3. Budget Execution

Table of Contents

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 General Provisions for Budget Execution

3.6 Amending the Operating Budget

3.7 Maintenance of a Balanced Budget

3.8 Establishment of a Budget Code or Center

3.9 Information Technology Budget Policies and Procedures

3.10 Capital Improvements Budget Policies and Procedures

3.11 Contingency and Emergency Fund

3.12 Federal Funds Budget Policies and Procedures

3.13 Intra State and Non-state Funds

3.14 Disbursement of Special Appropriations

3.15 Summer School Accounting and Reporting Guidelines - Higher Education Institutions

 

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

The role and function of OSBM in budget execution 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 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. OSBM provides technical assistance and guidance to state agencies in carrying out their delegated responsibilities related to budget execution. This can include assistance from OSBM management analysts who can provide outside expertise to ensure agencies’ organization and operations are streamlined, cost-effective, and able to meet requirements.

G.S. 143C-6-1(a) provides that all appropriations of State funds made to State 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 State agency the amount appropriated to it for each program and each object code from all governmental and proprietary funds. The certified budget for each State agency shall reflect the total of all appropriations enacted for each State agency by the General Assembly in the Current Operations and Capital Improvements Appropriations Act, UNC Self-Liquidating Projects, and any other act affecting the State budget. 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)).

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 (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. The budget enacted by the General Assembly will be put into place for each agency through the budget certification process. Items in (i), (ii), and (iii) may be accomplished on a type 11 budget revision. Refer to section 3.6.4 for additional information on budget revisions.

3.2.2 Authorized Budget

The authorized budget (adjusted certified budget) is composed of the certified budget plus allowable internal budget revisions (type 14 budget revisions) and adjustments that must be approved by OSBM (type 12 budget revisions). This is the working budget and is reflected on the monthly budget report (BD 701). Refer to section 3.6.5 for additional information.

 

3.3 The Total State Budget by Source of Funds

3.3.1 Definition of State Funds

G.S. 143C-1-1(d)(25) defines State funds as "any moneys including federal funds deposited in the State treasury except moneys deposited in a trust fund or agency fund as described in G.S. 143C-1-3."

3.3.2 General Funds

The general fund is made up of tax revenues (non-transportation) such as sales tax, individual income tax, corporate tax, insurance premium tax, and franchise tax. In addition, the general fund includes non-tax revenues such as income from the State Treasurer’s investments, fees received from the court system, miscellaneous fees charged for state services, transfers from the highway fund and the highway trust fund, and Medicaid disproportionate share receipts.

3.3.3 Highway Funds

The highway fund/highway trust fund is comprised of revenues from transportation-related activities. Generally, these revenues do not respond to inflationary changes as do the general fund revenues. Highway fund revenues include the highway related motor fuel tax, motor vehicle tax, motor vehicle registration fees, driver’s license fees, and non-tax revenues such as income from the State Treasurer’s investments.

3.3.4 Federal Funds

Federal funds are received directly by the State to support various programs. Examples would include: Medicaid, Temporary Assistance to Needy Families, Elementary and Secondary Education, highway construction, Low Income Energy Assistance Block Grant, Community Development Block Grant, Social Services Block Grant, Child Nutrition in Public Schools, Child Care and Development Fund (CCDF), Public Health block grants, and WIC (Women, Infants and Children) Nutrition Program, along with a host of other federally funded programs.

3.3.5 Departmental Receipts

Departmental receipts come from a variety of State 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 State agencies in the course of performing their governmental functions, that are applied to the cost of a program administered by the State 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.

Note: Although classified as departmental receipts, federal funds are outlined in section 3.3.4 because they represent a significant portion of the budget and are a major source of revenue for the State.

 

3.4 Structure of the Budget

3.4.1 Fund Types (Budget Codes)

The Office of State Budget and Management (OSBM) in consultation with the Office of State Controller (OSC) assigns a five digit number based on the budgetary necessity and classification into the proper fund type for budgetary reporting. Pursuant to G.S. 143C-1-3 the State Controller shall account for State resources through use of fund types (budget codes) which are described below. The Controller may not establish a fund type that differs from the listed fund types unless the Governmental Accounting Standards Board (GASB) has approved the use of the different fund type. However, if a conflict exists between a description used in this section and the definition of the corresponding fund type issued by the Governmental Accounting Standards Board, it is presumed that the definition issued by the Governmental Accounting Standards Board shall prevail. Additionally, the Controller shall keep the total number of budget codes to the minimum number practical.

If an agency needs to establish a new budget code, please review Establishment of a Budget Code, which appears later in the Budget Execution section.

Governmental Funds

  1. Capital Projects Funds – Accounts for financial resources to be used for the acquisition or construction of major capital facilities other than those financed by proprietary funds or in trust funds for individuals, private organizations, or other governments. Capital outlays financed from general obligation bond proceeds should be accounted for through a capital projects fund.
  2. Debt Service Funds – Accounts for the accumulation of resources for, and the payment of, general long-term debt principal and interest.
  3. General Fund – Accounts for all financial resources except those required to be reported in another fund.
  4. Special Revenue Funds – Accounts for the proceeds of specific revenue sources, other than trusts for individuals, private organizations, or other governments or for major capital projects, that are legally restricted to expenditure for specified purposes.
  5. Permanent Funds – Accounts for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs.

Proprietary Funds

  1. Enterprise Funds – Accounts for any activity for which a fee is charged to external users for goods or services. Activities are required to be reported as enterprise funds if any one of the following criteria is met. Each of these criteria should be applied in the context of the activity's principal revenue sources.
    1. The activity is financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity.
    2. Laws or regulations require that the activity's costs of providing services, including capital costs, be recovered with fees and charges rather than with taxes or similar revenues.
    3. The pricing policies of the activity establish fees and charges designed to recover its costs, including capital costs.
  2. Internal Service Funds – Accounts for any activity that provides goods or services to other funds, departments, or agencies of the primary government and its component units, or to other governments, on a cost-reimbursement basis. Internal service funds should be used only if the reporting government is the predominant participant in the activity. Otherwise, the activity should be reported as an enterprise fund.

Agency and Trust Funds

  1. Agency Funds – Accounts for resources held by the reporting government in a purely custodial capacity. Agency funds typically involve only the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments.
  2. Investment Trust Funds. – Accounts for the external portion of investment pools reported by the sponsoring government.
  3. Pension and Other Employee Benefit Trust Funds. – Accounts for resources that are required to be held in trust for the members and beneficiaries of defined benefit pension plans, defined contribution plans, other post employment benefit plans, or other employee benefit plans.
  4. Private-Purpose Trust Funds – Accounts for all other trust arrangements under which principal and income benefit individuals, private organizations, or other governments.

Designation – If State resources are designated by law as a fund or an account within a fund and there is a conflict between the legal designation and the appropriate accounting designation of the State resources, then the Controller shall determine the appropriate designation of the State resources based on the intended use and financial treatment of the State resources as set out in the law establishing the fund or account. The Controller shall determine the fund type of all separate funds and account for them accordingly.

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, 116-44.4, 116-68, 116-220, 116-235 are exempt from all requirements of budget execution, with the exception of 1) budget execution requirements of Article 8 concerning Capital, of Chapter 143C of the General Statutes and 2) 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 Number)

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 the North Carolina Accounting System (NCAS), the fund/purpose is the first four positions of the center number. The last eight positions of the center number are available to the agency for defining responsibility areas or alternate reporting needs. These eight positions will accommodate reporting needs currently associated with Responsibility Cost Center (RCC), Federal Responsibility Center (FRC), Program number and District. All twelve positions of the Center are not required for building an agency's Center key. Only the first four positions are required. Additional positions of the Center structure should be used as necessary to define organization, funding source, project number, program, grant identifier, and other reporting needs.

3.4.3 Object or Line Item (Account Number)

As defined by G.S. 143C-1-1(d)(20), an object or line item is an expenditure or receipt in a recommended or enacted budget that is designated in the Budget Code Structure of the North Carolina Accounting System Uniform Chart of Accounts prescribed by the Office of the State Controller. Also known as an account number, the object or line item describes the purpose of expenditure, the type of revenues received, and the balance sheet accounts required for Generally Accepted Accounting Principles (GAAP).

Actual expenditures are to be recorded and reported according to the account numbers designated in the North Carolina Accounting System (NCAS) at the appropriate expenditure account number level. Actual receipts are to be recorded and reported according to the account numbers designated in NCAS at the appropriate receipt account number level.

More information about the State accounting system is available at the Office of State Controller web page. A brief description of each group of expenditure and revenue accounts is outlined below.

3.4.4 Expenditure Accounts

The following major account groups for expenditure/object of expenditure/line item (53 XXXX) are recognized, as defined by OSC:

  • 1XXX - Personal Services (salaries and benefits) -- Expenditures incurred for services rendered by permanent and temporary employees and the related fringe benefits. Special employee awards and settlements, as well as compensation to board members, are also included in this expenditure group. For general government agencies, the funding source should dictate which category (Undesignated, Appropriated or Receipts) should be used to record these expenditures. Undesignated should be used when a cost allocation process allocates the expenditures to the appropriate funding source designation. For universities, this allocation is not required.
  • 2XXX - Purchased Services -- Expenditures incurred for services required to ensure the ongoing operation of State government facilities and government services. These services may be provided by external commercial firms, other state agencies, and/or other divisions within the same organization. Services provided within the State entity paid through a state payroll system would not be charged to this account group (e.g., Dual Employment-Account 1450). Also included in this account group are reimbursements for travel costs related to official State business.
  • 3XXX - Supplies -- Expenditures incurred for the purchase of supplies or materials expected to be consumed within the normal course of operating a department, facility or institution and which are generally recurring in nature. This account group should exclude purchases of tangible items which are more properly classified in the Property, Plant and Equipment group.
  • 4XXX - 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. Equipment should possess both of the following characteristics: it is not consumable or expendable and has an expected useful life of longer than one year. This property may require entry into the fixed asset system if the capitalization criteria are met.
  • 5XXX - Other Expenses and Adjustments -- Expenditures incurred for other miscellaneous operational costs such as legal or permit costs, pension payments, debt service, depreciation/amortization and other financial report adjustments.
  • 6XXX - Aid and Public Assistance -- Allocations or distributions of funds to direct recipients, providers or other agencies for some designated program, assistance or special project.
  • 7XXX - 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 537XXX accounts; these accounts should only be used for budget purposes to post to the related 737XXX and 787XXX budgetary accounts.
  • 8XXX - Intragovernmental Transaction -- This account group consists of operating transfers, reimbursements, residual equity transfers and transfers of appropriations.

3.4.5 Revenue Accounts

  • 1XXX Tax Revenues -- Revenues generated from taxes levied in accordance with general statutes.
  • 2XXX 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.
  • 3XXX 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.
    • Program Revenue – Investment earnings that are legally restricted for use in specific functions or programs.
    • General Revenue – Investment earnings that are not legally restricted for use in specific functions or programs.>
  • 4XXX Sales, Service and Rentals -- Revenue collected from the sale of services, rentals, or physical property.
  • 5XXX Fees, Licenses, and Fines -- Revenue collected for the issuance of fines, permits, licenses, or fees from licensed activity, in payment for certification from the State or in payment of a violation in state law.
  • 6XXX Contributions and Donations -- Included are gifts, donations and contributions received from private organizations and individuals. Also included are employer contributions to the State unemployment compensation fund, and employer and employee contributions made to one of the retirement systems, Death Benefit Plan, or the Disability Income Plan, all of which are administered by the State.
  • 7XXX Miscellaneous -- Revenues from sources not classified elsewhere, such as sale of items not normally held for resale, collections and recoveries.
  • 8XXX Intra-Governmental Transactions -- This account group consists of operating transfers, residual equity transfers, and transfers of appropriations.

 

3.5 General Provisions for Budget Execution

3.5.1 Budget Execution Overview

After OSBM issues a certified budget at the beginning of each fiscal year, OSBM and departments begin adjusting the budget for changes authorized by the General Assembly and for changes that have occurred since the finalization of the base budget during budget development. With the exception of internal budget revisions left to departments, 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.

3.5.2 Authorizations for Budget Adjustments

When the budget is certified on Form BD 307, the agency must set up a certified and an identical authorized 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.

G.S. 143C-6-4 outlines the appropriate circumstances when a department or 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 funds (purpose or programs).

3.5.3 Budget Authority Prior to Expenditure of Funds

Budget revisions must be requested 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 overexpended accounts. Pursuant to G.S. 143C-6-8, purchase orders, contracts, salary commitments, and any other financial obligations by State 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 State 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 BD 701. State agencies and universities shall not make direct entries into NCAS as a way to correct a budget revision that was not posted correctly.

3.5.4 Changes to Expend All Available Funds

According to G.S. 143C-6-2(a) appropriations are maximum and conditional and can only be accessed and used by a State agency and the UNC system 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.

3.5.5 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 NCSSM designated as special responsibility constituent institutions (SRCI) pursuant to G.S. 116-30.1 and the UNC 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 UNC 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 UNC Policy Manual published by UNC-General Administration (UNC-GA). All budget codes within the UNC system are required to enter a type 14 budget revision in OSBM’s budget revision system to align the code’s internal and OSBM’s official 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 UNC System President are permitted by statute to carry forward up to two and one-half percent (2 ½ %) of the unexpended fiscal year-end General Fund appropriation (also known as "management flexibility carry forward").

Universities may not budget or adjust receipts, distribute reserves, transfer appropriation to another budget code, or process any action that would have an impact on the certified budget through a flexibility revision as these actions must be approved by OSBM. OSBM or UNC-General Administration can provide additional information.

3.5.6 Two-Year Revisions

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).

3.5.7 Repeat Revisions

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 the Integrated Budget Information System for use in the new biennium. Repeat revisions completed after the base budget (Worksheet I) is finalized should be repeated until it is included in the base budget for the next biennium.

3.5.8 Budget Revision Review

Departments and agencies should review all revisions annually to ensure that revisions are repeated or included in the development of the base budget as needed. See Budget Instructions for additional information and refer to the Budget Revision user guide for technical assistance using the Integrated Budget Information System.

3.5.9 Receipts of Departments and Institutions

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, state 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.

3.5.10 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, but are a decrease of expenditures and should be handled in accordance with policies established by the Office of the State Controller (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.

3.5.11 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 the Office of the State Controller.

3.5.12 Disbursing Accounts with State Treasurer

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 Office of State Controller when requested through the Cash Management Control System.

 

3.6 Amending the Operating Budget

3.6.1 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 are defined under Section 3.4.1 of the State Budget Manual and 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 will be certified by OSBM.

3.6.2 Revisions for Agency and Trust Funds

Budget requests for Agency and Trust fund codes generally do not require OSBM’s approval. However, state agencies and universities must continue to:

  • Maintain budgets. The UNC 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.
  • Process internal budget revisions (type "14").
  • Use the monthly report on the budget (BD 701) showing the certified, authorized, and actual expenditure columns. The UNC 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 the Office of State Budget and Management for approval.

3.6.3 Budget Revision Requirements

Budget revisions are submitted to OSBM through the Integrated Budget Information System (IBIS) developed and maintained by OSBM. Agencies must use this system to process any revisions to their certified or authorized budgets. The process and procedures necessary to use IBIS have been incorporated into user guides that are available on the IBIS website. Any agency that has questions regarding the use of IBIS should consult with the OSBM budget analyst assigned to their agency at (919) 807-4700. OSBM reviews and approves all budget revisions that require an approval level outside of the agency.

Requests by agencies 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, non-recurring or time-limited. If time-limited is selected, an end date for the action must also be entered.
  • 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.
    • 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.
    • Overrealized 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 funds/purpose codes.
    • Program Restructure - This budget revision is to identify those that are solely for the purpose of aligning the budget for program budgeting (refer to OSBM memo dated 6-15-10).
    • 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 3.9 Information Technology Budget Policies and Procedures, provide the URL to the system entry in the Touchdown System. The Judicial Branch, General Assembly, individual community colleges, and UNC system are exempt from the IT regulations of Senate Bill 991.

3.6.4 Revising the Certified Budget

In order to reflect the actions of the General Assembly, revisions may be made in the certified budget only for the following three purposes as defined by G.S. 143C-1-1(d)(7):

  • 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

Requests for revisions to the certified budget for any of these reasons must be submitted to OSBM through IBIS. All revisions to the certified budget are identified by the six-digit budget reference number beginning with "11" that is automatically generated by the Integrated Budget Information System for each budget code beginning July 1 of the first year of each biennium. All budget revisions changing the certified budget also change the authorized budget.

3.6.5 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 1XXX 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 UNC system may be made as provided in Article 1 of Chapter 116 of the North Carolina General Statutes. Refer to section 3.5.5 for further guidance.

Some of the changes in the authorized budget must be approved by OSBM. Those budget revisions are identified with a six-digit number beginning with "12." Other changes may be made by a budget revision processed internally by the department; these are numbered beginning with "14." The distinction between these will be 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:

  1. An object or line item within a purpose or program (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.
  2. A purpose or program if the overexpenditure of the purpose or program is:
    1. Required by a court or Industrial Commission order;
    2. Authorized under G.S. 166A-19.40(a) of the Emergency Management Act; or
    3. Required to call out the National Guard.
  3. A purpose or program not subject to section (2) above, but only in accordance with the following restrictions:
    • the overexpenditure 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 overexpenditure is authorized on a nonrecurring basis; and,
    • total requirements for a State department shall not exceed their certified budget's requirements for the fiscal year by more than three percent (3%) 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 overexpenditures approved by the Director that fall 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 3.6.3) 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 funds
  • Consolidating funds and/or budget codes
  • Realigning within or between funds that impact the grant-in-aid (6XXX) or intra-agency transfer (8XXX) object classes
  • Establishing a new position.

3.6.6 Internal Budget Revisions

Agencies are delegated authority by OSBM to make nonrecurring changes within the authorized budget of each fund/purpose between and among expenditure account object classes 1XXX to 5XXX. All internal adjustments must be made in IBIS through an internal type "14" budget revision. These revisions are automatically assigned a reference number by IBIS beginning with "14" and continuing sequentially through the biennium for a budget code (Type 11, 12 and 14 share the same sequential numbering scheme for each budget code). Agency budgets should not contain over-expended accounts; therefore, revisions must be processed prior to over-expenditure. (Note: An internal revision is created in IBIS as a Type 14 revision and cannot be changed to a Type 12 revision.)

For guidance and restrictions on internal budget revisions that realign lapsed salary, see section 3.6.7. For all other internal revisions, the following adjustments are prohibited:

  1. changes to budgeted receipts;
  2. recurring realignments;
  3. realignments that impose obligations on the State beyond the end of the fiscal biennium;
  4. realignments between funds/purposes;
  5. realignments between different funding sources (e.g., general/highway fund appropriated accounts cannot be realigned with accounts supported through receipts); or
  6. realignments from operating accounts (2XXX to 5XXX) to the personal services (1XXX) object class.

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), transfers or changes within the authorized budget of the UNC system may be made as provided in Article 1 of Chapter 116 of the North Carolina General Statutes. Refer to section 3.5.5 for further guidance.

3.6.7 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 when requested.

When a Type 12 budget revision may be used: Lapsed salary may only be used for the 531XXX through 535XXX object classes, subject to the restrictions below. Prior approval from OSBM is required for any transfers of lapsed salary between funds/purposes or transfers outside of the 531XXX through 535XXX object classes.

When a Type 14 budget revision may be used: For transfers within a fund/purpose and within the 531XXX through 535XXX object classes only, agencies are authorized to move lapsed salary within a 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:

  1. Agencies may prospectively proactively budget up to 50% 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% projected may be expended once it has been generated.
  2. 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.
  3. 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).
  4. When lapsed salary is used for contractual services, the contract shall not extend beyond the fiscal year.
  5. Lapsed salary shall not be used to establish new positions (including time-limited positions), or to provide salary increases.
  6. The scope of a purpose/program shall not be increased through the use of lapsed salary.
  7. All lapsed salary revisions must have the Lapsed Salary code selected (refer to section 3.6.3 for further information).
  8. 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 UNC system may use its flexibility with generated lapsed salary funds. However, G.S. 143C-6-9 does require that any use of these funds be for one-time, nonrecurring expenditures. Refer to section 3.5.5 for further guidance.

3.6.8 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.

A state 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 that funds for the action are included in the amount appropriated to the agency. If approval is granted by the Director, the agency and the Controller will be notified of the approval. The Controller shall not honor a voucher in payment of a payroll that includes a new position or a change in an existing position that has not 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 state agencies to use salary reserve, for the purposes outlined above, within a given fund/purpose without prior approval by OSBM. Salary reserve may be transferred from one 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 does extend to salary reserve funds, universities must use them with like funding sources.

3.6.9 Salary Control

Salary Control is a feature of the Integrated Budget Information System (IBIS) that is available to all state 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, fund code, and salary account code. In addition to budget and salaries, Salary Control also maintains the authorized position (IBIS FTE) count and the HR position (Beacon FTE) count. The Salary Control user guide is available on the IBIS website and is updated as procedures and/or programs change.

In accordance with Article 1 of Chapter 116 of the General Statutes and G.S. 143C-6-5(c), the UNC system is not required to utilize the Salary Control.

3.6.10 Establishing a Position

positions on the budget revision must be entered by each position and in the special fields set up for this purpose in IBIS on the Position Detail tab. This information includes the fund number, expenditure account number, classification, 8-digit position number, annual salary, and full time equivalent (FTE). Salary lines must also be completed 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 in order to accurately budget the initial FTE. The analyst may require additional position information.

3.6.11 Position Control

Maintaining position control over salaries and salary reserve and maintaining an accurate number of positions is the responsibility of each individual agency. It is the responsibility of OSBM to monitor fiscal control over salaries and wages throughout state government, monitor the Salary Control feature in IBIS, approve the establishment of new positions, reconcile certifications, assist agencies in reconciling position counts and budgeted salaries, and ensure that each position established has sufficient funds budgeted to support it on an annual basis.

Per G.S.143C-4-7, the total number of permanent positions established in State entities shall not increase in any fiscal year by a greater percentage rate of change than that of the residential population of the State. This requirement applies to the university system and all of its entities. The UNC system, any special responsibility constituent institution/campus, or affiliated entity, shall provide any information requested by OSBM as necessary to ensure that the UNC 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, 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.

3.6.12 Over-Realized Receipts Budget Revisions

Agencies may submit to OSBM a budget revision to use additional receipts on a 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. Refer to section 3.6.4 and 3.6.5 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 that each budget code in the UNC system may realize over and above the certified budget to a maximum of 10%. The UNC System may budget these overrealized receipts on a type "12" budget revision on a nonrecurring or recurring basis as appropriate. Pursuant to Section 5 of Session Law 2011-391, the following receipts received by the UNC system should be adjusted on a type "11" budget revision so that both the certified and authorized budgets are modified:

  • tuition and fees established by the UNC Board of Governors pursuant to G.S 116-40.22(c)

G.S. 143C-6-1(b) requires that all receipts, including those of the UNC system, are budgeted in the fund/purpose from which the receipts were collected and appropriations made. Universities may continue to budget tuition in purpose/program (fund) 1990/0990.

3.6.13 Agency Procedures for Transferring the Clear Proceeds of Fines, Forfeitures and Penalties to the Office of State Budget and Management

Agencies, including the UNC 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 Moneys to the Fund

Pursuant to G.S. 115C-457.2, "the clear proceeds of all civil penalties and civil forfeitures that are collected by a State agency and are payable to the County School Fund pursuant to Article IX, Section 7(b) of the Constitution shall be remitted to the Office of State Budget and Management 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 twenty percent (20%) of the amount collected." The collection cost percentage to be used by a State agency shall be established and approved by the Office of State Budget and Management on an annual basis based upon the computation of actual collection costs by each agency for the prior fiscal year.

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."

The Cash Transfer

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 department code 3005 (Budget Code 23005) through the Cash Management Control System (CMCS) in the amount of the clear proceeds certified during the prior month. (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 CMCS as September activity.)

NOTE: Agencies should fax the "Fines, Penalties, and Forfeitures Deposit Documentation" form to OSBM (919-733-0640) documenting the transfer. Or, alternatively, the form can be emailed to OSBM's Business Officer.

The Accounting Entry

For all transfers of fines, forfeitures, and penalties to OSBM, agencies must record an operating transfer out using account number 538030 Fines/Penalties/Forfeitures Transfers in the North Carolina Accounting System (NCAS).

 

3.7 Maintenance of a Balanced Budget

3.7.1 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 State agencies, including the University of North Carolina, shall be subject to the availability of State funds or non-State funds. When necessary, OSBM will modify allotment requests to ensure that all State agencies remain within their most current available budget.

Requests for an allotment should be made for the general fund and highway fund as directed by OSBM and submitted to OSBM not less than ten (10) days before the beginning of the quarter covered by the request. The allotment should be submitted through the Integrated Budget Information System (IBIS). For more information on using the allotment form in IBIS, please refer to the user guide on the IBIS website.

An allotment account for each code is set up quarterly on the books of the Office of the State Controller. The allotment account serves as the control for the requisition of funds and represents the maximum available for the quarter.

3.7.2 Allotment Request Format

Allotment requests are to be submitted reflecting 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 (531XXX to 538XXX). Refer to section 3.4.4 for more information about expenditure accounts. Allotment requests should include estimated receipts, including federal, local, highway, and other. Refer to section 3.4.5 for more information about revenue accounts.

The University of North Carolina is to submit allotment requests according to the following break-out unless they are instructed by their analyst to do otherwise:

  • TOTAL PLANNED REQUIREMENTS
    • Payroll (531XXX)
    • Financial Aid (536XXX)
    • Other
  • TOTAL ESTIMATED RECEIPTS
  • TOTAL REQUESTED APPROPRIATION

3.7.3 Revisions to Allotments

Agencies may submit a request to change the authorized quarterly allotment to OSBM for approval. Details required for the initial allotment are also required for allotment revisions.

3.7.4 Requisitions for Funds

Agencies on a disbursing account with the State Treasurer have funds made available to them for expenditures by means of requisition of funds through the Cash Management Control System. After the quarterly allotment is received, a requisition for funds is submitted to the Office of the State Controller (refer to OSC’s Cash Management website).

 

3.8 Establishment of a Budget Code or Center

G.S. 143C-1-1(d)(3) defines a budget as a plan to provide and spend money for specified programs, functions, activities, or objects during a fiscal year. Accordingly, 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 North Carolina Accounting System (NCAS) 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.

3.8.1 Establishment of a Budget Code

Establishment of a new budget code is initiated by a State agency 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. A request for a new budget code should be submitted by the State agency through the Integrated Budget Information System (IBIS). For more information on using this form, please refer to the budget code user guide on the IBIS website. The request must include the proposed budget code number and all supporting documentation or requirements for the code, as well as indicate whether the proposed budget code is to be interest bearing. G.S. 143C-1-4(a) requires that interest earned on all funds be credited to the General Fund, and there must be clear directions in law for an exception. OSBM will review the request for budgetary necessity, approve and/or modify, and then by letter authorize the establishment of this budget code to OSC, Department of State Treasurer (DST), and the State Auditor. OSC will review this request for compliance with GASB and the Budget Code Structure of the NCAS Chart of Accounts and, upon approval and/or modification, validate the new budget code on NCAS.

3.8.2 Establishment of a Center (Purpose/Fund Code) Number and Title

A request for a new center (purpose/fund code) should be submitted by the State agency through the Integrated Budget Information System (IBIS). For more information on using this form, please refer to the fund code user guide on the IBIS website.

OSBM has traditionally considered a "Fund" to refer to a group of related programs or activities. The University of North Carolina uses the term "Purpose Code." The North Carolina Accounting System refers to it as a "Center," and the Office of State Controller uses "fund" and "center" interchangeably. Completion of a form within IBIS is required for all budget codes and centers including capital improvement budget codes and federal fund budget codes. The request must be submitted by all State agencies and approved under policies established by both OSBM and OSC.

3.8.3 Notification of Approval

The Office of State Controller will email OSBM and the individual indicated in the agency contact area of the approved form. This will be the only notification sent by OSC. After this approval is obtained, IBIS will be updated with the new information.

 

3.9 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)

3.9.2 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 State agency will be required to set up a 2XXXX budget code. If a project has multiple subprojects that are being tracked separately by ITS or the agency, the subprojects must be budgeted in separate cost centers. Beginning with the 2009-11 biennium, the 2XXXX budget codes for IT projects will be incorporated into the Worksheet I. If the IT project is federally funded, it does not have to be transferred to the 2XXXX IT budget code.

The following guidelines shall be used when creating the 2XXXX budgets:

  • Funds appropriated in the Appropriations Act for IT projects shall be certified to an agency's general fund code in a IT reserve, and then transferred 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.
  • Funds authorized from existing sources in the Appropriations Act for IT projects shall be transferred to the established 2XXXX budget code after certification.
  • Recurring funding in the continuation budget for existing IT projects shall be certified in the general fund and then transferred to the 2XXXX budget code after certification.
  • Transfers to the 2XXXX IT budget codes will be approved 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.

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 it can be documented that 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 an 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 that the project is implemented or abandoned.
  • Agency submits a revision to budget the funds that shall be reverted. Agency shall use account 538080 - Transfer to Budget Code 19050.
  • Agency submits an electronic cash transfer in CMCS to department code 9000 and denotes the transaction will be in budget code 19050 to revert the unexpended, unencumbered cash balance of the IT project. The cash transfer shall occur within 30 days of the notification that the project is implemented or abandoned.
  • Agency notifies OSBM analyst when the reversion to budget code 19050 has occurred.

3.9.3 Information Technology Rates and Fees

Under G.S. 143B-1321(a)(20), DIT is required to submit all rates and fees to OSBM for approval. So long as the rate or fee is not new or increased for any DIT customer, DIT is delegated the authority by OSBM to proceed with the change. Such changes 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 submit electronically a schedule of all proposed changes to OSBM's Information Systems Financial Analyst and to OSBM's Budget Analyst for DIT. These fees and rates shall be prepared by October 1 and shall be approved by the Office of State Budget and Management. The Office of State Budget and Management shall ensure that State 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, but 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.

 

3.10 Capital Improvement Budget Policies and Procedures

3.10.1 Repairs and Renovations Reserve Account

The Repairs and Renovations Reserve is a restricted reserve in the General Fund. The State Controller shall reserve to the Repairs and Renovations 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 Repairs and Renovations 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 Repairs and Renovations 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;
  • demolition.

Funds from the Repairs and Renovations Reserve Account cannot be used for new construction or result in additional square footage of an existing facility unless required in order to comply with federal or State codes or standards.

Departments requesting funds from the Repairs and Renovations 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.

The projects requested by Departments should be listed in priority order. For each project, complete the Repair and Renovation 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.

An example of the Repair and Renovations Request Worksheet can be found in the Library Section of the OSBM website.

3.10.2 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). 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 project funded entirely from non-General Fund sources and after consultation with the Joint Legislative Commission on Governmental Operations.

The transfer of funds between capital and operating budgets is prohibited. However, departments are allowed to make expenditures in their operating budget for repairs, maintenance and equipment purchases less than $100,000. Expenditures for repairs, maintenance, and equipment purchases between $100,000 and $300,000 may be allowed in the operating budget provided proper budget approval has been obtained from the Capital Section of OSBM. These types of expenditures allowed in the operating budget are not intended to provide supplemental funds for a formal capital project and shall only be used for individual repair and maintenance projects or equipment purchases. 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. Contact the Office of State Construction for a copy of the North Carolina Construction Manual.

3.10.3 University 2.5% Management Flexibility Carry Forward (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:

  • The Director of the Budget may establish a new capital project from carry forward funds after consulting with Governmental Operations;
  • The Director of the Budget may authorize the use of carry forward funds to increase the cost of an existing capital project.

3.10.4 Establishment of Capital Improvement Projects

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;
  • revenue bonds approved by the General Assembly, with debt service provided from income such as dormitory receipts, parking receipts, and other sources of income;
  • general obligation bonds approved by the General Assembly and a vote of the people, with debt service provided from the General Fund and secured by the full faith and credit of the taxing authority of the State;
  • legislative bonds approved by the General Assembly and limited to an amount not to exceed two-thirds of the amount of debt retired during the previous biennium, with debt service provided from the General Fund and secured by the full faith and credit of the taxing authority of the State;
  • limited obligation bonds approved by the General Assembly 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.

3.10.5 Project Cost Increase

A state 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 will be reported to the Joint Legislative Commission on Governmental Operations at the next meeting. The increase may be funded by:

  • gifts;
  • federal or private grants;
  • special fund receipts;
  • direct capital improvement appropriations to that agency.

3.10.6 Project Scope Increase

A state agency may increase the scope of a capital project only if the General Assembly authorized the increase (G.S. 143C-8-9). The State 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).

3.10.7 Project Reserve Account

The Project Reserve Account is a reserve account in the capital project fund. 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.

3.10.8 Reversion of Appropriation

A State Agency or institution should begin the planning or the construction of an authorized capital improvement project during the fiscal year in which funds are appropriated. OSBM can allow a state agency or institution 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 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

Procedures for requesting a capital improvement project as a part of the Governor's recommended budget to the General Assembly are outlined in the biennial budget instructions.

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.

3.10.9 Advanced Planning

Pursuant to G.S. 143C-8-7, a State Agency or institution may use non-general funds such as gifts, federal or private grants, excess receipts budgeted to the University of North Carolina Hospitals at Chapel Hill or other 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.

3.10.10 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).

3.10.11 Establishment of Capital Improvement Funds

After either the General Assembly or the Governor authorizes a new capital improvement project, OSBM will notify the agency either with:

  • a Capital Improvement Certification;
  • a letter (Governor’s Authorization).

The Capital Improvement Certification (BD 306) is used when a new project is authorized by the General Assembly, 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:

  • name of the project;
  • fiscal scope of the project;
  • capital improvement code where the project is to be established.

To establish a project, OSBM will certify the new capital project using the Integrated Budget Information System. In order to complete the Capital certification process, the agency will use IBIS to submit a new center (project) request to establish a new project fund. The fund or item number will be assigned by the agency or by UNC-General Administration for the member institutions. OSBM will certify the budget in that new center in the Contingency Reserve account and the Capital Improvement Certification (BD 306) will show the certified amount. Agencies will enter the project into NCAS. OSBM will send the Capital Improvement Certification report (BD306) to the Office of the State Controller for entry in the Cash Management Control System (CMCS). 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.

3.10.12 Capital Improvement Allotments

Capital improvement allotments refer to specific projects that are permanent and do not revert at the end of a quarter or fiscal year as do current operations allotments. No funds may be expended for a capital project without an approved allotment.

After a budget has been established for a capital project the agency should take the necessary steps to select a designer. This selection is coordinated with the Office of State Construction and the State Building Commission. Once the designer has been approved, the agency should submit the first allotment request for the project. This allotment should request the entire design fee for the project as approved by the Office of State Construction.

Unless the authority to do so has been delegated by law to an agency, after construction bids are received on a project, the Office of State Construction will review the bids and certify the low bids of qualified contractors. The Office of State Construction will then issue 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, it is presented to the State Budget Director for approval of the availability of funds. At this point, the agency will initiate the second allotment request for the project. This allotment will distribute into object lines 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 will be available for expenditure on the construction contracts and movable equipment.

3.10.13 General Fund Supported Debt Procedures/Guidelines

  • 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.
  • All funds must be spent within three days after the Trustee deposits the funds with the State Treasurer.
  • All vendors must be set up to receive electronic payments (exceptions must be approved by OSC).
  • Funds will only be drawn down from the Trustee bi-weekly.
  • Funds may only be requisitioned for actual invoiced expenses.
  • Any funds not expended and all refunds of expenditures must be immediately returned to the Trustee.
  • 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.
  • The proceeds from General Fund-supported debt are tax-exempt. In order to maintain the tax-exempt status, private uses of facilities funded from General Fund-supported debt are greatly restricted as long as the debt is outstanding. Private use is any direct or indirect use in a trade or business that is 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.
  • It is the State’s policy that 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.
  • 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.
  • Each agency must prepare a budget revision to establish the total authorized budget for the approved projects.
  • Allotments will be submitted with each requisition and only the amount of the requisition will be allotted.
  • Agency budget codes have been set up by OSBM, but the individual project codes must be set up by each agency.
  • At the beginning of every quarter, agencies must provide OSBM with an updated cash flow model for each project.

The process for the requisition of funds and the payment of invoices is as follows:

  • Agencies shall receive invoices from vendors and certify that these invoices are due and payable.
    • Monday: Agencies must submit their request for requisition of funds on the Monday of the week of the disbursements to OSBM.
    • Tuesday: OSBM reviews requisition requests and notifies the Trustee of needed funds by submitting the "Form of Requisition."
    • Wednesday: The Trustee will wire funds to the Department of State Treasurer on Wednesday for deposit in an OSBM budget code.
    •   
    • Wednesday: OSBM will remit a Funds Request Worksheet to OSC .
    • Thursday: OSC records a Journal Entry and allocates a wire transfer to agency budget codes (4XXXX).
    • Thursday: OSC will approve requisitions from agencies and release funds.
    • Thursday: Agencies will send electronic payments to vendors for approved invoiced expenses.

3.10.14 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. It is the responsibility of the agency budget officer to review all active capital projects periodically and immediately close those that are complete. The procedures to be followed in closing a project are outlined as follows:

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 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 be the corresponding digits to identify the budget year that the budget revision would occur.
  • Remaining Repair and Renovation balances may be transferred after approval from OSBM 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, an allotment should be submitted reverting the balance to an unallotted status.
  • After the project balance is reverted to the unallotted status, a budget revision is to be submitted 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, a refund of receipts should be completed transferring the receipt back to its original source.

 

3.11 Contingency and Emergency Fund

3.11.1 Procedures Relating to Requests for Contingency and Emergency Funds

Pursuant to G.S. 143C-4-4 the Contingency and Emergency (C&E) Fund is established within the General Fund. The General Assembly shall 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. A State 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 report on the request at the next scheduled meeting of 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 State agency. The agency shall then submit a "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 (Budget Code 19001).

After review and approval by OSBM, a journal entry will be prepared by OSBM and submitted to the Office of State Controller (OSC) and the State Treasurer (DST). This journal entry will be posted to the Cash Management System by OSC and the Core Banking System by DST.

 

3.12 Federal Fund Budget Policies and Procedures

All federal funds received directly from the federal government by any state agency subject to provisions of the State Budget Act shall be initially accounted for in a federal funds budget code (3XXXX) in accordance with the Budget Code Structure of the North Carolina Accounting System Uniform Chart of Accounts prescribed by the Office of the State Controller. The funds in the federal fund budget code will be transferred 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 UNC 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 State 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 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, 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.

Any changes or receipts of unanticipated funds during the biennium that continue the same level of service but do not increase the scope of a program can be budgeted on a nonrecurring basis, unless otherwise authorized in the current Appropriations Act. 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 state agency receiving federal funds must develop procedures for the 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. The regulations apply to all those federal funds that must be budgeted by state agencies except for university institutions.

3.12.1 Applications for Funds

Pursuant to G.S. 143C-7-1, a state agency that submits to the federal government or to any other party (including another state agency) an application for funds must also provide to OSBM a copy of the application 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 "Application for Grants Funds" 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 "Application for Grants Funds" form.

All State 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 The University of North Carolina and its constituent institutions.

3.12.2 Requisition and Disbursement of Federal Funds

Federal funds received directly from a federal agency shall be initially deposited 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 cash management system electronic funds transfer system. The center/fund and account 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 the Office of the State Controller.

3.12.3 Special Reports on Federal Funds

OSBM may require information from State agencies, including the UNC 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 and budget and expenditures by state and federal fiscal years, and any other information that would be helpful in making requested periodic special reports on federal funds.

3.12.4 Cost Allocation/Indirect Cost Policy

It is the policy of the State of North Carolina to maximize the recovery of direct and indirect costs for administering and implementing federal grants. All state agencies, including the UNC 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.

The Office of the State Controller 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 in order that they recover the optimum allowable indirect costs from their federal grants.

Individual cost plans are the responsibility of the agency.

An indirect cost proposal must be prepared at least annually in all State agencies to cover 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.

Exceptions to the development of a proposal will be granted by OSBM to any department that can demonstrate in writing that 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 UNC 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.

3.12.5 Indirect Cost Proposals

Each State agency or university shall prepare an indirect cost proposal annually unless the cognizant federal 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.

3.12.6 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. Requests for exemptions should be communicated in writing through department fiscal officers. Exemptions to claiming indirect costs in grant applications will be considered and granted 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.

3.12.7 Budgeting Indirect Costs

All indirect costs (or overhead receipts) should be deposited 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 UNC 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.

3.12.8 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.

3.12.9 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.

Appropriate budget procedures will be used to transfer the funds within a department or between departments.

 

3.13 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. All funds shall be budgeted and accounted for in a manner that will provide clear and complete information and accountability on a state fiscal year basis.

Procedures described for federal funds are applicable for intrastate and non-state funds that are eligible for indirect cost. (See section 3.12.4)

3.14 Disbursement of Special Appropriations

3.14.1 Special Appropriations Definition

Special appropriations are funds appropriated from the General Fund by the General Assembly to supplement the budgets of local governments and nonprofit corporations for regional and statewide programs in the areas of human services, education, cultural activities, fire protection, community development, and economic development. Funds are either appropriated from the State's General Fund directly to the non-state entity or appropriated to a state agency for transfer to a non-state entity. If the appropriation is a direct appropriation, the funds are budgeted (certified) in the Special Appropriations Reserve in the Office of State Budget and Management. If the appropriation is made to a state agency, funds are budgeted (certified) in that agency’s operating budget code.

3.14.2 Special Appropriations Letter to Recipient

After the appropriation is made, a letter should be sent by the agency in which funds are budgeted to the recipient organization stating that the General Assembly has appropriated funds to the organization and the purpose for which the funds are to be expended. Special appropriations can only be expended for the authorized projects and purposes specified in the appropriating legislation.

3.14.3 Request for Payment of Appropriation Form

Included with the letter to the recipient organizations should be a "Request for Payment of Appropriation," which must be filled out completely and notarized by the recipient organization. The request should specify the recipient, amount, and purpose of the appropriation. Any matching requirements or other restrictions imposed by the General Assembly should also be specified. The following additional information should be attached to the "Request for Payment of Appropriation" form:

  • By-laws
  • List of board members
  • Tax-exemption letters
  • Conflict of interest policy (G.S. 143C-6-23(b)) and<
  • Sworn statement of no overdue tax debts, as defined in G.S. 105-243.1.

Upon return of the requested information and successful review by the appropriate State agencies, disbursements can be made. Before disbursement is made, OSBM may require recipients of special appropriations to supply information demonstrating that the recipient is capable of managing funds in accordance with law and has established adequate financial procedures and controls. If, during an agency’s review of a recipient, the agency needs assistance in procuring additional information from the recipient, the State agency should immediately contact their OSBM budget analyst.

3.14.4 Special Appropriations - Disbursements

Pursuant to 09 NCAC 03M.0700, prior to disbursing any State funds, each agency shall sign a contract with the grantee that contains the provisions outlined in 09 NCAC 03M.0703. In addition, pursuant to 09 NCAC 03M.0401, all granting agencies must register their grant program with OSBM's Community Resource Information System (CRIS) prior to disbursing any State funds.

A letter of disbursement shall accompany the first check sent to a recipient organization. The letter of disbursement shall outline all reporting and spending requirements associated with the special appropriation.

Pursuant to G.S. 143C-6-21 and the State's Cash Management Plan, the Director of the Budget has discretion to disburse annual special appropriations totaling more than $100,000 on a quarterly or monthly basis. Annual special appropriations of $100,000 or less shall be paid in a single payment unless provided otherwise by State or federal law.

Pursuant to G.S. 143C-6-23, 09 NCAC 03M.0205, and 09 NCAC 03M.0401, a State agency that disburses a special appropriation to a non-state agency must identify the recipient to the State Auditor and OSBM. Each State agency shall provide each grantee with the accounting form and other requirements prescribed by the State Auditor and OSBM. Refer to http://www.ncauditor.net/NonProfitSite/regulations.aspx for specific forms that are required based on the received amount.

3.14.5 Special Appropriations Subject to Matching Requirements

Special appropriations subject to a matching requirement should be disbursed and expended in accordance with G.S. 143C-4-5, non-state match restrictions.

3.14.6 Issuance of Warrants Requirements

Pursuant to G.S. 143B-426.40G, all warrants issued for non-state entities shall be delivered by the appropriate agency to the entity’s legally designated recipient by United States mail or its equivalent, including electronic funds transfer.

 

3.15 Summer School Accounting and Reporting Guidelines - Higher Educational Institutions

3.15.1 Adaptation of Academic Calendar to Fiscal Year for Budget Reporting

Because of the variability in the number, length, and scheduling of individual summer sessions, all of the various summer sessions within a fiscal year will be determined by the date a session ends and will comprise a Summer School for budgetary and reporting purposes.

All Full Time Equivalent students for a summer session and all expenditures and revenue for that session must be accounted for and reported in the fiscal year in which the session is completed.

Under the academic calendar currently in effect at most institutions, the traditional first session of a Summer School is completed in the fiscal year just closing and the traditional second session of a Summer School is completed shortly after the beginning of a new fiscal year. Using the date a session is completed to determine the fiscal year in which the actual expenditures, receipts and statistical data are accounted for and reported will result in "split session" accounting and reporting for the traditional Summer School.

Budget reports for a fiscal year will reflect the second session of one traditional Summer School (to be completed shortly after a new fiscal year begins) and the first session of the next Summer School (to be completed at the close of a fiscal year). As a result of Session Law 2005-276 (the 2005 Appropriations Act), Summer School must remain completely receipt-supported.

3.15.2 Transfer of Advances (Revenue Collections)

Any revenue collected at the close of a fiscal year as advanced payment of tuition and fees for the summer session that begins in a succeeding fiscal year and encumbered expenses to include payroll must be transferred to the new fiscal year. Institutions must request authority for the transfer from OSBM by budget revision. This is done through the carry forward process.

3.15.3 Students Accounts Receivable

Institutions of higher learning should comply with the policy established by the Office of the State Controller as it relates to Student Accounts Receivable.

 

Budget Execution Index

Agency procedures transferring clear proceeds of fines, forfeitures, and penalties to OSBM

Allotments

Authorization for budget adjustments

Authorized budget - defined

Budget execution

Budget procedures for handling Transfers between block grants

Budget revisions

Budget structure

Capital improvement budget

Certificates of Participation (COPS)

Certified budget – defined

Change to an existing center (fund)

Contingency and Emergency Fund

Cost allocation/indirect cost policy

Disbursing accounts with State Treasurer

Establishing a position

Establishment of a center (fund)

Expenditure accounts

Federal funds budgeting

Fund type (budget code)

Governor’s authority for budget execution

Information technology budgets

Institutional budgeting – University

Intrastate funds

Lapsed salary revisions

Non-state funds

Object or line item (accounts)

Over-realized receipts budgeting

Position control

Purpose or Program (fund)

Refund of expenditure

Refund of receipts

Repairs and Renovations Reserve

Requisition for funds

Revenue accounts

Salary Control System

Salary fund changes requiring OSBM approval

Salary reserve revisions

Special appropriation

University management flexibility