As a municipal officer or employee, your job by its very nature places you in a position of public trust. You are responsible for ensuring that public resources are used in the best interests of the public. You also have a duty to use the limited public resources available to you as effectively and efficiently as possible. When serving in your public capacity, the interests of your municipality must come before your own. In fact and appearance, your actions and interests must be above reproach. This brochure is intended to help you better understand New York State law as it pertains to conflicts of interest, and your responsibilities when your public and private interests conflict.
The full text of Sections 800-809 of the General Municipal Law, which details conflicts of interest and is required to be posted in each local government, is provided in poster format [pdf - 2009].
You may have heard of the phrase “conflict of interest.” The phrase can apply in a variety of situations which all have one thing in common: an individual with divided loyalties, such as when a person has to act on behalf of the public in connection with a matter that affects his or her personal interests. Not all conflicts of interest, however, are prohibited by law.
In general, conflicts of interest on the part of municipal officers and employees are governed by Article 18 of the General Municipal Law. Among other things, Article 18 regulates your business dealings with your municipality. However, not all of your contracts or relationships with your municipality are prohibited.
If you are an officer or employee of a municipality, the law applies to you, whether you are paid or unpaid, or a member of a municipal board, commission or agency. The term municipality encompasses almost every type of local government entity, including counties, cities (other than New York City), towns, villages, school districts, BOCES, fire districts, public libraries, town and county improvement districts, urban renewal agencies and industrial development agencies.
Article 18 prohibits municipal officers and employees from having interests in contracts with the municipality for which they serve, but only under certain circumstances. In order for a municipal officer or employee to have a prohibited interest in a contract (one that violates the law), four conditions must be met: (1) there must be a contract; (2) the individual must have an interest in the contract; (3) the individual, in his or her public capacity, must have certain powers or duties with respect to the contract; and (4) the situation must not fit within any of the exceptions listed in law.
If you have an interest in a contract, and you do not have any of the powers or duties that could cause the interest to be prohibited, or if one of the statutory exceptions applies, then the interest is permitted. However, in most cases you will have to disclose your interest.
A contract includes any claim, account, demand against or agreement with a municipality – verbal or written, express or implied. Almost any business dealing you have with your municipality will involve a contract. Examples of contracts include purchase or sale agreements, construction agreements and service contracts, as well as vouchers for payment submitted to a municipality. A contract also includes the naming of a depository of public funds or the naming of an official newspaper of a municipality.
You have an interest in a contract when you receive a direct or indirect financial or material benefit as a result of a contract with your municipality. This is a factual determination. You are also deemed to have an interest in the contracts of certain individuals and business entities with which you have relationships.
With one exception, you are deemed to have an interest in the contracts of your spouse, your minor children and your dependents. The one exception is for contracts of employment which these individuals have with your municipality. Thus, if your spouse, minor child or dependent is hired as an employee by your municipality, you are not deemed to have an interest in that contract as a result of his/her employment.
You are also deemed to have an interest in the contracts of any firm, partnership or association of which you are a member or employee. Similarly, you are deemed to have an interest in the contracts of any corporation of which you are an officer, director or employee, as well as in the contracts of any corporation of which you directly or indirectly own or control any stock.
Just because you have an interest in a municipal contract does not necessarily mean that your interest is prohibited. In order for the interest to be prohibited, you must have one or more of the powers or duties described below, and the situation must not fit within one of the statutory exceptions also described below.
If you have an interest in a contract with your municipality, the interest may be prohibited, but only if you have certain official powers or duties with respect to that contract. To have a prohibited interest in a contract, you must have the power or duty, either individually or as a member of a board, to:
Ordinarily, members of the governing board of a municipality will have one or more of these powers or duties. In any situation, what is relevant to determining whether there is a prohibited interest is the existence of any of these powers and duties, not whether you choose to exercise them. In other words, merely refraining from acting in connection with a contract will not prevent you from having a prohibited interest in that contract. Thus, if you have an interest in a contract, and have at least one of the powers and duties listed above, the interest is prohibited unless one of the statutory exceptions discussed below is applicable.
There is also an additional rule applicable only to chief fiscal officers, treasurers and their deputies and employees. Unless an exception applies, none of these officers or employees shall have an interest in a bank or trust company designated as a depository, a paying agent or for the investment of funds of the municipality of which he/she is an officer or employee.
If you have an interest in a contract with your municipality, and have any of the powers and duties discussed above, the interest is prohibited unless a statutory exception is applicable. There are 17 statutory exceptions. Ordinarily, if one of these exceptions applies, an interest in a contract is permissible, even though you may have one or more of the powers and duties discussed in the preceding section. The seven most common exceptions are:
There are no exceptions for contracts that are competitively bid or contracts let in emergency situations. There are also no exceptions for when an individual discloses his or her interest, recuses him or herself or abstains from the discussion or vote on a matter.
With certain limited exceptions, if you or your spouse has, will have, or later acquires an interest in a contract with your municipality, you must disclose the nature and extent of that interest in writing. You must make the disclosure as soon as you become aware of the actual or prospective interest. The disclosure must be made publicly, to your immediate supervisor and to the governing body of the municipality, which must include the disclosure in the official record of its proceedings.
If you willfully enter into a contract in which you have a prohibited interest, the contract is null, void and unenforceable. If you willfully and knowingly violate the law by entering into a contract in which you have a prohibited interest, or by failing, when required, to disclose an interest in a contract, you may be guilty of a misdemeanor.
In addition to defining the circumstances when municipal officers and employees may not have interests in contracts, Article 18 prohibits certain other conduct on the part of municipal officers and employees:
Yes, and some municipalities are required to do so. Article 18 requires the governing body of each county, city, town, village, school district and fire district to adopt a code of ethics setting forth standards of conduct reasonably expected of their officers and employees. Other municipalities are authorized, but not required, to have codes of ethics.
A code of ethics is a document which sets forth standards of conduct for the guidance of a municipality’s officers and employees.1 A code of ethics must address disclosure of interests in local legislation, holding of investments in conflict with official duties, private employment in conflict with official duties, future employment and other relevant standards relating to the conduct of municipal officers and employees. A code of ethics may regulate or prescribe conduct which is not expressly prohibited by Article 18, but it may not authorize conduct that is prohibited by Article 18. Such codes may also provide for the prohibition of conduct or disclosure of information and the classification of employees or officers. You should review your municipality’s code of ethics to become familiar with the standards of your municipality.
1 A model code of ethics for fire districts is available on the State Comptroller’s website at www.osc.state.ny.us/localgov/firedist/modelcoe.pdf.
You also need to be aware that the courts of New York State have held public officials to a high standard of conduct. On occasion, the courts have negated certain actions which were not in violation of the literal provisions of Article 18 or a municipality’s code of ethics, but which were in violation of the spirit and intent of the statute, were inconsistent with public policy or suggested self-interest, partiality or economic impropriety. Therefore, if a situation involves conduct that does not technically violate either Article 18 or your municipality’s code of ethics but still raises potential questions of conflict of interest, your inquiry should not end there. Depending on the facts, it still may be advisable for you to recuse yourself or to abstain from participating in the discussion or vote on a particular matter.
Article 18 authorizes counties to establish boards of ethics to provide advisory opinions with respect to Article 18 and codes of ethics to the officers and employees of municipalities within the county. Similarly, the municipalities within a county are also authorized to establish their own boards of ethics. If your municipality has established its own board of ethics, requests for advisory opinions should be directed to the municipal board. Aside from contacting the appropriate board of ethics, you should also consider requesting advice from your municipality’s legal adviser. The Office of the State Comptroller’s Division of Legal Services is also available as a resource in connection with Article 18 and can be reached at (518) 474-5586. You can also contact the Division of Local Government and School Accountability at email@example.com. Please provide us with a daytime telephone number in your messages.
According to General Municipal Law, the chief municipal officer of each municipality must conspicuously post Sections 800-809 of Article 18 in each public building. The Office of the State Comptroller offers a two-page, tabloid-sized poster of the Law for your convenience. To request a copy or copies, contact the Division of Local Government and School Accountability at firstname.lastname@example.org, or by phone at (518) 474-4037.