North Carolina Department of Justice
North Carolina Department of Justice
North Carolina Department of Justice
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Reply To:

Ann Reed

Administrative Division

(919) 716-6800 (fax)919-716-6755

August 27, 1999

Kipling Godwin Chairman Columbus County Partnership for Children

P.O. Box 1481 Whiteville, North Carolina 28472

RE: Advisory Opinion: Conflict of Interest; Local Partnership for Children Board; N.C.G.S.

§14-234; Part 10B of Article 3 of Chapter 143B of the General Statutes; N.C.G.S. §143B

168.12(a)(1)

Dear Mr. Godwin:

You request our opinion concerning whether two members of the Columbus County Partnership for Children (the Partnership), who are also members of the Board of Directors of Columbus County Interagency Transportation, Inc. (Interagency Transportation), violated the State’s conflict of interest statute by remaining on the Partnership board and participating in a vote to award a grant to Interagency Transportation. One of the individuals who sits on both boards is the County Administrator, and the other is Chairman of the Interagency Transportation Board.

The Columbus County Partnership for Children was organized as a local partnership pursuant to Part 10B of Article 3 of Chapter 143B of the General Statutes. As a local partnership it receives Smart Start funds, which are to be used to ensure that the developmental needs of children are met in order to prepare them to begin school healthy and ready to succeed. Interagency Transportation is a nonprofit corporation organized by Columbus County under the North Carolina Nonprofit Corporation Act for the purpose of providing transportation for people with special needs to essential services such as health care facilities, sheltered workshops and day care facilities. The Board of Directors of Interagency Transportation is made up of various county government department heads, and it is funded through State and federal grants. The Partnership’s Grants Review Task Force recommended that Interagency Transportation receive funding in the amount of $11,000. The board voted to increase that amount to $14,400. The two Partnership board members who are also on the Interagency Transportation Board participated in that vote.

N.C.G.S. §14-234 prohibits directors of the public trust from contracting for their own benefit. In pertinent part, the statute provides: Kipling Godwin March 16, 2001 Pg 2

(a) If any person appointed . . . a . . . director to discharge any trust wherein . . . any county . . . may be in any manner interested shall . . . make any contract for his own benefit under such authority, or be in any manner concerned or interested in making such contract, or in the profits thereof . . . he shall be guilty of a misdemeanor.

The key element of a violation of this statute is a contract which personally benefits a public official. Ordinarily this statute is applied where a public body is considering entering into a contractual relationship with a for-profit organization, and a public official is a member of both groups. In your inquiry, the situation involves a contractual relationship between a public body and a nonprofit organization. No courts have specifically considered the application of the statute in these situations, but there is a discussion of the question in Ethics, Conflicts, and Offices: A Guide For Local Officials, by Fleming Bell (The Institute of Government, The University of North Carolina at Chapel Hill, 1997). Mr. Bell observes that if the benefit from a contractual relationship between a public body and a nonprofit organization flows to the nonprofit organization and not to individuals affiliated with the organization, the statute is not triggered. However, he observed that if there is some financial benefit to an individual affiliated with both groups, the statute may well apply. We agree with Mr. Fleming’s analysis.

The members of the Interagency Transportation Board are appointed to that board because of their positions with other governmental agencies whose clients have special transportation needs. You do not indicate that either of the board members who are the subject of you inquiry will gain any financial benefit, either directly or indirectly, as a result of a grant to Interagency Transportation, and such personal benefit seems unlikely under the facts described in your letter and our telephone conversations. Absent such personal benefit, we do not believe their membership on both boards and participation in the vote on the Interagency Transportation grant constitutes a violation of N.C.G.S. §14-234.

We note that, in addition to N.C.G.S. §14-234, local partnership members are also subject to the stricter conflict of interest standard set out in Part 10B of Article 3 of Chapter 143B of the General Statutes. N.C.G.S. §143B-168.12(a)(1) provides:

All appointed local board members shall avoid conflicts of interests and the

appearance of impropriety. Should instances arise when a conflict may be

perceived, any individual who may benefit directly or indirectly from the

partnership’s disbursement of funds shall abstain from participating in any

decision or deliberations by the partnership regarding the disbursement of funds.

This statute applies where a partnership member personally benefits from a grant or will likely be perceived as personally benefiting from a grant. As set out above, these board members will gain nothing personal from the grant to Interagency Transportation. In fact they serve on Kipling Godwin March 16, 2001 Pg 3

that board as a part of their official duties to the county. Thus, the perception that they will personally profit from the Interagency Transportation grant is unlikely. Consequently we do not believe that N.C.G.S. §143B-168.12(a)(1) applies. The two board members may nevertheless abstain from voting on the grant to Interagency Transportation if they believe that their votes will not be perceived as objective.

In your letter you also ask what you may do as Chairman of the Partnership board to enforce the statutory conflict of interest laws. We suggest that you contact your county attorney to discuss developing policies and procedures for handling conflict questions that arise under

N.C.G.S. §143B-168.12(a)(1). N.C.G.S. §14-234 is a criminal statute; therefore, you may turn over suspected violations of this statute to your local district attorney.

We trust that we have responded fully to your questions. If you have additional questions or if we can be of further assistance, please do not hesitate to call on us.

Sincerely,

Ann Reed Senior Deputy Attorney General

AR