A BILL TO BE ENTITLED
AN ACT providing for greater transparency in and maintenance of state and local government financial matters.
The General Assembly of North Carolina enacts:
SECTION 1.(a)  G.S. 115C‑442 reads as rewritten:
"§ 115C‑442.  Fidelity bonds.
(a)	The finance officer shall give a true accounting and faithful performance bond with sufficient sureties in an amount to be fixed by the board of education. A person may not be appointed as a finance officer if the person is unable to obtain the bond required by this subsection. This bond shall cover the faithful performance of all duties placed on the finance officer by or pursuant to law and the faithful accounting for all funds in his custody except State funds placed to the credit of the local school administrative unit by the State Treasurer. The premium on the bond shall be paid by the local school administrative unit. The amount of the bond fixed by the board of education may not be less than the greater of the following:
(1)	Fifty thousand dollars ($50,000).
(2)	An amount equal to ten percent (10%) of the board of education's total annually budgeted expenditures, up to a maximum bond amount of one million dollars ($1,000,000). The amount of annually budgeted expenditures includes the amount of total expenditures (excluding transfers out to other funds) in annually budgeted funds such as the local current expense fund, State Public School Fund, capital outlay fund, and enterprise funds but excludes those in intragovernmental service funds and those in trust or custodial funds. For the purpose of determining the minimum bond amount, the amount of annually budgeted expenditures should be those expenditures included in the initial annual budget resolution (excluding any interim budget resolutions) adopted by the board of education pursuant to G.S. 115C‑432.
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SECTION 1.(b)  This section applies to bonds purchased or renewed on or after January 1, 2024.
SECTION 2.  G.S. 143‑318.10 reads as rewritten:
"§ 143‑318.10.  All official meetings of public bodies open to the public.
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(b)	As used in this Article, "public body" means any elected or appointed authority, board, commission, committee, council, or other body of the State, or of one or more counties, cities, school administrative units, constituent institutions of The University of North Carolina, or other political subdivisions or public corporations in the State, whether established by the North Carolina Constitution or otherwise, that (i) is composed of two or more members and (ii) exercises or is authorized to exercise a legislative, policy‑making, quasi‑judicial, administrative, or advisory function. In addition, "public body" means the governing board of a "public hospital" as defined in G.S. 159‑39 and the governing board of any nonprofit corporation to which a hospital facility has been sold or conveyed pursuant to G.S. 131E‑8, any subsidiary of such nonprofit corporation, and any nonprofit corporation owning the corporation to which the hospital facility has been sold or conveyed.
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SECTION 3.  G.S. 132‑1 reads as rewritten:
"§ 132‑1.  "Public records" defined.
(a)	"Public record" or "public records" shall mean all documents, papers, letters, maps, books, photographs, films, sound recordings, magnetic or other tapes, electronic data‑processing records, artifacts, or other documentary material, regardless of physical form or characteristics, made or received pursuant to law or ordinance in connection with the transaction of public business by any agency of North Carolina government or its subdivisions. Agency of North Carolina government or its subdivisions shall mean and include every public body subject to Article 33C of Chapter 143 of the General Statutes and every public office, public officer or official (State or local, elected or appointed), institution, board, commission, bureau, council, department, authority or other unit of government of the State or of any county, unit, special district or other political subdivision of government.
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SECTION 4.(a)  G.S. 147‑13 reads as rewritten:
"§ 147‑13.  May convene Council of State; quorum; journal.
(a)	The Governor may convene the Council of State for consultation whenever the Governor may deem it proper. The Governor shall convene the Council of State whenever the statutes call for the concurrence, advice, discretion, opinion, or consent of the Council of State. In all meetings of the Council of State, five members exclusive of the Governor shall constitute a quorum.
(b)	The proceedings of the Council of State shall be entered in a journal, to be kept for this purpose exclusively and signed by all members present. Any member of the Council of State may have entered in the journal the member's dissent to any part of the journal. The journal shall be maintained by the Governor and shall be placed before the General Assembly when called for by either house.
(c)	The convening of the Council of State shall be subject to Article 33C of Chapter 143 of the General Statutes, and the minutes required under that Article shall include the journal kept in accordance with this section."
SECTION 4.(b)  This section becomes effective January 1, 2024.
SECTION 5.(a)  On or before October 1, 2023, the Council of State shall adopt rules establishing a comprehensive system of parliamentary procedure, including the method of introducing and considering resolutions presented by members of the Council of State and the posting of the journal and minutes online. If the Council of State fails to adopt rules as required by this section, Mason's Manual of Legislative Procedure shall apply to all meetings of the Council of State held after October 1, 2023, and the Governor shall provide for the posting of all minutes and the journal online within 10 business days of each meeting of the Council of State.
SECTION 5.(b)  On or before October 1, 2023, the Council of State shall review its department rules, as recorded in Chapter 1 of Title 06 of the North Carolina Administrative Code for compliance and conformity with the General Statutes and Sections 2 through 5 of this act, and initiate any amendments to those rules by that date.
SECTION 6.  Sections 2 through 5 of this act clarify and restate the intent of existing law that meetings, deliberations, and actions of the Council of State, like all public bodies, shall be conducted openly.
SECTION 7.  Part 3 of Article 4 of Chapter 153A of the General Statutes is amended by adding a new section to read:
"§ 153A‑54.  Financial management education required.
(a)	Each member of the governing board of a county shall complete financial management education, as provided in this section, if either of the following applies: (i) the Local Government Commission is exercising its authority under Article 11 of Chapter 159 of the General Statutes and has assumed control of the financial affairs of the county or (ii) the county is included on the most recently published Unit Assistance List issued by the Department of State Treasurer. For purposes of this section, the phrase "member of the governing board" means a member who (i) is in office on the date the Commission begins exercising its authority under Article 11 of Chapter 159 of the General Statutes and assumes control of the financial affairs of the county or is in office on the date the Unit Assistance List is published, (ii) is elected or appointed during the time the Commission is exercising its authority under Article 11 of Chapter 159 of the General Statutes and assumes control of the financial affairs of the county, or (iii) is elected or appointed within 12 months of the date the Unit Assistance List is published.
(b)	The financial management education required under subsection (a) of this section shall:
(1)	Cover laws and principles that govern local government fiscal and debt management, including, but not limited to, Chapter 159 of the General Statutes, and shall be no less than six clock hours.
(2)	Be provided by the Local Government Commission, North Carolina League of Municipalities, North Carolina Association of County Commissioners, the School of Government at the University of North Carolina at Chapel Hill, or other qualified sources at the choice of the governing board and upon the prior approval of the Local Government Commission.
(3)	Be completed by members of the governing board within three months of any of the events described in subsection (a) of this section requiring the education.
(4)	Not be required for a member who has completed financial management education within 24 months prior to the date the county on whose governing board the member serves is included on the Unit Assistance List.
(5)	Upon completion by the member, be verified in a record maintained by the clerk to the governing board. The clerk shall provide the verification to the Secretary of the Local Government Commission, upon request."
SECTION 8.  Article 2 of Subchapter II of Chapter 159 of the General Statutes is amended by adding a new section to read:
"§ 159‑6.1.  Whistleblower protections related to State and local government fiscal and debt management.
(a)	Statement of Public Policy. – It is the policy of this State that persons shall be encouraged to report verbally or in writing to the Local Government Commission, State and Local Finance Division in the Department of the State Treasurer, State Auditor, Attorney General, or other appropriate authority evidence of activity related to State and local government fiscal and debt management and involving the following: (i) a violation of State or federal law, rule, or regulation, (ii) fraud, (iii) misappropriation of State resources, or (iv) gross mismanagement, a gross waste of monies, or gross abuse of authority. Further, it is the policy of this State that persons shall be free of intimidation or harassment when reporting matters of public concern related to State and local government fiscal and debt management, including offering testimony to or testifying before appropriate legislative panels.
(b)	Protection From Retaliation. – No employer shall sue, discharge, threaten, or otherwise discriminate against an employee regarding the employee's compensation, terms, conditions, location, or privileges of employment because the employee, or a person acting on behalf of the employee, reports or is about to report, verbally or in writing, any activity described in subsection (a) of this section, unless the employee knows or has reason to believe that the report is inaccurate. No other employee of an employer shall retaliate against another employee because the employee, or a person acting on behalf of the employee, reports or is about to report, verbally or in writing, any activity described in subsection (a) of this section. No person shall sue, terminate a contract, threaten, or otherwise discriminate against a reporting person regarding the reporting person's compensation or terms of contract because the reporting person, or a person acting on behalf of the reporting person, reports or is about to report, verbally or in writing, any activity described in subsection (a) of this section, unless the reporting person knows or has reason to believe that the report is inaccurate.
(c)	Relief for Violation. – Any person injured by a violation of subsection (b) of this section may maintain an action in superior court for damages, an injunction, or other remedies provided in this section against the person who committed the violation within one year after the occurrence of the alleged violation.
(d)	Remedies. – A court, in rendering a judgment in an action brought pursuant to this section, may order an injunction, damages, reinstatement of the employee, the payment of back wages or payments owed under a contract, full reinstatement of fringe benefits and seniority rights, costs, reasonable attorneys' fees, or any combination of these. If an application for a permanent injunction is granted, the person maintaining the action shall be awarded costs and reasonable attorneys' fees. If in an action for damages the court finds that the person maintaining the action was injured by a willful violation of subsection (b) of this section, the court shall award as damages three times the amount of actual damages plus costs and reasonable attorneys' fees against the individual or individuals found to be in violation of subsection (b) of this section.
(e)	Unrelated Unfavorable Action. – It shall not be a violation of this section for a person to discharge or take any other unfavorable action with respect to an employee who has engaged in activity protected under this section if the person proves by the greater weight of the evidence that it would have taken the same unfavorable action in the absence of the protected activity of the employee."
SECTION 9.  G.S. 159‑18 reads as rewritten:
"§ 159‑18.  Capital reserve accounts.
Any local government or public authority may establish and maintain a capital reserve account for any purposes for which it may issue bonds. A capital reserve account shall be established by resolution of the governing board which shall state (i) the purposes for which the account is created, (ii) the approximate periods of time during which the moneys are to be accumulated for each purpose, (iii) the approximate amounts to be accumulated for each purpose, and (iv) the sources from which moneys for each purpose will be derived. A capital reserve account may be established in the general fund or in any public enterprise fund."
SECTION 10.  G.S. 159‑19 reads as rewritten:
"§ 159‑19.  Amendments.
The resolution may be amended from time to time in the same manner in which it was adopted. Amendments may, among other provisions, authorize the use of moneys accumulated or to be accumulated in the account for capital outlay purposes not originally stated."
SECTION 11.  G.S. 159‑20 reads as rewritten:
"§ 159‑20.  Funding capital reserve funds.
A governing board may make appropriations to a capital reserve account in its annual budget ordinance. When moneys or investment securities, the use of which is restricted by law, come into a capital reserve account, the identity of such moneys or investment securities shall be maintained by appropriate accounting entries. Each year, the budget officer shall include in the budget information submitted to the governing board with the proposed budget a report of the estimated ending balance for the current fiscal year in each capital reserve account, including the amounts allocated to each purpose identified in the resolution establishing the capital reserve account and an estimate of the amounts expected to be expended from each capital reserve account during the budget year."
SECTION 12.  G.S. 159‑21 reads as rewritten:
"§ 159‑21.  Investment.
The cash balances, in whole or in part, of capital reserve accounts may be deposited at interest or invested as provided by G.S. 159‑30."
SECTION 13.  G.S. 159‑22 reads as rewritten:
"§ 159‑22.  Withdrawals.
Withdrawals from a capital reserve account may be authorized by resolution of the governing board of the local government or public authority. No withdrawal may be authorized for any purpose not specified in the resolution  establishing the account or in a resolution amending it. The withdrawal resolution shall authorize an appropriation from the capital reserve account to an appropriate appropriation within the fund it is associated with, in accordance with the provisions of G.S. 159‑13(a). No withdrawal may be made which would result in an appropriation for purposes for which an adequate balance of eligible moneys or investment securities is not then available in the capital reserve account."
SECTION 14.(a)  G.S. 159‑34 reads as rewritten:
"§ 159‑34.  Annual independent audit; rules and regulations.
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(e)	The Commission shall provide a notice of warning to each unit of local government that fails to submit an annual audit within nine months of the unit's fiscal year end. The notice shall be delivered to the governing board head at the unit's primary mailing address and be made available on the Department of State Treasurer's website. The notice shall be issued and made available within 30 days following nine months after the unit's fiscal year end. A unit that fails to comply with the notice of warning and to complete the annual audit required under subsection (a) of this section within 12 months of the unit's fiscal year end shall be deemed to have given consent to the withholding of a portion of its sales tax distributions, as provided in subsection (f) of this section. Within 45 days of receiving the notice of warning, the unit may notify the Commission that it plans to appeal the action and the unit will be scheduled to appear before the Commission at its next regularly scheduled meeting.
(f)	A unit that fails to file a copy of its annual audit report with the Secretary within 12 months of the unit's fiscal year end may have a portion of its quarterly sales tax distributions withheld. The amount that may be withheld is an amount equal to one hundred fifty percent (150%) of the cost of the required annual audit as indicated in the audit contract between the unit and its external auditor for the audit report, if such a contract has been executed, or one hundred fifty percent (150%) of the actual fee for the most recently filed audit report if a contract has not been executed for the current year audit.
The Secretary of Revenue must withhold from the unit's distribution under G.S. 105‑486, and from the unit's distribution under G.S. 105‑501 if necessary, the amount required to be withheld upon written notification to do so from the Commission. The notifications must be made on a quarterly basis. The amount may be withheld in subparts if the amount to be withheld exceeds five percent (5%) of the unit's monthly general fund budget for the current fiscal year. The subparts shall be withheld in equal parts of five percent (5%) of the unit's monthly general fund budget for the current fiscal year until the total withholding amount is reached. The total amount to be withheld and any schedule of withholding shall be provided by the Commission in its notification to the Secretary of Revenue. The Secretary of Revenue shall begin withholding from the unit's first distribution of sales and use tax that is at least 45 days after the Secretary receives notification from the Commission.
When the required report has been filed with the Secretary, reviewed to ensure compliance with the requirements of this section, and accepted by the Secretary, the Commission must notify the Secretary of Revenue within 30 days to release the funds. The Department of Revenue must release the funds in the unit's first scheduled distribution of sales tax that is at least 45 days after the earlier of the following:
(1)	Two years from the date of notification for the funds to be withheld.
(2)	The date the Secretary of Revenue receives notification from the Commission that a report complying with the requirements of this section was filed and accepted by the Secretary."
SECTION 14.(b)  This section becomes effective January 1, 2024, and applies to audits for fiscal years ending on or after June 30, 2023.
SECTION 15.  Part 3 of Article 3 of Chapter 159 of the General Statutes is amended by adding a new section to read:
"§ 159‑38.1.  Fund balance reserve accounts.
A local government or public authority may establish and maintain a fund balance reserve account in the general fund or in any public enterprise fund for the purpose of maintaining appropriate cash reserves and an adequate fund balance. All of the following shall apply to a fund balance reserve account:
(1)	The account shall be established by resolution of the governing board. The governing board shall adopt a fund balance policy prior to adopting a resolution establishing a fund balance reserve account.
(2)	The governing board may make appropriations to a fund balance reserve account in its annual budget ordinance. When moneys or investment securities, the use of which is restricted by law, come into a fund balance reserve account, the identity of such moneys or investment securities shall be maintained by appropriate accounting entries.
(3)	Cash balances, in whole or in part, in fund balance reserve accounts may be deposited at interest or invested as provided in G.S. 159‑30.
(4)	Withdrawals from a fund balance reserve account may be authorized by resolution of the governing board of the local government or public authority. The withdrawal resolution shall authorize an appropriation from the fund balance reserve account to an appropriate appropriation within the fund it is associated with, in accordance with the provisions of G.S. 159‑13(a). No withdrawal may be made which would result in an appropriation for purposes for which an adequate balance of eligible moneys or investment securities is not then available in the fund balance reserve account.
(5)	Each year, the budget officer shall include in the budget information submitted to the governing board with the proposed budget a report of the estimated ending balance for the current fiscal year in each fund balance reserve account and an estimate of the amounts expected to be expended from each fund balance reserve account during the budget year.
(6)	If restricted funds are appropriated to or held in a fund balance reserve account, those funds shall continue to be restricted to their original purpose and shall be maintained by appropriate accounting entries."
SECTION 16.  G.S. 159B‑39 reads as rewritten:
"§ 159B‑39.  Permitted uses of revenue from electric power rates.
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(e)	This section applies only to cities and towns that are members of a municipal power agency."
SECTION 17.(a)  G.S. 160A‑17.2 reads as rewritten:
"§ 160A‑17.2.  Security interests in United States Department of Agriculture loans.
	
(b)	An interest‑free loan agreement entered into with the United States Department of Agriculture or an authorized intermediary acting on behalf of the United States Department of Agriculture is subject to approval by the Local Government Commission under Article 8 of Chapter 159 of the General Statutes, unless exempted in G.S. 159‑148(b).
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(d)	To secure payment of a loan under this section, a county or municipality may pledge a security interest only in the collateral being financed by a loan to that specific county or municipality. No county or municipality shall pledge a security interest for repayment of, or be liable for, loans entered into under this section by any other county or municipality."
SECTION 17.(b)  This section applies to loans made on or after the date this act becomes law.
SECTION 18.  Part 3A of Article 5 of Chapter 160A of the General Statutes reads as rewritten:
"Part 3A. Ethics Codes; Education Programs.
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"§ 160A‑89.  Financial management education required.
(a)	Each member of the governing board of a city shall complete financial management education, as provided in this section, if either of the following applies: (i) the Local Government Commission is exercising its authority under Article 11 of Chapter 159 of the General Statutes and has assumed control of the financial affairs of the city or (ii) the city is included on the most recently published Unit Assistance List issued by the Department of State Treasurer. For purposes of this section, the phrase "member of the governing board" means a member who (i) is in office on the date the Commission begins exercising its authority under Article 11 of Chapter 159 of the General Statutes and assumes control of the financial affairs of the city or is in office on the date the Unit Assistance List is published, (ii) is elected or appointed during the time the Commission is exercising its authority under Article 11 of Chapter 159 of the General Statutes and assumes control of the financial affairs of the city, or (iii) is elected or appointed within 12 months of the date the Unit Assistance List is published.
(b)	The financial management education required under subsection (a) of this section shall:
(1)	Cover laws and principles that govern local government fiscal and debt management, including, but not limited to, Chapter 159 of the General Statutes, and shall be no less than six clock hours.
(2)	Be provided by the Local Government Commission, North Carolina League of Municipalities, North Carolina Association of County Commissioners, the School of Government at the University of North Carolina at Chapel Hill, or other qualified sources at the choice of the governing board and upon the prior approval of the Local Government Commission.
(3)	Be completed by members of the governing board within three months of any of the events described in subsection (a) of this section requiring the education.
(4)	Not be required for a member who has completed financial management education within 24 months prior to the date the city on whose governing board the member serves is included on the Unit Assistance List.
(5)	Upon completion by the member, be verified in a record maintained by the clerk to the governing board. The clerk shall provide the verification to the Secretary of the Local Government Commission, upon request."
SECTION 19.  Except as otherwise provided, this act is effective when it becomes law.