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NYS Comptroller

THOMAS P. DiNAPOLI

The Academy for New York State's Local Officials

Protecting the Public’s Interest: A Tutorial on Local Government Ethics and Transparency in New York State

Module 3 - Case Studies on Conflicts of Interest

Discussion of Situation 6

A fire district treasurer is an officer of an insurance agency through which the district acquires liability insurance. The treasurer’s only official function with respect to the insurance policy is to issue a check to pay the policy premiums upon order of the board of fire commissioners following the board’s audit of a claim for payment. The treasurer receives no share of the premium paid to the agency or a commission from the district’s policy. He was employed with the agency before becoming fire district treasurer. He also owns 25% of the insurance agency’s stock.

Does the treasurer have a prohibited interest in a contract with the fire district? Why or why not? Are there any other issues with which the fire district should be concerned?

The fire district treasurer would not have a prohibited interest in a contract with the fire district.

  1. The procurement of insurance through the insurance agency results in a "contract" with the agency because the procurement involves an "agreement" with the fire district.
  2. The fire district treasurer is deemed to have an "interest" in the contract because he is an officer and stockholder of the insurance agency.
  3. Because the treasurer’s only duty with respect to the contract is to issue checks to pay properly audited claims for policy premiums, he does not have Section 801 powers and duties with respect to the contract.

Because the fire district treasurer does not have any Section 801 powers and duties with respect to the district’s contract with his insurance agency, the treasurer does not have prohibited interest in the contract. The treasurer, however, must publicly disclose his interest in writing to the board of fire commissioners and the disclosure must be included in the board’s minutes.

Other Issues to Consider:

The fire district’s code of ethics should be consulted to determine if it contains any pertinent provisions. To avoid an appearance of favoritism, the fire district’s procurement policy and procedures should require insurance to be procured through a competitive process (e.g., obtaining quotations from different vendors or issuing a request for proposals).

  Next: Situation 7