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‘Spend or lose’ law leads to unspoken credo to use money

The investigation into an off-the-books account kept by the former Haywood County Schools maintenance director at Haywood Builders Supply has shed light on an unspoken creed practiced among many government workers: use it or lose it.

Money left in the budget at the end of the fiscal year doesn’t roll over to the next year, but reverts back to the main office, whether that’s in Raleigh in the case of state workers or down the hall in the case of county workers. The result is often a scramble to spend down any budget surplus as the end of the fiscal year approaches.

But Ted Norman, the maintenance director of Haywood County Schools, came up with a new approach. He banked left over money at the end of the fiscal year with Haywood Builder’s Supply, in effect hiding the money from school accountants. On the books, it appeared the money had been spent. In reality, it was available as a credit balance at Haywood Builders for later use.

While a novel idea, this hiding of money didn’t sit well with school officials. Norman resigned, and the Waynesville detectives are investigating the matter. The scenario of employees mulling over what to do with unspent budgets is not a new one, however, thanks to a state statute that mandates the return of unspent money, specifically G.S. 143-18, titled “Unencumbered balances to revert to treasury.”

“There are up and down sides to that,” Eddie Davis, president of the North Carolina Educators Association, said of the state policy. “Some people believe if you don’t spend money that has been allocated, then the next year they won’t get as much as they had the previous year. The assumption is that they really didn’t need that full allocation, evidenced by the fact they didn’t spend it all.”

On one hand, employees who are thrifty “don’t want to be punished for not being wasteful,” Davis said. But on the other, “I hope people wouldn’t go out and start spending money just so they don’t lose it.

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“It’s is a kind of a Catch 22. It is kind of a rotating game. We don’t want to overspend, but we don’t want to under-spend,” he said.

Gordon Mercer, director of the Public Policy Institute at Western Carolina University, said the policy is a major problem in government budgeting practices.

“It doesn’t give agencies any incentive to save money because if they don’t spend it all, they number one lose it, but they also get penalized because people look at their budget and say, ‘You didn’t spend it all, so you must need less,’” Mercer said. “At all public agencies there is a last-minute scramble to spend all their money. Sometimes they are spending them on things that don’t make much sense.”

Mercer said a reform of that budget policy would be good for the state.

“What we really need to do during this period of federal deficits is reward agencies that save money. It would create better government efficiency,” Mercer said. “Those changes could be made with strong gubernatorial leadership at the state level.”

Of course, this doesn’t mean Norman’s secret, off-the-books account was exactly kosher. But it could explain the mindset.

The school maintenance funds Norman was hiding at Haywood Builders was county money rather than state money. Unlike money from the state, this particular pot of money from the county would have stayed with the school system regardless if Norman spent it all.

It would not have stayed in Norman’s department, however, but would have reverted back to the Haywood County Schools’ general fund and could have been reallocated to another department or for other uses the following year — unless Norman sought a budget amendment from the school board to approve a roll over of the funds, according to school finance officer Larry Smith.

Complicating matters, there is another pot of money the school gets from the county that does revert back to the county rather than stay with the school system.

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