138-7.
5.0.2 Cost-effective travel for state business
Employees traveling on official state business are expected to utilize the most cost-effective and efficient method of travel. Excess costs, circuitous routes, delays, luxury accommodations, and services unnecessary, unjustified, or for the convenience or personal preference of the employee in the performance of official state business are prohibited.
5.0.3 Travel eligible for reimbursement
Official state business
These policies are intended to apply only to state employees or other persons on official state business. Official state business occurs when the state employee or other person is traveling to:
- attend approved job-related training, or
- work on behalf of, officially represent, or provide a state service upon the State's request. Travel that would not directly benefit the State will not be reimbursable.
In-state and out-of-state travel
Subsistence costs are reimbursable for in-state and out-of-state travel on official state business. Out-of-state travel status begins when the employee leaves the state and remains in effect until the employee returns to the state. However, in-state allowances and subsistence rates apply when employees and other qualified official travelers use hotel and meal facilities located in North Carolina immediately prior to and returning from out-of-state travel during the same travel period.
5.1 Travel Reimbursement or Payment
5.1.1 Reimbursement Requests
Employees travelling on state business are responsible for submitting reimbursement requests in accordance with internal agency policies. Pursuant to G.S. 138-6(c), requests for reimbursement and documented expenditures shall be filed within 30 days after the travel period ends for which the reimbursement is being requested.
Specific dates of lodging must be listed on the reimbursement request. See 5.2.1-5.2.5 for more on lodging.
Each meal reimbursement rate must be listed on the reimbursement request. Departure and arrival times must also be listed on the reimbursement request. See 5.2.6-5.2.12 for more on meal reimbursements.
Receipts are required for transportation cost reimbursements including air fare, rental vehicles, taxi, car service, mobile phone ordered car service, airport shuttle service, public transportation, parking fees, tolls, and storage fees. See 5.2.13-5.2.28 for more on transportation.
Reference internal agency policies for required documentation for reimbursement of mileage and incidental expenses.
5.1.2 State-Issued Credit Cards
The state has authorized the use of state-issued credit cards (P-cards) for employees during travel on official state business. These cards are distributed at the discretion of the agency head and agencies are encouraged to set internal control policies for the use of state-issued credit cards.
Employees will be responsible for unauthorized costs and any additional expenses incurred for personal preference or convenience. Employee misuse of state-issued credit cards is grounds for termination.
5.1.3 Travel Advances
All employees travelling on state business who have not been issued state credit cards may be issued advances when authorized by the agency head or their designee in order that personal funds will not be required. No travel advances will be made to non-state employees.
Agencies should set internal policies addressing travel advances, including timely accounting of travel advances and submission of expenses. Fiscal records must be maintained by the agency for proper control. The following minimum conditions shall apply:
- Travel advances for occasional travel must not exceed the estimated cost of the trip.
- Advances must be deducted from the reimbursement request on the travel expense report.
- Requests for reimbursement and documented expenditures shall be submitted within 30 days after the travel period (pursuant to G.S. 138-6(c)) or June 30, whichever comes first.
Regularly scheduled travel
- Travel advances for employees who travel each month may be made through an annual advance of funds equal to the average monthly expense.
- All reimbursement requests shall be filed and paid monthly for incurred expenses and the advance must be repaid as of June 30 annually or earlier if required by the agency.
- If it is determined that the monthly reimbursement has averaged less than the annual advancement, the advance must be reduced to the newly established amount.
5.2 Travel Policies for State Employees
5.2.1 Subsistence Rates for Lodging and Meals
Employees are eligible for subsistence allowances when in travel status. Subsistence is an allowance related to lodging and meal costs (including gratuities) (G.S. 138-6). Travel status means being away from the employee's normal duty station or home and, while traveling, the employee must be acting in his/her official capacity as required by his/her work activities.
Standard State Subsistence Rates
For the 2023-25 biennium, the standard state reimbursement rate for meals and lodging (subsistence) is $135.60 for in-state travel and $154.90 for out-of-state travel. The Director of the Budget revises the subsistence rate on July 1 of each odd-numbered year based on the percentage change in the Consumer Price Index for All Urban Consumers (G.S. 138-6(a)(5)). The payment of sales tax, lodging tax, local tax, or service fees applied to the cost of lodging is allowed in addition to the lodging rate and is to be paid as a lodging expense (G.S. 138-6(a)(3)).
The employee may exceed the part of the ceiling allocated for lodging without approval for over-expenditure provided the total lodging and food reimbursement the employee is entitled to for that day does not exceed the maximum allowed daily subsistence (G.S. 138-6(a)(3)).
The following schedule (effective July 1, 2023) shall be used for reporting allowable subsistence expenses incurred while traveling on official state business:
|Expense||In-State||Out of State|
|Lodging (actual, up to)||$89.10||$105.20|
|Maximum Allowed Daily Subsistence||$135.60||$154.90|
Conditional Authorization for Federal GSA Subsistence Rates
Agency heads may choose to reimburse lodging and meals expenditures at the standard state subsistence rates or request authorization to set agency-specific rates up to the U.S. General Service Administration’s (GSA) subsistence rates.
To be granted conditional authority to set agency-specific subsistence rates (not to exceed the federal GSA rates) the agency head shall implement internal travel policies, publish them on the agency’s website, and submit a signed Attestation Form to OSBM each year by April 1. The policies shall, at a minimum, cover the topics listed in the Attestation Form.
The location and date-specific rates for lodging and breakfast, lunch, dinner, and incidental expenses can be found at https://www.gsa.gov/travel/plan-book/per-diem-rates, and are updated periodically. GSA rate adjustments for the first and last day of travel shall not apply.
5.2.2 Conditions for Lodging Reimbursement
Prior written approval by the agency head or their designee must be obtained to qualify for reimbursement for overnight stays. Supervisory personnel certifying the reimbursement request as necessary and proper must require documentation from the traveler to substantiate that the overnight lodging was necessary and accomplished. The travel reimbursement calculations must involve mileage from the starting address of the employee's regularly assigned duty station or home, whichever is less, to the final travel destination, to receive approved reimbursement.
Overnight lodging may only be authorized and paid to support business needs and final travel destinations that equal or exceed 35 miles, calculated from the employee’s home or duty station, whichever is less, to the final travel destination. "Duty station" is defined as the location where the employee is assigned. The designation of an employee's home as the duty station requires the approval of the agency head.
Each employee is responsible for his or her own request for reimbursement. Specific dates of lodging must be listed on the reimbursement request, which shall be substantiated by a receipt from a commercial lodging establishment.
5.2.3 Excess Lodging
Agency heads have the authority to grant excess lodging reimbursements above the standard state rates or the agency-specific rates as applicable per Section 5.2.1. Excess lodging authorization for in-state, out-of-state, and out-of-country travel must be obtained in advance from the agency head or their designee.
Excess lodging is allowed for the following reasons:
- Employee is in a high cost area and the current allowance is insufficient to secure lodging,
- Cost of the excess lodging is less than the cost of lower cost lodging plus transportation costs, or
- Employee or agency deems that lower cost lodging would put the employee at risk for safety or security.
Excess lodging authorization is not allowed for reason of convenience or personal preference for the employee. The employee may exceed the part of the ceiling allocated for lodging without approval from agency head or their designee provided that the total lodging and food reimbursement does not exceed the maximum allowed daily subsistence.
5.2.4 Third Party Lodging
Reimbursement for lodging in an establishment that is being rented out by a third party, or an establishment treated as an apartment building by state or local law or regulation, is allowed only if the agency can document that per day lodging rates will cost less than standard in-state or out-of-state lodging rates described in Section 5.1.1. Agency heads should set internal policies regarding third party lodging.
Internal agency approved third party lodging requests and payments must include documentation contained in travel or accounts payable records that provide evidence of savings to the State.
Third party lodging agreements are not allowed among family members or where such agreements or payments create a financial conflict of interest to the traveling employee or other agency managers or employees. Third party lodging may include, yet is not limited to, online website house or room rental services.
In each case where third party lodging is being considered, the applicant must provide their budget officer the following details regarding the arrangement:
- The amount to be charged
- The length of stay
- Projected cost savings compared to standard lodging rates
- Contact information
To receive reimbursement the employee must submit documentation of the budget officer’s approval as well as a signed rental agreement, or a reservation and receipt.
5.2.5 Penalties and Charges Resulting from Cancellations
Penalties and charges resulting from the cancellation of travel reservations (including airline, hotel, or other travel reservations and conference registrations) shall be the agency's obligation if the employee's travel has been approved in advance and the cancellation or change is made at the direction of and/or for the convenience of the agency.
If the cancellation or change is made for the personal benefit of the employee, it shall be the employee's obligation to pay the penalties and charges. However, in the event of accidents, serious illness, or death within the employee's immediate family or other critical circumstances beyond the control of the employee, the agency may pay the penalties and charges.
5.2.6 Meals During Overnight Travel
A state employee may be reimbursed for meals, including lunches, while on official state business when the employee is in overnight travel status.
Employees may be reimbursed for meals for partial days of travel when in overnight travel status and the partial day is the day of departure or the day of return. The following applies:
- Breakfast: depart duty station prior to 6:00 am.
- Lunch: depart duty station prior to Noon (day of departure) or return to duty station after 2:00 p.m. (day of return).
- Dinner: depart duty station prior to 5:00 p.m. (day of departure) or return to duty station after 8:00 p.m. (day of return).
- The travel must involve a travel destination located at least 35 miles from the employee's regularly assigned duty station or home, whichever is less.
5.2.7 Meals During Daily Travel
Agency heads may set individual agency policy to allow for employee reimbursement of breakfast and dinner meals for day travel when employees are not in overnight travel status. By state statute, lunches cannot be reimbursed unless the employee is in overnight travel status or otherwise specified in G.S 138-6. Agency policy should incorporate the following departure times and return times:
- Breakfast (morning): depart duty station prior to 6:00 am and extend the workday by 2 hours.
- Dinner (evening): return to duty station after 8:00 pm and extend the workday by 3 hours.
- The travel must involve a travel destination located at least 35 miles from the employee's regularly assigned duty station or home, whichever is less.
The Internal Revenue Service (IRS) considers meal reimbursement outside of overnight travel status as taxable compensation payments. If an employee receives breakfast or dinner under this section, then the agency must treat the payment as employee compensation for purposes of withholding federal, state, and FICA taxes. The Office of State Controller (OSC) has established payroll system payment mechanisms to ensure withholding of taxes for meal compensation under this section.
Agency heads who decide to implement this section as part of their agency’s travel policy should guarantee all employees are aware of the tax implications and include the policy in the agency’s internal policy and procedures manual.
5.2.8 Meals and Day-to-Day Activities
State employees may not be reimbursed for meals in conjunction with a congress, conference, assembly, convocation, meeting, or by whatever name called, of employees within a single state agency or institution or between the employees of two or more state agencies or institutions, to discuss issues relating to the employee's normal day-to-day business activities.
5.2.9 Meals for Required Employee Attendance
A state employee may be reimbursed for meals, including lunches, when the employee's job requires his/her attendance at the meeting of a board, commission, committee, or council in his/her official capacity and the meal is preplanned as part of the meeting for the entire board, commission, committee, or council. Such board, commission, committee, or council meetings must include persons other than the employees of a single state agency or institution.
5.2.10 Reimbursement for Meals
Each employee is responsible for his or her own request for meal reimbursement. Tips for meals are included in the meal allowance. Each meal reimbursement rate must be listed on the reimbursement request. Departure and arrival times must also be listed on the reimbursement request. The costs of meals included in other related activities (registration fees, conference costs, hotel registration, etc.) may not be duplicated in reimbursement requests. An employee may be reimbursed, if requested, for breakfast even if their lodging establishment offers a free continental breakfast.
If funding sources involve federal or non-state sources and the overseeing grant entities allow travel reimbursement rates that exceed state reimbursement rates and per diem amounts, state agencies shall utilize the lower standard state rates or the rates set in the agency’s policy as applicable per Section 5.2.1. Exceptions to this policy can be approved by the Agency head or their designee and must be included in the non-state grant records.
5.2.11 Excess Meals
No excess reimbursement will be allowed for meals unless there are predetermined charges, or the meals were for out-of-country travel. The agency head or their designee may grant excess subsistence for meals for out-of-country travel.
5.2.12 Convention Registration
State law allows reimbursement of the actual amount of convention registration fees as shown by a valid receipt or invoice (G.S. 138.6)
5.2.13 Transportation by Personal Vehicle
It is the intent of the State that state employee travel shall be conducted in the most efficient manner and at the lowest and most reasonable cost to the State. Agency heads should establish internal policies regarding passenger vehicle transportation and mileage reimbursement for in-state and out-of-state travel, including day and overnight trips. Agencies are encouraged to establish policies that promote efficient travel, such as ride-sharing.
Agencies should maximize utilization of state-owned vehicles (agency-owned or agency-assigned vehicles owned by the Department of Administration) whenever possible. When state-owned resources are not available, travelers may procure vehicles through the State’s term contracts or use personal vehicles, in accordance with agency policies.
If a state employee chooses to use a personal vehicle, actual mileage is reimbursable. Mileage is measured from the duty station or point of departure—whichever is closer to the destination—to the destination (and return). In accordance with agency’s policies, a state employee shall be reimbursed at a rate that does not exceed the business standard mileage rate set by the Internal Revenue Service (effective January 1 of each calendar year) when using their personal vehicle for state business.
Unless otherwise specified, the Office of State Budget and Management adopts the IRS rate annually. Agencies are advised to visit the IRS website to confirm the annual mileage reimbursement rates (https://www.irs.gov/tax-professionals/standard-mileage-rates).
NOTE: The IRS has announced the standard mileage rate for 2023. See "IRS issues standard mileage rates for 2023."
5.2.14 Transportation by a Rental Vehicle
If using a rental vehicle for either in-state or out-of-state travel, employees shall use the State’s term contracts when available.
Unless prior approval has been obtained from the agency head or their designee, the state employee shall bear the difference in cost when renting a vehicle from a class that exceeds the cost of a standard vehicle on the State’s term contract for short-term vehicle rentals. No reimbursement will be made for rental insurance purchased because state employees are covered under the State’s auto insurance program. However, reimbursement for automobile rental insurance will be permitted for individuals engaged in state business during travel to international destinations. Rental vehicles are not authorized for personal use.
5.2.15 Non-state Employee Riders
Non-state employees may accompany state employees when they have a business interest in the purpose of the trip and their presence is related to state business. Students of state universities, colleges, and institutions may be passengers to attend athletic events and other activities officially sanctioned by the institution, provided the proper account is reimbursed at the standard mileage cost rate by the student activity fund involved. Spouses and children of state employees may accompany them, if space is available and all travel is strictly for official state business (G.S. 143-341(8)(i)(7) grants Department of Administration rule-making authority in this area). Hitchhikers are not permitted.
5.2.16 Transportation by State Vehicle at Destination
At the employee's destination, state-owned vehicles may be used prudently for travel to obtain meals and for de-minimis personal purposes. Examples of de-minimis personal travel would include stopping for lunch, picking up a prescription at a pharmacy, and related errands. No common carrier or public transportation fares are reimbursable on a trip on which an employee uses a state-owned vehicle, unless it is shown that such transportation was more economical in a particular situation.
No reimbursement shall be made for the use of a personal vehicle in commuting from an employee's home to his duty station. (No mileage reimbursement is allowed to employees on "call back" status.) For the State's policy on compensation to employees on "call back" status, see the State Human Resources Manual.
5.2.18 Reimburse State for Commuting in State-owned Vehicle
Every individual who uses a state-owned passenger motor vehicle, pickup truck, or van to drive between the individual's official work station and his or her home, shall reimburse the State for these trips at a rate computed by the Department of Administration except as provided for in G.S. 143-341(8)(i)(7a).
Among the vehicles with exceptions, the provisions of this rule do not apply to clearly marked police and fire vehicles or unmarked law-enforcement vehicles used in undercover work and operated by full-time sworn law enforcement officers whose primary duties include carrying a firearm, executing search warrants, and making arrests.
The rate of reimbursement shall approximate the benefit derived from the use of the vehicle as prescribed by federal law and shall be determined by the Department of Administration. Reimbursement shall be for 20 days per month regardless of how many days the individual uses the vehicle to commute during the month. Reimbursement shall be made by payroll deduction each month from the employee's check and deposited as a refund of expenditure to the fund/center and account where the motor fleet bill is paid.
5.2.19 Parking, Tolls, Fees, and Fines
Parking fees, tolls, and storage fees are reimbursable while in the course of conducting official state business as long as such expenses are determined reasonable and clearly show that there was care taken to keep the costs to the State as low as possible. Receipts are required for reimbursement of these expenses.
Fines for traffic and parking violations are the responsibility of the state employee. Agency heads, or their designees, may grant internal agency exceptions to this policy c if an agency has a unique clearly documented business need that is not directly addressed by this OSBM policy. These exceptions are public records and shall be made available upon request by OSBM staff, auditors, or interested third parties.
5.2.20 Transportation by Common Carrier
Reimbursement for air, rail, or bus fare is limited to actual coach fare, substantiated by receipt. Reimbursement for fees for check–in, seat assignments, and baggage is limited to actual costs substantiated by receipt. TSA Pre-Check expense are for convenience and are not reimbursable.
5.2.21 Super Saver Rates
When traveling by common carrier to conduct official state business, employees traveling to their destination earlier than necessary and/or delaying their return to avail the state of reduced transportation rates may be reimbursed subsistence for additional travel days if, in the opinion of the agency head or their designee, the amount saved due to the early and/or delayed travel is greater than the amount expended in additional subsistence.
For example, when the reduced airfare rates require staying overnight one Saturday night, to be eligible for reimbursement, the state employee must stay overnight on the Saturday closest to the first or last day of official state business to which the employee is attending.
With sufficient justification, the agency head or their designee can make an exception to this requirement prior to travel commencing.
5.2.22 Transportation by International Flights
Employees traveling internationally on overseas flights may be reimbursed actual business class fare (substantiated by receipt) with prior approval of the agency head or their designee.
5.2.23 Coupons or Certificates for Reduced Air Fare
Coupons or certificates for reduced air fare, if acquired by a state employee while traveling on state business at state expense, are the property of the State and should be used, to the extent possible, by the State employee on future state business trips.
5.2.24 Travel Arrangement Fees and Service Charges
With sufficient justification and documentation, and with approval of the agency head or their designee, state employees can be reimbursed for usual, customary, and reasonable fees and service charges imposed by travel agents or third party travel sites for assistance in making travel arrangements.
5.2.25 Transportation by Chartered Aircraft
The use of charter aircraft must be approved by the agency head or their designee, provided the following is substantiated and put in writing:
- A state aircraft is not available or not appropriate for the size of the party traveling or the destination airport.
- The use of a charter flight is more economical than a commercial flight.
- The use of a charter flight is necessary because of unusual travel circumstances.
5.2.26 Travel to/from Airport or Car Rental at Employee's Duty Station
Reimbursement for travel between the employee's duty station or home (whichever is less) and the nearest airline terminal, train/bus station, or car rental provider may be made under the following circumstances. For travel by:
- Taxi, car service, mobile phone ordered car service, or Airport Shuttle - actual costs with receipts.
- Private Car - the business standard mileage rate set by the Internal Revenue Services for a maximum of two round trips with no parking charge, or for one round trip with parking charges. Receipts are required for parking claims.
- Use of Public Transportation – In lieu of using a taxi or airport shuttle, employees can be reimbursed without receipts $5.00 for each one-way trip either from the airport to the hotel/meeting or from the hotel/meeting to the airport, or the actual cost of the travel with the submission of receipts.
5.2.27 Travel to/from Airport at Employee's Destination
Reimbursement for travel to and from the airline terminal (or train/bus station if applicable) at the employee's destination may be made where travel is via most economical mode available as listed below:
- Taxi, car service, mobile phone ordered car service, or Airport Shuttle service – actual costs with receipts.
- Rental Vehicles - may be used with the prior approval of the agency head or their designee (receipt required).
- Use of Public Transportation – In lieu of using a taxi or airport shuttle, employees can be reimbursed without receipts $5.00 for each one-way trip either from the airport to the hotel/meeting or from the hotel/meeting to the airport, or the actual cost of the travel with the submission of receipts.
5.2.28 Travel Involving Trips Other than to and from the Airport
The actual costs of taxi and shuttle service fares are reimbursable when required for travel on official state business. The request must be documented with a receipt. The use of public transportation is reimbursable for actual costs with a receipt.
5.2.29 Authorization for Out-of-Country Travel
All out-of-country travel must be authorized by the agency head or such department official designated by him or her.
Out-of-country travel status begins when the employee leaves the country and remains in effect until the employee returns to the country. If the employee and other qualified official travelers use hotel and meal facilities located outside North Carolina, but within the continental United States, immediately prior to and upon returning from out-of-country travel but during the same travel period, out-of-state subsistence rates shall apply.
Reimbursement for costs incurred in obtaining or renewing a passport may be made to an employee who, in the regular course of his duties, is required to travel overseas in the furtherance of official state business. Passport expenses are chargeable to the same fund that supports the employee's trip.
5.2.31 Travel Related to a Political Function for Elected and Appointed Officials
No state funds may be used to pay travel or subsistence costs for a state official while attending a political function, meeting, or any political activity. Political activity is an activity directed toward securing the success or failure of a political party, candidate for partisan political office, partisan political group, or issue in a partisan election.
Official state business occurs when the state employee or other person is traveling to attend approved job-related training, work on behalf of, or officially represent the State. Travel that does not directly benefit the State will not be reimbursable.
Determining whether the travel was political in nature is the responsibility of the agency.
5.2.32 Per Diem Compensation
Per diem compensation is not applicable for state employees, only to members of state boards, commissions, committees, and councils who do not receive any salary from state funds for their services.
5.3 Travel Policies for Members of State Boards, Commissions, Committees, and Councils (Other than Licensing Boards and Members of the General Assembly)
Unless otherwise noted below, travel policies are the same as for state employees.
Members of state boards, commissions, committees, and councils are authorized, pursuant to G.S. 138-5(a)(1), to receive $15 per day stipend or per diem compensation for their official service. State employees and members of all state boards, commissions, and councils whose salaries or any portion of whose salaries are paid from state funds shall receive no per diem compensation in addition to their salaries or hourly pay rates.
Internal Revenue Service (IRS) audit responses issued in 2016 and 2017 have for certain boards concluded that these stipends or per diem compensation payments should be treated as employee compensation for purposes of federal and state withholding tax and FICA tax. As a result, boards, commissions, committees and councils should consult their respective General Counsel or tax attorney to ensure compliance with IRS employee compensation requirements. The Office of State Controller (OSC) has also established payroll system payment mechanisms to ensure withholding and FICA tax deductions are deducted from applicable member stipend or compensation payments. If your board or commission does not utilize the OSC payroll system, you should contact your payroll provider for assistance.
5.3.2 Meals and Refreshments
Meals may be provided and reimbursed only if preplanned as part of the meeting for the entire board, commission, committee, or council while on official state business.
Meals that are provided to the entire board, commission, committee, or council may include required staff who, in the regular course of their duties, are expected to attend the meeting and any other employee whose presence is necessary to accomplish a purpose of the meeting.
Refreshments (e.g., coffee, soft drinks, cookies, doughnuts) may be served at official board meetings. Reimbursement may be paid from state funds for the actual cost not to exceed $5.00 per member and required staff, per meeting per day. "Required Staff" shall be defined as an employee who, in the regular course of his or her duties, is expected to attend the meeting and any other employee whose presence is necessary to accomplish a purpose of the meeting.
5.3.3 Excess Expenses
With prior approval provided by the Agency head or board chair, excess expenses may be reimbursed to Board members. All exceptions must be in writing, are subject to public records disclosure requests, and shall include clearly documented business reasons that serve as a basis for the exception.
5.4 Travel Policies for Licensing Boards (Other than State Employees)
Unless otherwise noted below, travel policies are the same as for state employees.
Pursuant to G.S. 93B-5, non-state employee members of licensing boards shall receive $100.00 per day of official service. State employees and members of all licensing boards whose salaries or any portion of whose salaries are paid from state funds shall receive no per diem compensation from state funds for their services.
Transportation policies and regulations are the same as those for state employees, except that a mileage reimbursement rate set by G.S. 138-6(a)(1) is established at 25 cents per mile, not the IRS rate.
Refreshments (e.g., coffee, soft drinks, cookies, doughnuts) may be served at official board meetings. Reimbursement may be paid from state funds for the actual cost not to exceed $5.00 per member and required staff, per meeting per day. "Required Staff" shall be defined as an employee who, in the regular course of his or her duties, is expected to attend the meeting and any other employee whose presence is necessary to accomplish a purpose of the meeting.
5.4.4 Excess Expenses
With prior approval provided by the Agency head or board chair, or their designee, excess expenses may be reimbursed to Board members. All exceptions must be in writing, are subject to public records disclosure requests, and shall include the business reasons that serve as a basis for the exception.
5.5 Travel Policies for Non-State Employees
5.5.1 Non-state Employees
For the purposes of this section, non-state employees are those on official state business whose expenses are paid by the State and subject to state regulations, such as:
- Prospective professional employees
- Public school and community college employees
- Students on official state business
- Service contractors
- Hourly temporary employees
- Attendants of state employees with disabilities on official state business (provided advance approval is obtained from agency head or their designee)
Non-state employees traveling on official state business whose expenses are paid by the State are subject to these regulations, including statutory subsistence allowances, to the same extent as state employees. Travel expenses for members of a non-employee's family are not eligible to be paid by the State. No travel advances will be made to non-state employees.
5.5.2 Post-secondary Students
Student travel expenses while working as an employee of the State are considered official state business when traveling on behalf of their position and shall be paid from the same source of funds from which the employee is paid. Non-employee students at state institutions who travel on official state business are reimbursed from the General Fund consistent with payments for state employees. Official state business is defined in Section 5.0.3.
Non-employee students who travel to fulfill a course requirement for academic credit and whose expenses are paid or reimbursed by the General Fund are subject to these regulations, including statutory allowances, to the same extent as are state employees. Funds specifically appropriated or legally directed for student travel are authorized to be used for student travel expenses.
Approval for non-employee General Fund student travel to fulfill course requirements for academic credit must have written prior approval of the Vice Chancellor for Finance or his/her designee.
The purchase of food or beverage for students at higher education institutions is not allowable unless the student is in travel status. However, non-General Funds may be used for these purposes if such funds have been established and authorized for such purposes.
Payment of travel and subsistence expenses (hotel and meal costs) for attendants for employees with disabilities while traveling on official state business may be reimbursed to the same extent as are state employees if advance approval is obtained from the agency head or their designee.
5.5.4 Expert Witness Fees
A person used by any state agency, commission, committee, licensing board, or council as an expert witness may be reimbursed an agreed upon fee by said group. All travel costs will be reimbursed the same as for state employees.
5.6 Travel Policies for Agency Committees Not Established by G.S. 143B-10(d)
An employee of any agency or institution that operates from funds deposited with the State Treasurer, who is appointed to an agency committee not established by G.S. 143B-10(d), is subject to subsistence policies and regulations that apply to state employees.
Non-state employees who are members of agency committees not established by G.S. 143B-10(d) shall follow the travel policies for non-state employees.
6.1 Unemployment Compensation Accounts and Payments
Chapter 96 of the General Statutes of North Carolina provides for full unemployment insurance for all North Carolina employees, both private and public. Fiscal management of all agencies should be knowledgeable of its requirements and provisions. The State Human Resources Manual provides information relating to claims and services for employees.
Under the provisions of G.S. 96-9.6, the State of North Carolina elected to become liable for unemployment compensation payments made on its behalf by the Division of Employment Security in lieu of paying premiums. Among the requirements is the provision that each employing unit (agency) is required to make a contribution in each calendar year to the Unemployment Insurance Fund in an amount equal to the applicable percentage of the taxable wages the employer pays its employees during the year for services performed in this state (G.S. 96-9.2).
Agency will disburse the funding when funding is budgeted, immediate disbursement should be made. In instances where insufficient or no funding is budgeted, agencies must locate funds within their departments to meet this obligation. Budget requests to transfer funds into the proper line item for disbursement should be made to the Office of State Budget & Management (OSBM). Receipt-supported positions should be paid from the same source that supported their base salaries or from reserves set up for that purpose. OSBM establishes requirements for reserve funds based on employment levels and trends. OSBM provides notification of rate changes as necessary.
The Division of Employment Security sends detailed statements to the agencies for each fiscal period. Agency identity and budget codes are provided within the account number on the heading of the statement. General fund codes and special fund codes will carry different numbers.
6.1.1 Workers' Compensation Claims Accounts and Payments
The State of North Carolina is self-insured for the payment of Workers' Compensation claims. Each agency is required to pay its own claims out of its own appropriation. When necessary, each agency should submit a budget revision to OSBM to transfer funds to account number 5163XXXX.
The following accounts are used to record expenditures that are paid under the workers' compensation program. Budget revisions should reflect the detail level listed below.
- 51631000 Medical Benefits: This includes medical, surgical, hospital, nursing services, medicines, sick travel, rehabilitation services, and medical and surgical supplies.
- 51632000 Temporary Disability Payments: This includes any expenditures paid under an agreement to pay compensation for time lost from work.
- 51633000 Permanent Disability Payments: This includes payment for disfigurement and permanent full and partial disability ratings given at the end of the healing period.
- 51634000 Death Benefits: This includes compensation paid to a surviving spouse or dependent child and allowance for funeral expense.
Unless otherwise approved by OSBM, purchasing worker's compensation insurance from private insurance carriers is an inappropriate use of funds and not an authorized expenditure.
The Disability Income Plan of North Carolina (DIPNC) administered by TSERS and NC Flex Disability Plan include provisions for coordination of benefits. An injured employee receiving weekly workers’ compensation disability benefits is not entitled to simultaneous DIPNC short-term or long-term disability payments or NC Flex Disability Plan Long Term Disability income replacement. However, an injured employee may simultaneously receive weekly workers’ compensation disability benefits and NC Flex Disability Short Term Disability income replacement.
6.2 Safety Shoe Allowance for State Employees
In compliance with the Occupational Safety and Health Administration (OSHA) and Office of State Human Resources (OSHR) policy related to personal protective equipment, and to ensure state employees are provided ample opportunity to purchase required and proper safety shoes for adequate foot protection, the maximum reimbursement allowance for the purchase of safety shoes is set at $250 per biennium. The $250 maximum is per employee on each biennium budget, meaning if an employee is reimbursed $250 in the first year of the biennium then he/she cannot be reimbursed in the second year of the biennium.
OSBM and OSHR shall review the safety shoe reimbursement practice each biennium to adjust the allowance to reflect inflationary changes. Agencies may request an exception to this policy from OSBM.
6.3 Internal Business Controls for Telephone and Mobile Devices
Each agency is responsible for establishing appropriate use policies concerning telephone and mobile devices. At a minimum, these policies should address:
- Business criteria justifying the issuance of a mobile device for employees or positions.
- Business criteria justifying issuing a payroll related mobile device reimbursement or allowances for employers who require employees to maintain and use their personal phones for state business purposes. Actual call charges can be processed as accounts payable reimbursements. Mobile device allowances shall be paid through your agency’s central payroll system. These criteria and policies must comply with state public records laws and IRS issued guidance on the tax treatment of these payments.
- Internal business control policies to ensure monthly telecommunication vendor bills are reviewed before payment is issued to ensure errors, waste, and fraud are eliminated or addressed in an appropriate manner.
- Internal business control policies to ensure that under-utilized devices or high-cost devices are terminated or replaced with more cost-effective alternatives.
- Internal business control policies to ensure personal material and non de minimis use of state-funded mobile devices is prohibited.
- An annual inventory of state-funded mobile devices shall be completed, reviewed, and approved by each agency’s Chief Financial Officer or equivalent executive manager. At a minimum, the inventory shall include for each employee a with state-issued device:
- Employee name and position,
- Employee division or office,
- Device summary description,
- Initial device purchase cost,
- Monthly and annual vendor billing rates per device.
6.4 Attracting and Retaining an Exceptional Workforce
6.4.1 Transportation Expenses for Prospective Employees
An agency head or his or her designee is authorized to approve reimbursement of transportation expenses of prospective professional employees visiting agencies for employment interviews. These expenses are limited to transportation and subsistence for 3 days (5 days if one is a Saturday) at the standard in-state rate. The agency head or his or her designee may approve excess lodging expenses
6.4.2 Use of State Funds for Recognition of Meritorious Service
The use of state funds for purchases related to the recognition of individuals is permissible if they adhere to the policies established by OSHR for meritorious service awards, as authorized in G.S. 126-4(8) (refer to the "Service Awards" section of OSHR’s web site for further information).
In addition, state funds may be expended, not to exceed $100 per employee, for the purchase of a plaque or for the printing and framing of a certificate. The expenditure of state funds for these purposes is subject to the availability of funds within the agency.
6.4.3 Use of State Funds for Employee Wellness Activities
Agencies may spend a portion of lapsed salaries to cover nominal expenses related to health promotion and wellness activities as outlined in OSHR’s wellness policy. Nominal expenses cannot exceed $25 per person on an annual basis, and expenditures must adhere to the following guidelines:
- Funds cannot be spent to provide cash awards or cash incentives to employees or contractors,
- Funds cannot be spent to purchase gift certificates or gifts for employees or contractors,
- Funds cannot be spent to purchase large pieces of exercise equipment, and
- Funds cannot be used to purchase individual or group memberships to health clubs or support groups.
Funds may be pooled to provide an activity to a group of employees.
Agencies are strongly encouraged to take advantage of the free materials produced by the State Health Plan’s NC Health Smart, the Division of Public Health’s Eat Smart Move More, and the Office of State Human Resources' Worksite Wellness Policy. Agencies may also disseminate information about wellness discounts available to state employees through the WeSave program.
Agencies that receive grants and/or donations for wellness activities may spend those funds in accordance with the grant agreement or donor's direction only after reporting those funds to OSBM to ensure proper budgeting of the funds prior to expenditure and to comply with reporting requirements where applicable.
6.4.4 Use of State Funds for Employee Appreciation
Agencies may spend a portion of lapsed salaries to cover nominal expenses related to employee appreciation activities. Employee appreciation events can only occur once annually, and all staff must be allowed to attend. Nominal expenses per person cannot exceed a rate equivalent to the established per diem rates set for lunch. Expenditures must adhere to the following guidelines:
- Funds cannot be spent to provide cash awards or cash incentives to employees or contractors,
- Funds cannot be spent to purchase gift certificates or gifts for employees or contractors,
- Funds cannot be used to purchase anything that could potentially undermine public trust in the agency.
Agencies that receive grants and/or donations may spend those funds in accordance with the grant agreement or donor's direction only after reporting those funds to OSBM to ensure proper budgeting of the funds prior to expenditure and to comply with reporting requirements where applicable.
6.4.5 Membership Dues
Membership dues paid from state funds for agencies to organizations shall be kept to a minimum. The agency head or his/her designee must review and approve all memberships to determine that the benefits accruing to the State from such memberships will exceed the costs.
Membership dues shall not be paid from state funds for individual state employees or for the benefit of an individual state employee unless the benefit of the membership is for the State and the position for which the individual is employed. If the State is to benefit from an individual's membership in an organization, that benefit should derive not because of the individual, but because of the individual's position with state government regardless of who is in the position.
Additionally, although the membership may be in the name of the individual, this membership terminates when the individual terminates his employment with the State or moves to another agency.
6.4.6 Academic Assistance: Tuition, License, and Certificate Fees
The Academic Assistance Program provides reimbursement of qualifying academic costs for workforce planning and development. These expenses are charged to "Employee Educational Expense" under "Other Services." Eligibility and reimbursement details can be found in the State Human Resources Manual.
6.4.7 Intercollegiate Athletics and Intramurals
Payment or reimbursement for intercollegiate athletics or intramurals cannot be made from state funds. These costs must be paid out of student athletics and activity fees or non-state funding sources, such as private and foundation grants, that are specifically charged or designated for that purpose. (See G.S. 115D-43 for explicit prohibition related to community colleges.)
6.4.8 Employee Training Fees
Fees for courses that provide training in specific areas are charged in the Accounting System to "Employee Training" under "Other Services." Employee training involves courses that develop an employee's knowledge, skill, and ability to perform the duties of his/her present job, such as courses on computer use or management skills development. These courses generally have a set fee, are of short duration, and are not part of a curriculum the employee is participating in leading to an educational degree.
6.4.9 Executive Development Fees
Executive development fees are expenses incurred when an employee participates in an executive development opportunity (such as the UNC Executive Development programs) that would not fit the definition of employee training or academic coursework tuition fees. Executive development fees are charged to "Other Employee Training Expenses" under "Other Services."
6.5 Dual and Secondary Employment
Dual employment is when one agency secures the services of an employee of another agency on a part-time, consulting, or contractual basis.
Work performed for an employer other than an agency by any full-time state employees is termed secondary employment, not dual employment.
The State Human Resources Manual includes policies and procedures for dual and secondary employment.
6.6 Conditions and Limitations on Contractual Services Expenditures
Agencies shall acquire contractual services only after it is determined that the services cannot be reasonably accomplished by employees of the agency seeking such services. General Statute 143, Articles 3 and 3C and the rules and procedures of the Division of Purchase and Contract provide the reference for the procurement of services.
6.6.1 Statistical Data Services
OSBM coordinates the efforts of governmental agencies in the collection, development, dissemination, and analysis of official economic, demographic, and social statistics pertinent to state budgeting. To minimize duplication of effort in collecting or developing new statistical series, including contractual arrangements, agencies must submit to OSBM proposed procedures and funding requirements.(G.S.143C-2-2).
6.6.2 Contracts Between Agencies
The agency budget offices of contracting agencies must review each contract, prior to its execution, to be sure the terms of the contract are consistent with the budget policies and regulations of the State Budget Manual. If any terms are found to be inconsistent with budget regulations, including travel and subsistence regulations, those terms must be amended to conform to the State Budget Manual or be deleted from the contract. After this review, if the agency budget division feels an exception to budget policy is warranted and the need for an exception can be documented, agencies may request an exception from OSBM prior to execution of the contract.
All payments for services should be made after the service has been satisfactorily performed. Payments shall be made on a quarterly reimbursable basis for an amount equivalent to the percentage of the contract performed and services rendered. If a cash flow problem exists, agencies may advance one month's estimated expenses, or one quarter's estimated expenses if the contract is six months or longer duration.
6.6.3 Contracts Between an Agency and Private Employment Search Firm
An agency may employ a private employment search firm to conduct employment searches for difficult to fill professional and managerial vacancies. A search firm would normally be retained only after exhaustion of other methods of locating a person for a specialized, highly responsible position. Non-state funds shall be used to pay these costs to the maximum extent possible. State funds may only be used when non-state funds are not available.
6.7 Limitations on Accepting & Offering Honoraria
6.7.1 State Employees
A state employee shall not accept an honorarium for an activity where state-reimbursed travel, work time, or resources are used, or where the activity can be construed as having a relationship to the employee's state position (G.S. 138A-32). Such activity would be considered official duty on behalf of the state. A relationship exists between the activity and the employee's state position if the employee would not participate in the activity in the same manner or capacity if not employed in his or her current state job. The employee should make every attempt to avoid the appearance of impropriety.
An employee may receive an honorarium for activities performed during regular non-working hours or while on annual leave if the following conditions are met:
- All expenses are the total responsibility of the employee or the non-state sponsor of the activity in which the employee is participating.
- The activity has no relationship to the employee's state duties.
Nothing in this policy shall be interpreted as preventing the payment to the state by an outside source for actual expenses incurred by an employee in an activity, or the payment of a fee to the state (in lieu of an honorarium to the individual) for the services of an employee. Any such payments made to the state should be deposited to the account and an appropriate entry should be made to the appropriate revenue line.
6.7.2 Non-State Employees
Honoraria are the responsibility of each agency contracting for the personal services of a non-state employee. Each agency shall develop a form letter for such invitations and it shall include the amount of the honorarium offered. This amount shall cover any expenses incurred by the non-state employee in lieu of a per diem.
Any exceptions to these rules and regulations, except those expressly delegated, must be approved in advance by OSBM.
6.8 Conditions and Limitations on Moving and Relocation Expenditures
An agency may pay an employee's moving expenses when:
- A change of residence is deemed to be in the best interest of the state when such a change is required as a result of a promotion within the agency or by a change in assignment involving a transfer of the employee for the advantage and convenience of the employing agency. Transfer within or between agencies is termed for the best interest of the state if the employee is heavily recruited. Agency Heads can authorize the payment of moving expenses for new hires to state employment when it is determined that this is in the best interest of the state.
- The move is accomplished within 90 days. The agency head or designee may approve an extension of an additional 90 days.
- The new duty station for existing employees is 50 miles or more from either the employee's existing (or prior) duty station or residence, whichever is closer to the new duty station.
- The new hire to state employment is 50 miles or more from their existing residence.
Maximum payment for various categories of costs is enumerated in this section. Any additional costs must be borne fully by the employee.
Please note that the Internal Revenue Service (IRS) considers moving expenses paid to an employee directly or indirectly as taxable compensation. If an agency elects to pay for an employee’s moving expenses, then the agency must treat the payment as employee compensation for purposes of withholding federal, state, and FICA taxes. The Office of State Controller (OSC) has established payroll system payment mechanisms to ensure withholding of taxes for this type of compensation (applicable to agencies whose payroll is processed by OSC). Any moving expenses paid to an employee based on guidance in this section is taxable.
6.8.1 Maximum Payment for Moving of Household and Personal Goods
Payment for movement of household and personal goods includes items such as furniture, clothing, and personal effects. Any items that require special handling and/or packing, such as an animal, boat, airplane, motor vehicles, antiques, satellite dish, campers, woodworking equipment, workshop items, heavy machine equipment, and building materials are not considered as household or personal goods.
Payment includes, and is limited to, the cost of actual packing, transporting, and unpacking of a maximum of 15,000 pounds. If the move is on a weight basis (50 miles or more), the maximum cost to be paid can be no more than the lowest available regulated tariff rates. If additional storage is required for any such items, it is the responsibility of the employee and is not reimbursable.
Total transportation charge on any shipment shall be no more than the applicable charge on the same shipment under the next greater unit of weight at a rate applicable to such next greater unit of weight.
When a shipment exceeds 15,000 pounds, reimbursement shall be based upon the tariff rate of 15,000 pounds, When, due to extraordinary circumstances, the total weight exceeds the maximum weight allowable (15,000 pounds), a request for payment for this excess may be granted by agency heads.
Except as otherwise provided specifically herein, payment may be made only for basic services performed by the carrier. No payment may be made for expedited service, space reservation, or other special or non-routine services.
Every effort should be made to expedite the movement of the employee's household goods. However, the time allowed for the employee's relocation is the responsibility of the individual agency and should be granted as leave-with-pay for up to a total of 16 hours, which is accounted for as normal workday activities.
6.8.2 Payment for Insurance
Additional transit insurance coverage beyond the carrier’s required base coverage of 60 cents per pound per article is the responsibility of the employee and is not reimbursable. Exceptions to this policy are permitted but must be approved by agency head in writing.
6.8.3 Maximum Payment for Appliance Connections
The reasonable costs of disconnection of appliances, as defined in this section, at the old residence and reconnection or reinstallation of the same appliances at the new residence, by the carrier or by a service company may be allowed up to a maximum of $500 This would include items typically found in performing household operations such as electrical, water, gas hook-up, household appliances, and connection of a single telephone. This would not include items considered unnecessary to household operations such as television antennas, cable connection, satellite dish, nor any type of power tools, nor other equipment associated with home workshops, hobbies, or other activities. Also, utility deposits or the running of utility lines are not a reimbursable expense by the employing agency.
6.8.4 Maximum Payment for Moving Mobile Homes
In lieu of an allowance for loading, unloading, and insurance coverage, an agency may pay charges up to $1,000 for the following costs associated with the movement of mobile homes utilized as the employee's residence:
- Blocking and unblocking;
- Anchoring and skirting;
- Movement of air conditioners and utility buildings;
- Wheel rental.
Claims for payment for such services, whether performed by the carrier or a service company, must be supported by an itemized receipt.
6.8.5 Maximum Payment for Employee Relocation Travel Expenses
An agency may pay for travel expenses incurred in moving the employee and his or her family from the old residence to the new residence as follows:
For locating a new residence
Transportation expenses and mileage calculated at the statutory rate for a maximum of three round trips by automobile with each trip not to exceed two days (2 days, 1 night) for total house hunting trips not to exceed 6 days (6 days, 3 nights). Subsistence for meal costs as shown in the State Budget Manual travel section for each member of the family per trip. If overnight lodging is necessary, subsistence for the following day is allowable. Lodging is limited to one double room.
For day of moving
Mileage calculated at the statutory rate for a one-way automobile trip (a maximum of two cars). Subsistence for meal costs as shown in the State Budget Manual travel section for each member of the family. Employees have two days to complete the move. If overnight lodging is necessary, subsistence for the following day is allowable. Lodging is limited to one double room. The agency head or his/her designee can approve any additional time needed.
New duty station
Subsistence at the new duty station is not to exceed five days a week (Monday-Friday or a consecutive five-day period, if working a nontraditional schedule). Mileage is limited for one-round trip per week from the employee’s current residence to the new duty station, subject to state travel laws and regulations, from the time he or she begins work until he or she moves into a new residence, not to exceed a total of 40 consecutive working days, excluding any leave time.
6.9 Procedure for Moving and Payment
6.9.1 Arranging the Move
Prior to the actual move, the employee will submit a request to the agency head or his/her designee. The request shall include bids from three movers and an estimate of other allowable expenses. These regulations require competitive bids that do not exceed the tariff rates and charges as published and filed with the North Carolina Utilities Commission. Bidders must have all required state and federal licenses and insurance.
Bids included in the request should include:
- Shipment weight;
- Number of cartons;
- Charges for loading and unloading;
- Cost of transit insurance coverage.
The rules and regulations as contained in tariffs on file with the North Carolina Utilities Commission shall govern the transportation and loading.
The agency head or his/her designee will notify the employee in writing as to the mover receiving the contract. The agency head or designee should accept the low bid unless judged not to be the State's advantage and interest. An agency can pay the employee after the move or pay the vendor, whichever method is agreed to by the agency and employee. See section 6.9.2 for more details.
6.9.2 Procedure for Payment
Upon the completion of the move, the employee may pay the carrier and/or submit to the agency’s budget officer vouchers consisting of:
- A bill of lading from the carrier which shows actual rates and charges for transporting, loading and insurance, itemized by miles, loading charges with numbers and sizes of cartons, insurance coverage, and appliance disconnections and connections, as spelled out in this section.
- Certified weight ticket obtained by the mover and certifying the actual gross, tare, and net weights. This can be obtained from platform scales at truck stops, weight stations, etc.
- A copy of the letter authorizing the transfer at state expense. The agency shall reimburse the employee or pay the carrier upon receipt of proper documentation.
Please review the Office of State Controller’s Job Aid for guidance on the proper accounting of moving expenses. Reimbursement for appliance connections by a service company may be handled as a separate transaction.
6.9.3 Alternate Procedure
Agency heads or their designees are authorized to approve moving by an alternate procedure provided proper documentation and receipts support the move. The agency may reimburse the actual cash expenditure made by an eligible employee in moving his household goods by another method, provided such reimbursement does not exceed that which would have been made if a regulated common carrier had been used. This alternative may be applicable for movement of an employee's goods contained in a house trailer or by a rental trailer or truck or by a non-licensed mover. It is the responsibility of the agency head or designee to determine if this method is cost-effective before approval is granted.
(G.S. 126-8.5) governs the policies and procedures applicable to severance.
7.1 Registration Fees
State entities may choose to charge a registration fee for state-sponsored events including conferences, training sessions, and management retreats. The registration fee is typically made for defraying the cost of speakers, building or room use, handout materials, refreshments, and lunches. These fees are charged to Account 52930000 - "Registration Fees." The agency may require itemization and/or documentation of expenses.
7.2 Payment for Meals
Payment for meals is allowable for state-sponsored events if included in the registration fee, but such fee must not consist exclusively of meals or it will not be allowable unless meeting overnight travel criteria.
Pursuant to G.S. 138-6(a)(3), an agency cannot use funds to pay for conference meals for state employees at which a conference fee was not charged, unless the agency uses grants or trust funds (defined in G.S. 116-36.1 and G.S. 143C-1-3.) that allow for the provision of meals for a conference. The agency must have documentation of the grant or trust fund conditions. If this is the case, then meals may be provided to state employees even if a registration fee was not charged. The employee may not request reimbursement for the meal.
7.3 External Conferences
External conferences are those that involve the attendance of persons other than the employees of a single agency. Payments for external conferences sponsored or co-sponsored by an agency are authorized when they meet all the limitations and requirements listed below.
- The conference is planned in detail in advance, with a formal agenda or curriculum.
- There is a written invitation to participants, setting forth the calendar of events, the social activities, if any, and the detailed schedule of costs.
- The assembly are held in state facilities; however, non-state facilities can be rented and the cost charged to an agency without allocation to participants' daily subsistence allowances.
- The sponsoring agency may charge registration fees to participants for costs of external conferences.
Registration fees may not include costs of entertainment, alcoholic beverages, setups, flowers and/or promotional (gift) items. Registration fees collected and not used to defray expenses of the particular conference may not be used for other programs and must revert to the General Fund or Highway Funds as applicable (G.S. 138-6(a)(4)).
Sponsoring agencies may provide refreshments for "coffee breaks" provided there are ten or more participants and the costs do not exceed $5.00 per participant per day.
Notwithstanding the conditions above, sponsoring agencies may provide refreshments to conference participants at rates above $5.00 per participant per day if the costs are included in the external conference registration fee.
Lump-sum payments to a conference center or organization may be made for agency-sponsored conferences when funding for all participants is budgeted. When written authorization from the agency head or his or her designee is required, the authorization must provide the following:
- The number of persons expected to attend;
- The purpose and duration of the conference;
- The specific meals to be served at the conference (G.S 138-6);
- The approximate daily subsistence cost per person; and
- The name of the conference center, hotel, caterer, or other organization providing the service.
It is the responsibility of the agency to ensure that reimbursement for meals included in the lump-sum payment is not also included in reimbursement payments made to state employees who are conference participants.
7.4 Internal Conferences
Internal conferences are those that involve the attendance of employees within the sponsoring agency only. A routine staff meeting is not an internal conference.
Payments for internal conferences sponsored or co-sponsored by an agency are authorized when they meet all the limitations and requirements listed below:
- The conference is planned in detail in advance, with a formal agenda or curriculum.
- There is a written invitation to participants, setting forth the calendar of events and the detailed schedule of costs.
- No payment for meals is allowable unless overnight travel criteria are met.
- No excess travel subsistence may be granted for internal agency meetings, conferences, seminars, etc., and such meetings must be held in state facilities when available. No registration fee may be charged.
- Sponsoring agencies may provide refreshments for "coffee breaks" provided there are ten or more participants and costs do not exceed $5.00 per participant per day.
- Low cost conference items that are intended to promote employee recognition, improve morale or appreciation, or communicate agency contact information are permissible as long as they are infrequent, prudent, and reasonable in their scope.
- An agency cannot use state funds to support or underwrite a meeting, assembly, conference, seminar, or similar function by whatever name called that promotes any cause or purpose other than the mission and objective of the agency.
7.5 Training Sessions
Employee training involves courses that further develop an employee’s knowledge, skill, and ability to perform the duties of his/her present job, such as courses on computer usage or management skills development. These courses generally have a set fee, are of relatively short duration, and are not part of a curriculum the employee is participating in leading to an educational degree.
Payments for training sessions are authorized when they meet the limitations and requirements listed below:
- Fees for training courses that provide training in specific areas are charged in the accounting system to "Employee Training" under "Other Services."
- Agencies sponsoring training sessions may provide refreshments for "coffee breaks" provided there are ten or more participants and costs do not exceed $5.00 per participant per day.
- Agencies may reimburse employees for training books and materials related to training sessions, provided those books are required to participate in the training sessions. These books are considered property of the agency and not the personal property of the employee.
7.6 Management Retreats
A management retreat is a meeting or series of meetings consisting of an agency or division head and his or her top assistants and coworkers. Retreats are sometimes held at a site other than the usual workplace and are held no more frequently than once a year.
The following managers may authorize an annual management retreat:
- State employees who are elected by a vote of the people or appointed by the governor,
- The president of The University of North Carolina,
- The chancellors of the constituent institutions of the university,
- The executive director of University of North Carolina Hospitals at Chapel Hill,
- The chairman of the State Board of Education, and
- The president of the North Carolina Community College System.
Expenditures are permissible in a manner as if it were an internal conference.
7.7 Informal Meetings with Guests of Agency Heads
An informal meeting is a meeting consisting of an agency head or his or her designee and non-state employees during which official state business is discussed for the majority of the meeting. Informal meetings are one-time occurrences and are not held on a recurring or routine basis.
The following agency heads, or their designee, may be reimbursed from state funds for actual costs of meals for themselves and their non-state employee guests in conducting official state business when prior written approval has been provided by the agency head for a specific event:
- State employees who are elected by a vote of the people or appointed by the governor,
- The president of The University of North Carolina,
- The chancellors of the constituent institutions of the university,
- The executive director of University of North Carolina Hospitals at Chapel Hill,
- The chairman of the State Board of Education, and
- The President of the North Carolina Community College System.
Cost of meals and other expenses for family members of the above referenced state officials are not reimbursable.
7.8 Payment for Alcoholic Beverages and "Set-ups" Prohibited
Payment or reimbursement for alcoholic beverages or "set-ups" cannot be made from state funds. Individuals must bear these costs. They cannot be included in registration fees or paid from state funds.
Law enforcement personnel in the pursuit of their duties and industrial development personnel are exempt from this provision.
8.1 OSBM Reporting Chart
|Report||Submitted by||Due Date||Statutory Reference||Policy Section|
|Monthly Budget Report
Year End Budget Report (Close-out BD 701)
|Chief Fiscal Officer/ Budget Officer||Reports must be available electronically no later than the tenth working day of the following month||8.2|
|Certification of Mailing Lists of Each Public Document||Agency Heads||On or by July 1||G.S. 143-169.1||8.3|
|Biennial Fee Report||Chief Fiscal Officer/Budget Officer||Biennially, or annually as prescribed by OSBM||G.S. 143C-9-4||8.4|
|Annual Report Listing Committees or Councils||Agency Heads||February 1||G.S. 143B-10.(d)||8.5|
|Grants Management System||Department Head/Designee (Grants management staff)||Must be entered into Grants Management System
prior to disbursing grant funds
|Travel Policy Attestation||Agency Head/Designee||By April 1||8.7|
|Report on Rules with Economic Impact||Rulemaking coordinators||February||G.S. 150B-21(e) and 21.28||8.8, 10.9|
8.2 Monthly Budget Report
Agencies must balance both the certified and the authorized budget for revenues, appropriations, and cash levels for all reporting periods. OSBM budget analysts will monitor the complete Monthly Budget Report (NC Budget to Actual (791) Certified Report (RPTBE006) in NCFS) to ensure compliance with the State Budget Act and policies of OSBM. OSBM will notify agencies of any inconsistencies or discrepancies and advise of corrective action to be taken. This corrective action may include re-opening the month, correcting the problem, closing out, and re-certifying.
Reports must be available electronically to OSBM and the Office of the State Controller no later than the tenth working day of the following month
For more details on information included in reports, visit the Office of the State Controller’s website.
8.3 Mail List Survey
G.S. 143-169.1 requires the head of every state agency to certify to the Director of the Budget that the mailing list for each public document issued by his or her agency has been carefully reviewed, updated, and corrected within the previous 12 months. The reviewed, updated, and corrected mailing lists shall be comprised only of those persons and organizations who, within the previous 23 months, have:
- Requested to be included in such a mailing list,
- Have renewed a request to be included, or
- Are recipients contemplated for receipt of the pertinent public document by express provision of statute or judicial order.
The reporting period under review consists of public document mailing lists in use the prior 12 months. For example, the report for July 1, 2020 would consist of mailing lists used during the fiscal period July 1, 2019 through June 30, 2020. On or by July 1 of each fiscal year, agencies should submit reports to the appropriate OSBM analyst.
8.3.1 Certification Letter
Agency heads should submit a signed cover letter with the mail list report certifying the agency has complied with the legal requirements for state agency public document mailing list update. (Example below)
TO: Director of the Budget
FROM: Department Head
SUBJECT: Mailing List Update Certification
In accordance with G. S. 143-169.1 (state agency public document mailing list to be updated), this correspondence certifies that the mailing list maintained by the Department of ______________ has been carefully reviewed, updated and corrected within the past 12 months.
The mailing list includes only persons and organizations who, within the previous 12 months, have either requested to be included in such mailing list, have renewed a request to be included, or are recipients contemplated for receipt of the pertinent public document by express provision of statute or judicial order.
Attached is the Mailing Lists Report which provides complete information as required by Section 8 of the State Budget Manual.
8.4 Biennial Fee Report
G.S. 143C-9-4 requires OSBM to prepare a biennial report on the fees charged by each state department, bureau, division, board, commission, and agency during the previous two fiscal years. OSBM requests that organizations provide the fee data annually for efficiency and manageability of the collection / compilation process.
The report shall include:
- The statutory or regulatory authority for each fee,
- The amount of the fee (range)
- The frequency of the fee,
- The counting methodology for the fee,
- When the amount of the fee was last changed,
- The number of times the fee was collected during the prior fiscal year, and
- The total receipts from the fee during the prior fiscal year.
The reporting period is the biennium immediately preceding the current fiscal year, on June 30 or as directed. OSBM may choose to provide the report annually.
8.5 Committees and Councils Report
G.S. 143B-10.(d) requires that an annual report on committees and councils be submitted to the Joint Legislative Commission on Governmental Operations by March 31. OSBM compiles this report to include for each committee and council:
- A complete list of committees or councils,
- The total membership of each,
- The cost in the last 12 months,
- The funding source, and
- The title of the person who made the appointments.
The reporting period is the fiscal year immediately preceding the reporting period. For example, if the report is due February 2019, the reporting period is July 1, 2017 to June 30, 2018.
The report is due to OSBM annually on February 1.
8.6 State Grant Funds Reporting
OSBM maintains the Grants Management System to assist state funding agencies managing state financial assistance in accordance with G.S. 143C-6-23 and 09 NCAC 03M. These statutes and administrative rules cover the disbursement and use of state funds to non-state entities, including federal funds that flow through the state treasury. The Grants System serves as a central repository of state grant-funded assistance programs and awards. State funding agencies are required to register state assistance programs and awards with OSBM.
To access the Grants Management System state agency users will need a user ID and password. If you do not yet have a user id and password, please download and complete the CRIS and NCGrants Access Authorization Form and email it to Grants-OSBM@osbm.nc.gov.
The system is for state agency users only. If you are an organization looking for more information about grant programs in the state, please visit NC.gov Grant Opportunities.
For instructions on how to use the Grants Management System, please download the Grants System Help Guide, which includes step-by-step screen shots. For additional information, see our Frequently Asked Questions.
Pursuant to 09 NCAC 03M .0401, funding state agencies must monitor recipients to ensure they have met applicable reporting requirements and complied with all contract terms. If the funding agency determines a recipient is noncompliant, they shall take appropriate action as specified in 09 NCAC 03M .0800. Depending on the nature of the noncompliance, this may include reporting the recipient to OSBM for inclusion on the Suspension of Funding List (SOFL).
OSBM maintains the SOFL for non-compliant grant recipients. Per 09 NCAC 03M, agencies shall not disburse any state financial assistance to an entity on the SOFL. The SOFL is updated on a weekly basis. If you would like to be added to the SOFL distribution list, please contact Grants-OSBM@osbm.nc.gov
Agencies are expected to enter grant programs in the Grants Management System when grant programs are established.
8.7 Travel Policy Attestation
As detailed in section 5.2.1, agency heads may choose to reimburse lodging and meals expenditures at the standard state subsistence rates or request authorization to set agency-specific rates up to the U.S. General Service Administration’s (GSA) subsistence rates. To be granted this authority, agency heads shall attest annually to having implemented and published internal travel policies that cover, at minimum, the topics listed on the Travel Policy Attestation Form.
For agencies choosing this option, the Travel Policy Attestation Form is due to OSBM annually by April 1.
8.8 Report on Rules with Economic Impact
OSBM is required to provide a report on certain rules with economic impact to the Governor, the General Assembly, and local government stakeholders annually by March 1 (G.S. 150B-21(e) and 21.28).
Each February, OSBM requests information from agencies on their rulemaking actions from the previous fiscal year as well as anticipated rulemaking actions for the upcoming fiscal year. See additional details in section 10.9.
G.S. 143C-2-2 requires OSBM to "coordinate the efforts of governmental agencies to collect, disseminate, and analyze economic, demographic and social statistics pertinent to State budgeting." This includes a requirement that OSBM "prepare and release the official demographic and economic estimates and projections for the State."
OSBM's municipal population estimates are required for determining the distribution of state-shared funds to municipalities. These include:
- G.S. 58-84-25 Disbursement of Funds by Insurance Commissioner (effective January 1, 2008)
- G.S. 105-113.82(e) Distribution of Part of Beer and Wine Taxes
- G.S. 105-164.44F(b) Distribution of Part of Telecommunications Taxes to Cities
- G.S. 105-164.44I(g) Distribution of Part of Sales Tax on Video Programming Service and Telecommunications Service to Counties and Cities
- G.S. 105-472(b) Disposition and Distribution of Taxes Collected
- G.S. 105-511.4 Distribution and Use of Taxes
- G.S. 105-570 County Vehicle Registration Tax; shared with municipalities
- G.S. 136-41.1(a) Appropriation to Municipalities; Allocation of Funds Generally; Allocation to Butner (State Highway Fund)
OSBM’s municipal population estimates are also required by a number of other General Statutes, including:
- G.S. 7A-300.1 Local Supplementation of Salaries for Certain Officers and Employees
- G.S. 18B-1009 In-Stand Sales
- G.S. 58-36-10 Method of Rate Making; Factors Considered
- G.S. 58-40-25 Rating Methods
- G.S. 136-202(c) Metropolitan Planning Organizations
- G.S. 143B-437.09(a) Urban Progress Zone Designations
- G.S. 160A-360 Territorial jurisdiction
- G.S. 136-211 Department Authorized to Establish Rural Transportation Planning Organizations
- G.S. 136-189.11 Transportation Investment Strategy Formula
Every year OSBM prepares two types of population estimates for every municipality in North Carolina:
- Certified municipal population estimates, which are required by the General Statutes for revenue distribution.
- Standard municipal population estimates, which are used for planning.
The municipalities play a key role in building these estimates by providing OSBM with updated information and data on:
- annexation, detachment, and other boundary changes,
- group quarters, and
- residential construction and mobile homes.
In addition to data submitted by the municipalities, the municipal population estimates prepared by OSBM are based, in part, on that year’s state and county population estimates. The foundations for the county estimates are the decennial census and any official corrections made to the decennial census. The municipal population estimates are likewise developed from the previous decennial census and any official corrections made to it. Unless labeled as revised estimates, previous year municipal population estimates should not be compared to current year estimates.
Annexation refers to a land area that has been fully incorporated into an existing municipality. Attempted annexations that are under appeal or are pending are not included.
Annual Survey refers to the annual request for information OSBM sends to all municipalities. The annual survey includes three components: Boundary and Annexation, Group Quarter Population, and New Residential Construction and Mobile Homes. The survey detail OSBM annexation records and group quarter data for that municipality and requesting updates on/corrections to annexation names and dates, land areas, actual occupied housing unit and population counts; group quarters and their opening and closing dates; and changes in the number of housing units.
Boundary Change means any change in a municipality’s boundaries not including annexations and detachments.
Deadline includes any date given in this section by which an action is required. When the given date does not fall on a business day the deadline extends through the next business day.
Decennial Census refers to the census of population and housing, taken by the U.S. Census Bureau in years ending in 0. Article I of the U.S. Constitution requires that a census be taken every 10 years for the purpose of reapportioning the U.S. House of Representatives.
Detachment means a land area that was previously part of an incorporated municipality but that has since been removed.
Group Quarter means a longer term living arrangement other than a household. It includes institutions, where individuals are under care or custody, and noninstitutional living arrangements, such as college dorms and fraternities were 20 or more unrelated individuals are living together.
Municipal Population Estimates refer to the annual population estimates produced by OSBM for each municipality. Two estimates are prepared:
- Standard Municipal Population Estimates: These estimates are for July 1st of the previous year with municipal boundaries as of the same date. These estimates are used for general planning purposes and are the most common type of municipal population estimates that are produced.
- Certified Municipal Population Estimates: These estimates are for July 1st of the previous year with municipal boundaries as of July 1st of the current year as required by G.S. 136-41.1(a). These estimates are used by the State to determine the equitable distribution of state-shared revenues.
Provisional Estimates are prepared by OSBM before the final estimates are certified. These estimates are sent to each municipality to provide them an opportunity to identify and notify OSBM of any errors based on the annexation survey data they provided.
Special Census means a complete count of every household and its occupants, and of every institution where people live and its occupants, in a municipality, other than the regular decennial census taken by the U.S Census Bureau.
9.3 Key Obligations for Municipalities
Municipalities are required to meet three key obligations:
- Notify OSBM of changes in points of contacts (POCs), including name, address, phone number and email changes prior to June 1 of each year,
- Respond to the Annual North Carolina Demographic information Survey (https://ncds.osbm.nc.gov) by the stated deadlines, and
- Review the Provisional Estimates (at https://ncds.osbm.nc.gov) by the 4th business day before September 15th.
9.4 Meeting Obligation Procedures and Deadlines
- OSBM maintains a list of Points of Contacts for the annual demographic information survey and provisional estimates review. Municipalities and counties may contact email@example.com to verify their POC or to submit corrections in name, address, phone and e-mail listings.
- At the end of June, OSBM will e-mail POCs a request to respond and instructions on accessing and responding to the annual survey. Responses must be received by the end of the 3rd week in July. The survey can be accessed at: https://ncds.osbm.nc.gov.
- If a municipality chooses to conduct a special local census (see Section 9.6, Special Local Censuses, below) in addition to completing the annual survey, the municipality must send OSBM all final census data by August 1st.
- If a municipality chooses to have a special federal census (see Section 9.5, Special Federal Censuses and other Census Corrections, below) conducted in addition to completing the annual survey, OSBM must receive the final census results from the Census Bureau by September 1st.
- An e-mail informing municipalities of their provisional estimates will be sent to each municipality on or before August 27th. Municipalities will have until the close of business on 4th business day before September 15th to contact OSBM about any errors.
- Final estimates will be prepared by and certified on September 15th to enable the Department of Transportation to meet the requirements of G.S. 136-41.1(a). Any municipality whose final estimate is different from their provisional estimate will be sent a follow up letter on or before September 30th.
- Certified, standard and revised population estimates for municipalities will be posted online on or before September 30th at https://demography.osbm.nc.gov.
9.5 Special Federal Censuses and Other Census Corrections
Any municipality may elect to contract with the Office of Special Censuses of the United States Bureau of the Census to do a special federal census of the municipality. Any data from a special federal census will be used for municipal estimates by OSBM in addition to the requested survey data. The final, official, public data from such a census must be received by OSBM from the Census Bureau by September 1st in order to be incorporated in that year's estimates. All such data received from the Census Bureau will be used by OSBM, regardless of any request to the contrary by the municipality.
OSBM will also use any final, official, public data changes and corrections to the decennial census received from the Census Bureau. This data must be received from the Census Bureau by September 1st in order to be incorporated in that year’s estimates. Data changes from the Census will only be incorporated into current and future municipal population estimates and will not be applied retroactively to previous year municipal population estimates.
9.6 Special Local Censuses
Any municipality with a population under 500 (or for a portion of a larger municipality with less than 500 people in one county) may provide OSBM with a Special Local Census to be incorporated in the OSBM population estimate. This census would be carried out by the municipality, but must follow OSBM requirements. If the requirements are followed, OSBM will use the census data in addition to the requested annual survey data. Special Local Censuses must be received by August 1st of any calendar year for inclusion in that year’s estimates. Any special local census received after that date will be used in the following calendar year. The following requirements apply to Special Local Censuses acceptable by OSBM:
- The total population must be under 500 people.
- The municipality must provide a certified list of the permanent residents of their municipality as of a given date. This includes a complete list of all first and last names and addresses. The list should include telephone numbers, if available.
- P.O. Boxes are not acceptable addresses. A physical street address or a 911/EMS address point must be provided for all residents.
- A map of the town must be provided showing all addresses. If a housing unit does not have a physical address, its location may be indicated on the map and labeled for identification.
- OSBM will only accept a count of residents whose full name and location are clearly identified. Telephone numbers are used for random verification by OSBM.
9.7 Requirements for Newly Incorporated Municipalities
When the State Legislature incorporates a new municipality, OSBM is required by General Statute to prepare a population estimate for the new municipality:
- "§ 160A-486 Estimates of Population
When a newly incorporated municipality is not included in the most recent federal census of population but otherwise qualifies for distribution of State-collected funds allocated wholly or partially on the basis of current population estimates, the municipality shall be entitled to participate in the distribution of these funds by reporting all information designated by the Office of State Budget and Management. An estimate of this city's population will be made by the Office of State Budget and Management in accordance with procedures designated by that office. The estimate will be certified to State departments and agencies charged with the responsibility of distributing funds to local governments along with the current population estimates for all other municipalities."
It is the responsibility of new municipalities to contact OSBM to request that a population estimate be made. The municipality is responsible for supplying certain data to OSBM and may enlist the help of the government of the county in which it lies and/or the help of the regional planning organization to which that county belongs to produce this data. Either or both of these organizations may act as the agent of the municipality to supply data to OSBM. The municipality or its agent must supply OSBM with accurate maps showing the municipality's boundaries. The municipality or its agent should submit an electronic file of the new municipality’s boundaries for use in a geographical information system (GIS), or a list of all the census blocks and split blocks within its jurisdiction. If the municipality or its agent chooses to provide a list of census blocks and split blocks, the data for split blocks must include some measure of the split, for example, the percentage of the land area of the block that is within the municipality.
9.8 Appeals Process
OSBM considers appeals for errors caused by erroneous annexation data after the certified numbers are released. OSBM will consider appeals under the following conditions:
- A completed, annual survey was submitted to OSBM by the municipality by the July 23rd deadline, either electronically (by 11:59 p.m. of July 23) or by mail (postmarked on or before July 23);
- The municipality notified OSBM prior to the deadline to expect a substantive annexation;
- The municipality failed to submit this annexation with the survey or OSBM failed to include it in the certified estimate;
- For municipalities with an estimated population of 100,000 or less (not including the population of the annexation in question), the population error in the annexation data would have to affect at least 100 people and at least 5 percent of the estimated population (not including the population of the annexation in question) of the municipality. For larger municipalities, the population error would have to affect at least 5,000 people.
- A written appeal explaining the error is received by OSBM by November 15th of the calendar year in which the estimate is made. This appeal should also include all the necessary information that was erroneously excluded from the survey. No new data collected after July 23rd will be considered in any appeal.
- If appeals are received from more than one municipality, OSBM will not issue a recertification of the population estimates until the appeals of all municipalities have been duly considered. If appeals of any of the municipalities are granted, OSBM will make only one recertification of that year's estimates, which will include the results of all granted appeals.
The Administrative Procedure Act, Chapter 150B of the General Statutes, and Executive Order No. 70 from October 21, 2010 (hereinafter referred to as E.O. 70), as amended by Executive Order No. 48 from April 9, 2014, establish procedural requirements for the adoption, amendment, and repeal of administrative rules.
Proposed changes to permanent rules must progress through several stages of analysis, review, and feedback before becoming effective and entering the Administrative Code. An early step in that process involves OSBM review and approval of the proposed rule changes along with the agency’s analysis of the rules’ costs and benefits. This analysis is known as a fiscal and regulatory impact analysis, fiscal note, or regulatory impact analysis (hereafter “regulatory impact analysis” or “analysis”).
When agencies propose or amend multiple rules that are published and adopted together, the analysis is typically conducted on a package of related rules, rather than each individual rule. Hereafter, standalone rules or a package of related rules will be referred to as a rule change.
Agencies use regulatory impact analyses to anticipate and evaluate the likely consequences of rule changes, including both the expected beneficial outcomes and associated costs. The analysis process provides a structured framework for identifying, evaluating, and quantifying the likely effects of proposed rule changes on affected parties. The purpose of conducting a regulatory impact analysis is to:
- Improve rule design for better effectiveness and efficiency,
- Inform rulemaking bodies about likely impacts,
- Communicate with the regulated community and the public about the rule and the agency’s decision-making process, and
- Demonstrate whether a proposed rule change is reasonable and justified.
OSBM reviews proposed rule changes and their regulatory impact analyses to verify that the agency has sufficient funds to implement the rules and to ensure the agency has satisfied the analysis requirements of Chapter 150B and E.O. 70. In turn, the analysis is a tool to help agency staff and decision-makers design rules according to the rulemaking principles in G.S. 150B 19.1, which encourage striking an appropriate balance between maximizing regulatory benefits and minimizing regulatory costs.
After OSBM approval and consideration by the rulemaking body, agencies will publish the proposed changes and the regulatory impact analysis in the North Carolina Register for a 60-day public comment period. See OAH’s website for additional details. Agencies and OSBM publish approved regulatory impact analyses on their respective websites Agencies also notify interested parties about upcoming rule changes and public comment opportunities through their listservs.
10.2 Overview of a Regulatory Impact Analysis
A regulatory impact analysis, also referred to as a fiscal note, includes the following:
- A plain-language summary of the proposed rule change and a description of the problem or goal the proposed change attempts to address;
- The analysis should explain the rationale for the changes, including the purpose or goal of the rules and why the proposed regulatory intervention is needed.
- What negative outcome is the agency seeking to avoid or how is the agency trying to improve the wellbeing of North Carolinians through the rules?
- Note that while recent legislation or federal regulations requiring rulemaking is important context, it does not address the broader purpose and problem(s) being addressed through the rule change.
- An explanation of how the proposed change attempts to address the targeted problem or goal, and the expected outcomes;
- The analysis should describe the new proposed requirements, processes, or standards, and the expected response of affected parties.
- How much will the rules change the outcomes of interest compared to the status quo baseline, now and in the future? The analysis should draw on the best available research, program data, and professional experience to evaluate the likely impact of the rule changes.
- When describing the likely impacts of a rule, the analysis should note the affected parties, which could include state or local government entities and/or private sector entities (i.e., regulated business, consumers, nearby residents, program participants, or the general public).
- A realistic estimate of the impact, including benefits and costs, of a proposed rule change on affected parties;
- The analysis should quantify and monetize the identified impacts to the extent possible. Impacts include benefits and cost savings as well as rule implementation or compliance costs.
- The analysis shall include an explanation of how the impacts were calculated and note the assumptions, limitations, and sources for the information.
- Any additional information required by the provisions of G.S. 150B-21.4 and E.O. 70, as applicable to the proposed rule. For example, rules with substantial economic impact are required to include a discussion at least two alternatives to the proposed rule that the agency considered and why they were dismissed (G.S. 150B-21.4(b2)(5))
In summary, a regulatory impact analysis should explain why the rule change is necessary, how the agency proposes to address the problem or goal, and the expected outcomes to all affected parties. Even when all expected impacts are not fully monetizable, the information and context provided in the analysis can inform rule design and help decision-makers and interested parties make judgements about:
- The relative magnitude and distribution of costs and benefits;
- The likelihood of benefits exceeding costs;
- The cost effectiveness of the proposal compared to other approaches; and
- The degree of confidence in expected outcomes.
See section 10.4 for more details about the analytical process and content requirements.
10.3 Requirements Prior to Publishing Proposed Permanent Rule Changes
10.3.1 When Agencies Must Conduct Regulatory Impact Analysis
The Administrative Procedure Act may require a regulatory impact analysis for certain permanent rule changes (G.S. 150B 21.4). Analyses are not required for emergency and temporary rules. For any permanent rule change that has one or more of the impacts outlined below, agencies must submit a regulatory impact analysis to OSBM for review and obtain approval prior to publishing in the North Carolina Register:
- State funds impact – The rule change requires the expenditure or distribution of state funds.
- "Expenditure of funds" includes new agency activities required to be implemented by state employees or other agents of the state (contractors, temporary employees, etc.) paid with state funds. The agency must include in the analysis the opportunity cost of these activities to the extent they affect the ability of state employees or other agents of the state from performing already assigned tasks. Typically, opportunity costs take the form of changes in staff time (+/-) resulting from the rule change, even if performed by existing staff as part of their normal duties. Furthermore, any new agency expenditures must be included, even if additional receipts may offset the cost.
- "Distribution of state funds" includes funds paid out by the state or reallocation of funds across agencies or divisions.
- In short, a rule change that causes any additional costs to the state or that changes the allocation of funds requires OSBM approval.
- Local funds impact – The rule change impacts local government expenditures or revenues. Agencies must submit to OSBM the proposed rule text and fiscal and regulatory impact analysis of rule changes with impacts on local funds at least 60 days prior to the intended date of publication in the North Carolina Register, as per G.S. 150B-21.26.
- Substantial economic impact – The rule change has a substantial economic impact, i.e., an aggregate financial impact on all persons affected of at least $1 million in a 12-month period. A substantial rule could affect private entities alone, government entities alone, or a combination of public and private entities. The calculation to determine if a rule is substantial focuses on the combined magnitude of costs and benefits, rather than on net impact. For example, a rule generating $600K in benefits and $400K in costs is considered substantial.
10.3.2 Conditions for Rules with State Government Impact
For rule changes with state funds impact, the agency must obtain, in conjunction with the regulatory impact analysis approval, an OSBM certification of the state funds availability to cover the state impact from the proposed rule change prior to publishing the rule in the North Carolina Register (G.S. 150B-21.4(a)).
10.3.3 Conditions for Rules with Substantial Impact
G.S. 150B-21.4(b1) requires OSBM to certify that agencies proposing a rule change with a substantial economic impact adhered to the principles set forth in G.S. 150B-19.1(a)(2), (5), and (6) before the agency publishes the proposed text of any permanent rule change in the North Carolina Register. These principles encourage striking an appropriate balance between maximizing regulatory benefits and minimizing regulatory costs. OSBM will determine whether the proposed rule change adheres to the above regulatory principles based on the information agencies provide in the analysis.
10.3.4 Conditions for Rules Proposed by Cabinet Agencies
E.O 70 requires OSBM to ensure that during the regulatory impact analysis review and approval process cabinet agencies adhered to the principles outlined in Section 2 of the Order in adopting a proposed permanent rule change. Section 2 principles are similar to the principles later incorporated into G.S. 150B-19.1. OSBM will determine whether the proposed rule change adheres to the above regulatory principles based on the information agencies provide in the analysis.
10.3.5 Analysis Not Required for Rule Repeals
Agencies are not required to submit a regulatory impact analysis to OSBM for proposed rule repeals (G.S. 150B-21.4(d)). If the agency proposes to repeal a rule but also to adopt or amend one or more rules to replace the repealed rule, and if the rule(s) proposed for adoption or amendment require OSBM review or approval of an analysis, the agency may include the rule proposed for repeal in the package of rules subject to regulatory impact analysis.
10.4 Regulatory Impact Analysis Requirements
10.4.1 Depth of Analysis Determined by Proportionality Principle
A good regulatory impact analysis does not follow a strict formula or template. Different rule changes require different emphases and levels of analysis, and the depth of the analysis must be proportional to the nature and complexity of the rule change. Agencies must ensure they invest the appropriate level of resources in gathering data and analyzing the rule change. The two key factors determining the depth and comprehensiveness of analysis are:
- Size, duration, and distribution of expected impact, and
- Degree of discretion the agency has in developing the policy.
Other contributing factors in determining the appropriate level of analysis include:
- The degree to which the policy is novel, contentious, or irreversible,
- The level of uncertainty around likely impacts,
- The data available and resources required to gather further data,
- The time available for policy development.
Agencies are encouraged to contact OSBM during the drafting stage of the regulatory impact analysis for guidance in identifying the appropriate level of analysis. In general, rules with substantial economic impact typically require a more in-depth analysis compared to rules with an aggregate impact under $1 million in a 12-month period.
10.4.2 What Information Must Agencies Submit to OSBM?
Below is the information agencies must include in a regulatory impact analysis corresponding to non-substantial and substantial impact rule changes:
Non-Substantial Economic Impact Rules
a. Cover Page General Information
- A descriptive title of the rule change;
- The North Carolina Administrative Code citation(s);
- The name of the agency proposing the rule and agency contact information;
- A citation to the statute(s) authorizing the rule change or the federal law(s) or regulation(s) requiring the rule;
- A brief statement indicating whether the rule change has a state, local, and/or federal government impact, a private sector impact, and/or a substantial economic impact (Yes or No); and
- The certification of federal requirement, if applicable.
b. Summary of the Proposed Regulation
- Purpose or goal of the rule change – A description of the need for the proposed action, including a clear statement of the problem or goal the rule change is intended to address.
- Description of the change – Given the broad intended audience for impact analyses, the rule change description should clearly explain how the proposed changes would address the identified problem or goal. The description must be clear, concise, and avoid technical jargon. Discuss any expected improvements in public health, safety, or welfare, or how the rule change serves the public interest.
c. Impact Analysis – This section is the heart of the analysis and must describe the estimated impact on affected parties from the proposed rule change, as well as explain how the agency estimated the impact and how the proposed rule change interacts with existing regulatory requirements affecting the parties affected by the proposed rule change. Below are some general considerations agencies must take into account when evaluating the economic impact of the proposed rule change:
- Scope of Analysis – The appropriate time frame for analysis is dependent on the nature of a specific rule change and must cover a period long enough to encompass the important costs and benefits likely to result from the rule change. For many rule changes, a per year or three-year estimate may be sufficient. For others, such as a rule change with a phased implementation, or rule changes with up-front cost but long-term benefits, the appropriate time frame may be much longer.
- Baseline – The impacts identified must be measured against a baseline. This baseline must be the best assessment of the future under the status quo if the agency were not to adopt the rule change. It includes ongoing costs and benefits attributable to the current rule, as well as the effects of external factors like economic and demographic trends. This assessment must account for independently enforceable NC General Statutes currently in effect and rules contained in the NC Administrative Code. Informal agency policies not adopted as rules in compliance with G.S. 150B must be excluded from the assessment of the baseline.
- Cost Estimates – The economic impact of the rule change is the incremental difference between the baseline and the future condition expected after implementation of the proposed regulation. Cost estimates must include all direct costs, including opportunity costs. How is the rule change expected to change behaviors or processes compared to current rules? What costs, including financial costs and opportunity costs, are associated with these changes?
- Agencies must include tables and schedules of the cost estimates. Cost estimates must be monetized to the greatest extent practicable, while ensuring that the depth of analysis is proportional to the complexity and impact of the rule change.
- Where costs are not quantified in dollars, they must be listed and described and include quantification of factors related to costs in non-monetary terms where feasible (e.g., the number of persons, facilities, or localities affected). In cases where precise cost estimates are infeasible, estimating a range of costs under various plausible assumptions may be appropriate.
- If the rule change requires disbursement of state funds, include information on the source of funds that would be used to cover the new costs so that OSBM can certify the existence of funds (see G.S. 150B-21.4(a));
- Benefit Estimates – Explain how the actions required by the rule change are linked to the expected benefits. Benefits are not limited to budgetary cost-savings but are linked to the purpose and goals of the rule, including, for example, reduced risk of disease and healthcare costs, higher lifetime earnings, improved environmental resource values, or process efficiencies and staff time savings. Benefit estimates must be quantified in dollars to the greatest extent practicable, with the need for quantification increasing for rule changes of larger or more complex effects.
- Where benefits are not monetized, they must be listed and described in detail and include quantification of factors related to benefits in non-monetary terms where feasible (e.g., the number of persons, facilities, or localities affected). In cases where precise benefits estimates are infeasible, estimating a range of benefits under various plausible assumptions may be appropriate.
- Transparency and Reproducibility – A good analysis must clearly set out the basic assumptions and methods employed, as well as cite the scientific, technical, economic, and other data and information used in the analysis. This enables readers to understand how the authors of the analysis reached their conclusions.
- Stakeholder Input – Relevant stakeholder information deemed to have merit that the agency gathered during the drafting phase of the rule change should be included in the analysis, and conflicting viewpoints should be acknowledged and evaluated.
- Summary of Impacts – Agencies must include a summary discussion of the expected costs and benefits, both quantified and unquantified, along with key assumptions and limitations. For rules with multiple impacts, the summary should include a table of year-by-year or annualized impacts, as appropriate. In constructing this summary table, it may be helpful to organize annual costs and benefits by topic and/or affected party.
- Persons Affected – The analysis must identify the persons affected by the rule change within the categories listed below. Within each category, describe the type and number of different entities impacted by the rule change and briefly summarize how these units will be affected. In some cases, depending on the complexity of the rule change, it may be useful to organize the discussion by type of entity affected:
- State government entities,
- Local government entities,
- Federal government entities, and
- Private-sector entities.
- A copy of the proposed rule text as it will be published in the North Carolina Register;
- Any other relevant supporting information.
Substantial Economic Impact Rules
A rule change is considered to have a substantial economic impact if aggregate costs and benefits for all persons affected equal at least $1 million in a 12-month period. For example, a rule change with $600,000 in estimated benefits and $400,000 in estimated costs in a 12-month period would have a substantial economic impact.
For rule changes with a substantial economic impact, the agency's regulatory impact analysis must include the following:
a. The information required for non-substantial economic impact rules (see above).
b. Alternatives – Agencies must demonstrate that the proposed rule change achieves the regulatory objective in a cost-effective manner by describing at least two alternatives considered, evaluating their impacts to the extent practicable, and stating reasons why the agency rejected those alternatives. Alternatives are most commonly different means of implementing the proposed change, such as a more stringent or less stringent requirement, a different scope or timeline for the requirements, or targeting a different contributing factor to the problem. Agencies should also consider, when feasible, alternatives that would not require rulemaking, such as using economic incentives, an education campaign, implementing information disclosure requirements, or performance standards. The alternatives may have been identified by the agency, stakeholders, or members of the public. When there is a "continuum" of alternatives to address a particular problem, an agency should examine a preferred option, a more expensive or stringent option, and a less expensive or stringent option. When the status-quo is a possible alternative, it may be used as one of the two required alternatives. (See G.S. 150B-21.4(b2))
c. Net Present Value – Benefits and costs do not always occur in the same time period. When they do not, an agency must not simply add up all of the expected benefits or costs without accounting for when the impacts occur. Benefits or costs that occur sooner have a higher present value to society than equivalent benefits or costs occurring later. Given this time distinction, a discount rate of 7.0% must be used to adjust future benefits and costs when appropriate. OSBM can provide technical assistance with this calculation. At the discretion of OSBM, other discount rates may be used in addition to 7.0% for comparative purposes. (See G.S. 150B-21.4(b1) and the U.S. Office of Management and Budget’s Circular A-4 on Regulatory Analysis.)
d. Sensitivity Analyses – A regulatory impact analysis is a forward-looking model of expected behaviors and associated outcomes to assist regulatory and programmatic decision-making. These types of models rely on key assumptions and parameters based on the best information available. A sensitivity analysis compares the predicted costs and benefits of the rule when varying those key parameters (i.e., participation rate or unit cost) within the probable range. This analysis helps readers determine the degree of confidence that benefits will outweigh costs based on whether, and to what extent, the results are sensitive to key assumptions.
10.5 What Are the Requirements for Rules Agencies are Readopting?
G.S. 150B-21.3A requires all agencies subject to rulemaking to perform a periodic review of their existing rules. For rules that the final determination report (see G.S. 150B-21.3A(c)(3)) identifies as needing to be readopted, an agency must submit a regulatory impact analysis of the rule change to OSBM if all of the following conditions are met:
- The agency is proposing substantive changes to the rule, i.e. they have to publish the text of the rule in the NC Register as per G.S. 150B-21.2(c)(1)
- The proposed changes result in a substantial economic impact or have an impact on state government or any unit of local government (see section 10.3.1); and
- At least one rule in the package of rules the agency is proposing creates a net cost on any part of the regulated community.
The agency must meet the same regulatory impact analysis requirements as stated in Section 10.4. The baseline for rule changes agencies are proposing for readoption are the current, unexpired rules contained in the North Carolina Administrative Code, as well as any stand-alone statute.
10.6 What Are the Requirements for OSBM to Review Certain DHHS Temporary Rules
In accordance with G.S. 108A-54.1B(c), prior to submitting the proposed text of a temporary rule change to the Rules Review Commission and the Office of Administrative Hearings (as per G.S. 150B-21.1), DHHS must submit to OSBM an impact statement that includes the following:
a. General information
- The title of the rule change and North Carolina Administrative Code citation;
- The name of the division proposing the rule change and contact information;
- A citation to the statute(s) authorizing the rule change or the federal law(s) or regulation(s) requiring the rule;
- An indication of whether or not the rule change will generate state or local government impacts; and
- The text of proposed temporary rule change.
b. Description – The division must provide a description of the rule and changes from existing regulation, as well as an explanation of the need for the rule and the issue(s) or problem(s) it is intended to address.
c. Government Budget Impact Analysis – The analysis is the main part of the impact statement and must explain the fiscal impacts on state and local governments that would result from the temporary rule change. The division must also explain any current or future impacts on agency budgets and information on affected budget codes if there is a state-government impact. Below are some general considerations that must be taken into account when performing the analysis:
- Baseline – Agencies must measure costs and benefits compared to a baseline scenario. This baseline must be the best assessment of the future under the status quo if the agency were not to adopt the rule change. It includes ongoing costs and benefits attributable to the current rule, as well as the effects of external factors like economic and demographic trends. This assessment of the baseline scenario must account for independently enforceable NC General Statutes currently in effect and rules contained in the NC Administrative Code. Informal agency policies not adopted as rules in compliance with G.S. 150B must be excluded from the assessment of the baseline.
- Impact Estimates – The agency must determine the budgetary impact of the proposed rule change. The impact of the rule change is the incremental difference between the baseline and the future condition expected after rule implementation. The agency must monetize estimates to the greatest extent practicable, while ensuring that the depth of analysis is proportional to the complexity and impact of the rule change. Where the agency cannot quantify impacts in dollars, it must list and describe these impacts and include quantification of factors related to budgetary impacts in non-monetary terms where feasible (e.g., the number of persons, facilities, or localities affected). In cases where precise budgetary impacts estimates are infeasible, estimating a range of impacts under various plausible assumptions may be appropriate.
- Scope of Analysis – The appropriate time frame for analysis is dependent on the nature of a specific rule change and must cover a period long enough to encompass the important budgetary impacts resulting from the proposed rule change, especially impacts affecting the current and next biennia. Agencies must include tables of cost estimates over the appropriate time frame for analysis.
- Transparency and Reproducibility – A good analysis must clearly set out the basic assumptions, methods, and data used, enabling the reader to understand how the authors of the analysis reached their conclusions and, in the absence of confidential or proprietary information, reproduce the results themselves.
10.7 Submission, Review, and Approval Process
All required submissions of rule information to OSBM may be sent electronically to firstname.lastname@example.org. Faxes and paper submittals of information will not be accepted and will not constitute the submittal of a proposed rule change and supporting regulatory impact analysis.
The review process is often iterative, requiring one or more rounds of edits before the analysis is approved for publication, and agencies should plan accordingly when establishing timelines for their rule change process. OSBM will provide guidance and technical assistance during the review process. Discussing the proposed changes with OSBM early in the process can help guide the analysis development and facilitate the review process. Agencies are encouraged to plan time for iterative reviews and revisions to the analysis, accounting for the length and complexity of the rule changes.
Once OSBM has certified, reviewed, or approved the proposed rule change and the associated regulatory impact analysis (see sections 10.3 and 10.4 above), OSBM will notify the agency and Office of Administrative Hearing staff electronically. OSBM will post the approved analysis on its archive, along with the title of the rule change and the OSBM approval date. In the electronic notification, OSBM will provide a link to the posted document, which OSBM encourages agencies to use in informing the public and complying, where applicable, with G.S. 150B-19.1(c).
The agency is responsible for submitting the OSBM-approved rule change to the Office of Administrative Hearings for publication in the North Carolina Register or to the Rules Review Commission for review.
10.8 When to Re-submit Analyses for OSBM Approval
If the agency makes any changes to the rules and the associated regulatory impact analysis after OSBM approval but before publication in the North Carolina Register, OSBM asks that agencies send any updated version of an OSBM approved regulatory impact analysis to email@example.com so that OSBM can approve the updated rules and analysis for publication. G.S. 150B-19.1(c) requires agencies to publish the updated regulatory impact analysis on their website.
An agency must submit a newly drafted or amended regulatory impact analysis for OSBM review and approval after it has adopted the text of a proposed rule if:
- An agency adopted a rule that differs substantially from the text of a previous version of the proposed rule published in the North Carolina Register and must republish the text, as determined by the Rules Review Commission (G.S. 150B-21.2 (g)), and if the previous version of the proposed rule change required submitting a regulatory impact analysis to OSBM; or
- An agency adopted a rule that differs substantially from the text of a previous version of the proposed rule published in the North Carolina Register and must republish the text, as determined by the Rules Review Commission (G.S. 150B-21.2 (g)), and if the new version of the proposed rule change would cause the rule to require submitting a regulatory impact analysis to OSBM; or
- The Rules Review Commission objects to the proposed rule change, and the commission requests additional or revised data that changes the impact analysis or requires a new impact analysis.
An amended or newly drafted analysis should incorporate the new circumstances created by the revised proposed rule, and the agency shall submit the new or revised analysis according to the procedures outlined in this chapter.
10.9 Annual Report on Rules with Economic Impact
Each year by March 1, OSBM is required to provide a report on certain rules with economic impact to the Governor, the General Assembly, the North Carolina Association of County Commissioners, and the North Carolina League of Municipalities (G.S. 150B-21(e) and 21.28).
The report shall contain:
- A summary of the projected costs on local governments for rules adopted in the previous fiscal year, and
- A schedule of anticipated rule actions for the following fiscal year that would have a state government, local government, or substantial economic impact.
The report does not contain information on rule actions taken in the current fiscal year.
Reporting is based on the date the rules are adopted. Adoption is the rulemaking body’s final action to create, amend, or repeal the rules. Adoption occurs after the public comment period is completed and before Rules Review Commission review.
The above information is due to OSBM annually in February. OSBM will provide an information request along with template response forms to rulemaking coordinators. OSBM will compile and submit the report by March 1.
Affected Parties means those persons who will experience costs and/or benefits, whether quantified or unquantified, from the proposed rule change.
Agency means any institution, board, commission, bureau, department, division, council, or officer of the state, but does not include any agency in the legislature or judicial branch of state or local government. (See G.S. 150B-2(1a) for further description.)
Approval means the requirement that the agency must receive OSBM approval before it may publish the text of the rule change in the North Carolina Register for public comment . (See G.S. 150B-21.4.)
Baseline means the best assessment of the future under the status quo, absent the proposed rule change. It includes ongoing costs and benefits attributable to the current rule, as well as the effects of external factors like economic and demographic trends. This assessment of the baseline must account for independently enforceable NC General Statutes currently in effect and rules contained in the NC Administrative Code. Informal agency policies not adopted as rules in compliance with Chapter 150B must be excluded from the assessment of the baseline.
Certification of federal requirement means (specifically, as required under G.S. 150B-19.1.(g) the certification identifying:
- The federal law that the rule is purported to implement;
- The federal law that requires the rule or for which the rule is necessary for compliance;
- The federal law that places conditions on the receipt of federal funds.
If all or part of the proposed rule is not required by federal law or exceeds the requirements of federal law, then the certification shall state the reasons.
Local funds means receipts from non-federal and non-state governmental units and public interest organizations, including county and city funds, third-party matching funds, and in-kind contributions.
Monetize means to estimate the value, in dollars, of the effect of a rule change. For example, regulatory impact analyses might estimate the dollar value of time savings from process improvements or the value of avoided healthcare costs from emissions regulations. Both benefits and costs should be monetized to the extent possible. If full monetization is not possible, quantification and qualitative discussion still provide useful information for decision making.
Opportunity cost means the value of benefits that could have been received from an alternative that is forgone as a result of the regulatory action. The use of any resource, including a person’s time, has an opportunity cost. That opportunity cost is equal to the net benefit the resource would have provided in the absence of the regulatory action. For example, if a regulatory action adds paperwork and reporting requirements, the opportunity cost is the value of the staff time now used to comply with the added requirements.
Person means any natural person, partnership, corporation, body politic, unincorporated association, organization, or society that may sue or be sued under a common name.
Permanent rule means a rule adopted in accordance with the requirements of G.S. 150B-21.2.
Quantify means to estimate the size of a rule’s impact, showing how many units or entities are affected, or how much an outcome will change because of the rule. This is a required first step towards monetizing rule impacts.
Review before publication means the requirement that agencies proposing a permanent rule affecting local funds submit the rule to OSBM for review at least 60 days prior to publishing the rule in the North Carolina Register (G.S. 150B-21.26 )
Rule means each agency regulation, standard, or statement of general applicability that implements or interprets laws enacted by the General Assembly or Congress, or amends or repeals a prior rule. (See G. S. 150B-2(8a) for further clarification.)
Rule Change means the package of individual rules that are new or proposed for amendment that the agency is requesting to publish and adopt together. Collectively this package of rules is the new policy the agency is proposing to implement.
State funds means any moneys, including federal funds and any funds appropriated by the General Assembly or deposited in the state treasury except moneys deposited in a trust fund or agency fund as described in G.S. 143C-1-3.
Substantial economic impact means an aggregate financial impact on all persons affected of at least $1 million in a 12-month period (G.S. 150B-21.4(b1) ). Both costs and benefits must be included when estimating this financial impact. For example, a rule change with $600,000 of estimated benefits and $400,000 of estimated costs would have a substantial economic impact.
Temporary rule means a rule adopted in accordance to G.S. 150B-21.1.