CONFLICTS OF INTEREST -- Exceptions (contracts with not-for-profit corporations)
GENERAL MUNICIPAL LAW, §§801(1), 802(1)(f): A member of a school district board of education who is also an employee of a not-for-profit corporation would not have a prohibited interest in contracts between the district and the corporation for the provision by the corporation of arts-in-education programs to the district. However, disclosure would be required under General Municipal Law, §803.
This is in reply to your letter in which you inquire whether a school board member, who is also the salaried director of a local council for the arts, would have a conflict of interest under the following circumstances.
The local council for the arts is a not-for-profit corporation which provides arts programs for community participation. One such program is an arts-in-education program provided at four schools in the local school district. The New York State Council on the Arts has contracted with the local council to provide State funds up to fifty percent of the cost of the arts-in-education program. Under the terms of this grant, the school district is required to provide cash or in kind contributions toward the program.
The statutes relating to conflicts of interest of municipal officers and employees are contained in General Municipal Law, Article 18 (§§800-804). Article 18 defines "contract" to include "any claim, account or demand against or agreement with a municipality, express or implied * * *" (General Municipal Law, §800). "Interest" is defined in section 800(3) as a "direct or indirect pecuniary or material benefit accruing to a municipal officer or employee as the result of a contract with the municipality which such officer or employee serves." That statute also provides that a municipal officer or employee is deemed to have an interest in any contract of his or her municipality with a corporation of which he or she is an officer or employee. Pursuant to Article 18, unless an exception set forth in section 802 applies, an interest in a contract is prohibited if the officer or employee has the power or duty, individually or as a member of a board, to (a) negotiate, prepare, authorize or approve the contract or authorize or approve payment thereunder, (b) audit bills or claims under the contract, or (c) appoint an officer or employee who has any such powers or duties (General Municipal Law, §801).
In this instance, the school district is agreeing to provide funding for the program and the local council is agreeing to conduct the program. Therefore, it is our opinion that the local council would have a contract with the school district for purposes of article 18. Further, the school board member would have an interest in that contract between the council and the school district because she is an employee of the local council. Therefore, since the board member clearly has powers and duties listed in section 801 in relation to school district contracts (Education Law, §§1709, 1804), the interest in the contract would be prohibited unless an exception applies.
Section 802(1)(f) excepts from the applicability of section 801(1) any contracts "with a membership corporation or other voluntary non-profit corporation or association..." As noted, the local council is a not-for-profit corporation. Accordingly, pursuant to section 801(1)(f), the board member would not have a prohibited interest in contracts between the school board and the local council (see Stettine v County of Suffolk, 66 NY2d 354, 497 NYS2d 329).
The board member, however, would have to comply with the disclosure requirements of General Municipal Law, §803(1). Pursuant to section 803, the board member would be required to disclose in writing to the school board the nature and extent of an interest in any actual or proposed contract of the school district. In this instance, that disclosure should include the fact that she is a salaried employee of the council and the essentials of the contract between the council and the district. The disclosure statement must be set forth in the official minutes of the board.
Although the exception in section 802(1)(f) applies here, the school district's code of ethics should be examined to determine whether it contains any pertinent provisions. We note that codes of ethics must, among other things, contain provisions relating to private employment in conflict with official duties and may regulate conduct which is not expressly prohibited by article 18 (General Municipal Law, §806).
It should also be noted that recent court cases have held public officials to a high standard of conduct and, on occasion, have negated certain actions which, although technically not constituting a violation of article 18, violate the spirit and intent of the statute, are inconsistent with public policy, and suggest self-interest, partiality or economic impropriety (see, e.g., Zagoreos v Conklin, 107 AD2d 281, 491 NYS2d 358; Conrad v Hinman, 122 Misc 2d 531, 471 NYS2d 521; Matter of Tuxedo Conservation and Taxpayers Association v Town Board of Tuxedo, 69 AD2d 320, 418 NYS2d 638). In this regard, we note that the school district has contributed funds to the program and that the program is conducted on school district property. As a result, it appears that the effectiveness of the program and decisions as to whether it should be continued would, in part, be the responsibility of the board of education. Any such decisions might impact upon the board member in her position as salaried administrator of the program. Accordingly, it would seem that the board member should not participate in board discussions or decisions relating to the program provided at the district by the local council.
June 15, 1988