In early September 2009, the North Carolina State Board of Elections began an official audit of Harrell's campaign finance records, citing irregularities, unusual activity and incomplete entries. Among the items that reportedly caught the attention of auditors were hundreds of dollars in campaign expenditures at clothing and luggage stores marked as "committee meetings" on the paperwork Harrell filed. Shortly after the Board of Elections' announcement, the NC House Speaker's Office announced that the Speaker had ordered an ethics investigation of Harrell over his financial records. On September 20, 2009, Harrell submitted a letter of resignation to House Speaker Joe Hackney, effective immediately, amid the ongoing controversy over campaign expenditures totaling more than $13,000, revelations he was living outside of his district, and his divorce from his wife.
Legislative activities
In his first term as Representative of the 41st district, Harrell supported measures for higher teacher and state employee salaries, accessible and quality healthcare, protection of local small businesses and collaborative university efforts in the search for renewable energy sources. Harrell began his second term as Chair of the House Committee on Science and Technology and vice-chair of the House Committee on State Government and State Personnel, as well as vice-chair of the House Appropriations Subcommittee on Transportation. Early in his second term, Harrell received criticism for his support of H. 1252 in his committee. The bill was heavily supported by various conservative organizations as well as Time Warner Cable, which had a location within then-Representative Harrell's district. The left-leaning North Carolina Center for Public Policy Research listed Harrell 52nd in their 2008 effectiveness rankings, the highest ranking given to any freshman lawmaker. Those rankings have since been criticized for favoring the majority party, as they include votes from the media, lobbyists, and the lawmakers themselves. In the group's subsequent 2010 rankings, the Raleigh News & Observer reported that "the dubious honor for the biggest drop in effectiveness belongs to former Rep. Ty Harrell, who dropped from 52nd to 110th."
Political activities
In June 2007, Harrell became the first elected official in North Carolina to endorse Barack Obama, and after the president's election, Harrell was briefly rumored to have been considered a potential choice as Obama's ambassador to Canada.