This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

CONFLICTS OF INTEREST -- Codes of Ethics (prohibition against county officials serving on boards of not-for-profit agencies) -- Exceptions (contracts with not-for-profit agencies)

GENERAL MUNICIPAL LAW, §§801, 802(1)(f), 803, 806: A member of a county governing board who also serves on the board of a not-for-profit agency does not have a prohibited interest in a contract between the county and agency, but must disclose any interest in such a contract pursuant to General Municipal Law, §803 and should not participate in the discussion or vote on the contract. A county code of ethics may not prohibit county officials from serving as members of boards of not-for-profit agencies with which the county contracts since such a prohibition would be inconsistent with General Municipal Law, §802(1)(f), but may prohibit county officials from participating in the discussion and vote on contracts with not-for-profit agencies for which they serve.

You ask whether a member of a county governing board who also serves as an unsalaried member of the governing board of a not-for-profit agency would have a prohibited conflict of interest if the county entered into a contract with the not-for-profit agency to provide services on behalf of the county. You also ask whether county board members may be prohibited from serving as members of governing boards of not-for-profit agencies with which the county contracts.

The statutes relating to conflicts of interest of municipal officers and employees are contained in General Municipal Law, article 18 (§800 et seq.). Article 18 defines "contract" to include "any claim, account or demand against or agreement with a municipality, express or implied ..." (General Municipal Law, §800[2]). "Interest" is defined in section 800(3) as a "direct or indirect pecuniary or material benefit accruing to a municipal officer or employee as the result of a contract with the municipality which such officer or employee serves." That statute also provides that a municipal officer or employee is deemed to have an interest in any contract with a firm, partnership, association or corporation of which he or she is an officer or employee (General Municipal Law, §800[3][b],[c]). Pursuant to section 801(1), unless an exception set forth in section 802 applies, an interest in a contract is prohibited if the officer or employee has the power or duty, individually or as a member of a board, to (a) negotiate, prepare, authorize or approve the contract or authorize or approve payment thereunder, (b) audit bills or claims under the contract, or (c) appoint an officer or employee who has any such powers or duties. General Municipal Law, §804 further provides that a contract willfully entered into by or with a municipality in which there is a prohibited interest is null, void and unenforceable.

As a member of the not-for-profit agency's governing board, the county board member is deemed to have an interest in contracts between the agency and the county. If, as a member of the county board, he or she has powers and duties listed in section 801, that interest is prohibited unless an exception in section 802 applies.

Although it is likely that members of the county's governing board would have section 801 powers and duties in connection with these contracts, we need not resolve that question because an exception under 802 is applicable. Thus, even if the board member has section 801 powers and duties, his or her interest in the contracts would not be prohibited.

Section 802(1)(f) excepts from the applicability of section 801(1) any contracts "... with a membership corporation or other voluntary non-profit corporation or association". Since the agencies in question are not-for-profit, pursuant to this exception, a county board member would not have a prohibited interest in contracts between the county and the agency (see Stettine v County of Suffolk, 66 NY2d 354, 497 NYS2d 329).

The board member, however, would have to comply with the disclosure requirements of General Municipal Law, §803(1). Pursuant to section 803, the board member would be required to disclose in writing to the county board the nature and extent of an interest in any actual or proposed contract of the county. The disclosure statement must be set forth in the official minutes of the county board.

With respect to whether county board members may be prohibited from serving on governing boards of not-for-profit agencies with which the county contracts, we note that, pursuant to General Municipal Law, §806, each county is required to adopt a code of ethics setting forth for the guidance of its officers and employees the standards of conduct reasonably expected of them. Codes of ethics must address certain specified subjects, and also may regulate or prescribe conduct which is not expressly prohibited by article 18 and provide for the prohibition of conduct (General Municipal Law, §806[1]). In this regard, section 13 of chapter 946 of the Laws of 1964, which added article 18 to the General Municipal Law, provides that:

The provisions of [article 18] shall supersede any local law, charter, ordinance, resolution, rule or regulation of any municipality to the extent that such local law, charter, ordinance, resolution, rule or regulation is inconsistent with the provisions thereof. No local law, ordinance, resolution, rule or regulation shall modify or dispense with any provision of article eighteen of the general municipal law, as added by this act; provided, however, that nothing herein contained shall prohibit a code of ethics adopted pursuant thereto from supplementing the provisions of this act.

Thus, a code of ethics may not be inconsistent with the provisions of article 18 (1980 Opns St Comp No. 80-234, unreported; 1971 Opns St Comp No. 71-417, unreported; Belle v Town Board of Town of Onondaga, 61 AD2d 352, 402 NYS2d 677).

In our opinion, because a code of ethics may not be inconsistent with article 18, a code could not provide that interests of county officers and employees in county contracts with not-for-profit associations or corporations are prohibited and that any contract in which there is such an interest is void. As noted, section 802(1)(f) of article 18 expressly provides that an interest in a contract with a not-for-profit agency shall not be prohibited. The more difficult question, however, is whether a county could indirectly prohibit this conduct by including in its code of ethics a provision which prohibits county officials from serving as members of boards of not-for-profit agencies with which the county contracts. In our opinion, since such a prohibition would be tantamount to prohibiting interests in contracts that article 18 expressly permits, we believe that the inclusion of such a provision would be prohibited by the above-quoted language contained in section 13 of chapter 946 of the Laws of 1964.

It should be noted, however, that recent court cases have held public officials to a high standard of conduct and, on occasion, have negated certain actions which, although technically not constituting a violation of article 18, violate the spirit and intent of the statute, are inconsistent with public policy, or suggest self-interest, partiality or economic impropriety (see, e.g., Zagoreos v Conklin, 109 AD2d 281, 491 NYS2d 358; Conrad v Hinman, 122 Misc 2d 531, 471 NYS2d 521; Matter of Tuxedo Conservation and Taxpayers Association v Town Board of Tuxedo, 69 AD2d 320, 418 NYS2d 638; see also Parker v Town of Gardiner Planning Board, _____ AD2d _____, 585 NYS2d 571; Cahn v Planning Board of the Town of Gardiner, 157 AD2d 252, 557 NYS2d 488). Accordingly, a county board member should not participate in county board discussions or decisions relating to county contracts with a not-for-profit agency on which the board member serves. In our opinion, the county code of ethics could include a provision which embodies this common law principle and requires members to recuse themselves from all discussions relating to the not-for-profit agency and to abstain from voting on any contracts between the county and such agencies.

October 9, 1992
Kenneth R. Ingenito, Chairman
Rockland County Legislature