Could the Avery County Sheriff's Department hold and spend voluntary cash 'gifts' from arrested defendants in a separate 'Drug Fund' outside the county budget, and could the county finance officer cut the sheriff's regular appropriation by the amount in that fund?

Plain-English summary

The Avery County Sheriff's Department had set up a "Drug Fund" account. The sheriff told the AG's office how it worked: deputies arrested people for drug crimes, the arrested defendants (while awaiting trial) voluntarily handed the department cash, the cash went into the Drug Fund account, and the sheriff spent the money on department needs that supported law enforcement work. The fund existed outside the regular county appropriation process. The sheriff sent the AG two questions. Could the county's finance officer reduce the sheriff's annual appropriation by the amount in the Drug Fund? Could the sheriff's annual appropriation also be reduced by the value of property the department received under state and federal forfeiture laws?

Senior Deputy AG Edwin M. Speas, Jr. and Special Deputy AG W. Dale Talbert led with a problem the sheriff had not asked about. Accepting voluntary cash from criminal defendants awaiting trial, even with no strings attached, looked improper. It could be read as secret plea bargaining. It could be seen as compromising the impartiality of the agencies (sheriff, DA, court) handling the defendant's case. It could erode public confidence. The AG did not call it a crime, but the office "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." That language was unusually direct for an AG opinion.

On the assumption that the sheriff would keep the Drug Fund anyway, the AG turned to fiscal control. The Local Government Budget and Fiscal Control Act required "all taxes and other moneys collected or received by an officer or employee of a local government" to be deposited with the finance officer or in an official depository under the finance officer's supervision. G.S. § 159-32. Sheriffs were treated as officials or employees of local government for this purpose (citing a 1980 advisory letter to the Moore County sheriff). The AG read "moneys collected or received" broadly enough to cover unconditional cash gifts. So the Drug Fund could not legally sit outside the county finance system: any cash the sheriff accepted had to be deposited with the finance officer.

Once the money was in the county's official depository, the finance officer's job was to disburse it "in strict compliance with [the Act] . . . [and] the budget ordinance" (§ 159-25(a)(1) and (2)). The governing board could authorize the budget officer to transfer money from one appropriation to another within the same fund, but there was no statutory authority for the finance officer or budget officer to unilaterally reduce an agency's annual appropriations based on receipt of unanticipated revenue. Only the local governing board could change appropriations, and only by a formal amendment to the budget ordinance (§ 159-15).

The flip side was equally strict: an agency could not spend unanticipated revenue without first getting board approval. G.S. § 159-8(a) said no local government "may expend any moneys, regardless of their source . . ., except in accordance with a budget ordinance." So if cash showed up at the sheriff's department, the deputies could not turn around and spend it on new radios or training without first running it through the governing board. If the cash came in with restrictions or conditions placed by the donor (for example, "use this only for drug buy money" or "use this only to buy equipment"), the governing board had to either appropriate it for those specific uses or return it.

The opinion addressed the forfeiture question by referring the sheriff to a separate advisory letter the office had sent to all local law enforcement agency heads in February 1992. That letter is not included with this opinion. The AG noted that the Treasurer's Office concurred in the legal conclusions in the opinion.

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. The Local Government Budget and Fiscal Control Act has been amended several times since 1993, and federal and state asset forfeiture law has changed substantially, including federal equitable sharing reforms. Anyone advising a current sheriff's fund or forfeiture practice should verify the present statutes and any AG or School of Government guidance.

Background and statutory framework

The Local Government Budget and Fiscal Control Act of 1971 was North Carolina's response to long-standing concerns about fragmented and informal local government cash handling. Before the Act, county officers and agencies often maintained their own off-budget bank accounts, used informally for various expenses, with minimal oversight. The Act consolidated cash management under a single finance officer per local government, set out uniform budget adoption and amendment procedures, required deposit of all received funds with the finance officer or a designated official depository, and made the budget ordinance the operative authority for all expenditures.

A "Drug Fund" account at a sheriff's department in 1993 was the exact pattern the Act was designed to fix. The fact that the money was donated rather than appropriated did not change the analysis. The Act reached "all taxes and other moneys collected or received by an officer or employee of a local government," and that catch-all phrase swept in unconditional gifts.

The AG's secondary message about appearance of impropriety in cash gifts from criminal defendants warrants its own attention. The opinion did not identify a specific crime committed by either the sheriff or the defendants. North Carolina has bribery statutes, but those typically require a quid pro quo, which the facts as presented to the AG did not establish. The AG's concern was more institutional than criminal: the practice undermined the appearance of impartial criminal justice. The AG's recommended alternatives (court-ordered forfeitures or recorded plea agreements with restitution) channeled defendant-source money through transparent judicial procedures rather than through informal departmental accounts.

The cross-reference to the 1992 letter on forfeiture proceeds is notable because federal and state asset forfeiture had become a significant source of local law enforcement revenue by the early 1990s. The federal Comprehensive Crime Control Act of 1984 had established the Department of Justice's equitable sharing program, which routed federally forfeited assets back to participating local agencies. North Carolina's RICO Act and Controlled Substances Excise Tax provided state-side forfeiture revenue. The 1992 advisory letter would have explained how those proceeds had to be handled under the Budget and Fiscal Control Act.

Common questions

Was the Drug Fund practice illegal?

The AG opinion did not call it a crime. But it identified it as inconsistent with the Local Government Budget and Fiscal Control Act and as having a strong appearance of impropriety. The fix was to deposit any cash with the finance officer and to seek formal budget amendments before spending.

Could the county finance officer just reduce the sheriff's appropriation by the amount of unanticipated revenue?

No. Only the local governing board (the county commissioners) had statutory authority to change appropriations, and only by formal amendment to the budget ordinance. The finance officer could not do it unilaterally.

Could the sheriff insist on spending unanticipated revenue exactly as the donor specified?

The sheriff could ask the governing board to appropriate the money for the donor-specified purpose, and the board could agree. But if the board declined to do so, the money had to be returned to the donor; the sheriff could not spend it unilaterally.

What about cash voluntarily deposited at the department as a "donation" from a private citizen with no criminal case pending?

The Act's "all moneys collected or received by an officer or employee of a local government" language was broad enough to cover any donation, not just defendant-sourced gifts. A truly anonymous community donation would still have to go through the finance officer.

Did the same fiscal control rules apply to state and federal forfeiture proceeds?

Yes. The opinion referenced a February 1992 advisory letter that walked through the same Budget and Fiscal Control Act rules for forfeiture revenue. Forfeiture proceeds had to be deposited with the finance officer and could not be spent without a budget amendment.

Citations

• N.C. Gen. Stat. § 159-8(a) (no expenditure outside budget ordinance)
• N.C. Gen. Stat. § 159-15 (budget amendment by governing board)
• N.C. Gen. Stat. § 159-25(a)(1), (2) (finance officer duties)
• N.C. Gen. Stat. § 159-32 (deposit requirement)

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 Treasurer'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