January-February 2013

How to spend discretionary funds

Lauren Owens

TDCAA Research ­Attorney in Austin

What the law allows when it comes to hot check and asset forfeiture funds

In keeping with the tradition of the esteemed TDCAA research attorneys of the past,1 the time has come for us to bring you an update on the law governing expenditures of hot check and asset forfeiture funds. These issues are ever on the FAQ list of the research attorney, and with all the changes that have occurred since the last update in 2008, we figured it was time to fill you in on some new restrictions as well as give you a refresher course on all things discretionary funds-related. 
    While the hot check provisions have essentially stayed the same, the legislature made a number of significant changes to Chapter 59 of the Code of Criminal Procedure in 2011 that affect how prosecutors and law enforcement can use asset forfeiture proceeds. Responding to reports of abuse and misuse of funds, the legislature delineated several prohibited expenditures in CCP art. 59.06 and created new procedures for auditing and enforcement. Below is a brief review of the rules governing hot check funds and a highlight of some of the most important asset forfeiture fund guidelines for prosecutors.

Hot check funds
There are no significant changes to report regarding hot check fund administration. CCP art. 102.007 provides that a county attorney, district attorney, or criminal district attorney whose office collects and processes hot checks and sight orders may collect a fee not exceeding:
•    $10 if the face amount of the check or sight order does not exceed $10;
•    $15 if the face amount of the check or sight order is greater than $10 but does not exceed $100;
•    $30 if the face amount of the check or sight order is greater than $100 but does not exceed $300;
•    $50 if the face amount of the check or sight order is greater than $300 but does not exceed $500; and
•    $75 if the face amount of the check or sight order is greater than $500.2
    Nothing in the law prohibits the collection of a fee for each hot check written.
    The legislature did make a slight change in the wording of the statute allowing the collection of a processing fee for the benefit of the check holder, but the effect remains the same: The maximum fee that may be collected is $30.3 The attorney for the state must also collect the amount spent by the check holder in delivering notification by registered or certified mail. This fee must be remitted to the holder of the check or sight order upon receipt of proof of the actual amount expended.4
    The rules regarding expenditures that may be made from a hot check fund have not changed since our last update. The elected prosecutor still retains sole administrative discretion over the hot check fund and need not get commissioners court approval before making expenditures.5 That is not to say the fund is free from all county oversight, however. The fund is still subject to audits by the county auditor,6 and all interest that accrues on the account must be severed from the principal for the benefit of the county.7 See the PDF below for a quick summary of the major do’s and don’ts when it comes to spending hot check funds.

Asset forfeiture funds
The legislature made sweeping changes to CCP chapter 59 in 2011, adopting new restrictions on the ways asset forfeiture funds can be used and providing for new auditing and enforcement mechanisms by the attorney general.8 But generally speaking, the ways in which property and their proceeds are initially to be divided between prosecutors and law enforcement stayed the same, with only a few exceptions.
    Under CCP art. 59.06, the attorney representing the state may enter into a local agreement with law enforcement to administer forfeited property in one of two ways. First, the forfeited property may be transferred to law enforcement agencies to “maintain, repair, use, and operate the property for official purposes.” The law enforcement agencies may opt to transfer or loan the property to another municipal or county agency, a groundwater conservation district, or a school district, but the commissioners court or governing body of the municipality retains the right to revoke the loan at any time.9
    Alternatively, all forfeited “money, securities, negotiable instruments, stocks or bonds, or things of value, or proceeds from the sale of those items” must, after the deduction of court costs under art. 59.06(f), be divided according to the terms of the local agreement and deposited into special funds for the benefit of the prosecutor’s office and the law enforcement agencies. Funds deposited in a prosecutor’s account must be used solely for the “official purposes” of that office, while funds deposited in a law enforcement agency’s account may be used only for “law enforcement purposes.”10 If no local agreement exists, forfeited property must be sold on the 75th day after the date of the final judgment, and the remaining proceeds, after any deductions for interest holders and court costs, must be deposited in the state’s general revenue fund.11
    The legislature recently changed the allocation of property between prosecutors’ offices and DPS in certain drug cases. Under the new CCP art. 59.06(c-3), when a default judgment is entered in favor of the State in those cases, the local agreement between the prosecutor and DPS must either: 1) transfer the forfeited property to DPS to be used for official purposes; or 2) allocate 40 percent of the proceeds from the sale of the property to DPS for law enforcement purposes, 30 percent to the prosecutor’s office for official purposes, and 30 percent to the state’s general revenue fund. If the property was seized by DPS in conjunction with any other law enforcement agency, the prosecutor may allocate the proceeds according to a memorandum of understanding between all parties.12
    Before proceeds from asset forfeiture funds may be spent, a detailed budget clearly listing and defining the categories of expenditure must be submitted to the commissioners court or governing body of the municipality (even though their approval of the expenditures is not required). The budget should not list details that would endanger an investigation or prosecution, and the commissioners court or governing body may not use the budget to offset or decrease salaries, expenses, or allowances that the attorney’s office or law enforcement agency is receiving at the time the proceeds are awarded.13
    Perhaps of most interest to prosecutors is CCP art. 59.06(d-1), which outlines several new express spending prohibitions applicable to both prosecutors and law enforcement agencies. Prohibited expenditures include campaign contributions, generalized donations, and the purchase of alcoholic beverages. Also new is the requirement that “lame duck” officials get commissioners court approval before making any expenditures from the fund.14 All of the new spending prohibitions are outlined in the chart below.

Other changes
The final major changes made in 2011 invested the state auditor and the attorney general with auditing and enforcement authority. The state auditor now has authority to access books, accounts, vouchers, reports, and other records maintained by attorneys and law enforcement agencies under CCP art. 56.09 and must notify the attorney general of possible spending violations.15 The attorney general may then initiate a suit for injunctive relief, a civil penalty of up to $100,000, or both if a law enforcement agency or attorney for the State is found to have knowingly violated the law.16 Prosecutors should keep these new provisions in mind and take note of all spending restrictions before making expenditures from an asset forfeiture fund.

Determining how hot check or asset forfeiture funds may or may not be used might seem like a convoluted process, but if you use the charts provided and ask yourself a couple of questions before making any expenditures, the process can be greatly simplified:
    For hot check funds:
•    Is the expenditure related to the official business of the office?
•    Are there any other constitutional or statutory provisions prohibiting the expenditure?
    For asset forfeiture funds:
•    Is the expenditure for an official purpose of the office (prosecutors) or for a law enforcement purpose (agencies)?
•    If the forfeited property is real or personal property, will the law enforcement agency maintain, repair, use, and operate the property for official purposes?
    Remember that you can always call the association at 512/474-2436 with questions you may have about hot check and asset forfeiture funds, or any other issues that arise. We are here to help!

1 Markus Kypreos wrote the original article on asset forfeiture and hot check funds in 2005, and Sean Johnson brought you an update in 2008.
2 Tex. Code of Crim. Proc. art. 102.007(c).
3 Tex. Bus. & Com. Code §3.506 (substituting “maximum processing fee of $30” for “reasonable processing fee of not more than $30”).
4 Tex. Code of Crim. Proc. art. 102.007(g).
5 Op. Tex. Att’y Gen.  JM-0313 (1985).
6 Op. Tex. Att’y Gen. GA-0053 (2003).
7 Op. Tex. Att’y Gen. JC-0062 (1999); Tex. Loc. Gov’t Code. §113.021(c).
8 Most hot check and asset forfeiture expenditures guidelines come from Attorney General opinions, but as the attorney general’s own spokesperson recently reminded everyone, prosecutors still proceed at their own risk when abiding by those opinions: “It’s important to keep in mind that this opinion wouldn’t bind a court or a prosecutor to do anything at all. These opinions are purely advisory. They have no legal force or effect.” Tom Kelly, in a statement to the Austin American-Statesman newspaper on Friday, September 7, 2012.
9 Tex. Code of Crim. Proc. art. 59.06(b).
10 Tex. Code of Crim. Proc. art. 59.06(c).  Note that the “official purposes” language applicable to prosecutor’s offices is arguably broader than that for law enforcement agencies; however, the extent of that leeway is not clearly defined.
11 Tex. Code of Crim. Proc. art. 59.06(a).
12 Tex. Code of Crim. Proc. art. 59.06(c-4).
13 Tex. Code of Crim. Proc. art. 59.06(d).
14 Tex. Code of Crim. Proc. art. 59.06(d-1).
15 Tex. Code of Crim. Proc. art. 59.061.
16 Tex. Code of Crim. Proc. art. 59.062.