Filing Number: 97-09
Subject: Non-Profit
Keywords: abstention, appearance of impropriety, board member, business, conflict, county grant, Department of Community Development and Housing, disclosure, employee, federal government, grant, HUD, impropriety, joint venture, loan, non-profit, recusal, supervisor, undue influence
Decision By: Commissioners: David J. Facciolo, Vincent Oliver, Lawrence Sullivan, Frances West
Contact Email: admin@nccethics.org
 
Status: Active

Question:

          May a County employee involved in community, housing and development, who exercises discretion in the administration of HUD funds, serve on the board of directors of a non-profit organization which, through a joint venture, operates a program in conjunction with another organization which has been a recipient of the County administered HUD funds?

Conclusion:

           It does not violate the Ethics Code for a County employee, involved in community, development and housing, who exercises discretion in the administration of HUD funds, to serve on the board of directors of a non-profit organization which, through a joint venture, operates a program in conjunction with another organization which has been a recipient of the County administered MUD funds. If, however, any organization, which receives funds from, or is in a joint venture with, the non-profit organization should become an applicant for County administered HUD funds, the County employee should follow the procedure set forth in Section 2-173(f) of the Ethics Code, regarding disclosure and voting conflicts.

Facts:

          The requesting party is a County employee1 whose job involves community, housing and development issues. More specifically, the employee exercises discretion in the County's administration of HUD funds. The employee is one of a small number of employees who makes non-binding recommendations with regard to what organizations should receive HUD funds. The area in which the employee exercises responsibility also includes the planning, monitoring, and oversight of the sub-recipient program. The distribution of HUD funds to private organizations, through the County, is subject to public hearings.
 
          The requesting party has been asked to serve on a board of directors of a nonprofit organization, which, through a joint venture, operates a program in conjunction with another organization. This second organization (hereinafter "previous sub-recipient") has, in the past, been one of the recipients of the County administer HUD funds. The non-profit organization, which the County employee wishes to serve on its board of directors, however, has never directly been a recipient of County administered HUD funds. It does, however, provide loan funds to other organizations and groups, including the previous sub-recipient. As a member of the board of directors of the organization, the County employee would be expected to vote on any loan above $10,000.

Analysis:

           The New Castle County Ethics Code prohibits County employees from engaging in behavior which constitutes a conflict of interest2, defined as:
 
use by a county official or county employee of the authority of his or her office or employment or any confidential information received through his or her holding county office or employment for the private pecuniary benefit of himself or herself, a member of his or her immediate family or a business with which he or she is associated.3
 
          Although the term "business with which he or she is associated" means "any business in which the person is a director. . .", the term "business" is limited to for-profit entities.4 See, Advisory Opinion 97-04 (March 14, 1997). Accordingly, since the County employee's membership would not result in the "private pecuniary benefit of himself or herself, a member of his or her immediate family or a business with which he or she is associated", there is no conflict of interest.
 
           The Ethics Code, however, also prohibits appearances of impropriety,5 defined as:
 
the conduct of a county official or county employee which does not constitute a conflict of interest but which undermines the public confidence in the impartiality of a governmental body with which a county officer or employee is or has been associated by creating an appearance that the decisions or actions of the county official, county employee or the governmental body are influenced by factors other than the merits.6
 
          In the present situation, since the previous sub-recipient organization is not presently a recipient of County administer HUD funds, there is no appearance of impropriety created by her being a member of the Board. If, however, the previous sub-recipient applies for such funding, or if any other organization which receives funding from, or is in a joint venture with, the non-profit organization, applies for County administered HUD funding, an appearance of impropriety may exist. Thus, if the County employee must make a decision or take action in her capacity as a County employee which concerns the sub-recipient or other organization which receives funding from, or is in a joint venture with, the non-profit organization, the employee must follow the procedure set forth in Section 2-173(f) of the Ethics Code and recuse herself from the decision or action involving the sub-recipient(s), abstain from voting, and disclose the relationship.7
 
          Such a finding is in accord with prior advisory opinions, to wit, Advisory Opinion 92-02 (June 12, 1992) and Advisory Opinion 97-01 (January 10, 1997). Indeed, in Advisory Opinion 92-02, the Commission held that while there was no violation of the Ethics Code by County officials and employees serving as members of the board of directors of County Pride, a nonprofit corporation, said officials and employees would need to recuse themselves from matters involving the Chamber of Commerce which had a joint venture with County Pride. Likewise, in Advisory Opinion 97-01, the Commission held that there was no violation of the Ethics Code by a planning department employee advising his church building committee how to marshal a plan, provided proper precautions and abstention were followed.

Finding:

          In making the present ruling, the Commission notes that the employee must exercise caution to ensure she is aware of any potential areas which may result in appearances of impropriety. Thus, the employee must be knowledgeable, with regard to the organizations the non-profit organization funds or is in a joint venture with, to ensure that she has no involvement at the County if they are also applicants for the County administered HUD money. Also, should the employee's duties at either the County level or on the board of directors of the non-profit organization change, or if the non-profit organization should contemplate becoming an applicant for the County administer HUD funds directly, the Commission advises that the employee notify the Commission of any such change to determine if a Ethics Code violation exists under the changed circumstances.
 
          Finally, the Commission notes that this decision merely addresses possible violations under the New Castle County Ethics Code. It does not address any other law, Code, rule or regulation which also may be applicable.
 
BY AND FOR THE NEW CASTLE COUNTY ETHICS COMMISSION ON OCTOBER 29, 1997.
________________________________
David J.J. Facciolo, Chairperson

Footnotes:

1 Section 2-172 of the Ethics Code, as amended, defines "County employee" as "an individual employed by the county who is responsible for taking or recommending official action of a nonministerial nature including, but not limited to, action 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 a de minimis nature on the interests of any person.
2 Section 2-173(a). Restricted Activities.
3 Section 2-172. Definitions.
4 Section 2-172. Definitions.
5 Section 2-173(g). Restricted Activities.
6 Section 2-172. Definitions.
7 See, Advisory Opinion 91-02 (July 30, 1991) and Advisory Opinion 92-02 (June 12, 1992), both holding that 'where a County official who, in the discharge of his official duties may be required to vote on a matter which would give rise to an appearance of impropriety, that official should follow the procedure set forth under Section 2-173(f) for voting conflicts