Can a NC sheriff's department keep an off-budget 'drug fund' account funded by voluntary cash payments from arrested defendants who are awaiting trial, and can the county finance officer offset that money against the sheriff's annual appropriation?

Plain-English summary

Sheriff Edward E. Gwyn of Avery County wrote the AG to describe an arrangement his department had with criminal defendants. The department maintained a "Drug Fund" account into which arrested defendants awaiting trial for Controlled Substances Act violations deposited cash voluntarily, with no plea deal or court order behind the deposit and no conditions attached to its use. The department kept that account separate from its appropriated budget and spent it under the sheriff's direct supervision for law-enforcement purposes. Sheriff Gwyn asked two questions. Could the county finance officer unilaterally cut the sheriff's annual appropriation by the value of the cash going into the drug fund. And could the appropriation be reduced by the value of property received under state and federal asset-forfeiture laws.

Senior Deputy AG Edwin M. Speas, Jr., and Special Deputy AG W. Dale Talbert responded with two layers of analysis. The first was a strong policy warning. The second was the statutory answer.

The policy warning came first because the AG was troubled by the underlying practice. A law-enforcement agency accepting money "outside the judicial process" from people its officers had arrested and who were awaiting trial has "a strong appearance of impropriety," even if no quid pro quo passes. The arrangement could be interpreted as improper or secret plea bargaining, could inhibit the impartial judgment of the law-enforcement agency, the district attorney's office, and the court, and could erode public confidence in the entire judicial system. The AG's office did not support the practice and "ferverently" suggested it be discontinued in favor of court-ordered forfeitures or recorded plea agreements providing for restitution.

The legal answer assumed the practice continued. Three conclusions followed.

First, the drug-fund money had to be deposited through the county finance officer under the Local Government Budget and Fiscal Control Act. The AG read G.S. 159-32, which requires "all taxes and other moneys collected or received by an officer or employee of a local government" to be deposited under the Act, broadly enough to cover unconditional cash gifts. Sheriffs are officials of local government for purposes of the Act. So the off-book drug fund was not permissible: any cash a sheriff accepts on behalf of the department must be deposited "with the finance officer or in an official depository" under the supervision of the finance officer.

Second, the county finance officer cannot unilaterally cut the sheriff's annual appropriation by the value of money deposited into the drug fund (or anywhere else). The finance officer's role under G.S. 159-25(a) is to keep the account and disburse funds in strict compliance with the Act and the budget ordinance. The governing board, by appropriate resolution or ordinance, may authorize the budget officer to transfer money between appropriations within the same fund under G.S. 159-15, but no statute lets a budget officer or finance officer reduce an agency's appropriation on their own.

Third, the sheriff's department cannot spend the unanticipated revenue without board approval. G.S. 159-8(a) bars any local government from expending money "regardless of their source . . . except in accordance with a budget ordinance." So a sheriff who receives unanticipated funds must go back to the board and have the budget amended to permit the spending. If the funds came with restrictions or conditions (for example, to be used as drug "buy money" or for specific equipment), the governing board must either appropriate the money for those specified uses or return it.

The opinion separately referenced a February 1992 AG advisory letter sent to all local law-enforcement agency heads dealing with the related question of appropriations reductions tied to equitable-sharing proceeds from federal forfeitures, state judicial forfeitures, and state controlled-substances excise tax assessments. That letter was enclosed but is not reproduced in the opinion.

The Treasurer's Office concurred in the conclusions on matters within its statutory authority.

Currency note

This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Chapter 159 (Local Government Budget and Fiscal Control Act) has been amended in the decades since 1993, and asset-forfeiture rules at both the state and federal level have evolved substantially, including changes to the federal equitable-sharing program. Anyone with a current question about NC sheriff fiscal-control practices, asset forfeiture, or off-book funds should consult current Chapter 159, the current state and federal forfeiture frameworks, and counsel familiar with NC local government finance law.

Common questions

Q: Why does the AG describe the underlying practice as having "the appearance of impropriety" even though it is not criminal?
A: Because the source of the money is people who are awaiting trial and who depend on the sheriff (and the prosecutor, and the court) to handle their cases fairly. Even with no explicit quid pro quo, accepting money from a defendant while that defendant's case is pending invites the inference that the money buys something. That perception alone undermines confidence in the impartiality of the criminal process, regardless of what is actually in any individual party's mind.

Q: What is the difference between an "official depository" and an off-book account?
A: An official depository is a financial institution designated by the governing board under the Local Government Budget and Fiscal Control Act, where funds are subject to the finance officer's controls. An off-book account is one that sits outside that framework, typically under direct agency supervision, with no budget-ordinance entry, no governing-board appropriation, and no finance-officer oversight. The Act exists precisely so all local government revenue can be tracked, audited, and spent only as the elected board authorizes.

Q: Can the sheriff still spend the money on law-enforcement equipment if the donor specified that purpose?
A: Yes, but only after the governing board appropriates it for that purpose through a budget amendment. The condition imposed by the donor binds the board to either accept the money for the specified use or refuse it; it does not let the sheriff skip the budget process.

Q: Why can't the finance officer just net out the sheriff's appropriation when new revenue comes in?
A: Because that would let the finance officer set department budgets, which is not what the statute lets the finance officer do. Setting budgets is the governing board's job. If the board wants to reduce the sheriff's appropriation in light of new revenue, the board can do that by amending the budget ordinance. The finance officer cannot make that policy call alone.

Q: How does this differ from forfeiture proceeds the sheriff's department receives directly?
A: The opinion treats forfeiture proceeds (state judicial forfeitures, federal equitable sharing, and controlled-substances excise tax assessments) as a separate question addressed in a 1992 AG letter to local law-enforcement agency heads. The general rule is similar: receipt of unanticipated revenue does not let the receiving agency spend it outside the budget process, and any reduction in the agency's underlying appropriation has to be a board decision, not a finance-officer decision.

Background and statutory framework

The Local Government Budget and Fiscal Control Act, Chapter 159 of the NC General Statutes, is the structural backbone of local government fiscal practice in NC. It requires a board-adopted budget ordinance, a designated finance officer with specific statutory duties, deposit of all local government revenue through approved channels, and spending only as authorized by the budget ordinance. The Act applies to all kinds of local government revenue, including unanticipated revenue.

The 1993 opinion sits at the intersection of the Act and a specific law-enforcement practice. It signals two distinct concerns: a process concern (off-book funds violate the Act) and a substantive concern (accepting money from criminal defendants outside the judicial process undermines the integrity of criminal proceedings). Either concern alone would have justified the opinion's conclusions; together they explain the AG's strong recommendation that the practice be discontinued, not merely repaired.

The opinion also models a useful structural reminder: the finance officer is a fiduciary of the board, not a policymaker. The finance officer enforces the budget the board adopts. Where new revenue arrives, the finance officer's job is to receive and account for it; the board's job is to decide whether and how to spend it.

Citations

• N.C.G.S. § 159-8 (no local government may expend money except in accordance with a budget ordinance)
• N.C.G.S. § 159-8(a) (same, providing the express "regardless of source" language)
• N.C.G.S. § 159-15 (governing board may, by resolution or ordinance, authorize the budget officer to transfer moneys from one appropriation to another within the same fund)
• N.C.G.S. § 159-25 (duties of the local government finance officer)
• N.C.G.S. § 159-25(a)(1) (finance officer to "keep the account")
• N.C.G.S. § 159-25(a)(2) (finance officer to disburse all funds in strict compliance with the Act and the budget ordinance)
• N.C.G.S. § 159-32 (all taxes and other moneys collected or received by an officer or employee of a local government to be deposited in accordance with this section)
• Prior advisory letter of April 24, 1980 from Douglas A. Johnston, Assistant Attorney General, to Sheriff of Moore County (sheriffs are officials or employees of local government subject to the Act)
• February 1992 AG advisory letter to local law-enforcement agency heads (related question of appropriations and equitable-sharing/forfeiture proceeds)

Source

• Landing page: https://ncdoj.gov/opinions/cash-gifts-from-criminal-defendants-to-local-law-enforcement-agencies-propriety-and-fiscal-control/

Original opinion text

April 29, 1993

Sheriff Edward E. Gwyn Avery County Sheriff's Department Post Office Box 426 Newland, North Carolina 28657

Re: Advisory Opinion — Cash Gifts from Criminal Defendants to Local Law Enforcement Agencies; Propriety and Fiscal Control

Dear Sheriff Gwyn:

You state the Avery County Sheriff's Department has created and maintains a "Drug Fund" account into which is deposited money received from persons arrested by its deputies and awaiting trial for Controlled Substances Act violations. You further state the money is not paid over as part of plea bargains or under court orders but rather is provided voluntarily on the initiative of the alleged violators without any conditions attached to its use. The "Drug Fund" account is maintained separate and apart from funds appropriated to the Sheriff's Department by its governing board. We understand "Drug Fund" moneys are expended under the Sheriff's direct supervision only for official purposes which directly enhance the department's ability to perform its law enforcement duties. You ask whether Avery County's finance officer unilaterally may reduce the Sheriff's Department's annual appropriations by the value of the cash deposited into the "Drug Fund". You also ask whether the Sheriff's Department's annual appropriations may be reduced by the value of property it receives under state and federal forfeiture laws.

Before responding to your questions, the propriety of a law enforcement agency accepting money outside the judicial process from persons its officers have arrested and who are awaiting disposition of criminal charges should be addressed briefly. Although the practice does not violate the criminal law, it has a strong appearance of impropriety. Even if an alleged violator initiates the offer and provides the money without promise of any reciprocal consideration from the law enforcement agency, district attorney's office or court involved, the practice could be interpreted as improper or secret plea bargaining. The practice also could be seen as inhibiting those agencies' abilities to exercise impartial judgment in the violator's case and thereby erode public confidence in the entire judicial system. The Attorney General's Office does not support the practice and ferverently suggests it be discontinued in favor of court ordered forfeitures or recorded plea agreements providing for restitution of extraordinary costs incurred by law enforcement agencies.

Assuming you desire to continue the "Drug Fund" account, the first question that arises is whether it is appropriate for a local law enforcement agency to establish, maintain and make disbursements from such an account outside the uniform system of budget adoption, administration and fiscal control provided by the Local Government Budget and Fiscal Control Act (hereinafter "Act"). We think not. The Act requires "all taxes and other moneys collected or received by an officer or employee of a local government . . . [to] be deposited in accordance with this section." G.S. 159-32. The scope of the statute's requirement reasonably can be interpreted to include unconditional gifts of cash similar to those now being deposited in the "Drug Fund". For purposes of the Act, sheriffs are considered officials or employees of local government and are subject to the requirements of the Act. (See letter of April 24, 1980 from Douglas A. Johnston, Assistant Attorney General to Sheriff of Moore County.) Therefore, where a sheriff accepts on behalf of his department an unconditional gift of cash, he must deposit it "with the finance officer or in an official depository" under the supervision of the finance officer. G.S. 159-32.

Once money is deposited in accordance with the Act, a local government finance officer has the power and duty to "keep the account" and "disburse all funds . . . in strict compliance with [the Act] . . . [and] the budget ordinance". G.S. 159-25(a)(1) and (2). Although a governing board "by appropriate resolution or ordinance may authorize the budget officer to transfer moneys from one appropriation to another within the same fund", (G.S. 159-15) there is no statutory authority for a budget officer or finance officer unilaterally to reduce an agency's annual appropriations based upon the receipt of unanticipated revenue. Only the local governing board has authority to reduce or increase appropriations to a local government agency and such action must be accomplished by formal amendment to the budget ordinance. See G.S. 159-15.

While a local finance officer has no independent authority to reduce an agency's annual appropriations, an agency does not have authority to expend unanticipated revenue without with the approval of its governing board. G.S. 159-8(a) provides "no local government . . . may expend any moneys, regardless of their source . . . , except in accordance with a budget ordinance . . . ." Therefore, where a local law enforcement agency receives unanticipated revenue, it must obtain approval from its governing board, via amendment to its budget, to expend the funds. If the revenue is received with restrictions or conditions placed upon its use by the provider (e.g. to purchase law enforcement equipment or to be used as drug "buy money"), the local governing board must appropriate it for the specified uses or return it.

The question you ask concerning the authority of local governing boards to reduce annual appropriations to a law enforcement agency based upon receipt of proceeds from equitable sharing of federally forfeited property, state judicial forfeitures and state controlled substances excise tax assessments previously has been addressed fully in an advisory letter this office provided to all local law enforcement agency heads in February, 1992. A copy of the advisory letter is enclosed for your review and consideration.

The Treasuer's Office concurs in the legal conclusions set forth in this advisory opinion in so far as they involve matters within the Treasurer's statutory authority. Should you need further clarification of the opinions provided or have additional questions concerning the fiscal control of asset forfeiture proceeds, you may contact me or Assistant Attorney General Doug Johnston in the Treasurer's Office.

Edwin M. Speas, Jr.
Senior Deputy Attorney General

W. Dale Talbert Special Deputy Attorney General