No. 06-I-24 State Ethics Commission Advisory Opinion November 9, 2006
The Indiana State Ethics Commission ("Commission") issues the following advisory opinion concerning Indiana Code 4-2-6. Any opinion rendered by the Commission, until amended or revoked, is binding on the Commission in any subsequent allegations concerning the person who requested the opinion and who acted in good faith in accordance with the advice rendered, unless material facts were omitted or misstated by the person in the request for the opinion or testimony before the Commission.
SUMMARY
IC 4-2-6-8 Financial disclosure; filing false statement; penalty
SEC concluded that since no individual members of the TRF board of trustees were permitted to transact business on behalf of the fund, none of them could properly be characterized as having final purchasing authority for purposes of IC 4-2-6-8(a)(6).
BACKGROUND
On November 3, 2006, the Commission received a joint request for an advisory opinion from the respective General Counsels for the Indiana State Teachers’ Retirement Fund (TRF), the Indiana Public Employees’ Retirement Fund (PERF), and the Indiana Finance Authority (IFA) regarding the application of IC 4-2-6-8(a)(6) to the board members of each entity. The request for an opinion noted that IC 4-2-6-8(a)(6) requires any agency employee, special state appointee, former agency employee, or former special state appointee with “final purchasing authority” to file a written financial disclosure statement with the Inspector General. The term “final purchasing authority” has not yet been defined by statute, administrative rule, or written advisory opinion. The General Counsels indicated their belief that whether their respective board members would be required to file a financial disclosure statement in accordance with IC 4-2-6-8(a)(6) hinged on the definition of the term “final purchasing authority” and whether their respective board members would be considered to have such authority in the performance of their duties as special state appointees with the entities in question.
While the General Counsels collectively asked for a written advisory opinion as to the application of IC 4-2-6-8 to their respective boards, the Commission notes that each entity must be analyzed separately given that each entity has different statutory authority. Accordingly, the Commission issues separate written advisory opinions to each entity. The analysis in this opinion relates specifically to TRF.
ISSUE
Are members of TRF’s board of trustees required to file financial disclosure statements in accordance with IC 4-2-6-8?
RELEVANT LAW
IC 4-2-6-8, Financial disclosure; filing false statement; penalty
ANALYSIS
As a threshold matter, the Commission finds that it has jurisdiction over the six (6) trustees who comprise the board of the TRF. The Commission renders this advisory opinion by virtue of its authority under IC 4-2-6-4(b)(1)(A). This analysis is limited to the factual representations made to the Commission by Thomas N. Davidson, General Counsel of TRF, and the Commission’s understanding of the TRF’s statutory authority set forth in IC 5-10.4.
The Commission notes that TRF’s board of trustees is comprised of the following six (6) members: Five (5) trustees appointed by the governor, at least two (2) of whom must be members of the fund, and the director of the budget agency or the director's designee; the director of the budget agency or the director’s designee is an ex officio voting member of the board. See IC 5-10.4-3-1. TRF’s enabling statute also provides that the Governor shall appoint a director from the members. The statutory duties of the director are set forth in IC 5-10.4-3-5.
A majority of the board constitutes a quorum at any meeting for transacting business. See IC 5-10.4-3-4(c). The powers and duties of the board specifically include the expenditure of money, including income from the fund’s investments, in order to effectuate the fund’s purposes. See IC 5-10.4-3-6(b)(13). Various other statutory duties and powers of the board with regard to the management of property and investment authority are set forth in IC 5-10.4-3-9 and IC 5-10.4-3-10.
Mr. Davidson represents to the Commission that no individual board member can expend money, authorize the expenditure of money or sign contracts. He states that only the board as a whole can authorize such expenditures. Mr. Davidson further explains that TRF’s investment procurement policy provides that the Executive Director, with approval of the board of trustees, shall have full and complete authority to enter into all contracts on behalf of the fund for the procurement of goods and services.
With regard to the application of IC 4-2-6-8 in this case, the Commission finds that members of TRF’s board of trustees are not subject to IC 4-2-6-8(a)(6). Specifically, the filing requirement set forth in IC 4-2-6-8(a)(6) appears to be intended to apply to an individual employee or special state appointee, current or former, who has or had individual discretion to exert final purchasing authority. Given that no individual board member may transact business on behalf of the fund, but rather, a quorum vote is required for the transacting of any business, it appears that the no individual board member may properly be characterized as having final purchasing authority for purposes of IC 4-2-6-8(a)(6).
The Commission notes that members of TRF’s board of trustees are subject to a strict prohibition against conflicts of interest under IC 5-10.4-3-15. Individual board members are also subject to the conflicts of interest provisions under state ethics laws that are set forth in IC 4-2-6. To the extent that any individual board member would have a potential conflict of interest as contemplated by IC 4-2-6-9, any other state ethics statute, or TRF’s enabling statute, such member has a mandatory duty to disclose the potential conflict of interest for review.
Conclusion
Subject to the foregoing analysis, members of TRF’s board of trustees are not required to file financial disclosure statements under IC 4-2-6-8(a)(6); however, this advisory opinion does not relieve any individual board of member of any filing requirement the respective board member may have under another provision of IC 4-2-6-8(a). Members of TRF’s board of trustees must ensure compliance with this advisory opinion and all state ethics laws and rules.