Does the NC Secretary of State need a new statute before she can accept federal grants or private gifts to help her implement the Nonprofit Corporation Act?

Plain-English summary

House Bill 319 (1999) would have explicitly authorized the Secretary of State to apply for and accept grants from governmental and private sources to support her Nonprofit Corporation Act duties. The Secretary's general counsel asked the AG whether such authorizing legislation was even necessary, given that some state agencies have express grant-acceptance authority and the Secretary of State does not.

Senior Deputy AG Reginald Watkins and Special Deputy AG Lorinzo Joyner concluded that specific legislative authorization was not needed. The Secretary already had implied power to accept grants under three independent legal threads:

1. Implied administrative powers. The general rule in NC is that administrative agencies have the powers expressly conferred by statute plus powers implied as reasonably necessary to carry out express grants of authority (Equipment Co. v. Hertz Corp., 256 N.C. 277 (1961)). The Secretary's Chapter 55A duties include overseeing nonprofit corporations to ensure compliance with the Act, conducting investigations, and administratively dissolving noncompliant corporations. Accepting outside grants to fund those duties is reasonably necessary to perform them. Beyond that, G.S. 55A-1-30 explicitly gives the Secretary "the power reasonably necessary to perform the duties required of her by the Chapter."

2. The 1935 general authorization. 1935 Sess. Laws c. 479 (codified at G.S. 143-163) authorized "the State of North Carolina, and its several departments, institutions, agencies and commissions" to accept loans, grants, and other federal and private assistance "for [the State's] use, and to receive like financial and other aid from other agencies in carrying out any undertaking which has been authorized by the Governor of North Carolina, with the approval of the Council of State." The opinion noted that the Governor-and-Council-of-State approval procedure had fallen into disuse, but the underlying authority remained.

3. Recurrent legislative recognition in appropriations acts. Each biennial appropriations bill in modern NC practice has included a general provision recognizing that all agencies may receive unanticipated gifts and grants for specific purposes, and excluding such receipts from being used to decrease general-fund allocations. The opinion cited the 1995 Continuation Budget Operations Appropriations Act (c. 324, § 6.1) and the 1997 Current Operations and Capital Improvements Appropriations Act (c. 443, § 7(a)). These recurrent provisions presuppose that all state agencies have base-level authority to accept federal grants and private gifts; the appropriations act provides procedural rather than substantive authorization.

The opinion bracketed the implied power with two caveats. First, federal and private funds, once received by a state agency, become state funds and are subject to the Executive Budget Act. Second, the Secretary cannot accept grants on terms contrary to state law (e.g., terms that would conflict with G.S. 143-2, 143-83, or the State Auditor access clause in G.S. 147-64.7(a)(4)).

So House Bill 319 was not legally necessary, though the AG suggested the legislature could "clarify this issue by explicitly granting blanket authority to all State agencies to accept gifts and grants so long as they are reasonably necessary to effectuate an express power or duty."

Currency note

This opinion was issued in 1999. 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 Executive Budget Act has been replaced by the State Budget Act (Chapter 143C), enacted in 2006. References to G.S. 143-2 and 143-83 in the 1999 opinion should be checked against the current Chapter 143C provisions. The general rule (state agencies have implied power to accept federal grants and private gifts in furtherance of their statutory duties, subject to compliance with budget and audit law) remains the working framework, but the specific procedural statutes have shifted.

Common questions

Q: What are "implied powers" in NC administrative law?
A: Powers that a court or AG infers from a statutory grant of express authority because they are reasonably necessary to carry out the express powers. The doctrine recognizes that the legislature cannot anticipate every administrative detail when it creates an agency or assigns it duties. Equipment Co. v. Hertz Corp., 256 N.C. 277 (1961), is the canonical citation.

Q: Why doesn't every agency need explicit grant-acceptance authority?
A: Because accepting grants is a routine administrative tool that supports execution of express duties. Requiring a specific statute for every agency to accept every type of grant would be impractically rigid and would tie the legislature down to fine-grained authorizations that the implied-powers doctrine handles more sensibly.

Q: What did the 1935 Act do?
A: 1935 Sess. Laws c. 479 was a blanket authorization for all NC agencies to accept federal and other outside assistance. It set up a Governor-plus-Council-of-State approval procedure that, by 1999, had fallen into disuse. The opinion treats the substantive grant of authority as still effective even though the approval procedure has not been used.

Q: What is G.S. 55A-1-30?
A: The general implied-powers section of the Nonprofit Corporation Act. It gives the Secretary of State "the power reasonably necessary to perform the duties required of her by [Chapter 55A]." The opinion treats this as a statutory-level confirmation of the common-law implied-powers doctrine, specifically for nonprofit-corporation oversight.

Q: What strings come with accepted grants?
A: Three categories. First, the funds become state funds subject to Executive Budget Act controls. Second, the agency must comply with grant terms (limited by the requirement that those terms not conflict with state law). Third, G.S. 147-64.7(a)(4) requires every state contract or grant to include a clause providing State Auditor access to persons and records.

Q: Could a future legislature lock down implied authority?
A: Yes, by enacting a statute requiring specific authorization for grant acceptance. Implied powers exist in the absence of contrary statutory direction. The AG's analysis here assumes the legislature has not so directed.

Background and statutory framework

NC's executive branch is structured to give agencies the powers they need to execute their statutory missions, without forcing the legislature to micromanage. The framework draws on three layers:

• Common law implied powers. NC follows the general administrative-law doctrine that agencies have the powers expressly conferred plus those reasonably implied. Equipment Co. v. Hertz Corp. states the rule.
• Statutory necessary-and-proper clauses. Some agency-organic statutes include specific implied-powers grants. G.S. 55A-1-30 is the example here.
• General grant-acceptance authorities. The 1935 Act and the recurrent appropriations-bill provisions provide blanket recognition that all agencies may accept outside funding.

The Executive Budget Act (in 1999, principally Chapter 143; today, the State Budget Act in Chapter 143C) channels grant funds through OSBM and the budget process so that grant receipts do not silently inflate agency operations or substitute for general-fund cuts. The State Auditor's access right (G.S. 147-64.7(a)(4)) ensures that the State can audit how grant funds are used.

These pieces add up to a framework where individual agency-by-agency grant authorization is unnecessary as a matter of law, even though some agencies have it expressly and some do not. The opinion's practical advice to the Secretary of State: proceed under implied powers, comply with the Executive Budget Act, and do not accept grants on terms inconsistent with state law.

Citations

• N.C. Gen. Stat. ch. 55A (Nonprofit Corporation Act)
• N.C. Gen. Stat. § 55A-1-30 (implied powers of Secretary of State to perform nonprofit-corporation duties)
• N.C. Gen. Stat. § 55A, art. 14, art. 15 (administrative dissolution and revocation of nonprofit corporations)
• N.C. Gen. Stat. § 143-2 (Executive Budget Act, in 1999 form)
• N.C. Gen. Stat. § 143-34.2 (information on agency applications for nonstate funds)
• N.C. Gen. Stat. § 143-83 (state expenditures subject to budget law)
• N.C. Gen. Stat. § 143-163 (codification of the 1935 general grant-acceptance authority)
• N.C. Gen. Stat. § 147-64.7(a)(4) (State Auditor access clause required in state contracts and grants)
• 1935 N.C. Sess. Laws c. 479 (general authorization for state agencies to accept federal and private assistance)
• 1995 N.C. Sess. Laws c. 324, § 6.1 (Continuation Budget Operations Appropriations Act recognition of unanticipated gifts and grants)
• 1997 N.C. Sess. Laws c. 443, § 7(a) (Current Operations and Capital Improvements Appropriations Act recognition of unanticipated gifts and grants)
• Equipment Co. v. Hertz Corp. and Contractors, Inc. v. Hertz Corp., 256 N.C. 277, 123 S.E.2d 802 (1961) (implied administrative powers doctrine)
• 2 Am. Jur. 2d, Administrative Law, §§ 55, 62 (general implied-powers treatise discussion)

Source

• Landing page: https://ncdoj.gov/opinions/authority-of-secretary-of-state-to-apply-for-and-accept-federal-grants-and-private-gifts/

Original opinion text

Reply to: LORINZO L. JOYNER INSURANCE SECTION

(919) 716-6610 Fax: (919) 716-6757

June 21, 1999

Sheila Stafford Pope
General Counsel
Secretary of State
300 N. Salisbury Street
Raleigh, North Carolina 27603-5172

Re: Advisory Opinion; Authority of the Secretary of State to Apply for and Accept Federal Grants and Private Gifts; N.C. Gen. Stat. § 55A-1 et seq.

Dear Ms. Pope:

By letter dated May 17, 1999, you request an opinion as to whether a specific grant of authority to the Secretary of State is necessary for her to accept grants from governmental or private sources in the manner specified in House Bill 319. Such grants would be used to aid in the operation and development of nonprofit corporations pursuant to N.C. Gen. Stat. § 55A-1 et seq. It is our opinion that specific legislative authorization is not necessary for the Secretary of State to apply for and accept grants and gifts to be used to effectuate the purposes of the Nonprofit Corporation Act.

It should be noted that while the legislature has expressly conferred upon some agencies the authority to apply for and accept grants from governmental and private sources, the Secretary of State is among those agencies and offices which do not have that express grant of authority. It is, therefore, necessary to determine whether that authority is otherwise provided by law.

The general rule is that an administrative agency has only those powers expressly conferred upon it by statute or constitution, and such as are implied by its grant of authority. Implied powers are those that are reasonably necessary in order to carry out the powers expressly granted. The reason for implied powers is that the legislature cannot foresee all the problems incidental to carrying out the duties and responsibilities of the agency. Equipment Co. v. Hertz Corp. and Contractors, Inc. v. Hertz Corp., 256 N.C. 277, 123 S.E.2d 802 (1961). See also, 2 Am. Jur. 2d, Administrative Law, §§ 55, 62.

A review of the nature of the duties and responsibilities of the Secretary as they relate to the Nonprofit Corporation Act reveals that she is authorized to oversee nonprofit corporations to ensure that they are created and operated in conformity with the provisions of N.C. Gen. Stat. § 55A-1 et seq. She may conduct investigations to determine if a nonprofit corporation is subject to or has complied with all the provisions of the Act and, under appropriate circumstances, may administratively dissolve or revoke a certificate of authority of a nonprofit corporation. See, Chapter 55A, Articles 14 and 15. Finally, the Secretary of State has the power reasonably necessary to perform the duties required of her by the Chapter. N.C. Gen. Stat. § 55A-1-30.

It is our opinion that the oversight responsibilities of the Secretary of State are clearly designed to further the purposes of the Act, i.e., to aid in the creation, development and continued operation of nonprofit corporations governed by Chapter 55A of the General Statutes. We further believe that the power to accept grants from federal and private entities may be deemed reasonably necessary to carry out those responsibilities.

A review of pertinent legislative appropriations bills suggests that the legislature intends that every agency have the authority to accept financial assistance from both federal and private sources. For instance, in 1935 the General Assembly ratified "An Act Authorizing The State of North Carolina, and Its Several Agencies and Commissions … to Accept and Receive Loans, Gifts and Other Assistance from the United States Government and Other Agencies." See 1935 Sess. Laws, c. 479. Section 2 of Chapter 479 of that Act is codified as N.C. Gen. Stat. § 143-163 and provides in pertinent part:

The State of North Carolina, and its several departments, institutions, agencies and commissions are hereby authorized to accept and receive loans, grants and other assistance from the United States government, departments and/or agencies thereof, for its use, and to receive like financial and other aid from other agencies in carrying out any undertaking which has been authorized by the Governor of North Carolina, with the approval of the Council of State.

The 1935 Act contemplates that such federal and private financial aid will be for purposes authorized by the Governor and approved by the Council of State. However, we have conducted an exhaustive review and have found no instance where this approval procedure has been utilized. Instead, there have been numerous legislative enactments subsequent to the 1935 Act which have as a necessary predicate an agency's general authority to accept such aid so long as it is reasonably necessary to perform the duties and responsibilities conferred by statute. None of these subsequent acts mentions the procedure referenced in the 1935 Act.

For instance, it is the practice of the General Assembly to include a general provision in each appropriations bill which expressly recognizes that all agencies may receive gifts and grants that are unanticipated [by the General Assembly] and are for specific purposes. The provision typically excludes such gifts and grants from being used as a basis for decreasing the amounts allocated to such agencies from the General Fund. See, for example, the Continuation Budget Operations Appropriations Act of 1995, 1995 Sess. Laws, c. 324, s. 6.1 and the Current Operations and Capital Improvements Appropriations Act of 1997, 1997 Sess. Laws., c. 443, s. 7(a). It is worth noting that the 1997 Act amended N.C. Gen. Stat. § 143-34.2 to require that under certain circumstances, agencies must provide information related to their applications for nonstate funds (including federal funds) to the Office of State Budget and Management and the Advisory Budget Commission. Again, there is no requirement that the Governor or Council of State have approved the undertaking or purpose for which the aid is being requested.

It is our opinion that statutes enacted after the 1935 Act reflect an intent by the General Assembly to independently confer upon all State agencies the authority to accept federal grants and private gifts without obtaining the authorization of the Governor and approval of the Council of State. It may be appropriate for the General Assembly to clarify this issue by explicitly granting blanket authority to all State agencies to accept gifts and grants so long as they are reasonably necessary to effectuate an express power or duty. We do not believe, however, that its failure to do so is a bar to the Secretary's acceptance of grants and gifts.

Finally, we note that the authority to accept grants and gifts when reasonably necessary to carry out duties and responsibilities conferred by statute is not without limits. Funds received from grantors, whether governmental or private entities, take on the character of State funds and are generally subject to restrictions applicable to state expenditures. The Secretary must comply with the terms, conditions, and limitations of grants applied for and accepted and must expend all such funds in compliance with the Executive Budget Act. Notably, the Secretary of State cannot accept grants under terms which are contrary to State law. See, generally, N.C. Gen. Stat. §§ 143-2, 143-83. Moreover, as prescribed by N.C. Gen. Stat. § 147-64.7(a)(4): "All contracts or grants entered into by State agencies … shall include, as a necessary part, a clause providing access [to persons and records by the State Auditor] …."

In sum, it is our opinion that the Secretary of State has the power, without further legislative authorization, to accept federal grants and private gifts to assist her in implementing her duties under the Nonprofit Corporation Act so long as those grants or gifts are not contrary to state law and so long as she complies with the applicable provisions of the Executive Budget Act.

We hope this response addresses your concerns.

Yours very truly,

Reginald L. Watkins
Senior Deputy Attorney General

Lorinzo L. Joyner
Special Deputy Attorney General

DATE: June 21, 1999
REQUESTED BY: Sheila Stafford Pope, General Counsel, Secretary of State
AUTHOR: Reginald L. Watkins / Lorinzo L. Joyner

SUMMARY: The Secretary of State has the power, without further legislative authorization, to accept federal grants and private gifts to assist her in implementing her duties under the Nonprofit Corporation Act so long as those grants or gifts are not contrary to state law and so long as she complies with the applicable provisions of the Executive Budget Act.