I. Legal Requirements and Ethical
Considerations for Local Elected
Officials
A. Ethics in Government: Why is it important?
The conduct of elected officials affects public perceptions about and trust in
government. In some cases, legal requirements limit officials’ conduct, but in many
cases, the elected officials have choices about how to act, including whom to hire,
when to contract, and how to vote. Citizens expect elected officials to make these
choices based on what is in the best interest of the public, rather than what benefits
the official’s individual self- interest. Laws governing local officials therefore focus
on financial interests in voting and contracting, as well as other ways in which
government decision-makers might personally benefit from the actions they take.
In addition, constitutional due process requirements focus on the need for fair and
unbiased decision-making when certain types of private rights are at stake.
Training for elected officials is designed to focus on both the legal requirements and
the ethical considerations, so that these key governmental decision-makers will
have the information and insight they need to exercise their authority appropriately
and in the public interest.
B. State Ethics Requirements
Under North Carolina law, members of governing boards of cities, counties, local boards
of education, unified governments, sanitary districts, and consolidated city-counties are
required to receive at least two (2) clock hours of ethics training within twelve months
after each election or reelection (including appointment or reappointment) to office. The
training must cover laws and principles that govern conflicts of interest and ethical
standards of conduct at the local government level. This training requirement is an
ongoing obligation, triggered by each subsequent re-election or reappointment to office.
(G.S. 160A-87)
The law also requires these governing boards to adopt ethics resolutions or policies to
guide board members’ actions in performing their duties as members of these boards.
(G.S. 160A-86) The ethics resolution or policy must address at least five key
responsibilities of board members:
1.
2.
3.
4.
5.
Obey all applicable laws about official actions taken as board member.
Uphold integrity and independence of office.
Avoid impropriety in exercise of official duties.
Faithfully perform duties.
Act openly and publicly.
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No sanctions for failure to comply are specified in the statute. Indeed, no state law
specifically authorizes a board to sanction its members to enforce the ethics code or
for other purposes. Failure to adopt a code or comply with the provisions of the
code may elicit citizen and media criticism, however, and may itself be considered
unethical.
C. Censuring Board Members
Boards commonly use a motion or resolution of censure to address ethical or legal
transgressions by board members. Although there is no specific authority in the
general law for this type of action, elected boards do have general authority to pass
resolution or motions. A motion of censure has no legal effect other than to express
the dissatisfaction of the board (or a majority of the board). There are no specific
procedural requirements for such an action, although the School of Government’s
model code of ethics includes recommendations for a censure process.
II. Conflicts of Interest in Voting
In general, a governing board member has a duty to vote. However, there are
limited situations when a board member may be excused from voting. The following
three statutes address conflicts of interest in voting for counties:
G.S. 153A-44
G.S. 153A-340(g)
G.S. 153A-345(e1)
Similarly, the following three statutes address conflicts of interest in voting for
cities:
G.S. 160A-75
G.S. 160A-381(d)
G.S. 160A-388(e1)
A. Duty To Vote: G.S. 153A-44 (counties) and G.S. 160A-75 (cities)
These statutes allow a board member to be excused from voting only on matters:
involving the consideration of the member’s own official conduct or financial
interest. (The financial interest must be direct, substantial, and readily
identifiable. Board member compensation is not considered financial interest
or official conduct.)
on which the member is prohibited from voting under the following statutes:
G.S. 14-234 (discussed in Section III)
G.S. 153A-340(g) (zoning: counties—discussed below)
G.S. 160A‑381(d) (zoning: cities—discussed below)
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G.S. 153A-345(e1) (board of adjustment/quasi-judicial: counties—
discussed below)
G.S. 160A‑388(e1) (board of adjustment/quasi-judicial: cities—discussed
below)
B. Zoning: G.S. 153A-340(g) (counties) and G.S. 160A-381(d)
(cities)
These statutes prohibit a board member from voting on a zoning map or text
amendment if the outcome of the matter is reasonably likely to have a direct,
substantial and readily identifiable financial impact (positive or negative) on the
member.
C. Board of Adjustment and other boards exercising quasi-judicial
functions: G.S. 153A-345(e1) and G.S. 160A-388(e1)
These statutes specify that when the board is acting as a board of adjustment (see
below) or exercising other quasi-judicial functions, a board member shall not
participate or vote if the board member may not be able to make an impartial
decision on the matter before the board.
These statues provide that a board member may not be able to make an impartial
decision (and therefore may not vote on the matter) if the board member has:
a fixed opinion about the matter;
secret communications with a party to the matter that took place outside of the
hearing or board meeting;
a close familial, business or associational relationship with an affected person;
or
a financial interest in the outcome of the matter.
WHAT to be excused from voting on
Own financial interest or official conduct
Legislative zoning matter
Quasi-judicial zoning matter
(Note: If objection raised and a member does not recuse
himself, remaining board members must rule on
objection by majority vote)
Public contracts
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WHEN to be excused from voting
Always
Outcome reasonably likely to have a direct,
substantial, and readily identifiable financial
impact
Violate affected person’s constitutional rights
to impartial decision, including having a fixed
opinion prior to hearing, secret ex parte
communications, close familial, business, or
other relationship with affected person, or
financial interest in the outcome
Member or spouse derives direct financial
benefit under the contract
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III. Conflict of Interest Prohibitions
NC Conflict of Interest Statutes
Three conflict of interest statutes prohibit certain activities by all public officers and
employees at the state and local government level:
A. G.S. 14-234: “Self-benefiting” – Public officers or employees benefiting from
public contracts.
B. G.S. 133-32: “Gifts and favors” – Gifts and favor from contractors prohibited.
C. G.S. 14-234.1: “Insider Trading” – Misuse of confidential information.
What is a “Contract”
“An agreement between two or more parties creating obligations that are
enforceable or otherwise recognized by law . . . [in the context of government] a
contract in which a government receives goods or services.”
- Black’s Law Dictionary (7th edition)
A. Self-benefiting from public contracts (G.S. 14-234)
1. Key terms
Making a contract - A public officer or employee is involved in making a
contract if he or she participates in the preparation of the contract. A board
member is also involved in making a contract if the board takes action on the
contract, whether the board member participates in the board’s action or not. In
other words, each board member is involved in making any contract entered
into by the member’s unit of government. Performing ministerial duties related
to a contract is not “making” a contract.
Administering a contract - A public officer or employee is involved in
administering a contract if he or she oversees the performance of the contract
or has authority to make decisions regarding the contract or to interpret the
contract. Merely performing ministerial duties related to a contract is not
“administering” that contract.
Direct benefit - A public officer or employee receives a direct benefit if he or
she (or his or her spouse):
owns more than 10% of the company
derives any income or commission directly from the contract, or
acquires property under the contract.
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2. What the statute prohibits
G.S. 14-234 prohibits three activities:
1. Deriving a direct benefit if making or administering a contract: A public
officer or employee who makes or administers a contract on behalf of a
public agency may not also derive a direct benefit from the contract (unless
an exception applies).
2. Influencing others if deriving a direct benefit: A public officer or
employee who will derive a direct benefit from a contract but is not involved
in making or administering it shall not attempt to influence any other person
who is involved in making or administering the contract.
3. Getting gifts in exchange for influencing others: A public officer or
employee shall not solicit or receive any gift, reward, or promise of reward in
exchange for recommending, influencing, or attempting to influence the
award of a contract by the public agency he or she serves. Does not require
that the officer or employee either derive a direct benefit or be making or
administering the contract to violate this section of the statute.
3. Consequences of violation
Violation of this statute can result in a Class 1 misdemeanor, punishable by up to
120 days imprisonment and a fine in an amount left to the judge’s discretion (there
is no maximum allowable fine for a Class 1 misdemeanor). In addition, contracts
entered into in violation of this statute are void.
4. Exceptions
There are five exceptions to the first activity prohibited under the self-dealing
statute (deriving a direct benefit when involved in making or administering a
contract) that permit otherwise impermissible contracts. If one of these exceptions
applies, the unit of government may enter into the contract, but the conflicted public
officer cannot participate in any way, vote, or attempt to influence someone
involved in making or administering that contract.
These exceptions are:
1. Contracts between a public agency and a bank, banking institution, savings
and loan association, or a public utility;
2. Interests in property conveyed by an officer or employee of a public agency
under a judgment entered by a superior court judge in a condemnation
proceeding initiated by the public agency (a “friendly” condemnation);
3. An employment relationship between a public agency and the spouse of a
public officer of the agency – this exception does not apply to employees;
4. Payments by a public agency for certain public assistance programs; and
5. Contracts entered into by small jurisdictions (cities having a population of no
more than 15,000 and counties that have no cities with a population of no
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more than 15,000 within them) – this exception only applies to city or county
elected officials, not employees.
Additional rules must be followed for the small jurisdiction exception (#5 above):
1. a contract permitted under the exception cannot exceed $40,000 of goods or
services per year ($20,000 for medical services);
2. the exception does not apply to competitive bidding contracts (purchases or
construction or repair contracts costing $30,000 or more); and
3. the contract must be approved in a regular, open meeting of the board,
declared in the local government’s annual audit, and posted in a conspicuous
place (the posting must be updated every three months).
5. Federal Grants Management Common Rule
The Grants Management Common Rule (GMCR) is a set of federal regulations that
applies to most federal grant funds. The GMCR prohibits self-benefiting from a
public contract when federal funds are involved. While substantially similar to the
state law prohibiting deriving a direct benefit from a contract when involved in
making or administering the contract (GS 14-234(a)(1)), the GMCR differs in some
ways, as illustrated below:
State (G.S. 14-234(a)(1))
Federal (GMCR)
Who is covered
Officers, employees
Officers, employees, and agents of
grantee and subgrantees
Who else is
covered
Spouse
Spouse, immediate family, partners,
current or soon-to-be employer
What kind of
interest
Direct benefit
Real or apparent financial or other
interest
Exceptions
Penalties
1.
2.
3.
4.
5.
Banks & utilities
Friendly condemnation
Spouse employment
Public assistance
Small jurisdictions
Class 1 misdemeanor
Void Contract
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Financial interest that is not
substantial
Loss of federal funds
Disciplinary action
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B. Gifts and favors from contractors (G.S. 133-32)
1. What the statute prohibits
A public officer or employee may not accept gifts or favors from a past (within the
past year), current, or potential future vendor or contractor if the officer or
employee is charged with the duty of any or all of the following:
preparing plans, specifications, or estimates for public contracts;
awarding or administering public contracts; or
inspecting or supervising construction.
2. Exceptions
Exceptions are allowed for:
1. honoraria
2. advertising items or souvenirs of nominal value
3. meals at banquets
4. gifts to professional organizations
5. gifts from family or friends (which must be reported to the employee’s
agency head)
3. Consequences of violation
Violation of this statute can result in a Class 1 misdemeanor, punishable by up to
120 days imprisonment and a fine in an amount left to the judge’s discretion (there
is no maximum allowable fine for a Class 1 misdemeanor).
4. Federal Grants Management Common Rule
The GMCR also prohibits accepting gifts from contractors when federal funds are
involved. While substantially similar to the state gift prohibition (GS 133-32), the
GMCR differs in some ways, as illustrated below:
State (G.S. 133-32)
Federal (GMCR)
Prohibited giver
Past (w/in 1 year), present, or future
Current or future
Prohibited
receiver
Officers and employees involved in:
1. Preparing plans
2. Awarding or administering
3. Inspecting or supervising construction
All officers, employees,
agents of grantee and
subgrantees
Exceptions
Penalties
1.
2.
3.
4.
5.
Honoraria
Nominal advertising items
Meals at banquets
Professional groups
Family and friends
Class 1 misdemeanor
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Unsolicited gift of nominal
value
Loss of federal funds
Disciplinary action
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C. Insider Trading (G.S. 14-234.1)
A public officer or employee may not benefit, or help someone else benefit, from the
use of non-public information that the person has learned through his or her official
position.
Violation of this statute can result in a Class 1 misdemeanor, punishable by up to
120 days imprisonment and a fine in an amount left to the judge’s discretion (there
is no maximum allowable fine for a Class 1 misdemeanor).
Resources
A. Fleming Bell, II, Ethics, Conflicts, and Offices: A Guide for Local Officials (2nd
edition)
A. Fleming Bell, II, A Model Code of Ethics for North Carolina Local Elected Officials
with Guidelines and Appendixes
Frayda S. Bluestein, A Legal Guide to Purchasing and Contracting for North
Carolina Local Governments (2nd edition)
School of Government Ethics for Local Government Officials webpage:
http://www.sog.unc.edu/node/797
School of Government Local Government Purchasing and Contracting webpage:
http://www.sog.unc.edu/programs/purchase/index.html
School of Government Coates’ Canons NC Local Government Blog:
http://sogweb.sog.unc.edu/blogs/localgovt/
Contact the School of Government
Norma Houston
[email protected]
Ethics For Local Elected Officials
UNC School of Government
Frayda Bluestein
[email protected]
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