OPINION NUMBER - 155
ADOPTED - 1995/02/10
SUBJECT - Conflicts of Interest
REQUESTED BY: Kerry P. Eagan, Chief Administrative Officer of Lancaster County, on behalf of Linda Steinman, Lancaster County Commissioner
QUESTION: (1) Does the Nebraska Political Accountability and Disclosure Act prohibit an elected county official from serving on the governing body of an outside entity which has a contractual arrangement with the county?
A new member of the Lancaster County Commission is also a member of the twenty-eight person panel of the Community Human Services Planning Council (CHSPC). CHSPC is a community service organization which exists for the purpose of assessing community human services needs and human services agencies. CHSPC determines human service needs in the community and prioritizes those needs in an effort to assist community funding sources in making informed decisions as to the allocation of human services funds. CHSPC also provides technical assistance and guidance to non-profit human service agencies in an effort to create a more cost effective and efficient delivery system. The County of Lancaster and City of Lincoln use recommendations of CHSPC in determining how to appropriate and spend public funds for human services.
CHSPC has a rather loose organizational structure. It is not a corporation and does not appear to have anything in the nature of bylaws. It was created approximately four years ago. It's funding is provided in approximately equal amounts by Lancaster County, the City of Lincoln, and United Way of Lincoln and Lancaster County. Out of these funds two planning associates and one secretary are paid. Strictly speaking, these individuals are on the payroll of United Way. In addition, United Way has one of its employees devote one hundred percent of her time to CHSPC activities. Lancaster County has one of its employees devote forty percent of her time to CHSPC activities. To the extent that CHSPC has a governing body, it is the twenty-eight person planning council. In establishing the initial planning council an attempt was made to draw individuals from diverse backgrounds. Thereafter, as vacancies have occurred a sub group of the twenty eight person panel forms a nominating committee. It's recommendations are forwarded to the full panel which determines who will fill any vacant slot. The Lancaster County Commissioner is a Sargent with the Lincoln Police Department. Her activities with the police union and her duties with the Juvenile Division were factors in her being chosen to serve on the Planning Council. She became a member of the Planning Council prior to the time that she took office as a Lancaster County Commissioner.
When the CHSPC wishes to draw upon some of the money allocated to it by Lancaster County, it must follow the normal claim process. That is, it follows the same process as any outside business or entity which has provided goods or services to the county and is seeking payment for those goods or services.
Currently, a contract exists between Lancaster County and CHSPC. By this contract CHSPC provides long range planning on behalf of the county so as to assist the county in meeting current and future human service needs. The county provides CHSPC with money in connection with this contract.
There is nothing in the Nebraska Political Accountability and Disclosure Act which prohibits an individual from simultaneously serving as a member of a county board and as an officer or director of an entity which does business with the county. However, when such a situation exists certain provisions of the Nebraska Political Accountability and Disclosure Act may apply.
Section 49-14,103.01(2) provides that "no officer may have an interest in any contract to which his or her governing body, or any one for its benefit is a party. The existence of such an interest in any contract shall render the contract voidable by decree of a court of competent jurisdiction as to any person who entered into the contract or took assignment of such contract with actual knowledge of the prohibited conflict." The provision goes on to state that an officer has a prohibited interest in a contract if he or she "has a business association as defined in §49-1408 with a business involved in the contract."
Section 49-1407 defines the term business as "any corporation, partnership, limited liability company, sole proprietorship, firm, enterprise, franchise, association, organization, self-employed individual, holding company, joint-stock company, company receivership, trust, activity, or entity." We note that the definition of business does not distinguish between for profit entities and non-profit entities.
It is our opinion that the Community Human Services Planning Council is a business as defined in §49-1407. While the structure of CHSPC is somewhat loose, it does appear that it is an association, organization, activity, or entity which is distinct from the United Way, City of Lincoln, and the County of Lancaster. In reaching this conclusion we consider a number of factors. The first factor is that CHSPC seems to be self governing. That is, it is governed by the twenty-eight person panel. A second factor is that vacancies on the panel are filled by a process governed by the panel itself. A third consideration is the fact that when CHSPC wishes to make use of funds to which it is entitled under the contract, it must follow the same claims process that any other outside entity must use in dealing with the county.
Section 49-1408 provides that an individual has a business association with any business in which the individual is a partner, director, or officer. In our view, the twenty-eight person panel serves as the governing body of the organization. Serving on the panel is the eqivalent of being a director of the organization. We conclude that an individual serving on the twenty-eight person panel of CHSPC has a business association with that organization.
Given the foregoing, a county commissioner who serves on the twenty-eight person panel of CHSPC would have a prohibited interest in a contract if a contract were to be entered into between the county and CHSPC. Section 49-14,103.01(3) provides that the prohibition against an officer having an interest in a contract with a governing body shall not apply if the interested officer: a) makes a declaration on the record to the governing body responsible for approving the contract regarding the nature and extent of his or her interests prior to official consideration of the contract; b) does not vote on the matter of granting the contract; and c) does not act for the governing body which is a party to the contract as to inspection or performance under the contract in which he or she has an interest.
It is our understanding that a contract existed between Lancaster County and CHSPC prior to the time that the county commissioner took office. Therefore, the obligation that the county commissioner make a declaration on the record is not applicable. Obviously, the obligation that she not vote on the matter of granting the contract is not applicable. However, she would still be obliged to avoid acting on behalf of Lancaster County as to inspection or performance under the contract including abstaining on any vote to pay any claim made pursuant to the contract.
The nature of the contract between Lancaster County and CHSPC is such that there is a possibility that the contract will be renewed. If the county commissioner continues to be a member of the CHSPC Planning Council, and if the contract comes up for renewal, the county commissioner would be required to make a declaration on the record prior to the time that the county board voted on the matter of renewing the contract. This declaration may be made in writing and filed with the individual who normally keeps records for the county board. This filing would be a public record. In the alternative, the county board member may publicly disclose the nature of her interest at an open public meeting as long as the declaration is made part of the minutes of the meeting. The county commissioner would be prohibited from voting as to the renewal of the contract.
Section 49-1499 requires that certain public officials, including elected county officials prepare written statements disclosing a conflict of interest when they are faced in their official capacities with taking an action or making a decision which could result in a financial benefit or detriment to a business association. Should the county board be faced with taking action as to community human services planning council which action is not related to a contract, the county commissioner would have an obligation under this section.
There is nothing in the Nebraska Political Accountability and Disclosure Act which prohibits a county commissioner from serving on the governing board of an entity which does business with the county. However, in matters involving contracts between the county and the entity, the provisions of §49-14,103.01 apply. In noncontractual matters between the county and the entity in which there is a possibility of a financial benefit or detriment to the entity, the provisions of §49-1499 apply.