CEO 77-84 -- June 17, 1977

CONFLICT OF INTEREST; VOTING CONFLICT OF INTEREST

HOSPITAL DISTRICT COMMISSIONER VOTING TO RETAIN AUDITING FIRM WHICH DOES AUDITING FOR HIS PRIVATE EMPLOYER

To: (Name withheld at the person's request.)

Prepared by: Phil Claypool

SUMMARY:

The Code of Ethics for Public Officers and Employees, s. 112.313(7)(a), F. S. 1975, prohibits a public officer from being employed by a business entity which is doing business with his agency. In addition, the code prohibits a public officer from serving as an officer of a company which is selling services to his agency. Section 112.313(3), F. S. 1975. Neither provision is applicable, however, where a hospital district commissioner is an officer and employee of a company which retains an auditing firm which also has been retained by the board to do the annual audit of the hospital, as it is the auditing firm which has been retained by the hospital board of commissioners, not the company which employs the subject commissioner and which he serves as an officer. No voting conflict of interest pursuant to s. 112.3143 would be created were the commissioner to vote upon a measure to retain the subject auditing firm, as such retention would not inure to the commissioner's gain or to the gain of any principal who retains him.

QUESTIONS:

1. Does a prohibited conflict of interest exist where a hospital district commissioner is an officer and employee of a company which retains an auditing firm which also has been retained by the board to do the annual audit of a hospital operated by the board?

2. Does a voting conflict of interest exist when a hospital district commissioner has voted upon a measure which calls for the retention of an auditing firm to do the annual audit of a hospital operated by the board where the commissioner is an officer and employee of a company which also retains that auditing firm?

Question 1 is answered in the negative.

In your letter of inquiry and in a telephone conversation with our staff, you have advised that Mr. Joel Kaswan is a member of the Board of Commissioners of the South Broward Hospital District. The board, all seven members of which are appointed by the Governor, operates a public hospital. In December of 1976 the administrator of the hospital, at the direction of the board, established a five- person committee to study whether, for purposes of the hospital audit, a change in certified public accounting firms would be made. The committee followed an eight-step procedure of evaluation: Issuance of request for proposal; question and answer session; receipt and preliminary evaluation of replies to request for proposal; follow-up meetings with firms; documentation and verification of information requested; outside references; final evaluation; and presentation to the board of commissioners. On March 9, 1977, the committee recommended two of the ten firms which had been evaluated: Ernst & Ernst and Laventhal & Horwath. Although Mr. Kaswan, the subject commissioner, was not in attendance at this meeting, he transmitted a letter to other board members nominating the accounting firm of Alexander Grant & Company for the hospital audit. By vote, the board decided to hold a special meeting on March 16, at which time all three of the above-named firms would be present to make final presentations to the board. On March 16, after having heard from all three firms, the board, on motion of the subject commissioner, voted 5 to 3 to retain Alexander Grant & Company, a national firm which for a number of years has done the annual audit for a business entity which employs the subject commissioner. The commissioner also holds the office of treasurer and comptroller of the company by which he is employed, although he does not have a financial interest in the business. Neither he nor his employer has received any benefit from the hospital board's retention of the auditing firm.

Accordingly, we find that no prohibited conflict of interest exists where a hospital district commissioner is an officer and employee of a company which retains an auditing firm which also has been retained by the board to do the annual audit of a hospital operated by the board.

Question 2 is answered in the negative.

The Code of Ethics provides in relevant part as follows:

Voting conflicts. -- No public officer shall be prohibited from voting in his official capacity on any matter. However, any public officer voting in his official capacity upon any measure in which he has a personal, private, or professional interest and which inures to his special private gain or the special gain of any principal by whom he is retained shall, within 15 days after the vote occurs, disclose the nature of his interest as a public record in a memorandum filed with the person responsible for recording the minutes of the meeting, who shall incorporate the memorandum in the minutes. [Section 112.3143, F. S 1975.]

The application of this provision turns on whether a public officer has voted upon a measure in which he has a personal, private, or professional interest and which inures to the special gain of any principal by whom he is retained. Since you have stated that the company which employs the subject commissioner will not receive any benefit from the selection of the auditing firm, and since he is not employed by the auditing firm itself, there is no evidence that any special gain inured either to the commissioner or to his employer. Accordingly, no voting conflict of interest requiring disclosure is created in the commissioner's voting to retain the subject auditing firm.