In January of this year, the Enhance Local Government Transparency Act (N.C. Senate Bill 473) made some important changes to our conflict-of-interest laws for public officials. Most notably, the bill created new misdemeanor and felony offenses for public employees and officials who benefit from their positions, including officials who contract to benefit nonprofits with which they are associated. If you cover government boards and public officials, here are the changes you need to know about.
Before these changes, the law made it a class 1 misdemeanor for any “public officer or employee who is involved in making or administering a contract on behalf of a public agency” to “derive a direct benefit from the contract,” with some exceptions. That law, G.S. § 14-234, is still in effect. Even if the official is not directly involved in making the contract, the law prohibits that person from attempting “to influence any other person who is involved in making or administering the contract.” Furthermore, it prohibits officials from receiving or soliciting “any gift, favor, reward, service, or promise of reward, including a promise of future employment, in exchange for recommending, influencing, or attempting to influence the award of a contract by the public agency he or she serves.”
However, thanks to SB 473, the consequences for a public official who uses his or her influence to solicit financial gain can now be even more serious. The new law, G.S. § 14-234.2, effectively broadens the old law and creates a new Class H felony for any “elected officer of a political subdivision of this State [who]… solicit[s] or receive[s] personal financial gain from the political subdivision of this State for which that elected officer serves by means of intimidation, undue influence, or misuse of the employees of that political subdivision of this State.”
There are two exceptions to this provision. It does not apply if the financial gain is “received from [the] State for acting in the elected official's official capacity,” or to “financial gain received with the approval of the governing board of the political subdivision of this State for which that elected officer serves” (emphasis added).
The Enhance Local Government Transparency Act also addresses contracts that would not benefit the public official directly but would instead benefit a nonprofit with which the official is associated. The new law further broadens the existing conflict of interest law by creating a Class 1 misdemeanor for any public official who “knowingly participate[s] in making or administering a contract, including the award of money in the form of a grant, loan, or other appropriation, with any nonprofit with which that public official is associated” while failing to recuse himself or herself. This includes any attempts by the official to influence anyone voting on the contract or receiving or soliciting gifts or favors (including the promise of future employment) in “in exchange for recommending, influencing, or attempting to influence the award of a contract.” If this section is violated, the public official may be guilty of a misdemeanor and the contract is void, unless the immediate voiding of the contract will “result in harm to the public health or welfare.”
It’s important to remember that there is quite a long list of specific exceptions to this new nonprofit contract provision, including but not limited to contracts between a public agency and a bank, employment relationships between a public agency and the spouse of a public officer of the agency, and contracts in cities and towns with populations less than 20,000. The complete list of exceptions can be found in § 14-234(b) and (d1) through (d5).
The conflict-of-interest provisions are most noteworthy, but the Enhance Local Government Transparency Act also made a couple of other changes that are worth mentioning in passing. According to G.S. § 153A-28 and § 160A-64.1, finance officers must now garnish a board member’s compensation when that member has outstanding bills for county services. Additionally, G.S. § 159-34 now allows the Local Government Commission to help select and oversee the certified public accountant (CPA) who conducts the annual audit of the governing board’s accounts in the wake of an investigative report.
While the Enhance Local Government Transparency Act doesn’t change North Carolina’s conflict of interest laws dramatically, the expansions are significant enough that journalists who cover public bodies should take note.