Natural disasters, inflation and other factors can strain the finances of local governments. Many counties and municipalities already operate on tight budgets, so even one unexpected event could leave these governments unable to perform core functions. Instead of dealing with these fiscal crises on an ad hoc basis, some West Virginia legislators are attempting to install a system that identifies potential problems and installs measures to avert severe harm.

If House Bill 3517 becomes law, the state Auditor would have the power to declare fiscal watches and emergencies. Supporters of the legislation believe that it would safeguard the financial health of local governments while protecting the interests of employees, vendors and taxpayers. Some of the Auditor’s specific responsibilities would include the following:

  • Monitoring of debt — Determining whether local governments have paid the principal and interest due on their debt obligations in a timely manner.

  • Review of salary and vendor payments — Ensuring that local governments meet their financial commitments to employees, vendors and suppliers.

  • Ensuring proper financial practices — Evaluating whether a proper structure exists to record revenue and expenses, establish sound budgets and maintain appropriate tax policies. 

When financial irregularities or distress are identified, the Auditor can declare a fiscal watch or fiscal emergency, triggering additional oversight and corrective measures. This system is designed to address issues before they escalate into full-blown crises, minimizing the impact on local communities as consequences of fiscal mismanagement can include service disruptions, layoffs and increased taxes

HB3517 represents a significant shift in how West Virginia manages local government finances. By granting the Auditor authority to intervene early, the bill aims to prevent financial mismanagement and ensure that local governments remain solvent and accountable. However, it also places additional scrutiny on municipal leaders, who must adhere to stricter financial standards and reporting requirements.

For local governments, this means prioritizing sound financial practices, such as accurate recordkeeping, staying current with debt obligations and paying employees and vendors on time. Failure to comply could result in state intervention, which may include mandated corrective actions or oversight by financial experts. Under this rule, local governments should remain accountable to their constituents and operate within their means.

The attorneys at Pullin, Fowler, Flanagan, Brown & Poe advise local governments on their legal responsibilities in West Virginia, Kentucky and Ohio. We also assist parties who are engaged in legal matters with counties and municipalities. Please call us at 304-344-0100 or contact us online for an appointment.