Ethics Advisory Opinion No. 7
February 24, 1999
Issued By: City Attorney’s Office
Whether an organization may pay a member of a commission that is more than advisory in nature from its various funding sources for services rendered.
An organization has asked whether it may pay a member of a commission that is more than advisory in nature, from its various funding sources for services rendered. The following facts are presented:
The ABC Organization ("ABC") is a private, 501(c)(3) organization, governed by a ten (10) member volunteer board. For the past several years, a member of a City commission that is more than advisory in nature ("Commission") has served as Executive Director of ABC, a service he provides without compensation.
ABC has entered into a Contract with the City of
Foundation or grant money. ABC wishes to hire the Commission member to prepare written materials to be used by ABC and made available to the City in its instruction and assistance of various leaders.
Advertising revenue. ABC wishes to employ the Commission member to write and prepare a newsletter, compensation for which would come from advertising revenues he procures.
Fees for Services. ABC wishes to pay for services rendered from fees paid by organizations that come to ABC and request assistance with goal setting or other services.
Contributions from third parties for specific projects.
The issue is whether, under the City of
Improper Economic Benefit. As a general rule, a City official may not take any official action that "is likely to have an effect on [his] economic interest that is distinguishable from its effect on members of the public in general or a substantial segment thereof." If such occurs, the City official is under a duty to recuse himself and disclose, in writing, to the City Clerk the prohibited conduct. It is unlikely that a matter of ABC would come before the Commission. However, should it occur, the Commission member would be required to disclose the potential conflict to the City Clerk and recuse himself from any further participation in the matter.
Prohibited Financial Interest in Contract. Part B. Section 10 prohibits City officers from having a financial interest in a contract with the City or its agencies. Under this section, a City officer includes, among others, "members of any board or commission which is more than advisory in function." The Commission is such a body, and therefore, a member of the Commission is a City officer. However, to be in violation of this section, the City officer must have a financial interest in a contract with the City. A financial interest includes, but is not limited to, a contract in which the officer is a party to the contract or is a subcontractor or partner of a company doing business with the City for which he is providing services.
The City and ABC executed a Contract which contains a conflict of interest provision stating:
"[ABC] certifies, and this CONTRACT is made in reliance thereon, that neither it, its individual officers, employees or agents, nor any person having a substantial interest in this CONTRACT is an officer or employee of CITY or any of its agencies."
Given these facts, a member of the Commission would be in violation of the Ethics Code if he is paid for services pursuant to any contract between the City and ABC regardless of whether such services are paid from funding sources other than City funds. This is because he is being paid for services that arise under the City contract. The member may, however, be compensated for services resulting from non-City contracts without violating the Ethics Code or the Contract.
A member of a commission that is more than advisory in nature who sits as the unpaid Executive Director of the ABC Organization may not be paid for services resulting from a contract with the City regardless of the funding source of such services. He may, however, be compensated for services provided to other organizations as a result of a non-City contract.
FRANK J. GARZA