Filing Number: 96-01
Subject: County Contracts
Keywords: appointed official, conflict, contract, County official, federal government, financial interests, grant, impropriety, non-ministerial, program, public bid, public notice, supervisor, undue influence
Decision By: L. Susan Faw, Ethics Commission Counsel
Contact Email: admin@nccethics.org
 
Status: Active

Question:

           Whether a County official,1 may contract with a program ("Program") which is funded by a federal grant, but which in other respects has the attributes of a County agency.

Conclusion:

           No. The Commission concludes that, under the current federal grant, the Program constitutes a County agency. Therefore, if the County official were to contract with the Program, this would violate the contract and bid restrictions of the New Castle County Ethics Code. Also, such conduct would create an appearance of impropriety.
 
          The current grant terminates in mid-1996 however. If the terms of the grant and the relationship between the Program and County change, such that the Program would no longer be considered a County agency, these prohibitions vanish. For instance, if as is contemplated under the future grant beginning in mid-1996, the County ceases to have responsibility for the Program's federal funds and the Program's staff are no longer considered County employees, then the County official may contract with the Program without violating the Ethics Code.

Analysis:

Current Grant Terminating Mid-1996
 
          To determine the application of the Ethics Code, it is necessary to determine whether the Program is a County agency.
 
          The Program named: "New Castle County . . ."2 recently became a Section 501(c) (3) charitable organization under the Internal Revenue Code. Program staff are considered New Castle County employees and receive compensation and benefits comparable to other County personnel, although paid out of the federal grant monies. The County's Finance Department is responsible for maintaining and managing the Program's federal grant monies. While the County provides no direct financing, it does supply office space and technical assistance, such as advice from County departments regarding organizational, legal and financial issues. 
 
Future Grant Beginning Mid-1996
 
          At the conclusion of the current grant in mid-1996, federal funding of the Program will continue. However, the County will no longer have any responsibility for the federal funds. The Program will control and manage its own funding. The Program's only connection with the County will be that the County may (but is not obligated to) provide office space, rent free, and contribute the costs of telephone, photocopying and similar items.
 
County Official's Relationship to Program
 
          A County official wishes to contract with the Program. The department in which the County official works is responsible for oversight of the Program until conclusion of the current grant. More pointedly, this official works as the County's representative responsible for fiscal oversight of the Program. In this role, the official has no authority over Program hiring or contracting.
 
Contract and Bid Restrictions
 
          Section 2-173(e) of the Ethics Code prohibits County officials and employees from "enter[ing] into any contract . . . with the county . . . unless the contract has been awarded through an open and public process . . ."3
 
          The Commission concludes that, until conclusion of the current grant in mid-1996, the Program constitutes a County agency. Therefore, the County official may not contract with the County, including the Program. While the current grant is in effect, this prohibition can only be avoided if the contract were awarded "through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded."4
 
          When the current grant terminates however, the Program will cease to be a County agency. As noted above, the County's only connection with the Program will be to provide office space and certain in kind contributions, if it wishes to do so. At that point, the County official may contract with the Program.
 
Appearance of Impropriety
 
          Section 2-173(g) provides: "County officials and county employees shall avoid an appearance of impropriety" - defined as
 
[t]he conduct of a county official . . . which undermines the public confidence in the impartiality of a governmental body with which a county official or employee is or has been associated, by creating the appearance that the decisions or actions of the county official . . . or the governmental body are influenced by factors other than the merits.5

Finding:

          Under the current grant, the official is responsible for the County's fiscal oversight of the Program. While the official does not have authority over Program hiring or contracting, in light of the official's department's oversight duties, a contract between the Program and this official would create the appearance that the Program contracted with this official because this official's department, and specifically this official, is responsible for oversight of the Program on behalf of the County.
 
          When the current grant terminates however, the County official may contract with the Program.
 
 
                                                           
L. Susan Faw
Ethics Counsel
 
January, 1996

Footnotes:

1 This advisory opinion concerns a County official. It applies equally however to county employees covered by the New Castle County Ethics Code. For purposes of the Code, a "county employee" is "[a]n individual employed by the county who is responsible for taking or recommending official action of a non-ministerial nature with regard to: (1) contracting or procurement; (2) administering or monitoring grants or subsidies; (3) planning or zoning; (4) inspecting, licensing, regulating or auditing any person; or (5) any other activity where the official action has an economic impact of greater than [$500) on the interests of any person." Section 2-172. Definitions. County employee. 2 To protect the identity of persons involved, the name of the Program is not included. See Section 2-402(9). 3 Section 2-173(e) Restricted activities, states in its entirety: "No county official or [] employee or his spouse or child or any business with which the county official or [] employee or his spouse or child is associated shall enter into any contract valued at $500 or more with the county or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the county official or county employee is associated, unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the county official or county employee shall not have any supervisory or overall responsibility for implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction." 4 Section 2-173(e). For the entire text of this section, see footnote 2, supra. 5 See Section 2-172. Definitions. Appearance of impropriety.