NC legislature cracking down on delinquent counties and cities

All major private sector companies have to follow generally accepted accounting principles (GAAP), and they are subject to all sorts of financial regulations, like the Sarbanes-Oxley Act. But local governments often have huge hidden unfunded obligations (which add up to trillions of dollars nationally), and don’t comply with GAAP. A few have gone bankrupt as a result, sometimes with little advance warning.

Local governments often would flunk a real audit, and even when they are required by law to undergo an audit, they sometimes just ignore the law.

North Carolina’s GOP-controlled legislature is trying to improve financial transparency and accountability for local governments, over the Democratic governor’s resistance. The Cato Institute describes a recently passed law designed to improve auditing in mismanaged places like Spring Lake, a liberal suburb of Fayetteville: