On June 10, 2016, the Ohio Ethics Commission (OEC) issued Advisory Opinion No. 2016-01, considering whether a city council member can be employed as director of a nonprofit corporation that receives financial support from the city. While the opinion specifically discusses city officials, its conclusions also apply to elected and appointed school board and educational service center (ESC) governing board members.
As applied to school board or ESC governing board members (school officials), the opinion concludes that a school official cannot be employed by a nonprofit corporation that receives financial support from the district or ESC if the school official would:
- profit from the financial support or
- have an interest in the financial support, unless he or she meets an exception.
If the school official can serve as a compensated director of the nonprofit corporation, the school official is subject to other prohibitions during the service.
Profiting from the financial support
As explained in the opinion, a school official would profit from the district’s or ESC’s financial support, through contracts, grants, loans or other methods, if the:
- nonprofit corporation, or the position the official holds at the corporation, is dependent on the financial support.
- nonprofit corporation would use the financial support provided by the district or ESC as a basis for the school official’s compensation.
- official profits from the contract in some other way.
Generally, a nonprofit corporation is dependent on the district or ESC if it receives 25 percent or more of its financial support from the district or ESC.
In other words, if a school district provides a substantial amount of the financial support a nonprofit corporation receives, a school board member would not be able to serve as its compensated director. The opinion notes, however, that this restriction does not apply to a board member who is serving in an uncompensated position with the nonprofit.
Having an interest
If a school district or ESC provides any level of financial support to a nonprofit corporation, a school official employed as director of the corporation would have a prohibited interest in the contract. The school official could not serve as the compensated director of a nonprofit corporation that receives financial support from the district or ESC unless he or she can meet the exception to this restriction. There are four parts to the exception and the school official must be able to show all of them.
- The school district or ESC has determined the services the nonprofit corporation provides are necessary to fulfill a need for the district or ESC.
- There limited sources in the area that provide the services and the organization is uniquely suited to provide them.
- The nonprofit corporation provides the same or better treatment to the district or ESC than to its other clients or customers.
- The entire transaction is at arm’s length, the district or ESC has full knowledge of the school official’s interest, and the school official takes no part in voting or otherwise influencing decisions about the corporation.
If the school official is able to work as director for a nonprofit corporation that receives financial support from the district or ESC, he or she is subject to other restrictions.
- The official cannot take any action to authorize or approve any school district or ESC financial support, or other benefits to the nonprofit corporation.
- The official cannot represent the nonprofit corporation or any other person before any public agency on matters in which he or she personally participated during service to the district or ESC.
- The official cannot receive compensation from the corporation for personally rendering any services on its behalf on any matter before the school district or ESC.
- The official cannot disclose or use any confidential information he or she acquired during public service.
Seeking assistance from the OEC
In , the OEC stresses that the application of the law is fact specific. As a result, the OEC recommends any public official who seeks employment with a nonprofit corporation receiving financial support from the public agency should carefully gather all of the facts about the relationship. Further, the OEC reminds public servants they can seek guidance and advice before accepting any job.