For the purpose of this subchapter, the following definitions shall apply unless the context clearly indicates or requires a different meaning.
APPROPRIATION. The act of setting aside money for a specific purpose. In accounting for the government, an account that shows the funds a government department has been credited with.
ENCUMBRANCE or ENCUMBRANCES.
(1) A financial obligation created by a purchase order, contract, salary commitment, unearned or prepaid collections for services provided by the State, or other legally binding agreement.
(2) Include all outstanding purchase orders, unpaid invoices, written agreements, and contracts that have not been completed for which the town has an obligation to expend funds. Encumbrances against an appropriation are an obvious reduction in the amount available for future expenditures, and only when the encumbrances are recorded is a true report of the financial condition of a department evident.
NON-APPROPRIATION CLAUSE. Enables the lessee to terminate the lease agreement at the end of the current appropriation period without further obligation or penalty. This may be done only in cases where the lessee was unable to obtain funding for future payment obligations on the contract.
PREAUDIT REQUIREMENT. If an obligation is reduced to a written contract or written agreement requiring the payment of money, or is evidenced by a written purchase order for supplies and materials, the written contract, agreement, or purchase order shall include on its face a certificate stating that the instrument has been pre-audited to assure compliance with this section. The certificate, which shall be signed by the finance officer (or any deputy finance officer approved for this purpose by the governing board), shall take substantially the following form:
"This instrument has been pre-audited in the manner required by the Local Government Budget and Fiscal Control Act.
____________ (Signature of finance officer)"
Under the Local Government Budget and Fiscal Control Act, all expenditures must be supported by an appropriation. In G.S. § 159-28(b), bills, invoices, or other claims against a local government or public authority may be approved if:
1) The amount is determined to be payable; and
2) The budget or project ordinance includes an appropriation authorizing the expenditure and either;
2a) An encumbrance has been previously created for the transaction; or
2b) An unencumbered balance remains in the appropriation sufficient to pay the amount to be disbursed.
Contracts, including purchase orders, must include a pre-audit certificate signed by the Finance Officer.
(Res. 2020-16, passed 8-3-2020)