Can a Smart Start local partnership board member vote on a grant to a nonprofit if she also sits on that nonprofit's board?
Plain-English summary
The Columbus County Partnership for Children, a Smart Start local partnership, voted to award a $14,400 grant to Columbus County Interagency Transportation, Inc., a nonprofit that provides transportation for special-needs residents. Two members of the Partnership board also sat on the Interagency Transportation board: the County Administrator and the Chairman of Interagency Transportation. Both voted on the grant.
Kipling Godwin, the Partnership's chair, asked the AG whether the dual-service constituted a violation of either the criminal conflict statute (N.C.G.S. § 14-234) or the stricter Smart Start conflict provision (§ 143B-168.12(a)(1)).
Senior Deputy AG Ann Reed concluded no violation occurred. § 14-234 turns on personal financial benefit to the public official. The dual-board members were on the Interagency Transportation board because of their county positions (they served as county-government department heads, and the Interagency Transportation board was composed of those department heads as a matter of structure). They received no personal benefit from the grant; the money went to fund nonprofit operations.
The Smart Start statute, § 143B-168.12(a)(1), goes further than § 14-234: it requires partnership members to "avoid conflicts of interests and the appearance of impropriety" and provides that anyone who "may benefit directly or indirectly from the partnership's disbursement of funds shall abstain from participating in any decision or deliberations by the partnership regarding the disbursement of funds." The AG read "benefit" here in the same personal-financial-benefit sense as § 14-234. Because the board members would gain nothing personal from the Interagency Transportation grant, and were serving on the nonprofit board as part of their county duties, the perception of personal profit was unlikely and § 143B-168.12(a)(1) did not apply.
The opinion noted, however, that the dual-service members could abstain anyway "if they believe that their votes will not be perceived as objective." That offered Godwin a clean way to handle future borderline situations: when in doubt, recuse.
On enforcement: § 143B-168.12(a)(1) violations should be handled administratively through partnership policies (developed with county counsel). § 14-234 is a criminal statute, so suspected violations should be referred to the local district attorney.
Currency note
This opinion was issued in 2001. 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 Smart Start statutes have been amended several times since 2001, and the conflict-of-interest provisions for local partnerships may have been clarified or tightened. § 14-234 itself has been substantially rewritten. Any current Smart Start board member confronting a similar question should pull the current Part 10B of Article 3 of Chapter 143B and the current text of § 14-234 rather than rely on the 2001 framework.
Common questions
Q: What is Smart Start?
A: Smart Start is North Carolina's early childhood initiative, administered through a statewide nonprofit and a network of county-level "local partnerships for children." Local partnerships receive state funding and distribute grants to address children's developmental, educational, and health needs in their counties. The legal framework is in Part 10B of Article 3 of Chapter 143B.
Q: How is § 143B-168.12(a)(1) stricter than § 14-234?
A: § 14-234 is a criminal statute that targets actual personal financial benefit. § 143B-168.12(a)(1) is a partnership-governance rule that targets both direct and indirect benefit and requires avoiding the "appearance of impropriety." The Smart Start rule is broader in coverage even though the AG read it harmonized with § 14-234 on the substantive "benefit" element.
Q: Why didn't the AG treat dual board service as automatic personal benefit?
A: Because the board members were appointed to the Interagency Transportation board ex officio, by virtue of their county positions. They served the nonprofit as part of their county duties. No salary or fee flowed to them from the nonprofit. The grant benefited the nonprofit organization's operations, not the individuals serving on its board.
Q: Should the County Administrator have abstained anyway?
A: The opinion explicitly allowed it: "The two board members may nevertheless abstain from voting on the grant to Interagency Transportation if they believe that their votes will not be perceived as objective." Even where the statute does not require abstention, taking the precaution is permissible and may build public trust.
Q: What about the Chairman of Interagency Transportation?
A: Same analysis. He was Chairman as part of his role in the county; the role brought no personal compensation tied to the grant. Voting on the grant did not violate either statute.
Q: How does a partnership enforce these rules?
A: For § 143B-168.12(a)(1) violations: develop written conflict policies and procedures with the county attorney, and handle violations through partnership governance (removal, censure, ratification with cure procedures). For § 14-234 violations: refer suspected facts to the local district attorney; § 14-234 is a criminal statute and only a prosecutor can charge it.
Background and statutory framework
Smart Start local partnerships are nonprofit corporations chartered under Part 10B of Article 3 of Chapter 143B. They receive Smart Start funds, which they then disburse as grants to local providers (day care quality enhancement, early-literacy programs, health screening initiatives, transportation for special-needs children).
The boards of local partnerships are large and structurally diverse. Membership typically includes representatives of county government, the school district, healthcare providers, child-care providers, faith communities, parents, and others. Members are often drawn from positions in agencies that themselves could be grant recipients. So conflict questions arise frequently and predictably.
§ 143B-168.12(a)(1) was the legislature's response: a heightened, appearance-sensitive conflict standard tailored to the Smart Start structure. The statute requires avoidance of conflicts and appearances of impropriety, and mandates abstention by anyone who may benefit "directly or indirectly" from the partnership's disbursement of funds.
The AG's 2001 reading harmonized § 143B-168.12(a)(1) with § 14-234 on the substantive "benefit" element. Both, in the AG's view, focus on personal financial benefit. Institutional or ex officio dual service, without personal gain, does not trigger either statute.
That harmonization is significant. A literal reading of "indirectly" benefit could have swept in any board member whose home agency might gain from a Smart Start grant (because the home agency benefits "indirectly" through the partnership funding). The AG rejected that reading. The "indirect benefit" the statute targets is indirect personal benefit (kickbacks, salary increases tied to the grant, business contracts), not the routine fact that public officials sometimes wear two governance hats.
Citations
- N.C. Gen. Stat. § 14-234(a) (criminal conflict of interest; personal financial benefit element)
- N.C. Gen. Stat. § 143B-168.12(a)(1) (Smart Start conflict and abstention rule)
- N.C. Gen. Stat. ch. 143B, art. 3, pt. 10B (Smart Start statutory framework)
- Fleming Bell, Ethics, Conflicts, and Offices: A Guide For Local Officials (Inst. of Gov't, UNC Chapel Hill, 1997) (cited in the companion NHRMC opinion of the same date)
Source
Original opinion text
RE: Advisory Opinion: Conflict of Interest; Local Partnership for Children Board; N.C.G.S. § 14-234; Part 10B of Article 3 of Chapter 143B of the General Statutes; N.C.G.S. § 143B-168.12(a)(1)
Dear Mr. Godwin:
You request our opinion concerning whether two members of the Columbus County Partnership for Children (the Partnership), who are also members of the Board of Directors of Columbus County Interagency Transportation, Inc. (Interagency Transportation), violated the State's conflict of interest statute by remaining on the Partnership board and participating in a vote to award a grant to Interagency Transportation. One of the individuals who sits on both boards is the County Administrator, and the other is Chairman of the Interagency Transportation Board.
The Columbus County Partnership for Children was organized as a local partnership pursuant to Part 10B of Article 3 of Chapter 143B of the General Statutes. As a local partnership it receives Smart Start funds, which are to be used to ensure that the developmental needs of children are met in order to prepare them to begin school healthy and ready to succeed. Interagency Transportation is a nonprofit corporation organized by Columbus County under the North Carolina Nonprofit Corporation Act for the purpose of providing transportation for people with special needs to essential services such as health care facilities, sheltered workshops and day care facilities. The Board of Directors of Interagency Transportation is made up of various county government department heads, and it is funded through State and federal grants. The Partnership's Grants Review Task Force recommended that Interagency Transportation receive funding in the amount of $11,000. The board voted to increase that amount to $14,400. The two Partnership board members who are also on the Interagency Transportation Board participated in that vote.
N.C.G.S. § 14-234 prohibits directors of the public trust from contracting for their own benefit. In pertinent part, the statute provides:
(a) If any person appointed . . . a . . . director to discharge any trust wherein . . . any county . . . may be in any manner interested shall . . . make any contract for his own benefit under such authority, or be in any manner concerned or interested in making such contract, or in the profits thereof . . . he shall be guilty of a misdemeanor.
The key element of a violation of this statute is a contract which personally benefits a public official. Ordinarily this statute is applied where a public body is considering entering into a contractual relationship with a for-profit organization, and a public official is a member of both groups. In your inquiry, the situation involves a contractual relationship between a public body and a nonprofit organization. No courts have specifically considered the application of the statute in these situations, but there is a discussion of the question in Ethics, Conflicts, and Offices: A Guide For Local Officials, by Fleming Bell (The Institute of Government, The University of North Carolina at Chapel Hill, 1997). Mr. Bell observes that if the benefit from a contractual relationship between a public body and a nonprofit organization flows to the nonprofit organization and not to individuals affiliated with the organization, the statute is not triggered. However, he observed that if there is some financial benefit to an individual affiliated with both groups, the statute may well apply. We agree with Mr. Fleming's analysis.
The members of the Interagency Transportation Board are appointed to that board because of their positions with other governmental agencies whose clients have special transportation needs. You do not indicate that either of the board members who are the subject of you inquiry will gain any financial benefit, either directly or indirectly, as a result of a grant to Interagency Transportation, and such personal benefit seems unlikely under the facts described in your letter and our telephone conversations. Absent such personal benefit, we do not believe their membership on both boards and participation in the vote on the Interagency Transportation grant constitutes a violation of N.C.G.S. § 14-234.
We note that, in addition to N.C.G.S. § 14-234, local partnership members are also subject to the stricter conflict of interest standard set out in Part 10B of Article 3 of Chapter 143B of the General Statutes. N.C.G.S. § 143B-168.12(a)(1) provides:
All appointed local board members shall avoid conflicts of interests and the appearance of impropriety. Should instances arise when a conflict may be perceived, any individual who may benefit directly or indirectly from the partnership's disbursement of funds shall abstain from participating in any decision or deliberations by the partnership regarding the disbursement of funds.
This statute applies where a partnership member personally benefits from a grant or will likely be perceived as personally benefiting from a grant. As set out above, these board members will gain nothing personal from the grant to Interagency Transportation. In fact they serve on that board as a part of their official duties to the county. Thus, the perception that they will personally profit from the Interagency Transportation grant is unlikely. Consequently we do not believe that N.C.G.S. § 143B-168.12(a)(1) applies. The two board members may nevertheless abstain from voting on the grant to Interagency Transportation if they believe that their votes will not be perceived as objective.
In your letter you also ask what you may do as Chairman of the Partnership board to enforce the statutory conflict of interest laws. We suggest that you contact your county attorney to discuss developing policies and procedures for handling conflict questions that arise under N.C.G.S. § 143B-168.12(a)(1). N.C.G.S. § 14-234 is a criminal statute; therefore, you may turn over suspected violations of this statute to your local district attorney.
We trust that we have responded fully to your questions. If you have additional questions or if we can be of further assistance, please do not hesitate to call on us.
Sincerely,
Ann Reed
Senior Deputy Attorney General
AR