Filing Number: 17-09
Subject: Appearance of Impropriety
Keywords: appearance of impropriety, bias, board member, business, civic association, conflict, county grant, County resources, department manager, developer, disclosure, elected official, employee, Executive Office, financial interests, fundraising, gifts, grant, immediate family, impropriety, invitations, members, non-profit, presumption of good faith, private advantage or gain, private business, private consulting, public purpose, recommend, recusal, undue influence, vendor
Decision By: Eric J. Monzo; Sally Jensen; Robert Ralston; Chris Simon and Charles H. Toliver, IV
Contact Email: admin@nccethics.org
 
Status: Active

Question:

Whether a department in the County Administration (“Department”) may award discretionary grants or funds to certain organizations which have various relationships with officials and/or employees who work in that Department, and, if so, under what circumstances?

Conclusion:

The Department may award discretionary grants or funds using a process which includes an application process and a thorough review of such application by a small internal committee within the Department, with the final decision resting with the Department head[1], so long as actual or potential conflicts of interest are avoided through the recusal process, as explained more fully below.[2]  This advisory opinion is limited to the facts presented herein, and in the event that a conflict of interest or other issue arises in connection with the discretionary grant process which implicates the application of the Ethics Code, the Commission highly recommends that the Department contact the Commission regarding such decision to obtain an Advisory Opinion on the specific issue, as the Department has in this instance.    


Facts:

The Ethics Commission was contacted by a Department head in the County Administration seeking advice with respect to the awarding of discretionary grants and/or funds. The Department informed the Commission that any organization wishing to be granted discretionary funds from the Department may use the application made available to the general public by the Department.[3]  Among other questions, the application asks the applicant to “[l]ist any staff members, Board members, or immediate family members of staff or Board members who are employed by New Castle County government in any capacity.” To date, the Department has been using an informal internal committee to discuss applications for discretionary funds, but the final decisions have been made by the Department head. 

            Recently, the Department received applications for discretionary funds which pose ethical questions and the Department has asked the Commission for advice in general, as well as specifically related to these applications.  The scenarios presented to the Commission include the following:

            (1)       The Department head is on a board of a small organization which has requested a modest sum ($1000) to support an event it is holding; and

            (2)       A management level Department employee is on a board of a non-profit organization which has received discretionary funds from the Department in past years and it hopes to receive discretionary funds again this year.  The employee on the board was a member long before becoming an employee in this Department.  Further, the organization has the Department head appoint a (non-County employee) member to the board of this organization. 



 

Code or Prior Opinion:

Relevant Ethics Code Provisions and Case Law

            In Section 2.03.102, the following relevant terms are defined by the Ethics Code, as follows:

Appearance of Impropriety means conduct which is prohibited by Section 2.03.104.A.

Authority of office or employment means the actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular County office or position of County employment.

Business means any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self-employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit.

 

Business with which he or she is associated means any business in which the person is a director, officer, owner or employee; or a business in which a member of the person's immediate family is a director, officer, owner or has a financial interest.

Conflict or conflict of interest means conduct which is prohibited by Section 2.03.103.

County means New Castle County and including any County Department.

County employee means any person who receives compensation as an employee of a County Department or County row office.

County official means any person elected or appointed to any County office, board, commission or the New Castle County Council Audit Committee provided, however, that for purposes of Sections 2.03.103.B.2, 2.03.103.C, and 2.03.104.C. "County official" does not include any member of a board or commission which operates solely in an advisory capacity, and whose members are not compensated, other than reimbursement for expenses.

Fiduciary position means a paid or unpaid position imposing a legal duty to act primarily for another's benefit as an officer, director manager, partner, guardian, trustee, agent, or other position of responsibility for a legal entity or other person. Fiduciary positions assumed by the filer in a professional or business capacity are excluded from this definition.

Financial interest means any interest representing more than five (5) percent of a corporation, partnership, sole proprietorship, firm, enterprise, franchise, organization, holding company, joint stock company, receivership, trust, or any legal entity organized for profit.

Governmental body means any department, authority, commission, committee, council, board, bureau, division, service, office, official, administration, legislative body, or other establishment in the executive, legislative or judicial branch of a state, a nation or a political subdivision thereof or any department performing a governmental function.

Non-ministerial action means an action in which the person exercises his or her own judgment as to the desirability of the action taken.

Private enterprise means any activity conducted by any person, whether conducted for profit or not for profit and includes the ownership of real or personal property. Private enterprise does not include any activity of the federal, State or local government or of any department, authority or instrumentality of the federal, State or local government.

Recusal means, including but not limited to, withdrawing from sponsorship, deliberation, vote, research, preparation, discussion, negotiation, contract formation, policy making, planning, decision making, and/or implementation of a matter. It also includes a prohibition on conducting, in an official capacity, any private or public discussion of a measure raising a conflict or improper appearance. As soon as a potential conflict or improper appearance arises or is recognized, an official or employee must end direct or indirect participation, advice, input, direction, recommendation, or discussion, as well as refraining from vote, if the person is a not an elected official. Elected officials may choose to avoid recusal and may vote if they follow the alternate process described in Subsection 2.03.103.A.2.

Regulated by New Castle County means that an entity operating in New Castle County as a business or nonprofit organization requires approval from or regulation by New Castle County in order to lawfully conduct one or more business activities.

Regulation includes, but is not limited to, obtaining permits, registering residential rental property, or trade licensing, but does not include the payment of property taxes, sewer service charges, individual library use charges, park fees, animal licensing fees or other similar fees.

The New Castle County Ethics Code prohibits conduct on the part of County officials or employees which either creates the appearance of impropriety even where no direct conflict of interest is present.  Specifically, conduct which creates an appearance of impropriety is prohibited by Section 2.03.104.A of the New Castle County Code.[4]  To determine if an appearance of impropriety exists, the Delaware courts have stated that “[t]he test is… if the conduct would create in reasonable minds, with knowledge of all relevant facts, a perception that an official’s ability to carry out [his or] her duties with integrity, impartiality and competence is impaired.”  Hanson v. Delaware State Public Integrity Com’n, 2012WL3860732, at *16 (Del.Super. 2012), aff’d, 69 A.3d 370 (Del.Supr. 2013); and “[t]he test for appearance of impropriety is whether the conduct would create in reasonable minds, with knowledge of all the relevant circumstances that a reasonable inquiry would disclose, a perception that the [official’s] ability to carry out [the official’s] responsibilities with integrity, impartiality and competence is impaired.”  In re Williams, 701 A.2d 825, 832 (Del.Super. 1997).  The courts have advised the Commission to look at the totality of the facts presented, and this Commission has historically applied this standard when reviewing the conduct of County officials and employees.

            It is a violation of the New Castle County Ethics Code if a County official or employee uses his or her office or employment for his or her personal or private benefit, the benefit of a member of his or her immediate family, or a business with which he or she is associated.[5]  Economic benefits thereby derived with a de minimus impact may be exempted. [6]  

            The Ethics Code’s conduct rules in Section 2.03.104.A prohibit exercise of official authority which creates an appearance that the decisions or actions of a County official or employee are influenced by factors other than the merits of the matter for the decision. This prohibition exists because such conduct undermines public confidence in the impartiality of the individual or governmental body with which the employee or official is associated.

            The Code recites special prohibitions on County officials concerning their involvement with outside interests which interact with the County government. Section 2.03.103.B.2 prohibits the official from representing or assisting any private enterprise with respect to any matter before the County. This restriction extends to non-profit organizations as well as private businesses or private concerns.[7]

            Prior Commission Opinions       

            In Advisory Opinion 92-01, a County employee involved in community, housing, and development, who exercised some discretion in the administration of HUD funds with regard to a particular type of project, was permitted to serve on the Board of Directors of a non-profit organization which could be an applicant for such funds. The Commission held that “a County employee involved in community, housing, and development, who exercises discretion in the administration of HUD funds with regard to a particular project, may serve on the Board of Directors of a non-profit organization which may be an applicant for said funds. The employee, however, must exercise caution to ensure that he is aware of any potential areas which may result in appearances of impropriety, and recuse himself, when appropriate.”

            In Advisory Opinion 11-05, the Commission advised an elected official to resign from the board of a non-profit which served the public on County property and was regulated by the County. Since the official’s County position included authority to oversee to some extent the non-profit’s County contract, the official would be required to recuse himself from all board responsibilities. By remaining on the Board without being able to participate in any Board functions or responsibilities, the Commission argued that the official could create the appearance that he was using his County status to benefit the private organization, in violation of New Castle County Code Section 2.03.103.B.[8]

             County officials and employees have been permitted to lend their names, but not identification of their official County status, to fundraising activities of non-profits. In Advisory Opinion 01-08, an employee was permitted to become involved in a non-profit’s fundraising. The Commission found that the Code “does not prohibit the requesting party from being the spokesperson for the organization, provided he does not promote the fact that he is an inspector for New Castle County. It further does not prohibit the organization from seeking funds from . . . individuals or contractors. In doing so, however, the Commission notes that precautions should be followed to minimize any possible appearance that the party being solicited will receive favorable treatment from the County or feels compelled to donate to the organization due to the requesting party's inspection responsibilities. Such safeguards include: (1) having an individual, other than the requesting party, sign any direct written solicitations being made to contractors; and (2) not mentioning the requesting party's Land Use employment in any such solicitation.”

            In Advisory Opinion 15-03, the Commission was asked whether an appointed official could serve as a member of a non-profit board which has received occasional federal funds administered by the official’s department.  The Commission decided that the official may join the board of the non-profit if the official reveals the potential areas of improper appearance to both the non-profit and the appropriate County authority and recuses from any activities which may cause the appearance of conflict, including policy making, promotion, or other activities concerning the non-profit’s relationship with the County. 

              In Advisory Opinion 05-24, an elected official was permitted to become a board member of a non-profit community agency which received a small County grant for certain of its community activities as well as a County administered federal grant. Both grants were received pursuant to written applications and the federal grant was awarded and monitored subject to federal criteria. The official was required to recuse himself from policy-making, sponsorship, and voting on matters affecting the non-profit’s activity with the County.

            The Commission held, “The totality of circumstances in this case show that the official will be able to recuse himself in those few occasions when matters concerning the non-profit come before his agency. In the instance of the federal community block grants, his County responsibility is largely non-discretionary. The application, criteria, and approvals are restricted by federal regulations. His recusal can be easily accomplished without damaging the public's confidence that the grant is properly administered. In the matter of the other small County sponsored grant, his duty to oversee the conduct of the public's business must be balanced against the public's confidence that he is conducting its business impartially. That latter interest supersedes the former and mandates that the official recuse himself in the grant matters. If the official fully recuses himself as to both grants, a reasonable member of the public would not believe the board member's ability to carry out his County duties with integrity, impartiality and competence is impaired and the appearance of impropriety will be dissipated.”



Analysis:

This community is strengthened by citizen participation in local service organizations and non-profits which strive to make New Castle County a desirable place to live, work, and/or visit. Nothing in this opinion should be construed to say that County officials and employees should not be involved in such organizations.  The Commission encourages involvement and personal investment in local community organizations by County employees and officials, but such involvement by County officials and employees must fall within the parameters of the Ethics Code.

            The questions presented here are novel for the Commission, but the body of decisions issued by the Commission are instructive, some of which are referenced above. A distinct theme runs through the Advisory Opinions issued by the Commission on similar questions, and the theme, simply put, is that every County official or employee, when presented with a situation where a real or perceived conflict of interest may be present, that County official or employee must do everything possible to remove him or herself from the situation. If a County official or employee’s actions or decision-making creates a conflict of interest, is the product of a conflict of interest, or creates what appears to a reasonable person to be a conflict of interest, the County employee or official may not perform that action without running the risk of violating the Ethics Code.  Whenever questions arise on this topic, it is advisable for the County employee or official to consult the Ethics Commission, and the Commission commends the Department for contacting the Commission for advice on this matter.

            In the first scenario posed by the Department, the Department head is on a board of a small organization, and that is not a problem with respect to the Ethics Code unless the work performed by the organization is regulated by the County or is a County vendor.  This organization has requested a modest sum ($1000) to support an event it is holding.  While this organization should not be penalized from the receipt of discretionary County funds because of the position held by one of its board members, the Ethics Code would be breached if the Department head is involved in the decision about whether to award this organization discretionary funds. The Commission advises that the Department head must be recused entirely from the decision-making on that application for discretionary funds, and such decision-making authority must be transferred to a County employee who is part of the internal committee (or other appropriate, objective employee), who does not have any association with the applicant.  The Department head must have no input or vote on that application.  Even if the Department head decides, in the alternative or for any reason, to resign from the board of this organization, the Department head must not be part of any decision to grant this organization discretionary funds until a “cooling off period” of no less than six (6) months transpires from the time of resignation from the board.  

            In the second scenario presented by the Department, a management level Department employee is on a board of a non-profit organization which has received discretionary funds from the Department in past years. This non-profit organization hopes to receive discretionary funds again this year and has submitted an application.  The County employee who is on the board was a member of that board long before becoming a County employee.  In addition, the Department head, by virtue of its government position, appoints a person from the community (not a County employee) to the board of this non-profit. In this instance, the Commission advises that the Department employee who is on the board recuse him or herself from the discussion and decision-making process on this application in its entirety.  Additionally, because the Department head has the authority to appoint a board member, the Department head, as in the first scenario, must select someone on the informal committee to make the final decision in the Department head’s place.  As before, the Department head should not have any involvement in the discussion or decision on this application.  While an actual conflict of interest may not be present for the Department head, it may appear to the reasonable member of the public, with knowledge of the facts, that this non-profit received the discretionary funds as a result of reasons other than the merits and/or the standards used to decide other similarly situated applications for discretionary funds.            

            Again, the Commission commends the Department head for consulting the Commission before making these decisions on the discretionary fund applications.  In issuing this Advisory Opinion, the Commission is not attempting to take the word “discretionary” out of the term “discretionary funds.” The Ethics Code, however, applies to decisions on the distribution of discretionary funds in the same manner as it applies to any other decisions made by a County official or employee involving County resources.  It should be noted that these recommendations contained in this opinion are not limited to the employees or officials referenced specifically.  So that no conflicts or appearances of conflicts taint the decision-making process on discretionary fund applications, this opinion applies also to any other County employee or official involved in the decision-making on discretionary fund applications.

Finding:

The Department may award discretionary grants or funds using a process which includes an application and a thorough review of such application by an internal committee within the Department. The final decision on the awarding of such discretionary funds rests with the Department head, except where the Department head has an actual or perceived conflict of interest, such as, but not limited to, a situation where the Department head is on the board of the applicant or where the Department head appoints a person to the board of that applicant.  In the instances where the Department head has a perceived or actual conflict, to comply with the Ethics Code, the Department head may not take part in the discussion about the application or the decision-making on the application, and must transfer that authority to some other appropriate, responsible County employee or official who does not have any real or potential conflict with respect to that application.  Additionally, a Department employee who is on the board of the applicant, regardless of whether that employee is part of the internal committee, may not take part in any discussion or decision-making with respect to that applicant.  Anyone with a conflict or perceived conflict with respect to an application for discretionary funds must recuse themselves from the awarding of discretionary funds process in its entirety.  It is strongly recommended by the Commission that a request for an advisory opinion be filed with the Commission regarding any additional future discretionary fund decisions which may involve the application of the Ethics Code, e.g., conflicts or perceived conflicts of interests. 
 
In rendering this advisory opinion, this Commission has applied the New Castle County Ethics Code, which establishes the minimum level of ethical conduct required of County officials and employees.

BY AND FOR THE NEW CASTLE COUNTY

ETHICS COMMISSION

ON THIS 10TH DAY OF JANUARY 2018.

 

Eric J. Monzo, Esquire, Chairperson

New Castle County Ethics Commission

                   

                    

Decision:  Unanimous

Footnotes:

[1] The Department informed the Commission that this is the process currently in place.

[2] This Advisory Opinion, which interprets the application of the New Castle County Ethics Code to the questions presented herein, is not intended to limit or alter the application of any other ordinances, regulations, and the like, to the Department’s management of its discretionary funds. This advisory opinion is limited to the application of the Ethics Code to the facts presented.

[3] The application can be found at http://grants.nccde.org. 


[4] New Castle County Code Section 2.03.104.A states: “No County employee or County official shall engage in conduct which, while not constituting a violation of Subsection 2.03.103.A.1 undermines the public confidence in the impartiality of a governmental body with which the County employee or County official is or has been associated by creating an appearance that the decisions or actions of the County employee, County official or governmental body are influenced by factors other than the merits.” 

[5] New Castle County Code Section 2.03.103.A.1.

[6] Id.

[7] New Castle County Code Section 2.03.1.03.B.2, and 3. Prohibitions relating to conflicts of interest. 

B. Restrictions on representing another’s interest before the County.

2. No County official may represent or otherwise assist any private enterprise with respect to any matter before the County.  This prohibition is to be considered personal to the County official and is not, for purposes of the New Castle County Ethics Code inly, deemed to impact other members of a firm, business, or other employer by which the County official is employed. 

3. This subsection shall not preclude any County employee or County official from appearing before the County or otherwise assisting any private enterprise with respect to any matter in the exercise of his or her official duties. 

[8] See also, Advisory Opinion 10-06, in which an employee was prohibited from assuming a board seat on a non-profit that was pervasively regulated by his department. The Commission held, “Since the function of the board of this non-profit is to oversee activity which is conducted under extensive and continuous regulation by the employee's County department, the employee may not assume a seat without violating the Code provision against representation of a private entity before his department. Additionally, assumption of a leadership role in an organization extensively regulated by his department would create an appearance of partiality in decisions made by that department concerning the non-profit.”