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State Budget Policy

Authority:
General Statutes 143B-426.39

Effective Date:
7/1/95

References:
For detail information related to the State's budget, refer to the OSBM Budget Manual.

Policy:
The North Carolina State Constitution requires the Governor to "prepare and recommend to the General Assembly a comprehensive budget for the anticipated revenue and proposed expenditures of the State for the ensuing fiscal period." The General Assembly reviews and revises the budget and ratifies the approved budget. The ratified budget for each agency is certified to State agencies by the OSBM. Any changes to the certified budget must be approved by OSBM. The Constitution also states that the "budget as enacted by the General Assembly shall be administered by the Governor" and that "total expenditures of the State for the fiscal period covered by the budget shall not exceed the total of receipts during that fiscal period and the surplus remaining in the State Treasury at the beginning of the period."

The State budget is comprised of the following components:

• Continuation budget - which provides for the continuing level of service of existing programs.
• Expansion budget - which provides for expansion of existing programs, new programs, and salary increases and/or benefits for teachers and state employees.
• Capital improvement budget - which provides for construction, major repairs and maintenance, and land purchases.

Budgetary control is exercised at the agency, departmental, community college, and university level by way of quarterly allotments. The State maintains budgetary controls to ensure compliance with legal provisions included in the annual appropriated budget approved by the General Assembly. Changes to the program line-item levels require approval by the Director of the Budget. Quarterly allotments for the General Fund and State Highway Fund operating budgets are made upon the request of the spending agency, and no State appropriation is available for expenditure except as allotted by OSBM.

Most state departments maintain a formal or informal encumbering system to account for commitments resulting from approved requisitions, purchase orders, work orders, and contracts. At year-end, these represent the estimated amount of expenditures ultimately to result if unperformed contracts and open purchase orders in process are completed. Normally, encumbrances outstanding at year-end for unfulfilled obligations of the current year budget are re-established in the succeeding year and expended from that year's appropriations. However, in instances where justification can be established, OSBM will authorize a department to write a check from the current fiscal year to be deposited in the next fiscal year, which creates a budgetary expenditure referred to as "cash carryforward of appropriations."

Where appropriations lapse at year-end, even if encumbered, and the State intends to honor the contracts in progress at year-end, the State should:

• Disclose in the notes to the financial statements or by reservation of fund balance the encumbrances outstanding at year-end.
• Provide authority to honor the obligation using subsequent year's appropriations.