Opinion 2008 - 1


This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

CONFLICTS OF INTEREST-- Contracts (gifts to school district) -- Exceptions (contracts with not-for-profit-corporations)

GENERAL MUNICIPAL LAW §§ 800(2), 802(1)(f), 803: A school board member would not have a prohibited conflict of interest under article 18 of the General Municipal Law if he or she also served as a trustee on the board of trustees of a not-for-profit foundation that raises money and makes gifts to the school district. The school board member, however, should not participate in school board discussions or decisions relating to gifts from, or other matters involving, the not-for-profit foundation for which the board member serves as a trustee and, assuming disclosure is not otherwise required by General Municipal Law § 803, should disclose his or her relationship with the not-for-profit entity.

You ask whether there would be a conflict of interest under article 18 of the General Municipal Law if a member of the board of education of a union free school district also served as a member of the board of trustees of a not-for-profit foundation that raises money and makes gifts to the school district. The gifts made by the foundation would be formally accepted on behalf of the school district by resolution of the board of education (see Education Law § 1709 [12]).

Article 18 of the General Municipal Law (§§ 800 et seq.) contains provisions of law that relate to conflicts of interest of municipal officers and employees, including school district officers and employees (General Municipal Law § 800 [4], [5]). Pursuant to General Municipal Law § 800 (3), a municipal officer or employee has an "interest" in any "contract" with his or her municipality if the officer or employee receives a direct or indirect pecuniary or material benefit as a result of that contract. In addition, irrespective of whether an officer or employee receives a direct or indirect pecuniary benefit from a contract, an officer or employee is deemed to have an interest in any contract of a firm, partnership or association of which the municipal officer or employee is an employee or member, and any contract of a corporation of which the municipal officer or employee is an officer, director, employee or stockholder (General Municipal Law § 800 [3] [b], [c], [d]). A "contract" for this purpose means any claim, account or demand against or agreement with the municipality, whether express or implied (General Municipal Law § 800 [2]).

Pursuant to General Municipal Law §801(1), unless an exception set forth in General Municipal Law § 802 applies, an interest in a contract is prohibited if the officer or employee, individually, or as a member of a board, has any of the following powers or duties listed in General Municipal Law §801: (a) negotiate, prepare, authorize or approve the contract or approve payments thereunder; (b) audit bills or claims under the contract; or (c) appoint an officer or employee who has any such powers or duties. Any contract willfully entered into in which there is a prohibited interest is null, void and wholly unenforceable (General Municipal Law § 804), and any officer or employee who willfully and knowingly violates the provisions of article 18 of the General Municipal Law "shall be guilty of a misdemeanor" (General Municipal Law § 805). If an officer or employee has, will have or later acquires an interest in a contract or other agreement, the nature and extent of that interest generally must be disclosed in writing to his or her immediate supervisor and to the governing body of the municipality as soon as he or she has knowledge of the interest or prospective interest (General Municipal Law § 803 [1]). The written disclosure must be included in the official record of the governing body's proceedings (id.).

As a member of the board of trustees of the not-for-profit foundation, the school board member would be deemed to have an interest in any "contract" between the foundation and the school district. Since the school board member would have one or more powers and duties listed in General Municipal Law § 801 in connection with such a contract (see
e.g. Education Law §§ 1709, 1711, 1724), that interest would be prohibited, unless an exception in General Municipal Law § 802 applied.

As a rule, however, a gift constitutes a voluntary transfer of property from one to another without consideration (see e.g. McKenzie v
Harrison, 120 NY 260: Lecci v Nickerson, 63 Misc 2d 756, 313 NYS2d 474). Because of the gratuitous nature of a gift, it generally would not fall within the statutory definition of "contract" in General Municipal Law
§ 800 (2) and, therefore, would not give rise to an interest in a "contract" for purposes of article 18 of the General Municipal Law.

Moreover, even if the relationship between the not-for-profit foundation and the school district at issue here were to constitute a "contract" within the meaning of General Municipal Law § 800 (2), the board member's interest would not be prohibited because an exception under General Municipal Law § 802 would apply. Section 802(1) (f) excepts from the applicability of the prohibition against interests in General Municipal Law § 801, any contract "with a membership corporation or other voluntary non-profit corporation or association." Since the foundation here is a not-for-profit entity, the board member, pursuant to this exception, would not have a prohibited interest in contracts between the school district and the foundation (see e.g . Stettine v County of Suffolk, 66 NY2d 354, 497 NYS2d 329; 1988 Ops St Comp No. 88-77, at 147). The disclosure requirements of General Municipal Law §803, however, still would apply in such an instance.

Although we conclude that there would be no prohibited conflict of interest under article 18 of the General Municipal Law based on the facts presented, we note that each school district is required to adopt a code of ethics setting forth, for the guidance of its officers and employees, the standards of conduct reasonably expected of them (General Municipal Law § 806). Codes of ethics must address certain specified subjects, including disclosure of interests in legislation before the municipal governing board, and may regulate conduct that is not expressly prohibited by article 18 of the General Municipal Law (General Municipal Law § 806 [1]). We believe that a municipal code of ethics could include a provision that requires municipal governing board members to recuse themselves from municipal governing board discussions relating to not-for-profit entities for which they serve as officers, to disclose their relationship with the not-for-profit entity (assuming disclosure is not otherwise required by General Municipal Law § 803), and to abstain from voting on matters involving the not-for-profit entity (see 1992 Ops St Comp No. 92-30, at 78; but cf . 30 Ed Dept Rep 236 [Decision No. 12447]). The school district should consult its code of ethics to determine whether it contains any pertinent provisions. 1

Further, even if the school district's code of ethics does not require disclosure, abstention and recusal, we note that court cases have held public officials to a high standard of conduct and, on occasion, have negated certain actions that, although not constituting a literal violation of article 18 of the General Municipal Law, violate the spirit and intent of the statute, are inconsistent with public policy, or suggest self-interest, partiality or economic impropriety (see e.g. Zagoreos v Conklin , 109 AD2d 281, 491 NYS2d 358; Matter of Tuxedo Conservation and Taxpayers Association v Town Board of Tuxedo , 69 AD2d 320, 418 NYS2d 638; Conrad v Hinman , 122 Misc 2d 531, 471 NYS2d 521; see also Parker v Town of Gardiner Planning Board , 184 AD2d 937, 585 NYS2d 571, lv denied 80 NY2d 761, 592 NYS2d 670; Cahn v Planning Board of the Town of Gardiner , 157 AD2d 252, 557 NYS2d 488). Based on these decisions, we believe that, even if not required by the school district's code of ethics, the school board member should not participate in school board discussions or decisions relating to gifts from, or other matters involving, the not-for-profit foundation for which the board member serves as a trustee and, assuming disclosure is not otherwise required by General Municipal Law § 803, should disclose his or her relationship with the not-for-profit entity. 2

Accordingly, a school board member would not have a prohibited conflict of interest under article 18 of the General Municipal Law if he or she also served as a trustee on the board of trustees of a not-for-profit foundation that raises money and makes gifts to the school district. The school board member, however, should not participate in school board discussions or decisions relating to gifts from, or other matters involving, the not-for-profit foundation for which the board member serves as a trustee and, assuming disclosure is not otherwise required by General Municipal Law § 803, should disclose his or her relationship with the not-for-profit entity.

January 18, 2008

Warren H. Richmond, Esq., Attorney at Law
Board of Education of the Hauppauge Union Free School District

 

 

1In Ops St Comp No. 92-30, supra , we concluded that, because a code of ethics may not be inconsistent with the provisions of article 18 of the General Municipal Law (1980 Ops St Comp No. 80-234; 1971 Ops St Comp No. 71-417; Belle v Town Board of Town of Onondaga , 61 AD2d 352, 402 NYS2d 677), a code may not provide that interests of municipal officers and employees in contracts with not-for-profit associations or corporations are prohibited or that any contract in which there is such an interest is void. We also concluded that a code of ethics may not prohibit a municipal board member from serving as an officer of a not-for-profit corporation with which the municipality contracts.

2 The board member must also avoid contravening the statutory prohibition against disclosure of confidential information acquired in the course of his or her official school district duties (General Municipal Law § 805-a [1] [b]).