CEO 83-71 -- September 22, 1983

CONFLICT OF INTEREST; VOTING CONFLICT OF INTEREST

HOUSING AUTHORITY AND NURSING HOME AUTHORITY MEMBER VOTING TO AWARD AUDIT CONTRACT TO ACCOUNTING FIRM OF A BUSINESS PARTNER

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

SUMMARY:

No prohibited conflict of interest exists where the chairman of a city housing authority is engaged in a real estate partnership with an individual who is a partner in the accounting firm which audits the authority's books. Section 112.313(7), Florida Statutes, would not be violated, as the authority member does not have any employment or contractual relationship with the accounting firm which is doing business with his agency. Similarly, no prohibited conflict of interest exists where the chairman of a county nursing home authority is engaged in a real estate partnership with an individual who is a partner in the accounting firm which audits the authority's books.

No voting conflict of interest was created where the chairman of a housing authority voted to award an audit contract to an accounting firm, one partner of which also is a partner in a separate real estate venture with him. No memorandum of voting conflict was required under Section 112.3143, Florida Statutes, as the authority member was not retained by the accounting firm and as the votes to retain the firm to audit the authority would not appear to result in any gain to himself. Similarly, no voting conflict of interest was created where the chairman of a county nursing home authority voted to award an audit contract to an accounting firm, one partner of which also is a partner in a separate real estate venture with him.

QUESTION 1:

Does a prohibited conflict of interest exist where you, the chairman of a city housing authority, are engaged in a real estate partnership with an individual who is a partner in the accounting firm which audits the authority's books?

This question is answered in the negative.

In your letter of inquiry you advise that you serve as Chairman of the Palatka Housing Authority, which has its books audited every two years by contract with an accounting firm. You advise that the Executive Director of the Authority advertises for interested, qualified firms, ranks them, and negotiates with them in accordance with State law. She then sends to the Authority Board her choice, based on qualifications and negotiated price. The Board, in each case, has confirmed her recommendation with further approval from the area HUD office.

In addition, you advise that during the past six years, one accounting firm has been awarded the contract by unanimous vote of the Authority. You also advise that you have been a partner with the managing partner of the local office of this firm for the past few years in a partnership involving rental apartments and undeveloped real estate. Recently, you advise, the accounting firm sold its local office and assigned all contracts to a new accounting firm, a partnership consisting of the former managing partner and another CPA. Finally, you advise that you never have had an interest in either of the accounting firms.

The Code of Ethics for Public Officers and Employees provides in relevant part:

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 (1981).]

This provision prohibits a public officer from having any employment or contractual relationship with a business entity which is doing business with his agency. Here, the business entities doing business with the Authority are the accounting firms. However, under the circumstances you have presented, you do not have any employment or contractual relationship with the accounting firms; your contractual relationship rather is with an individual who is or was a partner in those firms.

Accordingly, we find that no prohibited conflict of interest exists by virtue of your real estate partnership with an individual who is a partner in the accounting firm which audits the Authority's books.

QUESTION 2:

Does a prohibited conflict of interest exist where you, the chairman of a county nursing home authority, are engaged in a real estate partnership with an individual who is a partner in the accounting firm which audits the authority's books?

In your letter of inquiry you advise that you serve as Chairman of the Putnam County Nursing Home Authority, which has been and will be audited by the same accounting firms referenced in your first question. Based on our response to your first question, we answer this question in the negative and find that no prohibited conflict of interest exists by virtue of your real estate partnership with an individual who is a partner in the accounting firm which audits the Nursing Home Authority's books.

QUESTION 3:

Was a voting conflict of interest created where you, the chairman of a housing authority, voted to award the audit contract to an accounting firm, one partner of which also is a partner in a separate real estate venture with you?

This question is answered in the negative.

In your letter of inquiry you question whether any conflict of interest was created by your votes to retain the original accounting firm to audit the Housing Authority and to permit the assignment of the audit contract to the new accounting firm.

The Code of Ethics provides in relevant part:

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, Florida Statutes (1981).]

This provision requires the filing of a memorandum of voting conflict (Commission on Ethics Form 4) in which a public official votes on a matter in which he has a personal, private, or professional interest, where the measure being considered would inure to the special private gain of the public official or to the special gain of any principal by whom he is retained.

As you have no interest in either of the accounting firms, your votes to retain them to audit the Authority would not appear to result in any gain to yourself. Nor do we find that the retention of these firms would inure to the special gain of a principal by whom you have been retained. Under the circumstances presented, you have not been retained by either of the accounting firms. In addition, we are of the opinion that the partner in the accounting firm who is involved in your real estate partnership also is not a principal by whom you have been retained. For similar examples, see CEO's 82-88, 81-8, and 79-33.

Accordingly, we find that no voting conflict of interest necessitating the filing of a memorandum of voting conflict was created by your votes to award the audit contracts to the accounting firms.

QUESTION 4:

Was a voting conflict of interest created where you, the chairman of a county nursing home authority, voted to award an audit contract to an accounting firm, one partner of which also is a partner in a separate real estate venture with you?

For the reasons given in our response to your third question, we answer this question in the negative and find that no voting conflict of interest requiring the filing of a memorandum of voting conflict was created by virtue of your votes to have the accounting firms perform auditing functions for the Nursing Home Authority.