CEO 94-17 -- April 21, 1994
CONFLICT OF INTEREST
HRS DISTRICT ADMINISTRATOR SERVING AS DIRECTOR
OF NONPROFIT CORPORATION CONTRACTING
To: (Name withheld at the person's request.)
No prohibited conflict of interest would be created were an HRS district administrator to serve without compensation on the board of directors of a nonprofit planning association established as an outgrowth of the incorporation of a health and human services element into the county's comprehensive plan and which contracts with the HRS district. Although Section 112.313(3), Florida Statutes, prohibits a public officer or public employee from acting as a "purchasing agent" to purchase services for her agency from a business entity of which she is a director and from acting in her private capacity as a director of a corporation selling its services to the district, Section 112.316, Florida Statutes, requires that the Code of Ethics not be interpreted to preclude private pursuits which do not interfere with the full and faithful discharge of a public officer's or employee's duties. CEO's 87-5 and 85-59 are referenced. Under the circumstances presented, the district administrator's serving on the board of directors of the planning association while the district contracts with it creates a unity of interest rather than a conflict of interest.
Inasmuch as the district administrator is not compensated for her service on the board, Section 112.313(7)(a), Florida Statutes, which prohibits certain conflicting employment and contractual relationships, does not apply.
Would a prohibited conflict of interest be created were an HRS District to enter into a contract with a nonprofit planning association (corporation) on whose Board of Directors the District Administrator serves?
Under the circumstances presented, your question is answered in the negative.
You advise that . . . . serves as the District Administrator of HRS District IX, as well as a non-compensated member of the board of directors of a local Health and Human Services Planning Association ("Association"), which is a private, nonprofit, tax exempt corporation developed to be a cooperative community forum consisting of representatives of local government, business, service providers, and private citizens. The Association is the outgrowth of the incorporation of a health and human services element into the County's comprehensive plan. This element called for the creation of a planning unit to ensure ongoing planning, development, coordination, and implementation of needed health and human service programs and facilities.
We are advised that the Association was chartered specifically to support coordination among all funding bodies and health and human services within the County and for planning across all areas of health and human services, not just those under the jurisdiction of the Department of Health and Rehabilitative Services. It also was developed in response to a need for an organizational unit, acceptable to the majority of funding and service providers in the County, to provide "leadership for initiating the interaction with all social service organizations." We are advised further that the impetus for this organization came from the County Board of Commissioners, the local United Way, and the Leadership of Palm Beach County Alumni Association.
We are advised that the Association operates under the direction of a 23-member board of directors representing business, social service providers, health and social service funding bodies, and education. Among the members of the Association's Board of Directors representing government/public funders/providers are the HRS District Administrator, a representative of the County Commission, a representative of the Area Agency on Aging, a County Court judge, and representatives of two local taxing districts. We also are advised that the Association is not a direct service provider.
We are advised that the Association currently employs six staff who "facilitate planning and coordinate service development." The Agency Overview booklet indicates that Association's efforts fall within four categories. They are:
1. Data base development and utilization;
2. Issue identification and response;
3. Technical assistance; and
4. Planning coordination and support.
You are concerned about whether a prohibited conflict of interest would be created if the District were to enter into a $34,000 contract to develop a plan addressing the "downsizing" of the South Florida State Hospital with the Association on whose board of directors the District Administrator serves. We are advised that the proposed contract will add an additional position to the Association for purposes related exclusively to the scope of work under the contract. Furthermore, we are advised that the Association, as an independent contractor, will hire a person to perform the work under the contract, while its current staff will provide research, planning support, and community involvement. In addition, under the supervision of the Director of the Public Health Unit, the District Program Supervisor for Alcohol, Drug Abuse and Mental Health will oversee the development of the plan under the contract to ensure that it conforms to the Department's requirements. We are advised that the District Administrator will have no direct role in its development. However, once developed, the District will include the plan and requested resources in its legislative budget request for FY 1995-96 and subsequent years.
The Code of Ethics for Public Officers and Employees provides in relevant part:
DOING BUSINESS WITH ONE'S AGENCY.--No employee of an agency acting in his official capacity as a purchasing agent, or public officer acting in his official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his own agency from any business entity of which he or his spouse or child is an officer, partner, director, or proprietor or in which such officer or employee of his spouse or child, or any combination of them, has a material interest. Nor shall a public officer or employee, acting in a private capacity, rent, lease, or sell any realty, goods, or services to his own agency, if he is a state officer or employee, or to any political subdivision or any agency thereof, if he is serving as an officer or employee of that political subdivision. The foregoing shall not apply to district offices maintained by legislators when such offices are located in the legislator's place of business. This subsection shall not affect or be construed to prohibit contracts entered into prior to:
(a) October 1, 1975.
(b) Qualification for elective office.
(c) Appointment to public office.
(d) Beginning public employment.
[Section 112.313(3), Florida Statutes.]
CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP.--No public officer or employee of an agency shall have or hold any employment or contractual relationship with any business entity or any agency which is subject to the regulation of, or is doing business with, an agency of which he is an officer or employee . . . ; nor shall an officer or employee of an agency have or hold any employment or contractual relationship that will create a continuing or frequently recurring conflict between his private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties. [Section 112.313(7)(a), Florida Statutes.]
The first part of Section 112.313(3) prohibits the District Administrator from acting in her official capacity to purchase goods or services for the District from any business entity of which she is an officer or director. The second part prohibits her, while acting in her private capacity, from selling any services to her own agency. For purposes of this provision, "business entity" is defined at Section 112.312(5), Florida Statutes, to mean
any corporation, partnership, limited partnership, proprietorship, firm, enterprise, franchise, association, self-employed individual, or trust, whether fictitiously named or not, doing business in this state.
We previously have advised that a nonprofit organization is a "business entity" for purposes of the Code of Ethics. See CEO 82-9 and CEO 82-39. That term is defined broadly in Section 112.312(5) to include "any corporation . . . doing business in this state." No distinction is made based upon whether a corporation or association has been organized as a profit-making enterprise. We find, therefore, that the Association is a "business entity" within the meaning of Section 112.312(5).
With respect to the first part of Section 112.313(3), we were advised in conjunction with CEO 90-36 that the signature of an HRS district administrator authorizes the expenditure of public funds to a contract provider. Therefore, were the District to contract with the Association for purposes of developing a plan addressing the "downsizing" of the South Florida State Hospital, we find that the District Administrator would be acting as a "purchasing agent," as that term is defined at Section 112.312(20), Florida Statutes, to purchase services for her agency from a business entity of which she is a director, seemingly in violation of the first part of Section 112.313(3). We also find that were the District Administrator to serve on the board of directors of the Association, that business entity would be selling its services to the District, thereby creating an apparent violation of the second part of Section 112.313(3). We previously have advised that a public employee is acting in a private capacity whenever a corporation of which she is director takes action. See CEO 82-37 and CEO 87-45.
However, rather than constituting a "conflict of interest" in violation of Section 112.313(3), we find that the proposed contractual relationship between the Association and the District would create a unity of interest. In CEO 84-40 we advised that neither Section 112.313(3) nor Section 112.313(7)(a) would prohibit a school board member from serving as a trustee of the Florida School Board Association Insurance Trust, a nonprofit self-insurance program which enables school districts to self-insure as a group statewide, if his school district participated in the trust. There we found a unity of interest, rather than a conflict of interest, in the school board member's serving as a trustee. On that basis, we found that Section 112.316, Florida Statutes, would operate to "exempt" what otherwise would have been a violation of Section 112.313(3). Section 112.316 provides:
CONSTRUCTION.--It is not the intent of this part, nor shall it be construed, to prevent any officer or employee of a state agency, or county, city or other political subdivision of the state or any legislator or legislative employee from accepting other employment or following any pursuit which does not interfere with the full and faithful discharge by such officer, employee, legislator, or legislative employee of his duties to the state or the county city, or other political subdivision of the state involved.
In finding that the school board member's service as a trustee for the trust would not interfere with the full and faithful discharge of his public duties as a member of the school board, we noted the following: (1) he would not stand to benefit privately were the school board to obtain self-insurance through the trust because the trust was a nonprofit program and he received no compensation for his service as a trustee; (2) he would be appointed trustee because of his public position with the school board (all of the other members of the board of trustees were school district officers or employees); and (3) the trust was created by the nonprofit Association of School Boards, which in turn was created to assist the school boards of this state. See also CEO 87-5.
Similarly, in CEO 85-59, we found, in part, that no violation of Section 112.313(3) would be created were the trustees or staff of the Historic St. Augustine Preservation Board to serve without compensation as officers or directors of a nonprofit, direct support organization created under Section 266.08, Florida Statutes, to operate for the benefit of the Board. Under the circumstances, we opined, a unity of interest between the Board and the organization would exist.
Here, the District Administrator would not stand to benefit privately because the Association is a nonprofit corporation and she would be serving without compensation. Furthermore, she would become a member of the Board solely because of her position as District Administrator. Finally, we find significant the fact that the Association, which receives both public and private funding, was the outgrowth of the incorporation of a health and human services element into the County's plan, which requires a planning unit to ensure ongoing planning, development, coordination, and implementation of needed health and human services programs and facilities of which the HRS District is a part. With the prospect of the "downsizing" of the South Florida State Hospital, State and County resources, both public and private, will be required to meet the demand and need for services for persons currently in residence at the hospital, persons residing in the District who are on a waiting list for the Hospital, persons with chronic mental illness, and persons encompassed in the definition of the class in the Federal Court proceeding in Sanbourne v. Chiles, which led, in part, to the downsizing of the Hospital. Given these circumstances, we find that there would be a unity of interest, rather than a conflict of interest, in the District Administrator's serving on the board of directors of the Association while the District contracts with the Association.
Section 112.313(7)(a) concerns conflicting employment and contractual relationships. We previously have advised that noncompensated service as an officer or director of a nonprofit corporation does not constitute an employment or contractual relationship. See CEO 83-70, CEO 89-59, and CEO 92-31. Inasmuch as the District Administrator is not compensated for her service on the Board, we find that Section 112.313(7)(a) would not apply.
Accordingly, we find that no prohibited conflict of interest would be created by the District Administrator's service on the board of directors of the Association, if the Association were to contract with the District to develop a plan directed at the "downsizing" of the South Florida State Hospital.