{"formats":[{"name":"JSON","format":"json","url":"\/downloads\/2025\/code-json\/15.2-2512.1.json"},{"name":"Plain Text","format":"text","url":"\/downloads\/2025\/code-text\/15.2-2512.1.txt"},{"name":"XML","format":"xml","url":"\/downloads\/2025\/code-xml\/15.2-2512.1.xml"},{"name":"HTML","format":"html","url":"\/downloads\/2025\/code-html\/15.2-2512.1.html"}],"law_id":72195,"edition_id":1,"section_id":72195,"structure_id":14684,"section_number":"15.2-2512.1","catch_line":"Local fiscal distress; determination by Auditor of Public Accounts; state intervention","history":"2024, c. 426.","full_text":"A\n\nFor purposes of this section:\n\t\t\t“Auditor” means the Auditor of Public Accounts.\n\t\t\t“Emergency fiscal manager” means an official appointed by the Commission on Local Government to implement a remediation plan approved by the Commission under subsection H to restore fiscal health for a locality in the Commonwealth. The “emergency fiscal manager” shall have broad powers to rectify the financial emergency and to assure the fiscal accountability of the locality and the locality’s capacity to provide or cause to be provided necessary governmental services essential to the public health, safety, and welfare.\n\t\t\t“Fiscal distress” means a situation whereby the provision and sustainability of public services, or the ability to appropriately fund financial liabilities, is threatened by various administrative and financial shortcomings, including cash flow issues, inability to pay expenses, revenue shortfalls, deficit spending, structurally imbalanced budgets, billing and revenue collection inadequacies and discrepancies, debt overload, failure to meet obligations to authorities, school divisions, or political subdivisions of the Commonwealth, lack of trained and qualified staff to process administrative and financial transactions, or the inability to timely produce an audited financial report. “Fiscal distress” may be caused by factors internal to the locality or external to the locality, and in various degrees such conditions may or may not be controllable by management or the local governing body or its constitutional officers.B\n\nThe Auditor shall use leading indicators based on financial data and relevant nonfinancial factors to develop criteria for a preliminary determination that a locality may be in fiscal distress. Such criteria shall be based upon information regularly collected by the Commonwealth or otherwise regularly made public by the locality and the locality’s annual audited financial reporting required to be submitted to the Auditor. Information provided by the Virginia Retirement System, the Virginia Resources Authority, the Virginia Public Building Authority, and other state and regional authorities concerning late or missed payments shall be shared with the Auditor.C\n\nBased upon the criteria established by the Auditor, the Auditor shall establish a prioritized early warning system. Under the prioritized early warning system, the Auditor shall establish a regular process whereby it reviews audited financial data and other relevant factors and qualitative information on at least an annual basis to make a preliminary determination that a locality may meet the criteria for fiscal distress. As part of the early warning system, the Auditor shall use leading financial indicators based on key data from the locality’s audited financial reports to evaluate information related to a locality’s financial position, financial reserves, debt, and operating revenues and expenditures, along with other relevant factors as applicable. The Auditor shall further evaluate localities that are identified as needing additional evaluation based on their initial financial indicators on the basis of additional leading indicators that may include retirement liabilities, revenue growth, economic and property market value data, reports prepared by the Commission on Local Government on revenue fiscal stress, and other relevant qualitative information.\n\t\t\tIf a locality has not submitted its audited annual financial report, pursuant to §§ 15.2-2510 and 15.2-2511, within 18 months of the required December 15 deadline or provided a plan to do so, the Auditor shall notify the Governor, the Secretary of Finance, and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government that the Auditor is unable to review the locality’s financial data as part of the early warning system or evaluate its financial condition due to the locality’s delay with submitting its audited annual financial report. A locality’s inability to timely produce its required audited financial report within 18 months of the required deadline as specified in this subsection or to provide a plan to do so shall automatically effectuate the provisions pursuant to subsection D whereby the Auditor shall make a preliminary determination that the locality may meet the criteria for fiscal distress.D\n\nFor a locality where the Auditor has made a preliminary determination of fiscal distress based upon the early warning system criteria, the Auditor shall notify the local governing body of its preliminary determination that it may meet the criteria for fiscal distress. In coordination with the local governing body or chief executive officer, the Auditor may conduct a review and request documents and data from the locality and the locality’s published budget information. Such review shall consider factors including budget processes, debt, borrowing, expenses and payables, revenues and receivables, and other areas, including staffing and the identification of external variables contributing to a locality’s financial position. Any local governing body that receives requests for information from the Auditor pursuant to such preliminary determination based on the above-described threshold levels shall acknowledge receipt of such a request and shall ensure that a response is provided within the timeframes specified by the Auditor. If the locality does not acknowledge the Auditor’s notification of a preliminary determination or does not provide a response to the Auditor’s requests within reasonable timeframes so specified, the Auditor shall notify the Governor, the Secretary of Finance, and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government that the locality is not responsive. After such review, if the local governing body or chief executive officer requests assistance or the Auditor is of the opinion that state assistance, oversight, or targeted intervention is needed, either to further assess, help stabilize, or remediate the situation, the Auditor shall notify the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government and the governing body of the locality in writing, outlining specific issues or actions that need to be addressed by state assistance, oversight, or intervention.E\n\n1. Once the Governor has received a notification from the Auditor indicating fiscal distress in a specific locality, the Governor shall consult with the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations about a plan for state assistance, oversight, or intervention prior to any expenditure of funds from the cash reserve. Any plan approved by the Governor for state assistance, oversight, or intervention shall, at a minimum, specify the purpose of such state assistance, oversight, or intervention efforts, the estimated duration of such efforts, and the anticipated resources, dollar amounts, and personnel directed toward such efforts. The staffing necessary to carry out the assistance, oversight, or intervention plan may be assembled from either public agencies or private entities or both and, notwithstanding any other provisions of law, the Governor may use an expedited method of procurement to secure such staffing when, in his judgment, the need for state assistance, oversight, or intervention is of an emergency nature such that action must be taken in a timely manner to avoid or address unacceptable financial risks to the Commonwealth.2\n\nThe Director of the Department of Planning and Budget shall identify any amounts remaining unexpended from general fund appropriations in the state budget as of June 30 of each year, which constitute state aid to local governments. The Director shall provide a listing of such amounts designated by item number and by program on or before August 15 of each year to the Governor and the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations.3\n\nFrom such unexpended balances identified by the Director of the Department of Planning and Budget, the Governor may reappropriate up to $750,000 from amounts that would otherwise revert to the balance of the general fund and transfer such amounts as necessary to establish a component of fund balance, which may be used for the purpose of providing state assistance, oversight, and intervention actions for localities deemed to be fiscally distressed and in need of state assistance, oversight, or intervention to address such distress. Any such reappropriation approved by the Governor shall be separately identified in the commitments specified on the balance sheet and financial statements of the State Comptroller for the close of each fiscal year, to the extent that such reserve is not used or added to by future appropriation actions.4\n\nPrior to any expenditure of the reappropriated reserve, the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government shall receive a notification from the Auditor that a specific locality is in need of state assistance, oversight, or intervention because of a worsening financial situation. The Auditor may issue such a notification upon receipt of an audited financial statement or other information that indicates the existence of fiscal distress. However, no such notification shall be made until appropriate follow up and correspondence ascertains that, in the opinion of the Auditor, such fiscal distress exists. Such notification may also be issued by the Auditor if written concerns raised about fiscal distress are not adequately addressed by the locality in question. The notification issued by the Auditor indicating fiscal distress in a specific locality pursuant to subsection D shall satisfy the notification requirement of this subdivision.F\n\nThe governing body and the elected constitutional officers of a locality subject to a plan of state assistance, oversight, or intervention approved by the Governor shall assist all state-appointed staff conducting such efforts regardless of whether such staff are from public agencies or private entities. The state-appointed staff shall provide periodic reports in writing to the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government outlining the scope of issues discovered and any recommendations made to address such issues, and the progress that is made on such recommendations or other state assistance, oversight, or intervention efforts. These periodic reports shall specifically address the degree of cooperation the state-appointed team is receiving from locally elected officials, including constitutional officers, city, county, or town managers, and other local personnel in regard to their intervention work.G\n\nThe Commission on Local Government shall act in an oversight capacity for the purpose of determining whether a locality has taken appropriate action to address the issues specified in subsection D as requested by the intervention staff and whether the locality appears to be on track to resolve its fiscal distress. Technical assistance, based on the Auditor’s existing oversight and support provided for local governments, shall be provided to the Commission on Local Government by the Auditor, and all agencies of the Commonwealth shall provide assistance to the Commission, upon request. The Commission on Local Government shall report its findings and conclusions to the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government.H\n\nFor purposes of this subsection, “locality” means any locality located in Planning District 19. If the Commission on Local Government’s report to the Governor concludes that a locality is either unwilling or unable to comply with the conditions necessary to address its fiscal distress, the Commission on Local Government shall appoint an emergency fiscal manager and implement a remediation plan to restore sustainable fiscal health to the locality. Following such appointment and during the duration of state remediation, the governing body and the chief executive officer of the locality shall not exercise any of the powers of those offices directly or indirectly relating to the locality’s finances except as provided in this subsection and such governing body and chief executive officer shall be subject to any conditions required by the emergency fiscal manager. Notwithstanding any other provision of law, general or special, the emergency fiscal manager may shift certain responsibilities and duties from the treasurer of the locality to the emergency fiscal manager if the emergency fiscal manager determines that it is necessary in order to implement the remediation plan. The emergency fiscal manager shall (i) implement an approved fiscal recovery plan; (ii) approve all professional services, suppliers, service provider contracts, and contractual labor agreements; (iii) approve all city employee payrolls; (iv) approve all long-term debt service and loan payments; (v) complete internal control and forensic audit assessments, as needed; and (vi) approve the annual operating and capital budget. The emergency fiscal manager may make recommendations to the governing body regarding the locality’s personnel and staffing. The authority granted under this subsection may apply to any locality facing fiscal distress whether such fiscal conditions originated before or after the enactment of this authority. The emergency fiscal manager shall submit a remediation plan to resolve the locality’s fiscal distress to the Commission on Local Government, which shall approve, reject, or revise the plan after timely notice of any proposed actions to be taken has been provided to the public and an opportunity for public input has been provided and such input has been considered by the Commission on Local Government. Such plan shall specify the purpose of remediation efforts, including the roles and responsibilities of the local governing body and the chief executive officer, directly or indirectly, relating to the locality’s finances and the benchmarks that will allow a locality to exit the state remediation plan upon meeting such benchmarks. Following approval of the remediation plan by the Commission on Local Government, the emergency fiscal manager shall report regularly to the Commission on Local Government, the Governor, and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government regarding progress in implementation of the remediation plan. The Commission on Local Government shall determine when the locality has met the benchmarks approved in the remediation plan and shall so notify the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government.I\n\nThe Department of General Services shall develop a master contract of qualified private sector turnaround specialists with expertise in local government intervention that the Governor can use to procure intervention services in an expeditious manner when he determines that state intervention is warranted in situations of local fiscal distress.","order_by":null,"text":{"0":{"id":260054,"text":"For purposes of this section:\n\t\t\t“Auditor” means the Auditor of Public Accounts.\n\t\t\t“Emergency fiscal manager” means an official appointed by the Commission on Local Government to implement a remediation plan approved by the Commission under subsection H to restore fiscal health for a locality in the Commonwealth. The “emergency fiscal manager” shall have broad powers to rectify the financial emergency and to assure the fiscal accountability of the locality and the locality’s capacity to provide or cause to be provided necessary governmental services essential to the public health, safety, and welfare.\n\t\t\t“Fiscal distress” means a situation whereby the provision and sustainability of public services, or the ability to appropriately fund financial liabilities, is threatened by various administrative and financial shortcomings, including cash flow issues, inability to pay expenses, revenue shortfalls, deficit spending, structurally imbalanced budgets, billing and revenue collection inadequacies and discrepancies, debt overload, failure to meet obligations to authorities, school divisions, or political subdivisions of the Commonwealth, lack of trained and qualified staff to process administrative and financial transactions, or the inability to timely produce an audited financial report. “Fiscal distress” may be caused by factors internal to the locality or external to the locality, and in various degrees such conditions may or may not be controllable by management or the local governing body or its constitutional officers.","type":"section","prefixes":["A"],"prefix":"A","entire_prefix":"A","prefix_anchor":"A","level":1,"next_prefix":"B"},"1":{"id":260055,"text":"The Auditor shall use leading indicators based on financial data and relevant nonfinancial factors to develop criteria for a preliminary determination that a locality may be in fiscal distress. Such criteria shall be based upon information regularly collected by the Commonwealth or otherwise regularly made public by the locality and the locality’s annual audited financial reporting required to be submitted to the Auditor. Information provided by the Virginia Retirement System, the Virginia Resources Authority, the Virginia Public Building Authority, and other state and regional authorities concerning late or missed payments shall be shared with the Auditor.","type":"section","prefixes":["B"],"prefix":"B","entire_prefix":"B","prefix_anchor":"B","level":1,"prior_prefix":"A","next_prefix":"C"},"2":{"id":260056,"text":"Based upon the criteria established by the Auditor, the Auditor shall establish a prioritized early warning system. Under the prioritized early warning system, the Auditor shall establish a regular process whereby it reviews audited financial data and other relevant factors and qualitative information on at least an annual basis to make a preliminary determination that a locality may meet the criteria for fiscal distress. As part of the early warning system, the Auditor shall use leading financial indicators based on key data from the locality’s audited financial reports to evaluate information related to a locality’s financial position, financial reserves, debt, and operating revenues and expenditures, along with other relevant factors as applicable. The Auditor shall further evaluate localities that are identified as needing additional evaluation based on their initial financial indicators on the basis of additional leading indicators that may include retirement liabilities, revenue growth, economic and property market value data, reports prepared by the Commission on Local Government on revenue fiscal stress, and other relevant qualitative information.\n\t\t\tIf a locality has not submitted its audited annual financial report, pursuant to §§ 15.2-2510 and 15.2-2511, within 18 months of the required December 15 deadline or provided a plan to do so, the Auditor shall notify the Governor, the Secretary of Finance, and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government that the Auditor is unable to review the locality’s financial data as part of the early warning system or evaluate its financial condition due to the locality’s delay with submitting its audited annual financial report. A locality’s inability to timely produce its required audited financial report within 18 months of the required deadline as specified in this subsection or to provide a plan to do so shall automatically effectuate the provisions pursuant to subsection D whereby the Auditor shall make a preliminary determination that the locality may meet the criteria for fiscal distress.","type":"section","prefixes":["C"],"prefix":"C","entire_prefix":"C","prefix_anchor":"C","level":1,"prior_prefix":"B","next_prefix":"D"},"3":{"id":260057,"text":"For a locality where the Auditor has made a preliminary determination of fiscal distress based upon the early warning system criteria, the Auditor shall notify the local governing body of its preliminary determination that it may meet the criteria for fiscal distress. In coordination with the local governing body or chief executive officer, the Auditor may conduct a review and request documents and data from the locality and the locality’s published budget information. Such review shall consider factors including budget processes, debt, borrowing, expenses and payables, revenues and receivables, and other areas, including staffing and the identification of external variables contributing to a locality’s financial position. Any local governing body that receives requests for information from the Auditor pursuant to such preliminary determination based on the above-described threshold levels shall acknowledge receipt of such a request and shall ensure that a response is provided within the timeframes specified by the Auditor. If the locality does not acknowledge the Auditor’s notification of a preliminary determination or does not provide a response to the Auditor’s requests within reasonable timeframes so specified, the Auditor shall notify the Governor, the Secretary of Finance, and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government that the locality is not responsive. After such review, if the local governing body or chief executive officer requests assistance or the Auditor is of the opinion that state assistance, oversight, or targeted intervention is needed, either to further assess, help stabilize, or remediate the situation, the Auditor shall notify the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government and the governing body of the locality in writing, outlining specific issues or actions that need to be addressed by state assistance, oversight, or intervention.","type":"section","prefixes":["D"],"prefix":"D","entire_prefix":"D","prefix_anchor":"D","level":1,"prior_prefix":"C","next_prefix":"E"},"4":{"id":260058,"text":"1. Once the Governor has received a notification from the Auditor indicating fiscal distress in a specific locality, the Governor shall consult with the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations about a plan for state assistance, oversight, or intervention prior to any expenditure of funds from the cash reserve. Any plan approved by the Governor for state assistance, oversight, or intervention shall, at a minimum, specify the purpose of such state assistance, oversight, or intervention efforts, the estimated duration of such efforts, and the anticipated resources, dollar amounts, and personnel directed toward such efforts. The staffing necessary to carry out the assistance, oversight, or intervention plan may be assembled from either public agencies or private entities or both and, notwithstanding any other provisions of law, the Governor may use an expedited method of procurement to secure such staffing when, in his judgment, the need for state assistance, oversight, or intervention is of an emergency nature such that action must be taken in a timely manner to avoid or address unacceptable financial risks to the Commonwealth.","type":"section","prefixes":["E"],"prefix":"E","entire_prefix":"E","prefix_anchor":"E","level":1,"prior_prefix":"D","next_prefix":"E2"},"5":{"id":260059,"text":"The Director of the Department of Planning and Budget shall identify any amounts remaining unexpended from general fund appropriations in the state budget as of June 30 of each year, which constitute state aid to local governments. The Director shall provide a listing of such amounts designated by item number and by program on or before August 15 of each year to the Governor and the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations.","type":"section","prefixes":["E","2"],"prefix":"2","entire_prefix":"E2","prefix_anchor":"E2","level":2,"prior_prefix":"E","next_prefix":"E3"},"6":{"id":260060,"text":"From such unexpended balances identified by the Director of the Department of Planning and Budget, the Governor may reappropriate up to $750,000 from amounts that would otherwise revert to the balance of the general fund and transfer such amounts as necessary to establish a component of fund balance, which may be used for the purpose of providing state assistance, oversight, and intervention actions for localities deemed to be fiscally distressed and in need of state assistance, oversight, or intervention to address such distress. Any such reappropriation approved by the Governor shall be separately identified in the commitments specified on the balance sheet and financial statements of the State Comptroller for the close of each fiscal year, to the extent that such reserve is not used or added to by future appropriation actions.","type":"section","prefixes":["E","3"],"prefix":"3","entire_prefix":"E3","prefix_anchor":"E3","level":2,"prior_prefix":"E2","next_prefix":"E4"},"7":{"id":260061,"text":"Prior to any expenditure of the reappropriated reserve, the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government shall receive a notification from the Auditor that a specific locality is in need of state assistance, oversight, or intervention because of a worsening financial situation. The Auditor may issue such a notification upon receipt of an audited financial statement or other information that indicates the existence of fiscal distress. However, no such notification shall be made until appropriate follow up and correspondence ascertains that, in the opinion of the Auditor, such fiscal distress exists. Such notification may also be issued by the Auditor if written concerns raised about fiscal distress are not adequately addressed by the locality in question. The notification issued by the Auditor indicating fiscal distress in a specific locality pursuant to subsection D shall satisfy the notification requirement of this subdivision.","type":"section","prefixes":["E","4"],"prefix":"4","entire_prefix":"E4","prefix_anchor":"E4","level":2,"prior_prefix":"E3","next_prefix":"F"},"8":{"id":260062,"text":"The governing body and the elected constitutional officers of a locality subject to a plan of state assistance, oversight, or intervention approved by the Governor shall assist all state-appointed staff conducting such efforts regardless of whether such staff are from public agencies or private entities. The state-appointed staff shall provide periodic reports in writing to the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government outlining the scope of issues discovered and any recommendations made to address such issues, and the progress that is made on such recommendations or other state assistance, oversight, or intervention efforts. These periodic reports shall specifically address the degree of cooperation the state-appointed team is receiving from locally elected officials, including constitutional officers, city, county, or town managers, and other local personnel in regard to their intervention work.","type":"section","prefixes":["F"],"prefix":"F","entire_prefix":"F","prefix_anchor":"F","level":1,"prior_prefix":"E4","next_prefix":"G"},"9":{"id":260063,"text":"The Commission on Local Government shall act in an oversight capacity for the purpose of determining whether a locality has taken appropriate action to address the issues specified in subsection D as requested by the intervention staff and whether the locality appears to be on track to resolve its fiscal distress. Technical assistance, based on the Auditor’s existing oversight and support provided for local governments, shall be provided to the Commission on Local Government by the Auditor, and all agencies of the Commonwealth shall provide assistance to the Commission, upon request. The Commission on Local Government shall report its findings and conclusions to the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government.","type":"section","prefixes":["G"],"prefix":"G","entire_prefix":"G","prefix_anchor":"G","level":1,"prior_prefix":"F","next_prefix":"H"},"10":{"id":260064,"text":"For purposes of this subsection, “locality” means any locality located in Planning District 19. If the Commission on Local Government’s report to the Governor concludes that a locality is either unwilling or unable to comply with the conditions necessary to address its fiscal distress, the Commission on Local Government shall appoint an emergency fiscal manager and implement a remediation plan to restore sustainable fiscal health to the locality. Following such appointment and during the duration of state remediation, the governing body and the chief executive officer of the locality shall not exercise any of the powers of those offices directly or indirectly relating to the locality’s finances except as provided in this subsection and such governing body and chief executive officer shall be subject to any conditions required by the emergency fiscal manager. Notwithstanding any other provision of law, general or special, the emergency fiscal manager may shift certain responsibilities and duties from the treasurer of the locality to the emergency fiscal manager if the emergency fiscal manager determines that it is necessary in order to implement the remediation plan. The emergency fiscal manager shall (i) implement an approved fiscal recovery plan; (ii) approve all professional services, suppliers, service provider contracts, and contractual labor agreements; (iii) approve all city employee payrolls; (iv) approve all long-term debt service and loan payments; (v) complete internal control and forensic audit assessments, as needed; and (vi) approve the annual operating and capital budget. The emergency fiscal manager may make recommendations to the governing body regarding the locality’s personnel and staffing. The authority granted under this subsection may apply to any locality facing fiscal distress whether such fiscal conditions originated before or after the enactment of this authority. The emergency fiscal manager shall submit a remediation plan to resolve the locality’s fiscal distress to the Commission on Local Government, which shall approve, reject, or revise the plan after timely notice of any proposed actions to be taken has been provided to the public and an opportunity for public input has been provided and such input has been considered by the Commission on Local Government. Such plan shall specify the purpose of remediation efforts, including the roles and responsibilities of the local governing body and the chief executive officer, directly or indirectly, relating to the locality’s finances and the benchmarks that will allow a locality to exit the state remediation plan upon meeting such benchmarks. Following approval of the remediation plan by the Commission on Local Government, the emergency fiscal manager shall report regularly to the Commission on Local Government, the Governor, and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government regarding progress in implementation of the remediation plan. The Commission on Local Government shall determine when the locality has met the benchmarks approved in the remediation plan and shall so notify the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and Appropriations and Local Government.","type":"section","prefixes":["H"],"prefix":"H","entire_prefix":"H","prefix_anchor":"H","level":1,"prior_prefix":"G","next_prefix":"I"},"11":{"id":260065,"text":"The Department of General Services shall develop a master contract of qualified private sector turnaround specialists with expertise in local government intervention that the Governor can use to procure intervention services in an expeditious manner when he determines that state intervention is warranted in situations of local fiscal distress.","type":"section","prefixes":["I"],"prefix":"I","entire_prefix":"I","prefix_anchor":"I","level":1,"prior_prefix":"H"}},"ancestry":[{"id":14684,"edition_id":1,"name":"Budgets, Audits and Reports","identifier":"25","label":"chapter","depth":3,"order_by":1,"parent_id":12733,"metadata":{},"date_created":"2026-06-26 03:49:20","date_modified":"2026-06-26 03:49:20","permalink":{"id":155873,"object_type":"structure","relational_id":14684,"identifier":"25","token":"15.2\/II\/25","url":"\/15.2\/II\/25\/","edition_id":1,"permalink":0,"preferred":1}},{"id":12733,"edition_id":1,"name":"Powers of Local Government","identifier":"II","label":"subtitle","depth":2,"order_by":1,"parent_id":12720,"metadata":{},"date_created":"2026-06-26 03:43:50","date_modified":"2026-06-26 03:43:50","permalink":{"id":152369,"object_type":"structure","relational_id":12733,"identifier":"II","token":"15.2\/II","url":"\/15.2\/II\/","edition_id":1,"permalink":0,"preferred":1}},{"id":12720,"edition_id":1,"name":"Counties, Cities and Towns","identifier":"15.2","label":"title","depth":1,"order_by":1,"parent_id":null,"metadata":{},"date_created":"2026-06-26 03:43:49","date_modified":"2026-06-26 03:43:49","permalink":{"id":151279,"object_type":"structure","relational_id":12720,"identifier":"15.2","token":"15.2","url":"\/15.2\/","edition_id":1,"permalink":0,"preferred":1}}],"structure_contents":[{"id":69297,"structure_id":14684,"section_number":"15.2-2500","catch_line":"Uniform fiscal year for all localities and school divisions","url":"\/15.2-2500\/","token":"15.2\/II\/25\/15.2-2500","metadata":false},{"id":79627,"structure_id":14684,"section_number":"15.2-2501","catch_line":"Establishment of funds for accounting and budgeting; separate depository and investment accounts not required","url":"\/15.2-2501\/","token":"15.2\/II\/25\/15.2-2501","metadata":false},{"id":58288,"structure_id":14684,"section_number":"15.2-2502","catch_line":"Notification by state officials and agencies","url":"\/15.2-2502\/","token":"15.2\/II\/25\/15.2-2502","metadata":false},{"id":67354,"structure_id":14684,"section_number":"15.2-2503","catch_line":"Time for preparation and approval of budget; contents","url":"\/15.2-2503\/","token":"15.2\/II\/25\/15.2-2503","metadata":false},{"id":72936,"structure_id":14684,"section_number":"15.2-2504","catch_line":"What budget to show","url":"\/15.2-2504\/","token":"15.2\/II\/25\/15.2-2504","metadata":false},{"id":70002,"structure_id":14684,"section_number":"15.2-2505","catch_line":"Budget may include reserve for contingencies and capital improvements","url":"\/15.2-2505\/","token":"15.2\/II\/25\/15.2-2505","metadata":false},{"id":84463,"structure_id":14684,"section_number":"15.2-2506","catch_line":"Publication and notice; public hearing; adjournment; moneys not to be paid out until appropriated","url":"\/15.2-2506\/","token":"15.2\/II\/25\/15.2-2506","metadata":false},{"id":74131,"structure_id":14684,"section_number":"15.2-2507","catch_line":"Amendment of budget","url":"\/15.2-2507\/","token":"15.2\/II\/25\/15.2-2507","metadata":false},{"id":83290,"structure_id":14684,"section_number":"15.2-2508","catch_line":"Governing bodies may require information of departments, etc","url":"\/15.2-2508\/","token":"15.2\/II\/25\/15.2-2508","metadata":false},{"id":84240,"structure_id":14684,"section_number":"15.2-2509","catch_line":"Auditor to devise system of bookkeeping and accounting","url":"\/15.2-2509\/","token":"15.2\/II\/25\/15.2-2509","metadata":false},{"id":76788,"structure_id":14684,"section_number":"15.2-2510","catch_line":"Comparative report of local government revenues and expenditures","url":"\/15.2-2510\/","token":"15.2\/II\/25\/15.2-2510","metadata":false},{"id":61281,"structure_id":14684,"section_number":"15.2-2511","catch_line":"Audit of local government records, etc.; Auditor of Public Accounts; audit of shortages; civil penalty","url":"\/15.2-2511\/","token":"15.2\/II\/25\/15.2-2511","metadata":false},{"id":64798,"structure_id":14684,"section_number":"15.2-2511.1","catch_line":"Return of local surplus funds","url":"\/15.2-2511.1\/","token":"15.2\/II\/25\/15.2-2511.1","metadata":false},{"id":66560,"structure_id":14684,"section_number":"15.2-2511.2","catch_line":"Duties of local government auditors","url":"\/15.2-2511.2\/","token":"15.2\/II\/25\/15.2-2511.2","metadata":false},{"id":70223,"structure_id":14684,"section_number":"15.2-2512","catch_line":"Audit of accounts of certain county officers, boards and commissions","url":"\/15.2-2512\/","token":"15.2\/II\/25\/15.2-2512","metadata":false},{"id":72195,"structure_id":14684,"section_number":"15.2-2512.1","catch_line":"Local fiscal distress; determination by Auditor of Public Accounts; state intervention","url":"\/15.2-2512.1\/","token":"15.2\/II\/25\/15.2-2512.1","metadata":false},{"id":56316,"structure_id":14684,"section_number":"15.2-2513","catch_line":"Special budget provisions","url":"\/15.2-2513\/","token":"15.2\/II\/25\/15.2-2513","metadata":false}],"previous_section":{"id":70223,"structure_id":14684,"section_number":"15.2-2512","catch_line":"Audit of accounts of certain county officers, boards and commissions","url":"\/15.2-2512\/","token":"15.2\/II\/25\/15.2-2512","metadata":false},"next_section":{"id":56316,"structure_id":14684,"section_number":"15.2-2513","catch_line":"Special budget provisions","url":"\/15.2-2513\/","token":"15.2\/II\/25\/15.2-2513","metadata":false},"metadata":false,"official_url":"https:\/\/law.lis.virginia.gov\/vacode\/15.2-2512.1\/","history_text":"

This law was first created in 2024. The record of its establishment is cataloged in chapter 426<\/a> of that year\u2019s edition of \u201cActs of Assembly,\u201d the annual state publication listing all changes made to the Code of Virginia in that year.<\/p>","references":[{"id":60350,"section_number":"15.2-2903","catch_line":"General powers and duties of Commission","order_by":null,"url":"\/15.2-2903\/"}],"refers_to":[{"id":76788,"section_number":"15.2-2510","catch_line":"Comparative report of local government revenues and expenditures","order_by":null,"url":"\/15.2-2510\/"},{"id":61281,"section_number":"15.2-2511","catch_line":"Audit of local government records, etc.; Auditor of Public Accounts; audit of shortages; civil penalty","order_by":null,"url":"\/15.2-2511\/"}],"permalink":{"id":155935,"object_type":"law","relational_id":72195,"identifier":"15.2-2512.1","token":"15.2\/II\/25\/15.2-2512.1","url":"\/15.2-2512.1\/","edition_id":1,"permalink":0,"preferred":1},"url":"\/15.2-2512.1\/","token":"15.2\/II\/25\/15.2-2512.1","dublin_core":{"Title":"Local fiscal distress; determination by Auditor of Public Accounts; state intervention","Type":"Text","Format":"text\/html","Identifier":"\u00a7 15.2-2512.1","Relation":"Code of Virginia"},"html":"\n\t\t\t\t\t\t

A.<\/span> For purposes of this section:\n\t\t\t“Auditor<\/span>” means the Auditor<\/span> of Public Accounts.\n\t\t\t“Emergency fiscal manager<\/span>” means an official appointed by the Commission on Local Government<\/span> to implement a remediation plan approved by the Commission under subsection H to restore fiscal health for a locality<\/span> in the Commonwealth. The “emergency fiscal manager<\/span>” shall have broad powers to rectify the financial emergency and to assure the fiscal accountability of the locality<\/span> and the locality<\/span>’s capacity to provide or cause to be provided necessary governmental services essential to the public health, safety, and welfare.\n\t\t\t“Fiscal distress<\/span>” means a situation whereby the provision and sustainability of public services, or the ability to appropriately fund financial liabilities, is threatened by various administrative and financial shortcomings, including cash flow issues<\/span>, inability to pay expenses, revenue shortfalls, deficit spending, structurally imbalanced budgets, billing and revenue collection inadequacies and discrepancies, debt overload, failure to meet obligations to authorities, school divisions, or political subdivisions of the Commonwealth, lack of trained and qualified staff to process administrative and financial transactions, or the inability to timely produce an audited financial report. “Fiscal distress<\/span>” may be caused by factors internal to the locality<\/span> or external to the locality<\/span>, and in various degrees such conditions may or may not be controllable by management or the local governing body<\/span> or its constitutional officers<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

B.<\/span> The Auditor<\/span> shall use leading indicators based on financial data and relevant nonfinancial factors to develop criteria for a preliminary determination that a locality<\/span> may be in fiscal distress<\/span>. Such criteria shall be based upon information regularly collected by the Commonwealth or otherwise regularly made public by the locality<\/span> and the locality<\/span>’s annual audited financial reporting required to be submitted to the Auditor<\/span>. Information provided by the Virginia Retirement System, the Virginia Resources Authority, the Virginia Public Building Authority, and other state and regional authorities concerning late or missed payments shall be shared with the Auditor<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

C.<\/span> Based upon the criteria established by the Auditor<\/span>, the Auditor<\/span> shall establish a prioritized early warning system. Under the prioritized early warning system, the Auditor<\/span> shall establish a regular process whereby it reviews audited financial data and other relevant factors and qualitative information on at least an annual basis to make a preliminary determination that a locality<\/span> may meet the criteria for fiscal distress<\/span>. As part of the early warning system, the Auditor<\/span> shall use leading financial indicators based on key data from the locality<\/span>’s audited financial reports to evaluate information related to a locality<\/span>’s financial position, financial reserves, debt, and operating revenues and expenditures, along with other relevant factors as applicable. The Auditor<\/span> shall further evaluate localities that are identified as needing additional evaluation based on their initial financial indicators on the basis of additional leading indicators that may include retirement liabilities, revenue growth, economic and property market value data, reports prepared by the Commission on Local Government<\/span> on revenue fiscal stress, and other relevant qualitative information.\n\t\t\tIf a locality<\/span> has not submitted its audited annual financial report, pursuant to §§ 15.2-2510<\/a> and 15.2-2511<\/a>, within 18 months of the required December 15 deadline or provided a plan to do so, the Auditor<\/span> shall notify the Governor, the Secretary of Finance, and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns<\/span> and the Senate Committees on Finance and Appropriations and Local Government<\/span> that the Auditor<\/span> is unable to review the locality<\/span>’s financial data as part of the early warning system or evaluate its financial condition due to the locality<\/span>’s delay with submitting its audited annual financial report. A locality<\/span>’s inability to timely produce its required audited financial report within 18 months of the required deadline as specified in this subsection or to provide a plan to do so shall automatically effectuate the provisions pursuant to subsection D whereby the Auditor<\/span> shall make a preliminary determination that the locality<\/span> may meet the criteria for fiscal distress<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

D.<\/span> For a locality<\/span> where the Auditor<\/span> has made a preliminary determination of fiscal distress<\/span> based upon the early warning system criteria, the Auditor<\/span> shall notify the local governing body<\/span> of its preliminary determination that it may meet the criteria for fiscal distress<\/span>. In coordination with the local governing body<\/span> or chief executive officer, the Auditor<\/span> may conduct a review and request documents and data from the locality<\/span> and the locality<\/span>’s published budget information. Such review shall consider factors including budget processes, debt, borrowing, expenses and payables, revenues and receivables, and other areas, including staffing and the identification of external variables contributing to a locality<\/span>’s financial position. Any local governing body<\/span> that receives requests for information from the Auditor<\/span> pursuant to such preliminary determination based on the above-described threshold levels shall acknowledge receipt of such a request and shall ensure that a response is provided within the timeframes specified by the Auditor<\/span>. If the locality<\/span> does not acknowledge the Auditor<\/span>’s notification of a preliminary determination or does not provide a response to the Auditor<\/span>’s requests within reasonable timeframes so specified, the Auditor<\/span> shall notify the Governor, the Secretary of Finance, and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns<\/span> and the Senate Committees on Finance and Appropriations and Local Government<\/span> that the locality<\/span> is not responsive. After such review, if the local governing body<\/span> or chief executive officer requests assistance or the Auditor<\/span> is of the opinion<\/span> that state assistance, oversight, or targeted intervention is needed, either to further assess, help stabilize, or remediate the situation, the Auditor<\/span> shall notify the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns<\/span> and the Senate Committees on Finance and Appropriations and Local Government<\/span> and the governing body<\/span> of the locality<\/span> in writing, outlining specific issues<\/span> or actions that need to be addressed by state assistance, oversight, or intervention. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

E.<\/span> 1. Once the Governor has received a notification from the Auditor<\/span> indicating fiscal distress<\/span> in a specific locality<\/span>, the Governor shall consult with the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations about a plan for state assistance, oversight, or intervention prior to any expenditure of funds from the cash reserve. Any plan approved by the Governor for state assistance, oversight, or intervention shall, at a minimum, specify the purpose of such state assistance, oversight, or intervention efforts, the estimated duration of such efforts, and the anticipated resources, dollar amounts, and personnel directed toward such efforts. The staffing necessary to carry out the assistance, oversight, or intervention plan may be assembled from either public agencies or private entities or both and, notwithstanding any other provisions of law<\/span>, the Governor may use an expedited method of procurement to secure such staffing when, in his judgment<\/span>, the need for state assistance, oversight, or intervention is of an emergency nature such that action must be taken in a timely manner to avoid or address unacceptable financial risks to the Commonwealth. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> The Director of the Department of Planning and Budget shall identify any amounts remaining unexpended from general fund appropriations in the state budget as of June 30 of each year, which constitute state aid to local governments<\/span>. The Director shall provide a listing of such amounts designated by item number and by program on or before August 15 of each year to the Governor and the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> From such unexpended balances identified by the Director of the Department of Planning and Budget, the Governor may reappropriate up to $750,000 from amounts that would otherwise revert to the balance of the general fund and transfer such amounts as necessary to establish a component of fund balance, which may be used for the purpose of providing state assistance, oversight, and intervention actions for localities deemed to be fiscally distressed and in need of state assistance, oversight, or intervention to address such distress. Any such reappropriation approved by the Governor shall be separately identified in the commitments specified on the balance sheet and financial statements of the State Comptroller for the close of each fiscal year, to the extent that such reserve is not used or added to by future appropriation actions. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

4.<\/span> Prior to any expenditure of the reappropriated reserve, the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns<\/span> and the Senate Committees on Finance and Appropriations and Local Government<\/span> shall receive a notification from the Auditor<\/span> that a specific locality<\/span> is in need of state assistance, oversight, or intervention because of a worsening financial situation. The Auditor<\/span> may issue<\/span> such a notification upon receipt of an audited financial statement or other information that indicates the existence of fiscal distress<\/span>. However, no such notification shall be made until appropriate follow up and correspondence ascertains that, in the opinion<\/span> of the Auditor<\/span>, such fiscal distress<\/span> exists. Such notification may also be issued by the Auditor<\/span> if written concerns raised about fiscal distress<\/span> are not adequately addressed by the locality<\/span> in question. The notification issued by the Auditor<\/span> indicating fiscal distress<\/span> in a specific locality<\/span> pursuant to subsection D shall satisfy the notification requirement of this subdivision. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

F.<\/span> The governing body<\/span> and the elected constitutional officers<\/span> of a locality<\/span> subject to a plan of state assistance, oversight, or intervention approved by the Governor shall assist all state-appointed staff conducting such efforts regardless of whether such staff are from public agencies or private entities. The state-appointed staff shall provide periodic reports in writing to the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns<\/span> and the Senate Committees on Finance and Appropriations and Local Government<\/span> outlining the scope of issues<\/span> discovered and any recommendations made to address such issues<\/span>, and the progress that is made on such recommendations or other state assistance, oversight, or intervention efforts. These periodic reports shall specifically address the degree of cooperation the state-appointed team is receiving from locally elected officials, including constitutional officers<\/span>, city<\/span>, county<\/span>, or town<\/span> managers, and other local personnel in regard to their intervention work. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

G.<\/span> The Commission on Local Government<\/span> shall act in an oversight capacity for the purpose of determining whether a locality<\/span> has taken appropriate action to address the issues<\/span> specified in subsection D as requested by the intervention staff and whether the locality<\/span> appears to be on track to resolve its fiscal distress<\/span>. Technical assistance, based on the Auditor<\/span>’s existing oversight and support provided for local governments<\/span>, shall be provided to the Commission on Local Government<\/span> by the Auditor<\/span>, and all agencies of the Commonwealth shall provide assistance to the Commission, upon request. The Commission on Local Government<\/span> shall report its findings<\/span> and conclusions to the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns<\/span> and the Senate Committees on Finance and Appropriations and Local Government<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

H.<\/span> For purposes of this subsection, “locality<\/span>” means any locality<\/span> located in Planning District 19. If the Commission on Local Government<\/span>’s report to the Governor concludes that a locality<\/span> is either unwilling or unable to comply with the conditions necessary to address its fiscal distress<\/span>, the Commission on Local Government<\/span> shall appoint an emergency fiscal manager<\/span> and implement a remediation plan to restore sustainable fiscal health to the locality<\/span>. Following such appointment and during the duration of state remediation, the governing body<\/span> and the chief executive officer of the locality<\/span> shall not exercise any of the powers of those offices directly or indirectly relating to the locality<\/span>’s finances except as provided in this subsection and such governing body<\/span> and chief executive officer shall be subject to any conditions required by the emergency fiscal manager<\/span>. Notwithstanding any other provision of law<\/span>, general or special, the emergency fiscal manager<\/span> may shift certain responsibilities and duties from the treasurer of the locality<\/span> to the emergency fiscal manager<\/span> if the emergency fiscal manager<\/span> determines that it is necessary in order<\/span> to implement the remediation plan. The emergency fiscal manager<\/span> shall (i) implement an approved fiscal recovery plan; (ii) approve all professional services, suppliers, service provider contracts<\/span>, and contractual labor agreements; (iii) approve all city<\/span> employee payrolls; (iv) approve all long-term debt service and loan payments; (v) complete internal control and forensic audit assessments, as needed; and (vi) approve the annual operating and capital budget. The emergency fiscal manager<\/span> may make recommendations to the governing body<\/span> regarding the locality<\/span>’s personnel and staffing. The authority granted under this subsection may apply to any locality<\/span> facing fiscal distress<\/span> whether such fiscal conditions originated before or after the enactment of this authority. The emergency fiscal manager<\/span> shall submit a remediation plan to resolve the locality<\/span>’s fiscal distress<\/span> to the Commission on Local Government<\/span>, which shall approve, reject, or revise the plan after timely notice of any proposed actions to be taken has been provided to the public and an opportunity for public input has been provided and such input has been considered by the Commission on Local Government<\/span>. Such plan shall specify the purpose of remediation efforts, including the roles and responsibilities of the local governing body<\/span> and the chief executive officer, directly or indirectly, relating to the locality<\/span>’s finances and the benchmarks that will allow a locality<\/span> to exit the state remediation plan upon meeting such benchmarks. Following approval of the remediation plan by the Commission on Local Government<\/span>, the emergency fiscal manager<\/span> shall report regularly to the Commission on Local Government<\/span>, the Governor, and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns<\/span> and the Senate Committees on Finance and Appropriations and Local Government<\/span> regarding progress in implementation of the remediation plan. The Commission on Local Government<\/span> shall determine when the locality<\/span> has met the benchmarks approved in the remediation plan and shall so notify the Governor and the Chairmen of the House Committees on Appropriations and Counties, Cities and Towns<\/span> and the Senate Committees on Finance and Appropriations and Local Government<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

I.<\/span> The Department of General Services shall develop a master contract<\/span> of qualified private sector turnaround specialists with expertise in local government<\/span> intervention that the Governor can use to procure intervention services in an expeditious manner when he determines that state intervention is warranted in situations of local fiscal distress<\/span>. <\/i><\/a><\/p><\/section>","plain_text":" CODE OF VIRGINIA\n\nLOCAL FISCAL DISTRESS; DETERMINATION BY AUDITOR OF PUBLIC ACCOUNTS; STATE\nINTERVENTION (\u00a7 15.2-2512.1)\n\nA. For purposes of this section:\n\t\t\t“Auditor” means the Auditor of Public Accounts.\n\t\t\t“Emergency fiscal manager” means an official appointed by the\nCommission on Local Government to implement a remediation plan approved by the\nCommission under subsection H to restore fiscal health for a locality in the\nCommonwealth. The “emergency fiscal manager” shall have broad powers\nto rectify the financial emergency and to assure the fiscal accountability of\nthe locality and the locality’s capacity to provide or cause to be\nprovided necessary governmental services essential to the public health, safety,\nand welfare.\n\t\t\t“Fiscal distress” means a situation whereby the provision and\nsustainability of public services, or the ability to appropriately fund\nfinancial liabilities, is threatened by various administrative and financial\nshortcomings, including cash flow issues, inability to pay expenses, revenue\nshortfalls, deficit spending, structurally imbalanced budgets, billing and\nrevenue collection inadequacies and discrepancies, debt overload, failure to\nmeet obligations to authorities, school divisions, or political subdivisions of\nthe Commonwealth, lack of trained and qualified staff to process administrative\nand financial transactions, or the inability to timely produce an audited\nfinancial report. “Fiscal distress” may be caused by factors\ninternal to the locality or external to the locality, and in various degrees\nsuch conditions may or may not be controllable by management or the local\ngoverning body or its constitutional officers.\n\nB. The Auditor shall use leading indicators based on financial data and relevant\nnonfinancial factors to develop criteria for a preliminary determination that a\nlocality may be in fiscal distress. Such criteria shall be based upon\ninformation regularly collected by the Commonwealth or otherwise regularly made\npublic by the locality and the locality’s annual audited financial\nreporting required to be submitted to the Auditor. Information provided by the\nVirginia Retirement System, the Virginia Resources Authority, the Virginia\nPublic Building Authority, and other state and regional authorities concerning\nlate or missed payments shall be shared with the Auditor.\n\nC. Based upon the criteria established by the Auditor, the Auditor shall\nestablish a prioritized early warning system. Under the prioritized early\nwarning system, the Auditor shall establish a regular process whereby it reviews\naudited financial data and other relevant factors and qualitative information on\nat least an annual basis to make a preliminary determination that a locality may\nmeet the criteria for fiscal distress. As part of the early warning system, the\nAuditor shall use leading financial indicators based on key data from the\nlocality’s audited financial reports to evaluate information related to a\nlocality’s financial position, financial reserves, debt, and operating\nrevenues and expenditures, along with other relevant factors as applicable. The\nAuditor shall further evaluate localities that are identified as needing\nadditional evaluation based on their initial financial indicators on the basis\nof additional leading indicators that may include retirement liabilities,\nrevenue growth, economic and property market value data, reports prepared by the\nCommission on Local Government on revenue fiscal stress, and other relevant\nqualitative information.\n\t\t\tIf a locality has not submitted its audited annual financial report, pursuant\nto §§ 15.2-2510 and 15.2-2511, within 18 months of the required\nDecember 15 deadline or provided a plan to do so, the Auditor shall notify the\nGovernor, the Secretary of Finance, and the Chairmen of the House Committees on\nAppropriations and Counties, Cities and Towns and the Senate Committees on\nFinance and Appropriations and Local Government that the Auditor is unable to\nreview the locality’s financial data as part of the early warning system\nor evaluate its financial condition due to the locality’s delay with\nsubmitting its audited annual financial report. A locality’s inability to\ntimely produce its required audited financial report within 18 months of the\nrequired deadline as specified in this subsection or to provide a plan to do so\nshall automatically effectuate the provisions pursuant to subsection D whereby\nthe Auditor shall make a preliminary determination that the locality may meet\nthe criteria for fiscal distress.\n\nD. For a locality where the Auditor has made a preliminary determination of\nfiscal distress based upon the early warning system criteria, the Auditor shall\nnotify the local governing body of its preliminary determination that it may\nmeet the criteria for fiscal distress. In coordination with the local governing\nbody or chief executive officer, the Auditor may conduct a review and request\ndocuments and data from the locality and the locality’s published budget\ninformation. Such review shall consider factors including budget processes,\ndebt, borrowing, expenses and payables, revenues and receivables, and other\nareas, including staffing and the identification of external variables\ncontributing to a locality’s financial position. Any local governing body\nthat receives requests for information from the Auditor pursuant to such\npreliminary determination based on the above-described threshold levels shall\nacknowledge receipt of such a request and shall ensure that a response is\nprovided within the timeframes specified by the Auditor. If the locality does\nnot acknowledge the Auditor’s notification of a preliminary determination\nor does not provide a response to the Auditor’s requests within reasonable\ntimeframes so specified, the Auditor shall notify the Governor, the Secretary of\nFinance, and the Chairmen of the House Committees on Appropriations and\nCounties, Cities and Towns and the Senate Committees on Finance and\nAppropriations and Local Government that the locality is not responsive. After\nsuch review, if the local governing body or chief executive officer requests\nassistance or the Auditor is of the opinion that state assistance, oversight, or\ntargeted intervention is needed, either to further assess, help stabilize, or\nremediate the situation, the Auditor shall notify the Governor and the Chairmen\nof the House Committees on Appropriations and Counties, Cities and Towns and the\nSenate Committees on Finance and Appropriations and Local Government and the\ngoverning body of the locality in writing, outlining specific issues or actions\nthat need to be addressed by state assistance, oversight, or intervention.\n\nE. 1. Once the Governor has received a notification from the Auditor indicating\nfiscal distress in a specific locality, the Governor shall consult with the\nChairmen of the House Committee on Appropriations and the Senate Committee on\nFinance and Appropriations about a plan for state assistance, oversight, or\nintervention prior to any expenditure of funds from the cash reserve. Any plan\napproved by the Governor for state assistance, oversight, or intervention shall,\nat a minimum, specify the purpose of such state assistance, oversight, or\nintervention efforts, the estimated duration of such efforts, and the\nanticipated resources, dollar amounts, and personnel directed toward such\nefforts. The staffing necessary to carry out the assistance, oversight, or\nintervention plan may be assembled from either public agencies or private\nentities or both and, notwithstanding any other provisions of law, the Governor\nmay use an expedited method of procurement to secure such staffing when, in his\njudgment, the need for state assistance, oversight, or intervention is of an\nemergency nature such that action must be taken in a timely manner to avoid or\naddress unacceptable financial risks to the Commonwealth.\n\n 2. The Director of the Department of Planning and Budget shall identify any\n amounts remaining unexpended from general fund appropriations in the state\n budget as of June 30 of each year, which constitute state aid to local\n governments. The Director shall provide a listing of such amounts designated\n by item number and by program on or before August 15 of each year to the\n Governor and the Chairmen of the House Committee on Appropriations and the\n Senate Committee on Finance and Appropriations.\n\n 3. From such unexpended balances identified by the Director of the Department\n of Planning and Budget, the Governor may reappropriate up to $750,000 from\n amounts that would otherwise revert to the balance of the general fund and\n transfer such amounts as necessary to establish a component of fund balance,\n which may be used for the purpose of providing state assistance, oversight,\n and intervention actions for localities deemed to be fiscally distressed and\n in need of state assistance, oversight, or intervention to address such\n distress. Any such reappropriation approved by the Governor shall be\n separately identified in the commitments specified on the balance sheet and\n financial statements of the State Comptroller for the close of each fiscal\n year, to the extent that such reserve is not used or added to by future\n appropriation actions.\n\n 4. Prior to any expenditure of the reappropriated reserve, the Governor and\n the Chairmen of the House Committees on Appropriations and Counties, Cities\n and Towns and the Senate Committees on Finance and Appropriations and Local\n Government shall receive a notification from the Auditor that a specific\n locality is in need of state assistance, oversight, or intervention because of\n a worsening financial situation. The Auditor may issue such a notification\n upon receipt of an audited financial statement or other information that\n indicates the existence of fiscal distress. However, no such notification\n shall be made until appropriate follow up and correspondence ascertains that,\n in the opinion of the Auditor, such fiscal distress exists. Such notification\n may also be issued by the Auditor if written concerns raised about fiscal\n distress are not adequately addressed by the locality in question. The\n notification issued by the Auditor indicating fiscal distress in a specific\n locality pursuant to subsection D shall satisfy the notification requirement\n of this subdivision.\n\nF. The governing body and the elected constitutional officers of a locality\nsubject to a plan of state assistance, oversight, or intervention approved by\nthe Governor shall assist all state-appointed staff conducting such efforts\nregardless of whether such staff are from public agencies or private entities.\nThe state-appointed staff shall provide periodic reports in writing to the\nGovernor and the Chairmen of the House Committees on Appropriations and\nCounties, Cities and Towns and the Senate Committees on Finance and\nAppropriations and Local Government outlining the scope of issues discovered and\nany recommendations made to address such issues, and the progress that is made\non such recommendations or other state assistance, oversight, or intervention\nefforts. These periodic reports shall specifically address the degree of\ncooperation the state-appointed team is receiving from locally elected\nofficials, including constitutional officers, city, county, or town managers,\nand other local personnel in regard to their intervention work.\n\nG. The Commission on Local Government shall act in an oversight capacity for the\npurpose of determining whether a locality has taken appropriate action to\naddress the issues specified in subsection D as requested by the intervention\nstaff and whether the locality appears to be on track to resolve its fiscal\ndistress. Technical assistance, based on the Auditor’s existing oversight\nand support provided for local governments, shall be provided to the Commission\non Local Government by the Auditor, and all agencies of the Commonwealth shall\nprovide assistance to the Commission, upon request. The Commission on Local\nGovernment shall report its findings and conclusions to the Governor and the\nChairmen of the House Committees on Appropriations and Counties, Cities and\nTowns and the Senate Committees on Finance and Appropriations and Local\nGovernment.\n\nH. For purposes of this subsection, “locality” means any locality\nlocated in Planning District 19. If the Commission on Local Government’s\nreport to the Governor concludes that a locality is either unwilling or unable\nto comply with the conditions necessary to address its fiscal distress, the\nCommission on Local Government shall appoint an emergency fiscal manager and\nimplement a remediation plan to restore sustainable fiscal health to the\nlocality. Following such appointment and during the duration of state\nremediation, the governing body and the chief executive officer of the locality\nshall not exercise any of the powers of those offices directly or indirectly\nrelating to the locality’s finances except as provided in this subsection\nand such governing body and chief executive officer shall be subject to any\nconditions required by the emergency fiscal manager. Notwithstanding any other\nprovision of law, general or special, the emergency fiscal manager may shift\ncertain responsibilities and duties from the treasurer of the locality to the\nemergency fiscal manager if the emergency fiscal manager determines that it is\nnecessary in order to implement the remediation plan. The emergency fiscal\nmanager shall (i) implement an approved fiscal recovery plan; (ii) approve all\nprofessional services, suppliers, service provider contracts, and contractual\nlabor agreements; (iii) approve all city employee payrolls; (iv) approve all\nlong-term debt service and loan payments; (v) complete internal control and\nforensic audit assessments, as needed; and (vi) approve the annual operating and\ncapital budget. The emergency fiscal manager may make recommendations to the\ngoverning body regarding the locality’s personnel and staffing. The\nauthority granted under this subsection may apply to any locality facing fiscal\ndistress whether such fiscal conditions originated before or after the enactment\nof this authority. The emergency fiscal manager shall submit a remediation plan\nto resolve the locality’s fiscal distress to the Commission on Local\nGovernment, which shall approve, reject, or revise the plan after timely notice\nof any proposed actions to be taken has been provided to the public and an\nopportunity for public input has been provided and such input has been\nconsidered by the Commission on Local Government. Such plan shall specify the\npurpose of remediation efforts, including the roles and responsibilities of the\nlocal governing body and the chief executive officer, directly or indirectly,\nrelating to the locality’s finances and the benchmarks that will allow a\nlocality to exit the state remediation plan upon meeting such benchmarks.\nFollowing approval of the remediation plan by the Commission on Local\nGovernment, the emergency fiscal manager shall report regularly to the\nCommission on Local Government, the Governor, and the Chairmen of the House\nCommittees on Appropriations and Counties, Cities and Towns and the Senate\nCommittees on Finance and Appropriations and Local Government regarding progress\nin implementation of the remediation plan. The Commission on Local Government\nshall determine when the locality has met the benchmarks approved in the\nremediation plan and shall so notify the Governor and the Chairmen of the House\nCommittees on Appropriations and Counties, Cities and Towns and the Senate\nCommittees on Finance and Appropriations and Local Government.\n\nI. The Department of General Services shall develop a master contract of\nqualified private sector turnaround specialists with expertise in local\ngovernment intervention that the Governor can use to procure intervention\nservices in an expeditious manner when he determines that state intervention is\nwarranted in situations of local fiscal distress.\n\nHISTORY: 2024, c. 426.","edition":{"id":1,"name":"2025","slug":"2025","date_created":"2026-06-21 22:39:22","date_modified":"2026-06-21 22:39:22","current":1,"order_by":1,"last_import":null}}