CEO 83-11 -- March 1, 1983

CONFLICT OF INTEREST

SCHOOL DISTRICT BUSINESS MANAGEMENT COMMITTEE DOING BUSINESS WITH SCHOOL DISTRICT

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

SUMMARY:

A prohibited conflict of interest would be created were the firm or corporation of a member of the Business Management Committee of the Broward County School District to do business with the School District. However, the prohibition of Sections 112.313(3) and (7)(a), Florida Statutes, may be waived for these advisory board members by the School Board on a case-by-case basis through the procedure set forth in Section 112.313(12), Florida Statutes.

QUESTION:

Would a prohibited conflict of interest be created were the firm or corporation of a member of the Business Management Committee of the Broward County School District to do business with the School District?

This question is answered in the affirmative, subject to the exceptions noted below.

In your letter of inquiry you have advised that ...., an attorney, and ...., an accountant, are members of the Business Management Committee of the Broward County School District. The Committee was established recently to assist the School Board in an advisory capacity concerning financial and administrative matters by lending private sector expertise to the School System in areas of accounting, auditing, budgeting, personnel, data processing, legal, and other specialized areas. You also advise that the School System on a continuing basis contracts out or purchases goods or services required in each of these areas. The duties of the Committee include such matters as reviewing and evaluating the format of financial reports and making recommendations for changes; participating in the selection of auditing firms, determining areas to be emphasized in the external audit, reviewing proposals by competing firms, and assisting in the development of the audit contract with the firm selected by the Board; and reviewing policies and procedures affecting the administrative financial and data processing areas and making recommendations to the Board.

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 or 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.

(d) Beginning public employment.

[Section 112.313(3), Florida Statutes (1981).]

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).]

Because the Committee's duties contemplate involvement in certain selection processes and contemplate advising the Board in areas concerning which Board members' firms or corporations may wish to provide services to the District, there is a potential for conflict of interest if a Board member's firm or corporation seeks to do business with the District. However, the Legislature has anticipated that situations like this would arise in the case of advisory board members and has provided:

The requirements of subsections (3) and (7) as they pertain to persons serving on advisory boards may be waived in a particular instance by the body which appointed the person to the advisory board, upon a full disclosure of the transaction or relationship to the appointing body prior to the waiver and an affirmative vote in favor of waiver by two-thirds vote of that body. In instances in which appointment to the advisory board is made by an individual, waiver may be effected, after public hearing, by a determination by the appointing person and full disclosure of the transaction or relationship by the appointee to the appointing person . . . . [Section 112.313(12) (Supp. 1982).]

As the Committee's duties are solely advisory, we find that the School Board may exempt on a case-by-case basis through this procedure potential conflicts involving Committee members whose firms or corporations may seek to do business with the District.

Your letter expresses concern over the application of the Code of Ethics to Committee members who are employed by large firms or corporations. Where a Committee member is an officer, director, partner, or employee of a large (perhaps multi-national) firm consisting of many divisions and subsidiaries, any one of which may provide goods or services to the School System, you suggest that it is possible that this may happen without the knowledge of a Committee member or even of the corporate subsidiary by which he is employed.

In response to this concern, we note first that the term "business entity" as used in the Code of Ethics is defined to mean "any corporation, partnership, . . . firm, . . . doing business in this state." Section 112.312(3), Florida Statutes. Given this definition, we have treated each corporate subsidiary as a separate business entity in applying the Code of Ethics. See CEO 78-20, CEO 79-55, and CEO 80-89. Secondly, we would suggest that a member of the Committee whose employer is that large should contact those individuals within the firm or corporation who are likely to be responsible for contracts with the District to inform them of his status as a member of the Committee and to advise them that there may be a problem in doing business with the School Board unless a waiver is obtained from the School Board under Section 112.313(12). If reasonable steps have been taken to inform a Committee member of his employer's dealings with the District, and the member still is not aware that his employer is doing business or is going to do business with the District, we doubt that the member would be faced with a conflict of interest of such magnitude as to be prohibited by the Code of Ethics.

Finally, although your letter has not referenced the possibility that business may be done by sealed, competitive bid, Section 112.313(12)(b), Florida Statutes, does provide a procedure for exempting conflicts of interest where a system of sealed, competitive bidding is used.

Accordingly, we find that a prohibited conflict of interest would be created were the corporation or firm of a member of the Business Management Committee to do business with the School District unless one of the exemptions of Section 112.313(12), Florida Statutes, applies, or unless the Committee member has made an unavailing but good faith attempt to learn of his employer's business dealings with the District in order to comply with those exemptions.