Session Law 2023-59: An Act to Increase Compliance by Counties and Municipalities That Fail to Timely Submit an Annual Audit Report

Session Law 2023-59 Notification and Appeal Timeline

North Carolina Session Law 2023-59(G.S. 159-34(e) – (h)),  An Act to Increase Compliance by Counties and Municipalities That Fail to Timely Submit an Annual Audit Report, was enacted in June 2023 and applies to audits for fiscal years ending on or after June 30, 2023. The following sections provide information on the law and its implementation. Please see the law in its entirety here – SL 2023-59

March 31 Date by which counties and municipalities must submit their prior fiscal year audit to avoid issuance of a Notice of Noncompliance. 
April 1Units that have not submitted the required audit on or after April 1 will be issued a Notice of Noncompliance, with a requirement to respond to the notice via submission of an appeal or filing of the required audit report.   
By April 30 LGC staff will provide a Notice of Noncompliance to all counties and municipalities that have not submitted an audit as of April 1. The law requires mailing notifications to the unit’s primary mailing address within 30 days; LGC staff will also make other efforts to ensure delivery and receipt of notices, including emailing the notifications to units. 
After NotificationCounties and municipalities receiving a notice may appeal a potential LGC action. See the “Appealing a Notice of Noncompliance” section below for details.

 Late Audit Notifications – Responses and Appeals Form
June 30Date after which counties and municipalities that have not submitted a prior fiscal year audit may be subject to withholding of a portion of sales tax distributions. Withholding of sales tax is not automatic; the LGC must act to initiate a withholding and units have the option to appeal the action both before and after a withholding is initiated.
July 1On and after July 1, counties and municipalities are deemed to have consented to the withholding of a portion of sales tax distribution unless their audit report is filed or the unit files an appeal that is considered and granted by the LGC.


NOTE: 

Questions on notices, appeals, and other topics related to SL 2023-59 should be directed to LGCNotifications@nctreasurer.com

Session Law 2023-59 Other Resources and Information

Tab/Accordion Items

A summary of the law follows; please be sure to read the law in its entirety here – SL 2023-59.

  • Requires the Secretary to provide a Notice of Noncompliance to all counties and municipalities that have not submitted an audit report within 9 months of fiscal year end. (G.S. 159-34(e))
  • Allows counties and municipalities to appeal the LGC action to withhold a portion of sales tax distribution if the audit is not submitted within 12 months of fiscal year end. (G.S. 159-34(f))
  • Allows the Secretary to provide notice to the Department of Revenue to withhold a portion of a county or municipality’s sales tax distribution if the entity has not submitted an audit report within 12 months of fiscal year end and either the action was not appealed by the local government, or the appeal was not successful. (G.S. 159-34(f) and (g))
  • Requires the LGC to establish and make available guidelines outlining specific criteria and circumstances that would warrant a successful appeal. (G.S. 159-34(f)) (see the “Appealing a Notice of Noncompliance” section below)
  • The LGC must delay withholding if it determines the county or municipality has provided sufficient evidence that the failure to submit an audit report is due to circumstances within the established guidelines. (G.S. 159-34(f))

Counties and municipalities that receive a Notice of Noncompliance pursuant to SL 2023-59 may appeal the potential LGC action by using the form below.  Appeals should not be emailed. 

Late Audit Notifications – Responses and Appeals Form

Appealing a Notice: Guideline for Successful Appeal
If a unit is appealing the action based on Paragraph 1 of the Revised Guidelines for Successful Appeal adopted by the Commission on November 12, 2024, the unit should indicate so on its appeal submission in the portal. LGC staff will then confirm that the unit meets the criteria of the guideline and send confirmation of the appeal to the unit. The LGC may waive the requirement for the unit to appear before the Commission.

Appealing a Notice: Other Appeals
If a unit cannot base an appeal under Paragraph 1 of the Revised Guidelines for Successful Appeal adopted by the Commission on November 12, 2024, a written appeal “based on other good cause with evidence" to support the basis for the appeal should be submitted through the portal. LGC staff will provide the appeals to the Commission for its review and consideration. Units will be scheduled to appear before the Commission on a schedule established by the Commission and staff.

Session Law 2023-59 modified G.S. 159-34 to require the LGC to establish and make available guidelines outlining specific criteria and circumstances that would warrant a successful appeal. (G.S. 159-34(f)). The LGC adopted an initial resolution at its December 5, 2023, meeting establishing a guideline for successful appeal and providing other guidance for appeals filed in 2024 (for FY 2023). At its November 12, 2024 meeting the LGC adopted revised guidelines for successful appeal, applicable to appeals filed in 2025 (for FY 2024). A summary of the November 12, 2024 resolution follows; please be sure to read the November 12, 2024 in its entirety here – 2024 Resolution Establishing Revised Guidelines for Successful Appeal of Sales Tax Withholding Pursuant to Session Law 2023-59.

  • The Commission shall deem an appeal successful under Paragraph 1 of the guidelines if the audit for which the Notice of Noncompliance was issued to the county or municipality is the only audit not submitted as required pursuant to G.S. 159-34(a). In addition, a written appeal submitted on this basis should also include (a) an explanation by the unit for the delay in audit submission and (b) a plan and timeline for submission of the outstanding audit.   
  • A county or municipality that cannot successfully appeal under Paragraph 1 of the guidelines may submit an appeal "based on other good cause with evidence" to support the basis for the appeal.
  • The Commission retains the discretion to direct or delay withholding portions of sales tax distributions of counties and municipalities that have failed to submit an appeal or are unable to successfully appeal the action under the guidelines established. 

In filing an appeal based on “other good cause with evidence” for LGC review, consider if your unit experienced any of the following events and describe those events with sufficient, ample detail in a written appeal letter to the LGC.  Address all events that may be applicable:

  • Did your unit have two or more finance officers working for the unit in the past 12 months?
  • Was the auditor delayed in completing the audit(s)?  What was the reason(s)?
  • Did your unit undergo software updates or conversions involving systems needed to complete the audit?  Provide an explanation and timeline.
  • Did your unit experience a natural or other disaster?
  • Did your unit experience a ransomware/cybersecurity attack? Provide a timeline and describe the effects.
  • Did your unit experience fraud or other criminal activity by unit staff?
  • Did your unit experience multiple unit vacancies at once in the two years preceding issuance of the Notice of Noncompliance letter?  (i.e. Finance Officer & Mayor or Council Member vacancies)
  • Did your unit experience a delay in procuring a new auditor that was no fault of the town? (i.e. issuing requests for proposals but no proposals were received?) Describe the issues, including timelines.
  • Include any other event or incident for the LGC’s consideration which you believe contributed to the unit’s failure to file the annual audit(s) timely.  Describe the event(s) or incident(s) in sufficient detail with dates.   

IN ADDITION, consider if your unit has taken any of the following actions to address or mitigate the issues identified above and describe those actions with ample detail in the written appeal letter to the LGC:  

Has your unit:

  • Sought bookkeeping, accounting, auditing or other assistance from the League of Municipalities or Association of County Commissioners, as applicable?
  • Sought assistance from other associations or units with performing audits or bookkeeping?
  • Contracted for assistance with preparing financial statements?
  • Taken any other actions to address or improve the management of the unit’s finances in seeking compliance with the annual audit requirement?

Submit your written appeal through the:

Late Audit Notifications – Responses and Appeals Form