Can a county commissioner who owns a real estate firm sell a house to a buyer using federal HOME program assistance funds, when the commissioner serves on the local HOME consortium board, without violating NC's conflict-of-interest law?
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This page answers the general question as of 1993. Ask about yours and see what current North Carolina law means for your facts, with citations you can check.
Plain-English summary
A North Carolina grants official asked about two transactions involving HOME assistance administered by the Iredell HOME Consortium. In Case 1, a county commissioner who also sat on the consortium board owned a real estate firm. The question was whether the commissioner or an employee of the firm could sell a home listed through that agency to a buyer using HOME funds. In Case 2, a city council member's son was a contractor who might build or repair HOME-funded homes.
The AG agreed that both cases presented conflicts under paragraph 3(t) of the HOME funding agreement and 24 CFR 92.356. The opinion says those provisions prohibit specified officials and relatives from having a financial interest in grant-connected contracts or projects. It found that the commissioner and the council member's son would benefit financially from the HOME funds.
For Case 1 only, the opinion separately addressed North Carolina law. N.C.G.S. §14-234(b) provided an exception to subsection (a) for certain payments for services furnished directly to needy people through direct public assistance programs. The AG said HOME could qualify and therefore no conflict arose under §14-234(a) in Case 1. It did not say the federal provisions overrode state law; it reported different conclusions under the two sets of provisions. It did not analyze Case 2 under the state statute or discuss a federal waiver.
Currency note
The opinion assesses the described cases and legal provisions as they stood in 1993. Check current grant terms, regulations, and state law for a present transaction.
Background and statutory framework
The funding agreement's paragraph 3(t) and 24 CFR 92.356 were the basis for the AG's conflict finding in each case. The letter briefly describes their restrictions and concludes the two people would benefit financially from HOME program funds. It does not set out an exception, waiver process, remedy, or consequence of a violation.
The opinion describes the state-law direct-public-assistance exception as subject to expressly stated circumstances and conditions. Its application of that exception was limited to the county commissioner's Case 1 transaction. The letter offers no general rule for resolving a disagreement between federal grant restrictions and state conflict law.
Common questions
Did the commissioner’s proposed HOME-assisted home sale present a conflict?
Yes under the funding agreement and 24 CFR 92.356, according to the AG. The opinion also says the state-law exception meant no conflict arose under N.C.G.S. §14-234(a) in that case.
What did the AG say about the council member’s son?
The AG found a conflict under the same two federal provisions for the son's proposed HOME-funded building or repair work. It did not decide whether the state conflict statute also applied to him.
Did the opinion say a HUD waiver would permit either transaction?
No. The letter does not discuss a waiver or how one might be obtained.
Did the opinion decide that federal rules override the state exception?
No. It found a conflict under the funding agreement and federal regulation while finding no conflict under the cited state provision for Case 1. It made no broader statement of priority between those rules.
Source
Original opinion text
April 6, 1993
Ms. Gail Brock
Chief, Grants Management Section
1307 Glenwood Avenue, Suite 250
Raleigh, NC 27605
Re: Advisory Opinion: Chief, Grants Management Section, Division of Community Assistance, Department of Commerce; Statesville Conflict of Interest; N.C.G.S. § 14-234
Dear Ms. Brock:
The following is submitted in response to the request for an opinion contained in your memorandum dated March 25, 1993 regarding the existence of a conflict of interest arising from a HOME grant to be administered by the Iredell HOME Consortium.
This office concurs in the conclusions set out in your memorandum to the effect that conflicts of interest exit in Case #1 and in Case #2 under the provisions of both paragraph 3(t) of the funding agreement and 24CFR92.356. As set out in your memorandum, the facts of Case #1 and Case #2 are as follows:
Case #1: A member of the Iredell County Board of Commissioners who also serves on the board of the consortium, is a real estate broker who owns a real estate firm. The city has inquired as to whether the commissioner or an employee of his firm selling a home listed through his agency to a person receiving HOME funds to assist with the purchase constitutes a conflict of interest.
Case #2: The city has requested an opinion on whether a contractor, who is the son of a member of the city council, may contract to build or repair homes that are funded with HOME funds.
Paragraph 3(t) of the funding agreement prohibits certain officials and their relatives from having any financial interest in any contract in connection with the grant. The provisions of 24CFR92.356 also prohibit certain officials and their relatives from having any financial interest in a project assisted by the HOME grant funds. Both the commissioner and the some of the councilman would very clearly benefit financially from the HOME program funds and, therefore, would have a conflict of interest under the provisions of paragraph 3(t) of the funding agreement and under the provisions of 24 CFR92.356.
The provisions of N.C.G.S. §14-234(b) create an exception to the conflict of interest provisions of N.C.G.S. §14-234(a) for programs that directly assist needy individuals. N.C.G.S. §14-234(b) provides generally that under certain expressly stated circumstances and conditions, it is not unlawful for a commissioner to accept payment for services furnished directly to needy individuals in connection with a program of direct public assistance to needy persons. The HOME program can be considered to be a program of direct public assistance to needy persons and, therefore, in Case #1 a conflict of interest does not arise under N.C.G.S. §14-234(a).
Ann Reed
Senior Deputy Attorney General
Charles J. Murray
Special Deputy Attorney General
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