2. Budget Development

Table of Contents

2.1 Governor's Authority for Budget Preparations

2.2 Biennial Budget

2.3 General Requirements of State Budgeting

2.4 Role of the Office of State Budget and Management (OSBM)

2.5 Process for Developing the State Budget

2.6 Components of the Recommended State Budget

2.7 Transition from Ratified to Certified Budget

2.8 Systems Supporting the Budget

2.1 Governor's Authority for Budget Preparation

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, 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)).

2.2 Biennial Budget - Terms and Definitions

Biennium - The two fiscal years beginning on July 1 of each odd-numbered year and ending on June 30 of the next odd-numbered year (G.S. 143C-1-1(d)(2)).

Budget - A plan to provide and spend money for specified programs, functions, activities, or objects during a fiscal year (G.S. 143C-1-1(d)(3)).

Budget year - The fiscal year for which a budget is proposed and enacted (G.S. 143C-1-1(d)(4)).

The State of North Carolina operates under a biennial (two-year) budget, with annual updates to the second year of the enacted budget. Further, according to the Constitution, total expenditures of the State 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).

North Carolina's Constitution (Article II, Sec. 11(1)) requires a session of the General Assembly in odd-numbered years. In 1973 the General Assembly began having annual sessions, meeting in short (reconvened) sessions in even-numbered years to adjust the biennial budget enacted during the previous long session.

2.3 General Requirements of State Budgeting

2.3.1 Information to Support State Budgeting

State agencies and non-state agencies (defined in G.S. 143C-1-1(d)(24) and (d)(18)) are required to submit to the Director any information requested 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 of the Budget is also charged with coordination of efforts to gather and analyze a variety of data that supports state budgeting (G.S. 143C-2-2).

2.3.2 All Agencies Included in Budget

All state agencies are included in the Governor's recommended state budget. The legislative and judicial branches are required to provide to the Director an estimate of financial needs 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 uniform accounting classifications (chart of accounts) adopted by the State Controller. Budget requests are submitted in accordance with detailed budget instructions that are issued biennially by OSBM.

2.3.3 University of North Carolina Unified Request

The Board of Governors of the University of North Carolina is required to submit to the Governor a unified budget request for all of the constituent institutions (G.S. 143C-3-3(b)). This request shall include requests for repairs and renovations funds, capital funds, and information technology. The continuation portion of 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 UNC 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, then Article 8 should be followed.

2.3.4 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.

2.3.5 Governmental and Proprietary Funds Included in Budget

Pursuant to G.S. 143C-3-5(d), the Governor's recommended state 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. Funds of the University of North Carolina which are exempted in G.S. 143C-1-3(c) shall not be included.

2.3.6 Block Grant Plans

Pursuant to G.S. 143C-7-2, the Secretary of each agency that receives and administers federal block grant funds must prepare and submit to the Director of the budget the agency's block grant plan. Plans are required annually. The Director establishes a time and procedure for submitting plans, and is required to submit them to the General Assembly not later than:

  • February 28 in odd-numbered years.
  • April 30 in even-numbered years.

Since block grant plans are prepared and approved annually, whereas the recommended state budget is prepared, submitted and approved on a biennial basis, the procedures and timelines for submitting block grant plans to the Director of the budget are typically handled outside of the biennial budget instructions, often through memorandum to the department heads and chief fiscal officers of state agencies.

2.4 Role of the Office of State Budget and Management (OSBM)

The role and function of OSBM in budget development is to define the budget process and to prepare and present the Governor's budget recommendations. In creating this financial plan, which reflects the priorities of the State and balances needs with available resources, OSBM considers a number of factors that impact the budget. OSBM provides technical assistance and analysis to state agencies in developing budget requests, and to the Governor and other decision-makers in prioritizing requests and final recommendations.

2.5 Process for Developing the State Budget

OSBM emphasizes a budget process that, while operating on a two-year cycle, is much broader in scope and focused on long-term outcomes. The key steps in the budget process are:

  1. Distribution of budget instructions to state agencies for submitting budget requests.
  2. Update of agency performance information and development of agency requests.
  3. Preparation of the Governor's recommended budget.
  4. Release of the Governor's recommended state budget.
  5. Legislative review and passage of the final state budget.

2.5.1 Instructions to State Agencies for Submitting Budget Requests

Before a legislative session in even-numbered years, OSBM develops and issues instructions to state departments and institutions for making biennial budget requests. The instructions detail the concepts of the base, change, and capital budgets as they are to apply to the biennial budget under preparation. (These concepts or components of the State budget are discussed in Section 2.6). Instructions are provided for submitting performance information and for meeting special requirements for all information technology requests, as set forth by the state Chief Information Officer (CIO) and the Department of Information Technology.

Administrative policies and procedures may vary from one biennium to the next, so new instructions are issued for each budget. Largely, however, most budget development guidelines remain relatively constant from one biennium to the next.

Budget instructions generally include:

  • Timeline and deadlines for budget submissions;
  • Forms and supporting schedules to be used;
  • Allowable increases;
  • Requirements for supporting schedules;
  • Narrative justifications;
  • Priority rankings;
  • Statistics;
  • Required performance information; and
  • Requested special provisions or statutory changes.

OSBM also distributes information to be considered when preparing budget requests, such as:

  • Demographic projections;
  • Economic trends;
  • Inflationary trends; and
  • Implications of relevant administrative rulings, court decisions, and federal and state legislation that may need to be considered in preparing the budget requests.

Instructions also include information about the Governor's policy priorities and, if pertinent, limitations on budget growth.

The most recent version of Instructions for Preparation of the Recommended State Budget and the Biennial State Plan can be obtained by contacting OSBM or by visiting the website at http://www.osbm.nc.gov.

2.5.2 Limitations on Budget Growth

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. These limitations are factors that must be considered by OSBM in developing the Governor’s budget recommendations.

2.5.3 Development of Agency Budget Requests

As an initial step in the budget process, departments should adopt broad goals and strategies that provide the context for long-term policy formation and budgetary decision-making. These goals should describe what departments hope to achieve over the next three to five years and should establish how plans will be implemented by outlining specific strategies. Development of goals and strategies should be in compliance with G.S. 143B-10(h), Executive Order No. 3, and the performance management information discussed in Section 2.6.3 below.

Departments are encouraged to have each division or unit prepare the initial division-level budget for programs they are responsible for operating. This will provide significant input into the budget process and the justification of each request. Emphasis in this process should be on:

  • Identifying areas of potential cost savings through productivity increases or program modifications;
  • Identifying realignments of existing resources;
  • Identifying alternative levels of improved or increased program services;
  • Identifying and preparing quantifiable program data measures, and objectives to support the budget request;
  • Developing prioritized requests for new or increased funding for operations and capital improvements; and
  • Identifying performance measures that are linked to agency services.

Departments are encouraged to conduct their own internal budget hearings to refine and prioritize budget requests. This prioritization should be governed by the goals and strategies discussed above.

OSBM budget analysts work with agency and university campus budget officers regarding acceptable levels for continuation budgets and provide technical assistance and guidance to agencies in developing budget requests. Assistance is available from OSBM management analysts for agencies experiencing unusual growth that will affect their budgets, or in areas related to meeting mandates within budgetary limits.

2.5.4 Preparation of the Governor’s Recommended Budget

During this stage of budget development OSBM reviews the agency budget requests. At the same time, revenue projections and tax policy are being finalized to determine the level of funding 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 a department/agency or institution submits its base, change and capital improvement budget requests to OSBM in the early fall of even-numbered years. OSBM review and consideration of budget requests includes the evaluation of agency requests for adherence to budget preparation guidelines, technical accuracy, and funding needs. The requests are studied in detail by OSBM staff, questions and concerns are resolved with the agencies, and changes are made as necessary for accuracy and completeness. Budget requests are then forwarded to the Governor who will review them in the context of the Governor’s goals and priorities. The Governor or Governor’s appointee may meet with senior departmental managers during this process.

The final recommended budget results from meetings between the Governor and OSBM staff. At these meetings, economic and revenue forecasts are finalized and decisions are made as to all components of the budget (base, change, and capital improvements). Balancing the budget could require significant reductions in the base budget, limiting the expansion of programs, capital improvement projects, or other budget requests, and making changes to state tax structures.

2.5.6 Required Elements of the Governor's Recommended State Budget

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 Recommended State Budget, presented in a format determined by the Director, which sets forth goals for improving the State, with recommended expenditure requirements, funding sources and performance information for each state government program and each proposed capital improvement. It must distinguish base budget requirements, program reductions and eliminations, program expansions, new programs, and all proposed capital projects in the context of the Six Year Capital Improvements Plan.
  • A Budget Support Document providing line item detail corresponding to the Recommended State Budget for each budget code and program or purpose. It must:
    1. Use the Uniform 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 for each year of the biennium under request; proposed expenditures and receipts for each year of the biennium under request; and proposed increases and decreases.
    2. Provide detailed information on recommended capital improvements expenditures.
    3. Project accurate receipts, fund balances, expenditures and the existing or proposed appropriations to support them.
    4. Show line-item detail at no less than the two-digit level in the Uniform Chart of Accounts.
    5. 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 Appropriations Act and a Capital Improvements Appropriations Act supporting the Governor’s budget recommendations in order to make appropriations for each year of the biennium under request.
  • 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 upon 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 documentation and the same level of accounting detail as is required in the first year. These recommended changes are presented as amendments to the enacted state budget and incorporated in a recommended Current Operations Appropriation Act and a recommended Capital Improvements Appropriations Act.

Short Session Budget adjustments to the biennial budget include those for operating requirements of programs, such as increases to reflect changes in the enrollment or population currently served by public schools, prisons and entitlement programs. Adjustments are made to program requirements and financial support based on a new economic and inflationary analysis.

2.5.7 Budget Message

G.S. 143C-3-5(f) requires the Governor’s published budget recommendations to be accompanied by a budget message that explains the goals and important features of the budget, the estimated revenue availability, the reasons for changes from the previous biennium or fiscal year, and the anticipated sources of funding for major increases in the continuation and expansion items. 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 State Budget

 

Once the budget is finalized, the budget documents are printed and the budget and supporting information is submitted to the General Assembly. At this stage of budget development, the goal is to ensure that the recommended state budget is fully understood by all interested parties, particularly the public and the legislature. The Governor’s recommended state budget is the starting point for legislative consideration of the budget.

The Governor's recommended budget is formally presented along with the budget message during the opening days of the General Assembly's session in the winter of the odd-numbered years. The recommended budget document is available to the public at that time.

2.5.10 Legislative Review and Passage of the Final State Budget

 

Legislative review of the budget begins once the 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.

The subcommittees during the past sessions included:

  • Education
  • Health and Human Services
  • Agriculture, Natural and Economic Resources
  • Justice and Public Safety
  • General Government
  • Capital Improvements
  • Transportation
  • Information Technology.

(In addition to the Appropriations Committee, budget bills are referred to the Finance Committee and committees on Pensions and Retirement. The 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 considers 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 will debate any changes to state retirement rates proposed in the budget bills.)

Traditionally each legislative chamber reviews each component of 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 the legislative rules for enactment of 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 the procedures in the event that the General Assembly fails to 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 for funding. The Governor of North Carolina has the authority to veto the legislatively approved budget.

2.6 Components of the Recommended State Budget

The State budget is made up of funds used to operate existing or new government programs and funds for capital improvements. In developing the Governor's recommended state budget, the budget (and the development process) is considered in three parts: development of the base budget, the change budget, and the capital improvements budget. All are constructed using the North Carolina Accounting System Uniform Chart of Accounts and each has unique elements and information requirements. Budget instructions fully explain the steps for development of each component. Below is summary explanation of each component.

2.6.1 Base Budget

The base budget 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 Worksheet I should also reflect the removal of nonrecurring items and include the correct level of receipt-supported activities.

The base budget is prepared jointly by the budget analyst and appropriate agency personnel. A printout called the Worksheet I is the starting point for the development process. This worksheet is generated from the Integrated Budget Information System (IBIS). The Worksheet I includes prior year actual expenditures, current year certified and authorized budgets, and recommended adjustments for the biennium under request. The budget is constructed in line-item detail using the Uniform Chart of Accounts.

2.6.2 Change Budget

The change budget refers to the establishment of new and/or pilot programs and the expansion of existing programs and salary increases and/or benefits for teachers and state employees. The expansion request also may include:

  • Enrollment adjustments for public schools, community colleges, and the University of North Carolina.
  • Inflationary adjustments to categories of ongoing operational expense (for example, utilities and information technology contracts).
  • 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.
  • Major (nonrecurring) equipment (other than replacement, which is typically a continuation budget adjustment).

The change budget is prepared by the agency on a form called the Worksheet II. The Worksheet II is available in IBIS.

During this phase of budgeting, 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 reductions.

2.6.3 Strategic Planning

Strategic planning is a key part of the budget development process and is a required part of all agencies’ budget submissions. As directed by G.S. 143C-3-5, the Governor is required to develop budget recommendations for the upcoming biennium that include not only recommended expenditure requirements and funding sources, but also performance information for agencies. Strategic plans should clearly align with agency budget requests and provide performance information to support the agency's budget priorities.

An agency strategic plan provides expanded performance information in an effort to 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, this information is designed to improve funding, planning, and management decisions in state government. Strategic plans are comprised of the following components:

  • Agency Executive Summary: A high-level summary of the strategic plan that may also include pertinent information such as recent accomplishments, challenges being faced, and the envisioned future of the agency. The agency's executive summary presents information about who it serves, what it delivers, and what steps it is taking toward achieving its mission.
  • Mission Statement: A description of an organization's basic purpose (its fundamental reason for being) that concisely identifies what the organization does, why, and for whom.
  • Vision Statement: A forward looking statement of what an organization can and should be in the future that articulates what an ideal outcome would look like.
  • Agency Values: A succinct list of terms and definitions of values and principles that govern behavior within an agency.
  • Goals: A broad statement of what a department or institution wants to achieve over a long period of time. Goals explain how an agency will meet its mission.
  • Objectives: A measureable, time-based statement of intent that is directly linked to a goal.
  • Strategies and Initiatives: A statement that describes the actions an agency will take to achieve its objectives.
  • Measures of Success: A quantifiable performance measure (also known as a performance indicator) used to track the progress of strategies and initiatives for accomplishing organizational goals.

For more information on the elements of an agency strategic plan please see the strategic planning memo, guidelines, and template documents found on the OSBM website

2.6.4 Information Technology (IT)

According to G.S. 143B-1320(a)(11), "information technology" 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."

IT is an increasingly important part of state government programs and operations. A request for new or expanded funding for information technology is considered through the change budget process. The Governor is required in G.S. 143C-3-5(b)(4) to 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 Recommended State Budget.

2.6.5 Requirements for IT Budget Requests

In addition to providing the requisite information in Worksheet II forms, 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, the opportunities for technology sharing, the 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 the 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, the opportunities for technology sharing, the requirements of the General Statutes, and any other factors relevant to the analysis.For acquisitions, an explanation of the method by which the acquisition will be financed.

2.6.6 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 of a department or institution.

The establishment of 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.

2.6.7 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 needs estimates to the Director of the Budget by September 1 of even-numbered years G.S. 143C-8-4. Needs estimates are submitted using Worksheet III (the first year of the six-year needs estimate is considered an agency’s official request). Transportation infrastructure is not included in this process. Detailed procedures for submitting Worksheet III are outlined in the biennial budget instructions provided by OSBM.

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).

2.6.8 Repair and Renovation Requests must include:

  • A description of current deficiencies (FCAP) 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); and
  • An identification of any receipts available to support the project.

2.6.9 New Capital Project Requests 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; and
  • An estimate of revenues to be derived from the project for the first five years of operation.

2.6.10 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 Assessments 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 (i) preservation, adequacy and use of existing facilities, (ii) health and safety considerations, (iii) operational efficiencies, and (iv) projected demand for governmental services (G.S. 143C-8-3).

Like the Needs Assessment, the Capital Improvement Plan is prepared in two parts. The Repair and Renovations part of the Capital Improvement Plan must identify projects in priority order by State agency and shall specify the means of financing. The New Capital Projects part of the capital plan must contain (i) estimates of real property acquisition, construction, or rehabilitation costs; (ii) means of financing; (iii) an estimated schedule to complete the project; and (iv) a schedule of any debt service obligations.

2.6.11 Capital Budget

The Director of the Budget recommends capital improvement expenditures for the upcoming fiscal year in the Capital Budget. Capital projects recommended in the first year of the six-year Capital Improvement Plan are known as the Recommended Capital 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 the following:

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.

2.6.12 Short Session Capital Budget Development>

The six-year Capital Improvement Plan is updated after the Regular Session of the General Assembly to reflect actual capital authorizations. Agencies are invited to submit Worksheet IIIs for emergency capital needs that have emerged since the development of the capital plan. These Worksheet IIIs and the capital plan developed for the Regular Session are used to develop the Recommended Capital Budget for the Short Session of the General Assembly.

2.7 Transition from Ratified to Certified Budget

G.S. 143C-1-1 defines Certified Budget as the budget as enacted by the General Assembly including adjustments made for (i) distributions to State agencies from statewide reserves appropriated by the General Assembly, (ii) distributions of reserves appropriated to a specific agency by the General Assembly, and (iii) organizational or budget changes directed by the General Assembly but left to the Director to carry out.

Once the General Assembly enacts the budget and it is signed into law by the Governor, it becomes the spending plan for the State, against which actual revenue collections and expenditures are monitored.

The budget ratified by the General Assembly is certified to each agency by OSBM. The Certified Budget is prepared on the Integrated Budget Information System (IBIS) and is issued to the agency. When the budget is an operating budget, a Certified Budget (BD 307) is issued. When the capital budget is certified, a Capital Improvement Certified Budget (BD 306) is issued. Information from the Integrated Budget Information System (IBIS) is transferred automatically to the North Carolina Accounting System (NCAS).

2.8 Systems Supporting the Budget

2.8.1 North Carolina Integrated Budget Information System

The North Carolina Integrated Budget Information System (NC IBIS) is a centralized, web-based system for North Carolina state government budgeting and performance management. IBIS provides a common workspace environment for state agencies and OSBM to perform budget planning, development and execution activities.

IBIS assists the budget development process by providing state agencies and departments with the electronic forms required to develop their budget requests, as well as providing requested performance information. IBIS also includes applications for the Governor to prepare budget recommendations to the General Assembly.

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.

IBIS can be accessed through the OSBM website.

User guides and online tutorials are available through the OSBM website or by contacting OSBM.

2.8.2 North Carolina Accounting System (NCAS)

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. The North Carolina Accounting System (NCAS) is an accounting system that facilitates internal control over fiscal operations and provides a structure for recording accounting data for the purpose of preparing standardized and meaningful financial statements and reports. NCAS accommodates various management reporting requirements, including budget requirements.

NCAS is a comprehensive accounting system with many types of accounting classifications for various financial reporting requirements. The diversity of the accounting functions within the department will dictate how many classifications are used. These various classifications are the heart of the system and allow for the posting of accounting transactions for later retrieval and reporting.

The use of a Uniform Chart of Accounts makes it possible to summarize expenditure data. As a result, total dollars budgeted and expended for services and commodities for the entire operation of the State of North Carolina can be determined.

Equally as important as the actual accumulation of dollar amounts is the common terminology that the chart produces. By having definitions for the various expenditure and revenue objects, much doubt is removed when questions arise regarding what is included in an object. Comparability between agencies becomes more meaningful.

The Office of the State Controller has prepared the North Carolina Accounting System Information Guide that describes how to record transactions and develop reports.

The NCAS Information Guide is available on-line

Chart 1

Biennial Budget Development Process (for illustrative purposes only)

The budget development timeline shown below illustrates the process that was actually used to develop the FY 2009-11 budget.

Budget Development Timeline Chart

Budget Development Index

All agencies included in the Budget

Biennial Budget terms and definitions

Block Grant Plans

Budget Message

Capital Improvement Budget

Certified Budget

Constitutional Authority

Continuation Budget

Development of Agency Budget Request

Executive review

Expansion Budget

Governmental and Proprietary funds included in the budget

Information Technology

Information to Support State Budgeting

Instructions to State Agencies for Submitting Budget Request

Integrated Budget Information System (IBIS)

Legislative Review and Passage of the Final State Budget

Limitations on Budget Growth

Non-State Entities

North Carolina Accounting System

Preparation of the Governor's Recommended Budget

Required Elements of the Governor's Recommended State Budget

Required timeline when Administrations change

Release of Governor's Recommended State Budget

University of North Carolina Unified Request