550 likes | 681 Views
Conflicts of Interest. Sandra Warren, Director, CPD Houston Office. Ken McDonald, Attorney, Office of Regional Counsel. What is Conflict of Interest?. Black’s Law Dictionary defines a “conflict of interest” as:
E N D
Conflicts of Interest • Sandra Warren, Director, CPD Houston Office • Ken McDonald, • Attorney, Office of • Regional Counsel
What is Conflict of Interest? Black’s Law Dictionary defines a “conflict of interest” as: “a real or seeming incompatibility between a person’s private interests and his or her public or fiduciary duties.”
Discussion Topics • Conflicts of Interest: SHP Shelter + Care ALERT: Will discuss applicable Federal law and Federal regulations...State and local conflict provisions are not subjects of this presentation
Conflicts of Interest Procurement Non-procurement • Two Types
Procurement Conflicts of Interest • Procurement of: • Supplies – SHP & S+C • Equipment – SHP & S+C • Construction – SHP ONLY • Services – SHP ONLY Key point – ALL other Conflicts of Interest are NON-PROCUREMENT
Procurement Conflicts of Interest • Procurement by Local Governments: • 24 CFR § 85.36 • Procurement by Non-profit organizations (Recipients only!) (Project Sponsors areNOT included!): • 24 CFR § 84.42 This presentation will cover non-procurement conflicts only….with three exceptions!
Decision Point! • Four Possibilities • SHP Procurement • SHP Non-procurement • S+C Procurement • S+C Non-procurement
Non-Procurement Conflicts • What Regulations and Rules apply? • SHP • 24 CFR § 583.330(e) • S+C • 24 CFR § 582.340(b) ALERT: Check State and Local laws!
SHP Conflicts • 24 CFR § 583.330(e) • No person who is employee, agent, consultant, officer or elected or appointed official of recipient who:
SHP Conflicts • Exercises any functions or responsibilities w/ respect to SHP activities, • Is in a position to participate in the decision making process, • Or gains inside information with regard to such activities may:
SHP Conflicts • Obtain a personal or financial interest or benefit from a SHP activity. • Have an interest in any contract with respect to a SHP activity or its proceeds. • For themselves or those with whom they have business or family ties. ALERT: Regulations apply during the person’s tenure and for one year thereafter.
SHP Conflicts • ALERT: • Participation by homeless individuals who also are participants under the SHP program in policy or decision making (as required by McKinney Act) does NOT constitute a conflict of interest. • See 24 CFR § 583.330(e)
SHP Conflicts • HUD may grant exception to Conflict of Interest on a case-by-case basis. • Recipient must request an exception in writing.
SHP Conflicts ALERT! ALL Conflict of Interest documents MUST be included in any request for an exception!!!
Exceptions • Threshold Requirements: • Public disclosure of conflict. (governmental entities only) • Opinion of Recipient’s attorney that exception does not violate State or local law. HUD legal counsel determines whether threshold requirements are met.
Exceptions – 6 Factors • Significant cost benefit or essential expertise to project. • Person affected: • Member of group or class of eligible persons. • Exception will permit such person to receive generally same interests or benefits as are being made available or provided to the group or class.
Exceptions – 6 Factors 3. Person affected has withdrawn from his or her functions or responsibilities, or the decision making process with respect to the assisted activity. 4. Interest or benefit was present before affected person was in the “conflicting” position.
Exceptions – 6 Factors 5. Undue hardship to recipient or person affected when weighed against public interest served by avoiding the prohibited conflict. 6. Any other relevant considerations. HUD CPD determines whether to grant the exception.
S+C Conflicts • 24 CFR § 582.340(b). • Similar to SHP. • What constitutes conflict. • Persons covered. • Recipient must make written request for exception.
S+C Conflicts • Threshold requirements for exception similar to SHP. • Exceptions: • Public disclosure by units of general local government and PHAs only.
S+C Conflicts • ALERT: • Participation by homeless individuals who also are participants under the S+C program in policy or decision making [as required by 24 CFR § 582.300(a)(1)] does NOT constitute a conflict of interest. • See 24 CFR § 582.340(b)
When in Doubt? Contact your HUD CPD Representative to resolve a question or conflict.
Conflicts of InterestSome Illustrations SHP S+C SHP S+C S+C SHP S+C SHP
Illustration #1 • Cybil Civic is a Commissioner of Fort Travis County, Texas. • Cybil is also Vice-president of the Board of Directors of American Homeless Shelters of Fort Travis County (AHS). • She does not receive a salary or any other compensation for serving on AHS’ Board. • AHS is project sponsor and receives $25,000 in SHP grant funds from the County. • Is there a problem here?
Answer #1 • YES. • Cybil may NOT continue to serve as a County Commissioner of the County and also as VP of AHS’ Board. • Cybil has no financial interest in AHS, but she does have a personal interest in the organization because of her membership on the Board of American Homeless Shelters. 24 CFR § 583.330(e).
Illustration #2 • Bay County Housing Services (BCHS), a nonprofit organization serving the homeless, sought a contractor to provide case management services as a part of its transitional housing program by sealed competitive bids. • The project will be funded with SHP funds. • Sarah Smith Associates is the SHP program administrator for BCHS. • Case Solutions, Inc., was the low bidder for the job and has been selected for the award of this contract. • The principles of Sarah Smith Associates and Case Solutions, Inc., are sisters. • Can BCHS award the contract to Case Solutions, Inc.?
Answer #2 • No. • This is “procurement of professional services” by BCHS covered by 24 CFR § 84.42. • Conflict of interest for an agent of the recipient to administer a contract supported by federal funds if a member of her “immediate family” has a financial interest in the company selected for the award. • Accordingly, it would be a conflict of interest for Sarah Smith Associates to administer a case management contract for BCHS funded with SHP money, since the principals of Sarah Smith Associates and Case Solutions, Inc., are sisters.
Illustration #2a • Would it make a difference in the last example if Bay County Housing Services (BCHS) were to pay Sarah Smith Associates its fees for case management services out of BCHS’ general operating funds and not with SHP money?
Answer #2a • No. • The fact that BCHS is paying Sarah Smith Associates out of its general operating fund would not prevent the occurrence of a conflict of interest in the previous example. • Sarah Smith Associates, as the program administrator of BCHS, cannot administer a SHP funded contract for BCHS in which her sister has a financial interest. 24 CFR § 84.42.
Illustration #3 • The Bear Creek MHMR (MHMR) of Tennessee City, Texas, wishes to lease a “day-use facility” for homeless families in Tennessee City. • MHMR will pay the lease payments on the facility from its SHP operating funds. • Sam Houston is a member of the MHMR board. • “Davy” Crockett, Sam’s business partner, owns the facility which MHMR would like to lease. • Can “Davy” Crockett lease the “day-use facility” to MHMR?
Answer #3 • No. • It would be a conflict of interest for “Davy” Crockett to lease a building which he owns to MHMR for a “day-use facility” funded with HUD SHP moneys. 24 CFR § 583.330(e)(1). • The referenced conflict of interest regulation prohibits a person who is an appointed official of the recipient who is in a position to participate in the decision making with regard to an SHP activity, from obtaining a financial benefit from such activity, for a person with whom they have business ties.
Illustration #4 • HUD notified Texas City (City), that it would be a conflict of interest for its project sponsor, ASSIST, to rehabilitate a building using SHP funds when one of the board members of ASSIST is also an employee of the City in a position to gain inside information about the City’s SHP assisted activities. • The City has now come to HUD asking for an exception to this conflict. • One of the threshold requirements for an exception is that the conflict be publicly disclosed. 24 CFR § 583.330(e)(1). • City Council at its regular meeting approved a Resolution authorizing the City to enter into an agreement with ASSIST. • Adequate public disclosure? Why or why not?
Answer #4 • No. • The approval of the SHP funding agreement between the City and ASSIST did not inform the public about the nature of the conflict as required by the cited regulation. • At a minimum, disclosure should inform the public that: • The City is awarding SHP funds to ASSIST to rehab a building, even though one of ASSIST’s board members is a City employee in a position to gain inside information about the City’s SHP assisted activities. • HUD has determined this to be a conflict of interest. • The City is publicly disclosing such a conflict in connection with a request the City has made to HUD for an exception to the conflict.
Illustration #5 • “Choppy” Waters is the Mayor of Seadrift, Texas (City). • The City funds a legal aid program for the homeless using SHP moneys. • Because of problems with its current project sponsor for this program, the City switched projectsponsors mid-year to Texas Lawyers Aiding the Homeless (TLAH), a non-profit corporation. • When “Choppy” Waters’ wife, Alice, is not running her restaurant, she serves as an unpaid member of the Board of TLAH. • The Mayor has made public this conflict and has recused himself from voting on SHP funding for TLAH. • Can Alice remain on the Board?
Answer #5 • NO. • Alice may not continue her service on the Board. • This is a conflict of interest under 24 CFR § 583.330(e)(1) because a person with whom the Mayor has “family ties” has a “personal interest” in a recipient of SHP funds from the City. • Of course, the City can always request an exception from HUD to permit Alice to remain on the TLAH Board.
Illustration #6 • MHMR of Gulf County (agency) is a recipient of an SHP grant for permanent housing and supportive services from HUD. • The agency has a 12 member advisory board composed of current and former homeless clients of the agency. 24 C.F.R. § 583.300(f) • The advisory board must “sign off” on every change that MHMR wants to make to its SHP-funded homeless program. • One of the advisory board members is a recipient of permanent housing and supportive services paid for by the agency with SHP money. • Conflict of Interest?
Answers #6 • NO. • Participation by homeless individuals on MHMR’s SHP advisory board who are receiving services/housing through the SHP program does NOT constitute a conflict of interest under the SHP regulations. 24 CFR §583.330(e)(1)
Illustration #7 • In 2005, the Heartland Mental Health Corporation (HMHC or recipient) hired Marshall and Associates to administer its mental health supportive services program for the homeless funded with HUD SHP money. HUD learned of this arrangement on monitoring visit to HMHC in 2007. • John Marshall is President and partner of Marshall and Associates and has served as the ED of HMHC since 2001. • HUD has determined this to be a Procurement conflict of interest under 24 CFR § 84.42. • The HMHC has requested an exception for this ongoing conflict. • Should HUD grant the requested exception?
Answer #7 • No, probably not. • Absent extraordinary circumstances, HUD is reluctant to grant exceptions to conflicts “after the fact.” • Moreover, HUD could require recipient HMHC to provide assurance that any funds expended for which Mr. Marshall benefited financially were appropriate (costs were fair and reasonable) for services rendered. • HMHC may request HUD for an exception to the conflict “from this point forward.”
Illustration #8 • Harris County requested an exception to a conflict under the SHP program. • The County’s request did not include the threshold documents required by 24 CFR §583.330(e)(2), namely: • Public disclosure of the conflict. • Recipient’s Attorney’s opinion certifying no violation of state or local law. • The County had furnished these items 6 months earlier with a similar conflict request. • Must the County furnish the missing items to HUD?
Answer #8 • Yes. • SHP regulations state that HUD may grant an exception to a conflict of interest on a “case-by-case” basis. 24 CFR §583.330(e)(2). • Accordingly, a Recipient must furnish updated thresholds and factors for each exceptionrequest made to the agency.
Illustration #9 • Quintana Supportive Services (QSS), an SHP project sponsor of the City of Quintana, administers a dedicated Homeless Management Information System (HMIS) project for the City. • “Oil Tanker Annie,” the Executive Director of QSS, is the owner of Simple Data Solutions, Inc., a computer store. • She never actually sells computer equipment purchased with SHP funds to the City, but her salespeople may. • Will Annie “run aground” on HUD’s conflict of interest regs if one of her salespeople sells 5 flat screen monitors to the City for its HMIS project purchased with SHP assistance?
Answer #9 • Yes. • This would be a procurement conflict of interest under 24 CFR § 85.36(b)(3). • 24 CFR § 85.36(b)(3) provides that no employee of the [project sponsor] shall participate in the administration of a contract supported by Federal funds when the employee has a financial interest in the firm selected for the award. • If Annie’s computer company is selected for the award of the computer contract from the City, since Annie is also the executive director of the project sponsor administering the HMIS project for the City, Annie would have a financial interest in the administration of a contract supported by Federal (SHP) funds. • Accordingly, Annie must instruct her salespersons not to sell computer equipment to the City for this project or the City will have to seek an exception to the potential conflict.
Illustration #9a • In the previous illustration, would it make a difference in the result if Annie offered the 5 flat screen monitors free of charge to City for which SHP funds are being used?
Answer #9a • No. • If Annie and her computer store gave the 5 flat screen monitors to the City free of charge, there would be no “financial” conflict of interest under the procurement regulations because neither Annie nor her computer store would have a “financial interest” in the transaction. 24 CFR §85.36(b)(3). • However, 24 CFR §85.36(b)(3) further provides that it is a conflict of interest to have an “other interest” in the firm selected for the award. Accordingly, since Annie is the owner of the firm selected for the award of the contract, she has an “other interest” in the firm selected for the award and a conflict of interest still exists.
Illustration #10 • Kenedy County Homeless Partnership (KCHP), a project sponsor of SHP funds from the Kenedy County, wrote HUD requesting an exception to a conflict of interest to permit Kenedy County Community Development Department officials to serve on the KCHP’s Board. • Supposedly, HUD’s Portland Office had granted a project sponsor a similar exception request under the Shelter+Care conflict of interest regs earlier in the year. • The KCHP letter emphasized that the SHP and Shelter+Care conflict of interest regs were virtually identical. • Can HUD grant KCHP the requested exception?
Answer #10 • No. • The SHP conflict of interest regs provide that an application for an exception to such regs can only be made by the Recipient. 24 CFR §583.330(e)(2). • Recipient is defined in section 422(9) of the McKinney Act to mean any governmental or nonprofit entity that receives assistance under Part C, Supportive Housing Programs, 42 U.S.C. §11381 thru 11389. • Accordingly, KCHP cannot apply for the exception – only Kenedy County has that right.
Illustration #11 • Longhorn Military Services (LMS), a non-profit corporation and a recipient of SHP funds from HUD, provides supportive services and transitional housing to homeless veterans. • LMS is seeking an exception from HUD for a conflict of interest under the SHP regulations. • In connection with LMS’ request, the recipient’s attorney rendered an opinion that there might be a violation of the Texas Non-profit Corporation Act if the conflict of interest was not disclosed to disinterested members of the recipient’s board, or is not “fair” to the recipient non-profit corporation. • Is there a problem here?
Answer #11 • Yes. • HUD’s SHP conflict of interest regulations contain certain “threshold” requirements which must be satisfied. • One such requirement is that the recipient’s counsel must opine that the interest for which the exception is sought would not violate state or local law. 24 CFR § 583.330(e)(2)(ii) • The recipient’s attorney’s opinion did not unequivocally state that the exception request would not run afoul of State law. • Accordingly, HUD must deny the requested exception pending receipt of an acceptable recipient’s attorney’s opinion.
Illustration #12 • Fairytale City Housing Authority (HA) is administrating a Tenant-Based Rental Assistance (TBRA) program with its Shelter+Care grant funds. One of the HA’s homeless clients would like to lease an apartment at Gosling Arms Apartments. • The HA’s Executive Director is Mother Goose. Mother Goose’s step-sister, Old Mother Hubbard, is the owner of Gosling Arms Apartments. • Conflict of interest?