This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on August 8, 2003, basing its approval solely on the facts and circumstances stated herein.
 

May a board of aldermen provide funding to a non-profit organization when a member of the board of aldermen is also a member of the non-profit organization’s board of directors?

State law restricts the Mississippi Ethics Commission to interpreting and issuing opinions on Sections 25-4-101 through 25-4-119, 1972 Mississippi Code Annotated and Article IV, Section 109, Mississippi Constitution of 1890.  Therefore, this opinion does not address the Mississippi laws outside the Commission’s jurisdiction nor the governmental entity’s internal rules and regulations.

The pertinent conflict of interest laws to be considered here are:

Constitutional Section 109 states:
 

“No public officer or member of the legislature shall be interested, directly or indirectly, in any contract with the state, or any district, county, city, or town thereof, authorized by any law passed or order made by any board of which he may be or may have been a member, during the term for which he shall have been chosen, or within one year after the expiration of such term.”

Code Section 25-4-101 states:
 
 

“The legislature declares that elective and public office and employment is a public trust and any effort to realize personal gain through official conduct, other than as provided by law, or as a natural consequence of the employment or position, is a violation of that trust.  Therefore, public servants shall endeavor to pursue a course of conduct which will not raise suspicion among the public that they are likely to be engaged in acts that are in violation of this trust and which will not reflect unfavorably upon the state and local governments.”

Code Section 25-4-103(f)(i)(ii), (g)(ii), (h), (o) and (p)(i)(ii)(iii) states:
 

“(f) ‘Contract’ means:

(i) Any agreement to which the government is a party; or

(ii) Any agreement on behalf of the government which involves the payment of public funds.

(g) ‘Government’ means the state and all political entities thereof, both collectively and separately, including but not limited to:

(ii) Municipalities.

(h) ‘Governmental entity’ means the state, a county, a municipality or any other separate political subdivision authorized by law to exercise a part of the sovereign power of the state.

(o) ‘Public funds’ means money belonging to the government.

(p)  ‘Public servant’ means:

(i) Any elected or appointed official of the government;

(ii) Any officer, director, commissioner, supervisor, chief, head, agent or employee of the government or any agency thereof, or of any public entity created by or under the laws of the State of Mississippi or created by an agency or governmental entity thereof, any of which is funded by public funds or which expends, authorizes or recommends the use of public funds; or

(iii) Any individual who receives a salary, per diem or expenses paid in whole or in part out of funds authorized to be expended by the government.”

Code Section 25-4-105(2) states:
 

“(2) No public servant shall be interested, directly or indirectly, during the term for which he shall have been chosen, or within one (1) year after the expiration of such term, in any contract with the state, or any district, county, city or town thereof, authorized by any law passed or order made by any board of which he may be or may have been a member.”

Pertinent facts and circumstances provided by the requestor, absent identifying data, are set forth as follows and considered a part of this opinion.
 

On behalf of the City, I am submitting a question for your official response.  This is a very time sensitive issue as it involves our FY 2004 Budget preparations.

We have received a formal request for funding from a local non-profit organization, which a current member of our Board of Aldermen serves as a member of its board of directors.  My specific question is may a city donate municipal funds to an organization, which a member of its board of alderman sits on that organizations board of directors?

The Commission formally adopts Advisory Opinion No. 98-099-E in response to this request and by attachment incorporates it into this opinion.

Based solely on the facts and circumstances presented by the requestor, the Commission’s opinion is as follows.

Constitutional Section 109 and Code Section 25-4-105(2), both cited above, prohibits a governmental board member, including an alderman, from having an interest, direct or indirect, in any contract authorized by the governmental board of which he is a member during his term and for one year thereafter.

In Frazier v. State, 504 So. 2d 675, (Miss. 1987), the Mississippi Supreme Court set forth the following four elements necessary to apply the Constitutional Section 109 prohibition, and thereby the Code Section 25-4-105(2) prohibition:
 

1. Is there a governmental contract with the state, county, municipality or district?

2. Does the public officer have an interest, direct or indirect, in the contract?
 

3. Is the contract authorized by a law passed or order made by a board or public body of which the public officer is a member?

4. Was the authorizing law or order passed during the public officer’s term or within one year after the expiration (or termination) of such term?

First regarding element 1, the funding is, in effect, an implied governmental contract where the city agrees to fund the non-profit corporation and the non-profit corporation agrees to use the funds to provide the services or assistance for which the city is statutorily authorized to appropriate funds.  As the requestor did not provide any statutory authority to donate funds to the non-profit organization and since the Mississippi Constitution prohibits donations of public funds, then obviously this funding must be contractual in nature.¹

Regarding elements 2 and 3, the action to provide the funding is by the board of aldermen of which the alderman in question is a member. Therefore, these two elements are clearly met.

Lastly regarding element 4, a board of directors member of a non-profit corporation, such as the alderman in this instance, has an interest in its contracts through his fiduciary obligations to the non-profit corporation as a board of directors member.

Therefore, based on the above, the board of aldermen would be prohibited by Constitutional Section 109 and Code Section 25-4-105(2) from authorizing the above identified funding to the non-profit corporation during the alderman’s term and for one year thereafter. This prohibition will apply for as long as the alderman remains a member of the board of directors of the non-profit corporation.

The requestor is cautioned to advise the board member that a recusal or an abstention will not prevent a violation of Constitutional Section 109 and Code Section 25-4-105(2).  Even without the board member’s vote or other participation, the authorization by the board, nonetheless, results in a contract in which the board member has a prohibited interest.
 

The issue presented by the requestor also must be viewed as it relates to Code Section 25-4-101, set forth above.  This code section sets the tone for the conflict of interest laws as the Legislature’s “Declaration of Public Policy.”  This public policy can be summarized as any circumstance having the potential of creating suspicion among the public and reflecting unfavorably upon the state or local government should be closely reviewed by public servants with the intent to reduce or eliminate any suspicion on the part of the public which detracts from the public’s trust in state or local government.

Clearly, a city’s funding of a non-profit corporation that has an alderman of the city as one of its board of directors, has the potential of creating suspicion among the public and reflecting unfavorably upon the city.  Therefore, the city should not authorize such funding in order to comply with the public policy set forth in Code Section 25-4-101.
 
 

Scott Rankin
Executive Director
 

¹  See Constitutional Sections 66 and 96 of the Mississippi Constitution of 1890 regarding prohibitions relating to donation of public funds.