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Decreasing revenues among local governments across the country have placed an increased focus on governmental financial practices. For states with local government financial oversight organizations, the ratios and other benchmarks used to assess fiscal stability face increased scrutiny. This study examines financial reports sent to North Carolina’s financial oversight body, the Local Government Commission (LGC), to determine the types of operational and policy practices that can lead to fiscal stress based on guidelines established by the LGC. Findings indicate that lowering levels of fund balance, increased salaries, increased debt service levels, and the presence of a countywide water system all increased the probability of a county government receiving notice of potential financing problems requiring immediate action.

The financial audit process has provided much transparency into the internal control structure and the ability of local governments to remain fiscally stable. The outcomes of many of these audits have provided much information regarding the ability of local governments to provide services in a timely and efficient manner. Even with the implementation of stricter legislation and more stringent accounting standards in addition to an increased level of state oversight, irregular practices and mismanagement continue to occur. This study examines the independent auditor findings in professionally administered governments in North Carolina. Findings indicate numerous reporting problems within a majority of county governments ranging from internal control problems to reconciliation issues that are required to be addressed for information users that question the sustainability of the unit. Lengthy audits processes, less expensive audits and smaller governments that do not have the ability to employ more accountants or accounting specialists are among the factors that increase the probability of reporting problems and inaccurate data.

Studies involving the allocation of funds among local governments usually are broad in nature with foci based on a variety of factors ranging from service demand to performance outcomes. The conundrum of indirect costs allocation associated with service demand continues to confront local governments. The internal service fund (ISF) has been the primary device used in this endeavor, but over the past two decades, its utilization has decreased. County finance officers in the southeastern United States were surveyed to determine why the ISF is not as prevalently used as in previous years and what has happened to indirect costs as a result of these changes. Findings suggest many reasons for ISF's usage decline including limited usefulness and reallocation of indirect costs to departments. In addition, county governments with a cost allocation plan and larger budget sizes continue to use the ISF as an accounting device