Purchase and Contract Division; Community Colleges; Local Boards of Education

Subject:

Purchase and Contract Division; Community Colleges; Local Boards of Education.

Requested by:

Jim R. Lowry State Purchasing Officer

Question:

1. Do the regulations of the North Carolina Department of Administration, Division of Purchase and Contract, apply to the lease or rental of equipment by community colleges or local boards of education?

2. Do the regulations of the North Carolina Department of Administration, Division of Purchase and Contract, apply to lease-purchases of equipment by community colleges or local boards of education?

Conclusions:

1. No.

2. No, unless the contract contains a legal commitment to purchase the equipment.

1. G.S. 143-49(1) requires the Secretary of Administration:

"To canvass sources of supply, and to purchase or to contract for the purchase, lease and leasepurchase of all supplies, materials, equipment and other tangible personal property required by the State government, or any of its departments, institutions or agencies under competitive bidding or otherwise as hereinafter provided."

G.S. 143-53 delegates to the Advisory Budget Commission the authority to adopt rules and regulations necessary for the implementation of the State purchasing program.

The clear language of G.S. 143-49(1) restricts the authority and duty of the Secretary of Administration to the requirements of ". . . State government, or any of its departments, institutions or agencies. . . ." Rules and regulations governing state purchasing would therefore not apply to community colleges or local boards of education unless they fall within the definition of ". . . State government, or any of its departments, institutions or agencies. . . ."

It has been the consistent opinion of this Office that individual educational institutions within the Community College System are not "agencies" of the State government of North Carolina as that term is used in the Administrative Procedure Act. See 44 N.C.A.G. 315. These institutions are deemed to be instrumentalities of county government, even though the State Board of Education and the Department of Community Colleges exercise some degree of control over them.

This opinion is based upon the predominately local characteristics possessed by the individual institutions. Primary control is vested in an independent, local board of trustees. G.S. 115D-20.

Financing is substantially provided from county resources. G.S. 115D-32. Employees of individual community colleges are primarily excluded from coverage under the State Personnel Act. G.S. 126-5. Tort actions for damages may be brought directly against a community college board of trustees as opposed to an action against the State of North Carolina. G.S. 115D-58.12.

It should also be noted that in the event an individual community college ceases to operate, title to all real and personal property generally reverts to the county. G.S. 115D-14. These factors establish a strong presumption that the status of such an institution is that of a local, as opposed to a State, entity.

These same factors apply to the status of local boards of education. Local boards are elected by voters on a county-wide basis. G.S. 115C-35. Such boards are expressly given ". . . general control and supervision over all matters pertaining to the public schools in their respective administrative units . . ." by G.S. 115C-36. G.S. 115C-40 designates each county board of education as a body corporate with the power to purchase, hold and transfer real and personal property. It therefore follows that local boards of education, like community colleges, are primarily instrumentalities of county government rather than agencies of the State.

G.S. 115D-58.5(b), however, specifically states:

"Each institution shall be govern in it purchasing of all supplies, equipment, and materials by contracts made by or with the approval of the Purchase and Contract Division of the Department of Administration." (Emphasis added)

The legislature has, by statute, specifically directed community college boards of trustees to purchase all supplies, equipment and materials in accordance with the rules and regulations of the Division of Purchase and Contract, even though they are not considered to be institutions or agencies of the State.

G.S. 115C-522 states, in pertinent part:

"It shall be the duty of local boards of education to purchase or exchange all supplies, equipment and materials in accordance with contracts made by or with the approval of the Department of Administration." (Emphasis added)

The legislature, in enacting G.S. 115C-522, used language very similar to that in G.S. 115D58.5(b) to require local boards to purchase through the Division of Purchase and Contract. G.S. 115D-49, which was the predecessor statute to G.S. 115D-58.5(b), contained language identical to that quoted above with the exception of a 1965 amendment which added the words "or exchange." Neither of these statutes ever included any specific reference to leases or lease-purchases.

It therefore follows that if the rules and regulations of the Division of Purchase and Contract apply to leases or lease-purchases by community colleges or local boards of education, such a construction must be derived from the definition of the term "purchase" and the intent of the legislature in enacting G.S. 115D-58.5(b) and G.S. 115C-522.

The term "purchase" has a distinct legal meaning which distinguishes it from a lease or rental. A "purchase" implies a transfer of title and possession for valuable consideration, whereas in a lease or rental agreement it is only the custody and right of use that is transferred.

See Watson Industries v. Shaw, Commissioner of Revenue, 235 N.C. 203 (1952). The use of the word "purchase" should therefore not be presumed to also encompass leases or lease-purchases wherein no transfer of title is mandated.

Similarly, the legislature, in enacting G.S. 115D-58.5(b) and G.S. 115C-522, may not be presumed to have intended to include these statutes more than what is unambiguously stated. In 1971, the legislature specifically amended G.S. 143-49 to include leases and lease-purchases within the duties of the Secretary of Administration in regard to state purchasing. It must be presumed that similar language would have been included in G.S. 115D-58.5(b) and 115C-522 if such a construction had been intended. At the very least, this amendment demonstrates the recognition by the legislature that the term "purchase" does not encompass leases or lease-purchases.

It is therefore the opinion of this Office that the regulations of the Division of Purchase and Contract do not apply to leases or lease-purchases of equipment by community colleges or local boards of education where there is no legal commitment in the contract for a transfer of title at any point in time. This opinion is limited to contracts and has no application to transactions which are labeled as lease-purchases but which are in actuality installment sales contracts which provide for full payout of the contract price and transfer of title at the end of the contract term. Agreements of this type are lease-purchases in name only and must be construed to be purchases within the meaning of the statute.

Rufus L. Edmisten Attorney General

Grayson G. Kelley Assistant Attorney General