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HomeMy WebLinkAbout26-531 Confidential PHONE: 717-783-1610 STATE ETHICS COMMISSION FACSIMILE: 717-787-0806 TOLL FREE: 1-800-932-0936 FINANCE BUILDING WEBSITE: www.ethics.pa.gov 613 NORTH STREET, ROOM 304 HARRISBURG, PA 17120-0400 ADVICE OF COUNSEL May 20, 2026 To the Requester: 26-531 This responds to yourletter dated May 1, 2026, by which you requested a confidential advisory from the Pennsylvania State Ethics Commission (“Commission”), seeking guidance as to the general issue presented below: Issue: Whetherthe Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1101 et seq., would impose prohibitions or restrictions upon an individual serving as a school director, who is the owner and operator of a \[Business Entity\] that provides \[Services\], with regard to the \[Business Entity\] entering into a contract to provide \[Services\] to the school district. Brief Answer: The Ethics Act would not prohibit the \[Business Entity\] from contracting to provide services to the school district while the individual is serving as a school director for the school district. However, the \[Business Entity\] is a business with which the individual is associated in his capacity as the owner of the \[Business Entity\], and pursuant to Section 1103(a) of the Ethics Act, the individual generally would have a conflict of interest as a school director in matters that would financially impact him or the \[Business Entity\], including matters pertaining to contracting between the \[Business Entity\] and the school district. Additionally, the restrictions and requirements of Section 1103(f) of the Ethics Act, including the requirements for an “open and public process,” would have to be observed as to any contract between the \[Business Entity\] and the school district that would be valued at $500 or more. Facts: Confidential Advice, 26-531 May 20, 2026 Page 2 You request a confidential advisory from the Commission based upon submitted facts that may be fairly summarized as follows. You are a School Director for the \[Name of School District\] (“School District”). The duties of the School District School Board (“School Board”) include adopting policies, approving the annual budget, levying taxes, and approving contracts and procurements. In your private capacity, you are the owner and operator of\[Name of Business Entity\] (“the \[Business Entity\]”), which provides \[Services\] in the areas of \[Examples of Services\]. For its projects, the \[Business Entity\] engages independent consultants from a roster of consultants that are familiar with the \[Business Entity’s\] practice. The School District might take \[Steps Requiring Services\]. The School District has not yet issued a request for proposals for these services or otherwise initiated a procurement process for these services. You state that you seek guidance as to whether and under what specific conditions the \[Business Entity\] may lawfully submit a proposal to the School District for \[Certain Services\] while you are serving as a School Director for the School District. In particular, you pose the following questions: 1) Under Section 1103(f) of the Ethics Act, what specific elements must an “open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded,” contain in order for the \[Business Entity\]to enter into a contract or subcontract with the School District valued at $500 or more, and in particular, what is required with respect to: (a) the form, content, duration, and venue of public notice; (b) the manner in which proposals must be solicited; (c) the documentation of all proposals considered; (d) the manner in which the awarded contract must be publicly disclosed; and (e) the requirement that the public official have no supervisory or overall responsibility for the implementation or administration of the contract; (2) Whether a sole source or limited competition procurement may satisfy the “open and public process” requirement of Section 1103(f) of the Ethics Act where the School District, after evaluation, would determine that the methodology offered is not reasonably available from other vendors, or wouldSection 1103(f) require some form of competitive solicitation regardless of any uniqueness determination by the School District; (3) Under Section 1103(a) of the Ethics Act, what restrictions would apply to your conduct as a School Director both before and during any procurement process in which the \[Business Entity\] would be a participant, and specifically: (a) if School District officials would independently inquire about the \[Business Entity\]or its services, what information, if any, could you provide without violating Section 1103(a), and should any such response be routed through the School District Confidential Advice, 26-531 May 20, 2026 Page 3 Solicitor or procurement officer rather than through you directly; (b) would you be permitted to participate in School Board discussions about whether to take \[Certain Steps\] generally, separate from any vendor selection; and (c) should all communications between you and the School District concerning this matter be routed through the School District Solicitor, School District Superintendent, or designated procurement officer; (4) Under Section 1103(j) of the Ethics Act: (a) what disclosure, abstention, and recusal steps must you take during any School Board meeting at which the procurement, evaluation, award, modification, or oversight of a contract involving the \[Business Entity\] will be discussed or voted on; (b) must you refrain from developing scope- of-work, drafting requests for proposals, establishing evaluation criteria, scoring vendors, participating in vendor interviews, attending executive sessions on the topic, overseeing and administering the contract, or approving payments or changes orders; and (c) should you file a written abstention memorandum, leave the room during deliberations, and request that specific language be entered into the meeting minutes documenting your recusal; (5) If you would be fully recused from any discussion, development, approval, or oversight of the procurement process, would the \[Business Entity\] be permitted to respond to a publicly issued request for proposals on the same terms as any other vendor; (6) Under Sections 1104 and 1105 of the Ethics Act, are there any reporting obligations on your Statements of Financial Interests, beyond the ordinary disclosure of your ownership interest in the \[Business Entity\], that would be triggered by the \[Business Entity\] submitting a proposal to or entering into a contract with the School District, and if so, in what reporting year and in what specific category should such interests be disclosed; (7) Whether the answers to any of the foregoing questions would change if the engagement were structured as: (a) a subcontract under a prime contractor selected by the School District; (b) a multi-year engagement; (c) a no cost or pro bono engagement; or (d) a contract with a party other than the School District itself, where the services would nevertheless be funded by, requested by, coordinated with, performed for, or substantially benefit the School District (for example, through a School District-affiliated foundation, an intermediate unit collaboration, or a 501(c)(3) supporting the School District); (8) In addition to the Ethics Act, would Section 3-324 of the Public School Code, 24 P.S. § 3-324, impose any separate restrictions upon the \[Business Entity\] with respect to submitting a proposal to, contracting with, subcontracting for, or being paid by the School District while you would be serving as a School Director, and how should the open and public process requirements of Section 1103(f) of the Confidential Advice, 26-531 May 20, 2026 Page 4 Ethics Act be reconciled with the school director restrictions and limitations on drafting specifications contained in Section 3-324 of the Public School Code; (9) If the services in question are \[Types of Services\] for which competitive bidding may not otherwise be required under the Public School Code, what process would nevertheless satisfy the “open and public process” requirement of Section 1103(f) of the Ethics Act, and in particular, would such a process be expected to include prior public notice, posting on the School District website or in a newspaper of general circulation, a defined response period, written documentation of all responses received, and public School Board action recording the award of the contract; and (10) Are there any other provisions of the Ethics Act, any Regulations of the State Ethics Commission, any Commission rulings, or any other related Pennsylvania laws that you should consider before authorizing the \[Business Entity\] to submit a proposal, enter into a contract or subcontract, or perform services related to the School District. Discussion: 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, the 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 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 material facts. Sections 1103(a)and 1103(j) of the Ethics Act provide: § 1103. Restricted activities (a) Conflict of interest.-- No public official or public employee shall engage in conduct that constitutes a conflict of interest. (j) Voting conflict. -- Where voting conflicts are not otherwise addressed by the Constitution of Pennsylvania or by any law, rule, regulation, order or ordinance, the following procedure shall be employed. Any public official or public employee who in the discharge of his official duties would be required to vote on a matter that would result in a conflict of interest shall abstain from voting and, prior to the vote being taken, publicly announce and disclose the nature of his interest as a public record in a written memorandum filed with the person responsible for recording the Confidential Advice, 26-531 May 20, 2026 Page 5 minutes of the meeting at which the vote is taken, provided that whenever a governing body would be unable to take any action on a matter before it because the number of members of the body required to abstain from voting under the provisions of this section makes the majority or other legally required vote of approval unattainable, then such members shall be permitted to vote if disclosures are made as otherwise provided herein. In the case of a three-member governing body of a political subdivision, whereone member has abstained from voting as a result of a conflict of interest and the remaining two members of the governing body have cast opposing votes, the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. 65 Pa.C.S. §§ 1103(a), 1103(j). The following terms related to Section 1103(a) are defined in the Ethics Act as follows: § 1102. Definitions “Conflict” or “conflict of interest.” Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. The term does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. “Authority of office or employment.” The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. “Business.” Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self-employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit. Confidential Advice, 26-531 May 20, 2026 Page 6 “Business with which he is associated.” Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. 65 Pa.C.S. § 1102. Subject to the statutory exclusions to the Ethics Act’s definition of the term “conflict” or “conflict of interest,” 65 Pa.C.S. § 1102, a public official/public employee is prohibited from using the authority of public office/public employment or confidential information received by holding such a public position for the private pecuniary (financial) benefit of the public official/public employee himself, any member of his immediate family, or a business with which he or a member of his immediate family is associated. The use of authority of office is not limited merely to voting but extends to any use of authority of office including, but not limited to, discussing, conferring with others, and lobbying for a particular result. Juliante, Order 809. In each instance of a conflict of interest, a public official/public employee would be required to abstain from participation, which would include voting unless one of the statutory exceptions of Section 1103(j) of the Ethics Act would be applicable. Additionally, the disclosure requirements of Section 1103(j) of the Ethics Act would have to be satisfied in the event of a voting conflict. Section 1103(f) of the Ethics Act, pertaining to contracting, provides as follows: § 1103. Restricted activities (f) Contract.-No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official or public employee is associated or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the public official or public employee is associated, unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the public official or public employee shall not have any supervisory or overall responsibility for the implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of the making of the contract or subcontract. 65 Pa.C.S. § 1103(f). Confidential Advice, 26-531 May 20, 2026 Page 7 The term “contract” is defined in the Ethics Act as follows: “Contract.” An agreement or arrangement for the acquisition, use or disposal by the Commonwealth or a political subdivision of consulting or other services or of supplies, materials, equipment, land or other personal or real property. The term shall not mean an agreement or arrangement between the State or political subdivision as one party and a public official or public employee as the other party, concerning his expense, reimbursement, salary, wage, retirement or other benefit, tenure or other matters in consideration of his current public employment with the Commonwealth or a political subdivision. 65 Pa.C.S. § 1101. Section 1103(f) does not operate to make contracting with the governmental body permissible where it is otherwise prohibited. Rather, where a public official/public employee, his spouse or child, or a business with which he, his spouse or child is associated, is otherwise appropriately contracting with the governmental body, or subcontracting with any person who has been awarded a contract with the governmental body, in an amount of $500 or more, Section 1103(f) requires that an “open and public process” be observed as to the contract with the governmental body. Section 1103(f) of the Ethics Act also provides that the public official/public employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. It is administratively noted that the Public School Code provides in part: § 3-324. Not to be employed by or do business with district; exceptions (a) No school director shall, during the term for which he was elected or appointed, as a private person engaged in any business transaction with the school district in which he is elected or appointed, be employed in any capacity by the school district in which he is elected or appointed, or receive from such school district any pay for services rendered to the district except as provided in this act…. (b) No school board shall draw, cause to be drawn or accept a specification for any item to be purchased by the school district that would limit the purchase of the item to the firm, corporation, partnership or other business entity of which a school director is an officer, agent or employe and exclude all other persons who could submit quotations or bid on an equivalent item. Confidential Advice, 26-531 May 20, 2026 Page 8 (c) It shall not be a violation of this section for a school district to contract for the purchase of goods or services from a business with which a school director is associated to the extent permitted by and in compliance with 65 Pa.C.S. Ch. 11 (relating to ethics standards and financial disclosure). 24 P.S. § 3-324. On its face, Section 3-324(c) of the Public School Code permits contracting between school districts and businesses with which school directors are associated as long as the requirements of the Ethics Act are observed. Sections 1104(a) and 1105(b) of the Ethics Act, 65 Pa.C.S. §§ 1104(a), 1105(b), provide for the filing of annual Statements of Financial Interests (“SFIs”) by public officials/public employees. Section 1105(b)(2) of the Ethics Act requires the filer to disclose on the SFI his occupation or profession. Subject to certain statutory exceptions, Section 1105(b)(5) of the Ethics Act requires the filer to disclose on the SFI the name and address of any direct or indirect source of income totaling in the aggregate $1,300 or more. Section 1105(b)(8) of the Ethics Act requires the filer to disclose on the SFI any office, directorship or employment in any business entity. Section 1105(b)(9) of the Ethics Act requires the filer to disclose on the SFI any financial interest in any legal entity engaged in business for profit. The term “financial interest” is defined in the Ethics Act as “\[a\]ny financial interest in a legal entity engaged in business for profit which comprises more than 5% of the equity of the business or more than 5% of the assets of the economic interest in indebtedness.” 65 Pa.C.S. § 1102. Conclusion: In applying the above provisions of the Ethics Act to the instant matter, you are initially advised of the following general principles. As a School Director for the School District, you are a public official subject to the provisions of the Ethics Act.The \[Business Entity\] is a business with which you are associated in your capacity as the owner of the \[Business Entity\]. Pursuant to Section 1103(a) of the Ethics Act, you generally would have a conflict of interest in matters before the School Board that would financially impact you or the \[Business Entity\]. As long as the restrictions and requirements of the Ethics Act would be observed, the Ethics Act would not prohibit the \[Business Entity\] from entering into a contract to provide \[Certain Services\] to the School District while you are serving as a School Director. However, subject to the statutory exclusions to the Ethics Act’s definition of the term “conflict” or “conflict of interest,” you would have a conflict of interest in any matters before the School Board pertaining to contracting between the \[Business Entity\] and the School District. In each instance of a conflict of interest, you would be required to abstain from participation, which would include voting unless one of the statutory exceptions of Section 1103(j) of the Ethics Act would be applicable. Additionally, the disclosure requirements of Section 1103(j) of the Ethics Act would have to be satisfied in the event of a voting conflict. Confidential Advice, 26-531 May 20, 2026 Page 9 The restrictions and requirements of Section 1103(f) of the Ethics Act would have to be observed as to any contract between the \[Business Entity\] and the School District that would be valued at $500 or more. See, Kistler v. State Ethics Commission, 610 Pa. 516, 22 A.3d 223 (2011) (regarding the requirements for an “open and public process”). Having established the above general principles, your specific questions shall now be addressed. With respect to your questions regarding Sections 1103(a) and 1103(j) of the Ethics Act (questions No. 3, 4, and 5) you are advised as follows. Section 1103(a) of the Ethics Act imposes restrictions upon you in your public capacity as a School Director rather than upon you in your private capacity. Therefore, Section 1103(a) would not prohibit you, in your private capacity as the owner of the \[Business Entity\], from providing information to a School District official who would independently inquire about the \[Business Entity\]or its services. The Ethics Act would not require that communications between you, as the owner of the \[Business Entity\], and the School District be routed through anyone other than the School District official or employee who would normally be responsible for handling such communications. At any such time that the School District would beseeking to procure certain \[Services\] and there would be an actual or reasonable expectation of a business relationship forming between the School District and the \[Business Entity\]for the provision of those \[Services\], you generally would have a conflict of interest under Section 1103(a) of the Ethics Act and could not participate in matters related to the School District’s procurement of those \[Services\]. You specifically would have a conflict of interest with regard to: (1) participating in School Board discussions about whether to take \[Certain Steps\]; (2) developing scope-of-work; (3) drafting requests for proposals for those \[Services\]; (4) establishing evaluation criteria; (5) scoring vendors; (6) participating in vendor interviews; (7) attending executive sessions on the topic; (8) voting to award a contract to the \[Business Entity\]; (9) overseeing and administering a contract between the \[Business Entity\] and the School District; and (10) approving payments or changes orders related to a contract between the \[Business Entity\] and the School District. You further would be prohibited from using the authority of your public position as a School Director or confidential information received as a result of being in your public position to effectuate a private pecuniary benefit to the \[Business Entity\] through a detriment to a competitor of the \[Business Entity\] for a School District contract, such as for example by voting against the approval of a competitor’s bid for a School District contract. As noted above, in each instance of a conflict of interest, you would be required to abstain from participation, which would include voting unless one of the statutory exceptions of Section 1103(j) of the Ethics Act would be applicable. Additionally, you would be required to satisfy the disclosure requirements of Section 1103(j) each time a voting conflict would arise. Specifically, prior to the vote being taken, you would be required to publicly announce and disclose the nature of your interest as a public record in a written memorandum filed with the person responsible for Confidential Advice, 26-531 May 20, 2026 Page 10 recording the minutes of the meeting at which the vote is taken. Sections 1103(a) and 1103(j) would require you to abstain from participation during executive sessions or public meetings of the School Board when matters in which you have a conflict of interest will be discussed and for you to document your recusal from matters in which you have a conflict of interest. Whereyou would be fully recused from any discussion, development, approval, or oversight of the procurement process, the \[Business Entity\] would be permitted to respond to a publicly issued request for proposals on the same terms as any other vendor. Turning to your questions regarding Section 1103(f) of the Ethics Act (questions No. 1, 2, 8, and 9), you are advised as follows. Where the \[Business Entity\], a business with which you are associated, would be otherwise appropriately contracting with the School Board, or subcontracting with any person who has been awarded a contract with the School Board, in an amount of $500 or more, Section 1103(f) would require that an “open and public process” be observed as to the contract with the School District. The statutory phrase “an open and public process,” which is not defined in the Ethics Act, does not mandate a competitive bidding process. See, Kistler, supra. “The Ethics Act is not a procurement statute, and there is no indication that the General Assembly intended it to constrain or modify \[other\] statutory provisions … that do set forth specific procedures for awarding contracts.” Kistler, 610 Pa. 516, 535; 22 A.3d 223, 235. Accordingly, Section 1103(f) would not require competitive bidding for \[Types of Services\]s where it would nototherwise be required under the Public School Code or where the School District would determine that a sole source or limited competition procurement would be necessary for contracting purposes. Regardless of whether competitive bidding is or is not required in a particular instance, neither the Ethics Act nor the Regulations of the State Ethics Commissiondictate the specific elements of an “open and public process” that must be followed with respect to: (1) the form, content, duration, and venue of public notice; (2) the manner in which proposals must be solicited; (3) the documentation of all proposals considered; or(4) the manner in which the awarded contract must be publicly disclosed. Basedupon the plain language of Section 1103(f) of the Ethics Act, at a bare minimum an “open and public process” regarding a contract between the School District and the \[Business Entity\] would include “prior public notice and subsequent public disclosure of all proposals considered and contracts awarded.” It is further clear from the plain language of Section 1103(f) that as a School Director, you would be prohibited from having any supervisory or overall responsibility for the implementation or administration of a contract between the School District and the \[Business Entity\]. To the extent that your questions relate to the potential applicability of provisions of the Public School Code to contracting between the School District and the \[Business Entity\], the Commission does not have the statutory jurisdiction to interpret the requirements and restrictions of the Public School Code as they may pertain to contracting between the School District and the \[Business Entity\]. Therefore, this advisory may not address the potential applicability of any school director restrictions and limitations on drafting specifications contained in Section 3-324 of the Public School Code. Confidential Advice, 26-531 May 20, 2026 Page 11 In response to yourquestion regarding the applicability of the Ethics Act to various arrangements by which the \[Business Entity\]would provide its services (question No. 7), you are advised as follows. The restrictions and requirements of Section 1103(f) of the Ethics Act would be applicable to a multi-year contract between the \[Business Entity\] and the School District. To the extent that the \[Business Entity\] would provide services to the School District through a subcontract with a prime contractor selected by the School District, the restrictions and requirements of Section 1103(f) would be applicable as to the contract between the prime contractor and the School District. The restrictions and requirements of Section 1103(f) would not be applicable where: (1) the \[Business Entity\] would provide services to the School District at no cost or on a pro bono basis; or (2) the \[Business Entity\] would enter into a contract with a party other than the School District to provide services that would be funded by, requested by, coordinated with, performed for, or substantially benefit the School District (for example, through a School District-affiliated foundation, an intermediate unit collaboration, or a 501(c)(3) supporting the School District). Under any of the foregoing circumstances, Section 1103(a) of the Ethics Act would remain applicable to the extent that any matters before the School Board would financially impact you or the \[Business Entity\]. In response to your question regarding reporting requirements on your SFI (question No. 6), you are advised that in order to be in full compliance with the Ethics Act, you would be required to disclose on your SFI: (1) your occupation or profession as a \[Provider of Services\]; (2) the name and address of the \[Business Entity\] as a direct or indirect source of income if the disclosure threshold of $1,300 or more would be met in a given calendar year; (3) your office, directorship or employment with the \[Business Entity\]; and (4) your financial interest in the \[Business Entity\]. See, Sections 1105(b)(2), 1105(b)(5), 1105(b)(8), and 1105(b)(9) of the Ethics Act. Lastly, in response to your question as to whether there any provisions of Pennsylvania law in addition to the Ethics Act that you should consider before authorizing the \[Business Entity\]to submit a proposal, enter into a contract or subcontract, or perform services related to the School District (question No. 10), you are advised that the Commission lacks the statutory jurisdiction to provide legal guidance as to laws other than the Ethics Act that may be applicable to your proposed conduct. Therefore, the propriety of your proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11) of the Ethics Act, an Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, provided the requester has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. This letter is a public record and will be made available as such. Finally, if you disagree with this Advice or if you have any reason to challenge same, you may appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Confidential Advice,26-531 May 20, 2026 Page 12 Any such appeal must be in writing and must be actually receivedat the Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa. Code § 13.2(h). The appeal may be received at the Commission by hand delivery, United States mail, delivery service, or by FAX transmission (717-787-0806). Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. Respectfully, Bridget K. Guilfoyle Chief Counsel