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Official Opinion 94-12

Official Opinion 94-12

March 16, 1994
To: 

Interim Executive Director
Georgia Housing and Finance Authority

Re: 

Federal HOME Regulations prohibit a former member of the Board of Directors of the Georgia Housing and Finance Authority from participating in or benefitting from financial programs of the Authority for a period of one year and further prohibit such participation in HOME Programs of other participating jurisdictions.

This replies to your request for my opinion regarding the application of federal assistance conflict of interest regulations and state law to the business plans of a present member of the board of directors of the Georgia Housing and Finance Authority ("Authority"). Your letter states that the board member contemplates resigning from the Authority and then joining a real estate development firm. That firm is planning to participate in programs administered by the Authority and similar programs independently administered by local governments in the state.

Your first question concerns 24 C.F.R. § 92.356, a regulation of the HOME program of the Department of Housing and Urban Development ("HUD"). In part it states:

No persons described in paragraph (c) of this section who exercise or have exercised any functions or responsibilities with respect to activities assisted with HOME funds or who are in a position to participate in a decisionmaking process or gain inside information with regard to these activities, may obtain a financial interest or benefit from a HOME assisted activity, or have an interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, during their tenure or for one year thereafter.

24 C.F.R. § 92.356(b) (1993) (emphasis added).

The provision clearly prohibits a former board member of the Authority from participating for a year in HOME programs administered by the Authority. However, you wish to know whether this paragraph prohibits such participation in HOME programs in which the Authority is not involved.

The underlined indefinite article "a" above apparently is the basis for your uncertainty. Literally, for one year, a described person may not "benefit from a HOME assisted activity." However, the persons covered pursuant to 24 C.F.R. § 92.356(c) include: "any person who is an employee, agent, consultant, officer, or elected official or appointed official of the participating jurisdiction, state recipient, or subrecipient which are receiving HOME funds." (Emphasis added.)

A similar reference to "the" participating jurisdiction is contained in the description of covered transactions in 24 C.F.R. § 92.356(a)(2) which "include the acquisition and disposition of real property and the provision of assistance by the participating jurisdiction." (Emphasis added.) Thus it might appear from the descriptions of covered matters and persons that the prohibition applies to only those matters involving the participating jurisdiction with which the employee or official is, or was, affiliated.

While situations involving the participating jurisdiction may be the more likely source of conflict, from a policy standpoint one may envision situations in which experience and influence in the program of one participating jurisdiction might give unfair advantage in applying to the program of another. Because of this possibility and more specifically, the literal breadth of the prohibition itself, I interpret the prohibition broadly to apply to a HOME program of another participating jurisdiction; however, the issue is not free from doubt. Further, as I do not officially advise federal agencies in the administration of federal law, I recommend in each particular case that guidance be requested from HUD and, in particular, the participating jurisdiction be asked to seek the discretionary exception permitted by 24 C.F.R. § 92.356(d).

In addition to granting financial aid, the Authority allocates among qualified buildings within the state certain low income housing credits against federal income tax. 26 U.S.C. § 42(h) (Supp. 1993); O.C.G.A. § 50-26-8(a)(32). You have asked whether a similar one-year prohibition applies to this program. Because there is a finite amount of federal low income housing credit available in any year within Georgia, the allocation of available credit amounts becomes a matter of competition among housing projects. However, our research has disclosed no similar specific periods of prohibition applicable to the application for, allocation of, or receipt of federal tax credits under the program administered by the Authority. You have also asked whether other state or federal provisions may require the board member "to wait a specified period of time." A review of a number of programs available to the Authority has disclosed that identical or similar prohibitions exist whenever federal funds are administered by a state recipient. The Community Development Block Grant program, also administered through HUD, has the same prohibition covering the tenure of the member and one year thereafter, and adds to it a specific unlimited prohibition for the life of any activities pursuant to an Urban Development Action Grant. 24 C.F.R. § 570.611(b) (1993). Other programs with similar prohibitions include, but are not limited to, Farmers Home Administration funded programs (7 C.F.R. § 1944.254(f) (1993)); energy conservation programs (10 C.F.R. § 470.17 (1993)); Small Business Administration programs (40 C.F.R. § 21.12(a)(4) (1993)); and Environmental Protection Administration grants (two year prohibition) (40 C.F.R. § 501.15(f) (1993)).

The Authority staff should become familiar with the conflicts of interest provisions of each program they administer, and be especially vigilant when former members indicate they have an ownership or beneficial interest in an applicant for financial assistance under the program. Appropriate use of available waiver provisions requires that the recipient agency, not the former member-applicant, move for the exception and demonstrate that the purposes and effective and efficient administration of the program would be furthered by such a waiver. (See, e.g., 24 C.F.R. §§ 92.356(d)).

I have found no comparable provisions for a specified waiting period under state law, though I believe a former board member remains under a lingering duty to disclose potential conflicts of interest. Pope v. Propst, 179 Ga. App. 211, 213 (1986) ("never use any information coming to him confidentially"). Each such situation is fact specific. If a former board member, for example, is exercising an undue influence from a prior association or is benefitting from privileged information, the absence of an express waiting period may or may not be of controlling significance under state law.

Based upon the foregoing and subject to the qualifications expressed herein, it is my official opinion that federal HOME Regulations prohibit a former member of the Board of Directors of the Georgia Housing and Finance Authority from participating in or benefitting from financial programs of the Authority for a period of one year, and further prohibit such participation in HOME Programs of other participating jurisdictions; however the latter is not free from doubt. Further, there is no corresponding mandatory waiting period under state law; nor is there a corresponding mandatory waiting period under federal law for the allocation of low income federal housing tax credits. However, there are such periods for other federal programs, with which the Authority staff should become familiar for its own compliance purposes. Further, state law imposes fiduciary standards which do not necessarily end with membership or employment, or over passage of time. Finally, my official opinion and advice necessarily is to the Authority and to its members in their official capacity only.

Prepared by:

GEORGE S. ZIER Staff Attorney