In our roles as either internal or claims auditors for school districts on Long Island, we are often asked about whether certain purchases can be considered a gift of public funds. While we often recite the regulations per the School Law book when providing an answer, it is important to understand the legal basis for the laws. And who better to talk about laws than an attorney! The following was graciously provided by Christopher W. Shishko, Partner at Guercio & Guercio:
One of the many difficulties of public service is navigating the various laws and regulations governing ethics, improper gifts, and the potential for inappropriate influence. These laws and regulations should immediately be distinguished from New York State Penal Law sections 200.00, 200.03, and 200.04 which establish criminal penalties for varying degrees of bribery. The anti-bribery laws each contemplate a direct quid pro quo (something for something). For instance, bribery in the third degree occurs when a person confers, or offers or agrees to confer, “any benefit upon a public servant’s vote, opinion, judgement, action decision or exercise of discretion as a public servant.” The laws and regulations governing ethics, improper gifts, and potential for inappropriate influence reach further and also require a degree of interpretation. This article discusses the legal framework regarding gifts as well as relevant legal interpretations.
Legal Framework
Article VIII, Section 1 of the New York State Constitution provides, in pertinent part: “No county, city, town, village, or school district shall give or loan any money or property to or in aid of any public individual, or private corporation or association, or private undertaking . . . .” This Section is intended to ensure that any expenditures made by a municipality are in furtherance of a public purpose. A public purpose has been defined as something “necessary for the common good and general welfare of the people of the municipality, sanctioned by its citizens [and] public in character.” (Sun Printing & Publishing Ass’n v. City of New York, 152 N.Y. 257 [1897]; Schulz v. Warren County Bd. Of Sup’rs, 179 A.D.2d 118 [3d Dep’t 1992]). If the benefit is mixed, i.e., both a public and private benefit, there is no improper gift provided the private benefit is merely incidental to the public benefit, and such public benefit is primary. (NY Tele. Co. v. Second Bros., Inc., 62 Misc.2d 866, aff’d 35 A.D.2d 779 [4th Dep’t 1970]). However, “a purpose whose primary benefit is private rather than public cannot stand.” (Schulz, 179 A.D.2d at 122).
Other relevant sections of the law include New York State General Municipal Law, Public Officers Law, Education Law, Part 83 of the regulations of the Commissioner of Education, decisions of the Courts and Commissioner of Education, and opinions of the New York State Attorney General and the State Comptroller. By way of example, the State Comptroller has advised of the following expenditures of public funds to be acceptable:
- Purchasing a plaque of nominal value in recognition of service by unsalaried individuals (Opns. St. Comp. 79-882 [1979]);
- Paying only for the meals of board members at a dinner held to recognize their service, provided the cost of the dinner is reasonable (Ops. St. Comp. 80-775 [1980]);
- Paying only for the meal of a retiring board member at a dinner held to honor the retiring board member (Ops. St. Comp. 83-57 [1983]); and
- Purchasing pins for employees in recognition of their years of service (Opns. St. Comp. 99-11 [1999]).
The State Comptroller has also opined that, where a usual monthly board meeting was scheduled to take place at 8:00 PM, after normal dinner hours, the board members’ decision to arrive several hours before the meeting to review relevant materials “appear[ed] to be a matter of personal choice.” Appropriately, any meal expenses arising before the meeting were considered personal expenses because the board members chose to arrive early and they could have reviewed the materials at a different time. Furthermore, any meal expenses arising after the meeting concluded do not satisfy the “in furtherance of public business” requirement because, “presumably, the board members are no longer performing official duties.” (Opns. St. Comp. No. 82-253 [1982]; Opns. St. Comp. No. 98-2 [1998]).
Duty of Loyalty and Code of Ethics
In all situations, municipal officers and employees owe a duty of undivided loyalty to act in the best interest without self-interest, a duty to act as a reasonably prudent person would under similar circumstances, and a duty of obedience, to act in a manner furthering the mission of the organization. (Roslyn Union Free School District v. Barkan, 16 N.Y.3d 643 [2011]). This obligation is reflected in the fact that municipalities are required to implement individual Codes of Ethics which may be more stringent than legal requirements. Penalties for a violation may include, fine, suspension, removal from office or employee discipline. (GML §805-a[2]; Application of the Board of Education, Dec. No. 17,147 [2017]).
Gifts
More frequently, questions arise about a public officer or employee’s acceptance of gifts from third parties. General Municipal Law Section 805-a(1) prohibits soliciting or accepting any gift worth more than $75, where it could reasonably be inferred that the gift was intended to influence or reward official action. Moreover, even when there is no actual intent to influence, a gift is prohibited where it can be reasonably inferred under the circumstances it was intended to influence or reward. The term “gift” includes but is not limited to money, tangible items, services, loans, travel, entertainment or hospitality offerings. The unit of measurement is a single gift or cumulative gifts over a 12-month period.
The language of Section 805-a(1) aims to ensure municipalities avoid any appearance of impropriety. For example, where current members of a municipality were invited to an annual dinner celebration hosted by a vendor, the Commissioner of Education held that, even though there was no evidence of actual intent to reward, it could reasonably be inferred that the dinner was to reward the municipality for their past business. (Appeal of Dashefsky, 46 Ed. Dep. Rep. 219 [2006]). Notably, the Attorney General has stated “[a] school district may include within its code of ethics more stringent gift provisions, including . . . a prohibition on receipt of any gift by officers or employees.” (Atty. Gen. Opinion 99-16 [1999]).
Reasonable and Necessary Expenses
Perhaps more complicated is the situation in which attendance at a remote location is necessary for a presentation, training, or seminar. New York General Municipal Law Section 77-b permits a municipality to authorize any of its members, officers or employees to attend a conference by a majority vote of the relevant board. A conference includes any convention conducted for the betterment of the municipality. When an authorized employee attends a conference, all actual and necessary registration fees, expenses of travel, meals and lodging incurred in connection with attendance of a conference may be charged against the municipality. (See also Educ. Law § 2118 (entitling school district officers, including members of the board of education and superintendents, to be reimbursed for “any expenses actually and necessarily incurred in the performance of their official duties.”)). The “official duties” of a board of education are those duties expressly delegated by statute or necessarily and reasonably implied therefrom. (Appeal of Bode, 33 Ed. Dept. Rep. 260 [1993]; see also Educ. Law §§ 1709, 1903). The State Comptroller has explained that meal expenses constitute “actual and necessary expenses” depending on whether the local official is traveling outside of his or her regular work area on official business for an extended period of time. This authority would extend to events such as during an offsite retreat which may include a luncheon or a dinner. (Opns. St. Comp. No. 81-13 [1981]; Opns. St. Comp. No. 79-717, unrep. [1979]). School districts and municipalities typically adopt policies implementing these requirements and providing procedures to ensure compliance with same.
Based upon the above, it is important that public officers and employees avoid any appearance of impropriety during offsite events, retreats, and conferences and with respect to use of public funds for same.
Christopher W. Shishko, Partner
Guercio & Guercio, LLP