Subject: Conflicts of Interest
Requested By: Douglas D. Christensen, Commissioner, Nebraska Department of Education
Questions Presented: Does a potential conflict of interest exist by virtue of the Commissioner of Education’s appointment to the board of directors of a non-profit corporation which may provide contractual services for the Nebraska Department of Education, and if so, what actions are required in the event of such contract?
Conclusions: No. Simultaneous service does not in and of itself create a potential conflict of interest, but see Analysis.
Facts: The Commissioner of Education (Commissioner) has been invited to serve on the Board of Directors of Applied Information Management Institute (AIM), a not-for-profit corporation engaged in assisting schools and other educational organizations to support information technology education. The Commissioner would receive no fee for serving on the AIM Board. All activities connected with the Commissioner’s Board membership would occur on his own time, and without using any state resources. The Department of Education (Department) has in the past contracted with AIM, and it is possible the Department may contract with AIM during the Commissioner’s tenure on the AIM Board. The Commissioner is appointed by the elected State Board of Education (State Board) and is the executive officer of the State Board and the administrative director of the Department. The Commissioner acts under the authority of the State Board. The Commissioner may delegate administrative and supervisory functions to Department staff. Either the Commissioner or Deputy Commissioner must approve and sign contracts valued at $10,000 or more. Contracts for less than $10,000 are approved and signed by Department administrators and staff. In some situations, the State Board authorizes the Commissioner to enter into specific contracts.
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Analysis: There is nothing in the Nebraska Political Accountability and Disclosure Act (Act) which prohibits the Commissioner of Education from serving on the board of directors of an outside business. The mere fact of simultaneous service as both Education Commissioner and AIM Board member does not create a potential conflict of interest under the Act. However, certain conflict of interest provisions merit discussion and consideration in anticipation of a conflict based on possible future events.
The Commissioner of Education is by definition under Section 49-1436 of the Act an official in the executive branch of state government. The Commissioner is also a public employee by definition under Section 49-1442, and a public official as per Section 49-1443.
Section 49-1407 defines “business” as “any corporation, partnership, limited liability company, sole proprietorship, firm, enterprise, franchise, association, organization, self-employed individual, holding company, joint-stock company, receivership, trust, activity, or entity.” This definition makes no distinction between a for-profit or non-profit entity. Therefore, AIM is a business by definition under the Act.
A “business association” is defined by Section 49-1408 to include “a business in which the individual is a partner, limited liability company member, director, or officer.” By definition under the Act, the Commissioner would have a business association with AIM by virtue of serving as a member of its Board of Directors.
With respect to contracts with governmental bodies, Section 49-14,102 provides:
Except as otherwise provided by law, no public official or public employee, a member of that individual’s immediate family, or business with which the individual is associated shall enter into a contract valued at two thousand dollars or more, in any one year, with a governmental body unless the contract is awarded through an open and public process which includes prior public notice and subsequent availability for public inspection during the regular office hours of the contracting governmental body of the proposals considered and the contract awarded. No contract may be divided for the purpose of evading the requirements of this section. This section shall not apply to a contract when the public official or public employee does not in any way represent either party in the transaction . . .
Section 1.5 of the Department’s Administrative Memorandum No. 110 provides that contracts of $2,000 or more with a business with which a public employee is
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associated must, pursuant to Section 49-14,102, be either competitively bid or disclosed in a public notice as an agenda item at a meeting of the State Board. Any contract in an amount of $10,000 or more must be approved by the State Board as per Section 1.1 of Admin. Memo No. 110, and must be signed by either the Commissioner or Deputy Commissioner as per Section 1.2.
Section 49-14,102 would apply to any contract between AIM and the Department valued at $2,000 or more. As executive head of the Department, and as a member of the Board of Directors of AIM, the Commissioner is not only a public official or employee who has a business association with AIM, but also can be said to represent both parties in any contractual transaction since he serves as both a Board member and the Department head. Therefore, contracts between AIM and the Department valued at $2,000 or more in any one year should be awarded through an open and public process as required by Section 49-14,102. Failure to comply with this section of law could result in a voidable contract.
Section 49-1499.02 states in pertinent part as follows:
(1) An official or employee of the executive branch of state government who would be required to take any action or make any decision in the discharge of his or her official duties that may cause financial benefit or detriment to him or her, a member of his or her immediate family, or a business with which he or she is associated, which is distinguishable from the effects of such action on the public generally or a broad segment of the public, shall take the following actions as soon as he or she is aware of such potential conflict or should reasonably be aware of such potential conflict, whichever is sooner:
(a) Prepare a written statement describing the matter requiring action or decision and the nature of the potential conflict; and
(b) Deliver a copy of the statement to the commission and to his or her immediate superior, if any, who shall assign the matter to another. If the immediate superior does not assign the matter to another or if there is no immediate superior, the official or employee shall take such action as the commission shall advise or prescribe to remove himself or herself from influence over the action or decision on the matter.
(2) This section does not prevent such a person from (a) making or participating in the making of a governmental decision to the extent that the individual’s participation is legally required for the action or
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decision to be made . . . A person acting pursuant to subdivision (a) of this subsection shall report the occurrence to the commission.
If the Commissioner of Education would be required to take any action or make any decision in the discharge of his official Department duties that may cause either a financial benefit or detriment to AIM, a business with which he is associated by virtue of his seat on AIM’s Board of Directors, then he should follow the actions outlined above in Section 49-1499.02. A Potential Conflict of Interest Statement (NADC Form C-2) should be filed with this Commission describing the matter requiring his action or decision and the nature of the potential conflict. This Commission will then advise the Commissioner as to what action to take to remove himself from influence over the action or decision on the matter.
As the Commission determined in Advisory Opinion No. 154, Sections 49-14,102 and 49-1499 (the predecessor statute to 49-1499.02) are not necessarily mutually exclusive, and here both statute sections would be applicable in a contractual conflict of interest arising out of the dual representation by the Commissioner of both AIM and the Department. In the creation of any contract between AIM and the Department, the negotiation of such contract should be assigned to subordinate staff, with approval and signature of the contract delegated to the administratively-authorized Deputy Commissioner. The Commissioner should not advise the State Board as to the contract terms. Further, if AIM is one of a number of contract bidders, the contract award decision should be made by the State Board rather than the Commissioner for contracts of $2,000 or more in keeping with Section 1.5 of Admin. Memo No. 110 and Section 49-14,102 of the Act.
Section 49-14,101.01(1) states:
A public official or public employee shall not use or authorize the use of, for personal financial gain, financial gain of a member of his or her immediate family, or financial gain of a business with which he or she is associated, other than compensation provided by law, (a) that person’s public office or any confidential information received through the holding of a public office or (b) personnel, resources, property, or funds under that person's official care and control other than in accordance with prescribed constitutional, statutory, and regulatory procedures.
The Commissioner’s activities related to his membership on the AIM Board of Directors must not be conducted on state time or performed using government staff, resources, property or funds. This includes, but is not limited to, the use of
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computers, telephones, photocopiers, fax machines, or personnel. The office of the Education Commissioner should not be used to the financial gain of AIM, nor should any confidential information known to the Commissioner in his official and public capacity be used to secure financial gain for AIM. Confidential information includes not only that information which is strictly confidential, but also internal information not generally available to others.
Summary: The Education Commissioner may serve on the board of a private corporation which contracts with the Department of Education, provided any such contract valued at $2,000 or more in any one year is awarded through an open and public process as required by Section 49-14,102. The provisions of Section 49-1499.02 must be followed in the case of any action or decision by the Commissioner which could cause a financial benefit or detriment to the private corporation. In accordance with Section 49-14,101.01, the Commissioner may not use his public office, any confidential information received through the holding of his public office, or any public resources for the financial gain of the private corporation.
ADOPTED as an advisory opinion pursuant to Section 49-14,123(10) and Title 4, Chapter 1, Rules of Practice and Procedure. As provided in Section 49-14,123(10), this advisory opinion shall be binding upon the Commission unless amended or revoked concerning the person or public body who requested the opinion and acted in reliance thereon in good faith unless material facts were omitted or misstated by the person in the request for the opinion.
DATED this 11th day of April, 2003.
NEBRASKA ACCOUNTABILITY AND DISCLOSURE COMMISSION
/s/ Dawn Rockey
Dawn Rockey, Chairperson