In response to an audit report’s reference to possible violation of state law regarding the handling of several funds, Washington’s City Council could take action to remedy the problem.

During its meeting Monday, the council is scheduled to consider adopting a budget-ordinance amendment for special reserve, reserve and internal service funds, according to the council’s tentative agenda. Matt Rauschenbach, the city’s chief financial officer, is expected to discuss the proposed amendment with the mayor and council members.

During her presentation of the city’s audit report for fiscal year 2015, Crystal Roberts, a certified public accountant with Martin Starnes & Associates, noted there are no significant deficiencies or material weakness in internal control with the city’s finances. Roberts, upon questioning by Councilman Doug Mercer who noticed the report made references to violations of the state’s General Statutes, acknowledged the city might be in violation of state law regarding the handling of three funds. At the council’s Jan. 11 meeting, Roberts said she was awaiting word from the state’s Local Government Commission on that issue, which has been a matter of debate and different interpretations of the law. The Local Government Commission oversees the finances of local governments in North Carolina.

The report specifies the city’s water reserve fund, sewer reserve fund and CDBG program income fund as possibly being in violation of the law.

“Past practice for these funds has been to adopt a budget when there were planned expenditures, not for revenue only,” Rauschenbach wrote in recent memorandum to the mayor and council members. “Revised interpretation of NC G.S. 159-13 (a) suggests the adoption of a budget when there is only estimated revenue and no planned expenditure. As such, budgets are being established for these funds with the appropriation of reserve for future expenditures utilized to offset the expected revenue and balance the funds.”

The proposed budgets for the funds total $41,414, just a fraction of the city’s $14.5 million general fund (day-to-day operations).

Washington isn’t alone in possibly being in violation of state law. At the Jan., 11 meeting, Roberts said the state in recent months informed her company that some of its other local governments were not adopting budgets for specific funds.

The council meets at 5:30 p.m. Monday in the Council Chambers in the Municipal Building, 102 E. Second St. To view the council’s agenda for a specific meeting, visit the city’s web­site at www.washingtonnc.gov, click “Government” then “City Council” heading, then click “Meeting Agendas” on the menu to the right. Then click on the date for the appropriate agenda.