A recently passed North Carolina law—S.B. 473, effective Dec. 9, 2021—imposes new restrictions and requirements on public officials. While North Carolina has for a long time prohibited public officials from deriving a direct benefit from a contract, this legislation added two new sections to the criminal code prohibiting personal gain and participation in contracting with non-profits.
- Public Officials Prohibited from Misusing Their Positions for Personal Financial Gain
Section 14-234.2 (a new statutory provision) prohibits elected officers of a public political subdivision from soliciting or receiving personal financial gain from their position through intimidation, undue influence or misuse of employees. Personal financial gain does not include financial gain received for lawfully acting in the individual’s official capacity or with approval of the political subdivision which the individual serves. Violation of this section is a Class H felony, punishable by imprisonment ranging from four to 25 months.
- Local Public Officials Must Recuse Themselves from Participating in Making or Administering Contracts with Non-Profits They Serve
Section 14-243.3 (another new statutory provision) prohibits local public officials from knowingly participating in making or administering a contract, including a monetary award (i.e., grant, loan or other appropriation), with any non-profit with which that individual is associated as a director, officer, or governing board member. Participating in making or administering a contract includes:
- deliberating or voting on the contract;
- attempting to influence another board member who is deliberating or voting on the contract; or
- soliciting or receiving any gift, favor, reward, service, or promise of reward in exchange for recommending, influencing, or attempting to influence the award of a contract with the non-profit.
However, this does not prohibit the governing body from entering into a contract with such a non‑profit so long as certain procedures are followed. A knowing violation of this section is a Class 1 misdemeanor, punishable by jail time of up to 120 days, plus a fine. Additionally, any contract into which the governing body enters in violation of this section is void. In limited circumstances, the contract may continue in effect until an alternative can be arranged.
For both public and private organizations, Brooks Pierce attorneys have extensive experience counseling non-profits, charities, private foundations and other organizations on formation, ongoing operations, business transactions and tax law. Please contact Elizabeth Troutman or Erin Barker if you have any questions on the new restrictions and requirements on public officials.
