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HomeMy WebLinkAbout05-007 SnyderI. ISSUE: OPINION OF THE COMMISSION Before: Louis W. Fryman, Chair John J. Bolger, Vice Chair Donald M. McCurdy Raquel K. Bergen Nicholas A. Colafella DATE DECIDED: 9/12/05 DATE MAILED: 9/21/05 05 -007 Willard A. Snyder, President Northwestern Lehigh Educational Foundation 6543 Reeser Road New Tripoli, PA 18066 Re: Public Official; Board Member; Non - Profit 501(c)(3) Educational Foundation; School District; Political Subdivision; Statement of Financial Interests. Dear Mr. Snyder: This Opinion is issued in response to your advisory request dated July 29, 2005, by which you requested advice from the State Ethics Commission. Whether a member of a non - profit 501(c)(3) educational foundation established by a school district to support the mission of the school district by promoting, enhancing and supplementing school district programs through, inter alia, contributions to tax exempt 501(c)(3) organizations is considered a "public official" subject to the Public Official and Employee Ethics Act (the "Ethics Act "), 65 Pa.C.S. § 1101 et seq., and the Regulations of the State Ethics Commission, 51 Pa. Code § 11.1 et seq., and particularly, the requirements for filing Statements of Financial Interests. II. FACTUAL BASIS FOR DETERMINATION: As a Board Member for the Northwestern Lehigh Educational Foundation (Foundation), you seek an opinion as to whether you are subject to the Ethics Act. You have submitted facts that may be fairly summarized as follows. The Northwestern Lehigh School District (School District) recently established the Foundation as a non - profit 501(c)(3) educational foundation. You have submitted a copy of the School District's Resolution adopted January 19, 2005, approving the incorporation of the Foundation, appointing the initial Board of Directors of the Foundation, and Snyder, 05 -007 September 21, 2005 Page 2 approving the Bylaws for the Foundation, with Exhibit A, consisting of a copy of the Articles of Incorporation for the Foundation as filed with the Department of State, Corporation Bureau on September 9, 2004, and Exhibit B, consisting of a copy of the Bylaws of the Foundation, which document is incorporated herein by reference. Based upon the foregoing submitted documents, we take administrative notice of the following additional facts. The Foundation is a domestic non - profit corporation incorporated under the Nonprofit Corporation Law of 1988. The Foundation was organized exclusively for "charitable, religious, educational and scientific purposes." Articles of Incorporation, Attachment # 1, ¶ 3(a). The Foundation's purposes and powers are as follows: Purposes and Powers 1.02 The Foundation shall have the purposes, powers, and limitations set forth below: A. The purposes of the Foundation, subject to the restrictions and limitations set forth in this article, are: 1. To receive and maintain a fund or funds, including endowment funds, of real or personal property, or both, and, to use and apply the whole or any part of the income from these funds and the principal of these funds exclusively for charitable, scientific, literary, or educational purposes either directly or by contributions to organizations that qualify as exempt organizations under Section 501(c)(3) of the Internal Revenue Code and its regulations as they now exist or as they may be amended. 2. To promote, enhance and supplement educational programs, including extracurricular activities, for the benefit of the students and faculty of the Northwestern Lehigh School Distrcit [sic] (hereinafter the "School District "). 3. To provide an organization to review program ideas and to make gifts and grants to the various schools of the Northwestern Lehigh School District and to the individual departments, teachers, students and student groups, to further the purposes of the Foundation and of the Northwestern Lehigh School District; and 4. To act as fiscal agent for donors who wish to sponsor projects at the various schools of the Northwestern Lehigh School District and their individual departments, teachers, students and student groups, to further the purposes of the Foundation and of the Northwestern Lehigh School District. 5. The Foundation is organized exclusively for charitable purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code "), including for such purposes the making of distributions to organizations that qualify as exempt organizations under said Section 501(c)(3) of the Code, or the corresponding provisions of any future Federal tax code. The Foundation shall not carry on any other activities not permitted to be carried on by: (a) an organization exempt from Federal income tax under Section Snyder, 05 -007 September 21, 2005 Page 3 501(c)(3) of the Code; or (b) Section 170(c)(2) of the Code, or the corresponding provisions of any future Federal tax code. Bylaws of Northwestern Lehigh Educational Foundation, Inc. (Foundation Bylaws), ¶ 1.02 (A)(1) — (5). The School District's Board of Directors appoints the nine (9) Directors for the Foundation Board. Articles of Incorporation, Attachment # 1, ¶ 10(a); Foundation Bylaws, ¶ ¶ 3.02, 3.04. Foundation Board Members do not receive compensation for serving on the Board. Foundation Bylaws, ¶ 3.07. The Foundation shall not set policy for the School District, shall not act contrary to School District policy, and shall not support actions of others contrary to School District policy. Foundation Bylaws, ¶ 1.02 (C). Funds raised by the Foundation are to be used to "enhance, supplement and enrich existing programs and to provide new programs and opportunities to the various schools of the Northwestern Lehigh School District and to their individual departments, teachers, students and student groups." Foundation Bylaws, ¶ 8.03. You state that the Board of Directors for the School District appointed you as a founding Foundation Board Member. You further state that in your capacity as a Foundation Board Member, you lack any power or authority related to the School District. You note that the School District Solicitor was unsure whether the Ethics Act would apply to you. Therefore, you seek an official ruling as to your status as a Foundation Board Member. By letter dated August 22, 2005, you were notified of the date, time and location of the public meeting at which your request would be considered. III. DISCUSSION: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based upon the facts that the requester has submitted. In issuing the advisory based upon the facts that the requester has submitted, this Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts that have not been submitted. It is the burden of the requester to truthfully disclose all of the material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent the requester has truthfully disclosed all of the material facts. The response to your question hinges upon key definitions in the Ethics Act and Regulations of the State Ethics Commission. The term "public official" is defined in the Ethics Act as follows: § 1102. Definitions "Public official." Any person elected by the public or elected or appointed by a governmental body or an appointed official in the executive, legislative or judicial branch of this Commonwealth or any political subdivision thereof, provided that it shall not include members of advisory boards that have no authority to expend public funds other than reimbursement for personal expense or to otherwise exercise the power of the State or any political subdivision thereof. Snyder, 05 -007 September 21, 2005 Page 4 65 Pa. C. S. § 1102. The regulations of the State Ethics Commission similarly define the term "public official" and set forth the following additional criteria that are used to determine whether the advisory board exception applies: (i) The following criteria will be used to determine if the exception in this paragraph is applicable: (A) The body will be deemed to have the power to expend public funds if the body may commit funds or may otherwise make payment of monies, enter into contracts, invest funds held in reserves, make loans or grants, borrow money, issue bonds, employ staff, purchase, lease, acquire or sell real or personal property without the consent or approval of the governing body and the effect of the power to expend public funds has a greater than de minimis economic impact on the interest of a person. (B) The body will be deemed to have the authority to otherwise exercise the power of the Commonwealth or a political subdivision if one of the following exists: (1) The body makes binding decisions or orders adjudicating substantive issues which are appealable to a body or person other than the governing authority. (11) The body exercises a basic power of government and performs essential governmental functions. (111) The governing authority is bound by statute or ordinance to accept and enforce the rulings of the body. (IV) The body may compel the governing authority to act in accordance with the body's decisions or restrain the governing authority from acting contrary to the body's decisions. (V) The body makes independent decisions which are effective without approval of the governing authority. (VI) The body may adopt, amend and repeal resolutions, rules, regulations or ordinances. (VII) The body has the power of eminent domain or condemnation. (VIII) The enabling legislation of the body indicates that the body is established for exercising public powers of the Commonwealth or a political subdivision. (ii) The term does not include judges and inspectors of elections, notary publics and political party officers. Snyder, 05 -007 September 21, 2005 Page 5 (iii) The term generally includes persons in the following offices: (A) Incumbents of offices filled by nomination of the Governor and confirmation of the Senate. (B) Heads of executive, legislative and independent agencies, boards and commissions. (C) Members of agencies, boards and commissions appointed by the General Assembly or its officers. (D) Persons appointed to positions designated as officers by the Commonwealth or its political subdivisions. (E) Members of municipal, industrial development, housing, parking and similar authorities. (F) Members of zoning hearing boards and similar quasi - judicial bodies. (G) Members of the public bodies meeting the criteria in paragraph (i)(A). 51 Pa. Code § 11.1. The term "political subdivision" is specifically defined in the Ethics Act as follows. § 1102. Definitions "Political subdivision." Any county, city, borough, incorporated town, township, school district, vocational school, county institution district, and any authority, entity or body organized by the aforementioned. 65 Pa.C.S. § 1102. See also, 51 Pa. Code § 11.1 (definition of "political subdivision "). Because status as a public official depends in part upon the nature of the entity served, we shall first consider the nature of the Foundation. In this regard, we are guided by the principles set forth in Eiben, Opinion 04 -002, wherein we addressed the question of whether certain individuals serving a charter school were "public officials" or "public employees" subject to the Ethics Act. As part of our analysis, we considered the nature of the charter school, noting that the Ethics Act defines the term "political subdivision" to include, inter alia, any authority, entity or body "organized" by a school district. 65 Pa.C.S. § 1102. Turning to the meaning of the word "organize," we determined that a charter school is "organized" when it is established as a public nonprofit corporation and when the school district grants a charter to it. As to the school district's involvement in granting a charter, we determined that a charter school that is "organized" by a school district's grant of a charter is an entity or body organized by another political subdivision, a local school district, and therefore, is itself a "political subdivision" as defined in the Ethics Act. Id. In the instant case, the School District, through its Resolution of January 19, 2005, "organized" the Foundation by approving the incorporation of the Foundation, appointing the initial board of directors, and approving by -laws for the Foundation, which endowed the Foundation with the capacity to transact the legitimate business for which it was created. Snyder, 05 -007 September 21, 2005 Page 6 See, Eiben, supra; Gent, Opinion 95- 006 -R. In that the Foundation was "organized" by the School District, a political subdivision, the necessary conclusion is that the Foundation is also a political subdivision. We parenthetically note that the Foundation's status as a non- profit corporation does not exclude it from the definition of "political subdivision" given that the Ethics Act's definition of "political subdivision" includes any "county, city, borough, incorporated town, township, school district, vocational school, county institution district, and any authority, entity or body, organized by the aforementioned." 65 Pa.C.S. § 1102 (Emphasis added). See, Gent, Opinion 95 -006 -R (wherein we noted that the fact that a regional planning commission was organized as a non - profit corporation did not alter the conclusion in our base opinion that the planning commission was a "political subdivision "). Having determined that the Foundation is a political subdivision as defined by the Ethics Act, we shall now consider whether as a Board Member for the Foundation, you are a "public official" subject to the Ethics Act. Status as a "public official" subject to the Ethics Act is determined by applying the above definition and criteria to the position held. The focus is necessarily upon the position itself, and not upon the individual incumbent in the position, the variable functions of the position, or the manner in which a particular individual occupying the position may carry out those functions. See, Philips v. State Ethics Commission, 470 A.2d 659 (Pa. Commw. Ct. 1984); Mummau v. Ranck, 531 Fed. Supp. 402 (E.D. Pa. 1982). Furthermore, the Commonwealth Court of Pennsylvania has directed that coverage under the Ethics Act be construed broadly and that exclusions under the Ethics Act be construed narrowly. See, Phillips, supra. In applying the Ethics Act's definition of "public official," the first portion of the definition provides that a public official is a person who is: (1) elected by the public; (2) elected or appointed by a governmental body; or (3) an appointed official in the executive, legislative or judicial branch of the Commonwealth of Pennsylvania or a political subdivision of the Commonwealth. Muscalus, Opinion 02 -007. When the first portion of the definition is met, one's status as a public official subject to the Ethics Act is established, unless the exclusion for members of purely advisory boards is applicable. 65 Pa.C.S. § 1102. As a Foundation Board Member, you clearly fall within the third category above because you are an appointed official in a political subdivision. In considering whether the statutory exclusion for members of purely advisory boards would apply, we note from the Foundation's Articles of Incorporation and Bylaws establish that the purpose of the Foundation is to support the mission of the School District; to receive and maintain a fund or funds, and to use income from these funds exclusively for charitable, scientific, literary, or educational purposes by direct or indirect contributions to organizations that qualify as exempt organizations under Section 501(c)(3) of the Internal Revenue Code; to promote, enhance and supplement educational programs for the benefit of the School District; to review program ideas and to make gifts and grants to the various schools of the School District; and to act as fiscal agent for donors who wish to sponsor projects at the various schools in the School District. Clearly, the Foundation goes beyond advisory functions in that it exercises a basic power of government and performs essential governmental functions. Accordingly, it is the opinion of this Commission that (1) the Foundation is a "political subdivision" as defined by the Ethics Act; (2) the Foundation is not an advisory board within the exclusionary language set forth in the Ethics Act's definition of "public official" in that it exercises a basic power of government and performs essential governmental functions; and (3) you as a Foundation Board Member are a "public official" subject to the Ethics Act and the Regulations of the State Ethics Commission, and particularly, the requirements for filing Statements of Financial Interests. Lastly, the property of the proposed course of conduct has only been addressed Snyder, 05 -007 September 21, 2005 Page 7 under the Ethics Act. IV. CONCLUSION: A non - profit educational foundation established and organized by a school district to support the mission of the school district by promoting, enhancing and supplementing school district programs through, inter alia, contributions to tax exempt 501(c)(3) organizations is a "political subdivision" as defined by the Public Official and Employee Ethics Act (the "Ethics Act "), 65 Pa.C.S. § 1101 et seq. In that the foundation exercises a basic power of government and performs essential governmental functions, it is not an advisory board within the exclusionary language set forth in the Ethics Act's definition of "public official." A member of the foundation's board of directors, as an appointed official in a political subdivision, is a "public official" subject to the Ethics Act and the Regulations of the State Ethics Commission, and particularly, the requirements for filing Statements of Financial Interests. Act. The propriety of the proposed conduct has only been addressed under the Ethics Pursuant to Section 1107(10), the person who acts in good faith on this Opinion issued to him shall not be subject to criminal or civil penalties for so acting provided the material facts are as stated in the request. This letter is a public record and will be made available as such. Finally, a party may request the Commission to reconsider its Opinion. The reconsideration request must be received at this Commission within thirty days of the mailing date of this Opinion. The party requesting reconsideration must include a detailed explanation of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code § 21.29(b). By the Commission, Louis W. Fryman Chair Vice Chair John J. Bolger did not participate in this matter.