November 5, 1992

 

FACTS:


You are the general counsel to the Department of Public
Welfare (the Department). You wish to know under what circumstances
a Department employee who owns rental property may rent her
property to recipients of public assistance benefits. You have
described various forms of public assistance benefits and request
advice under each circumstance.

You inform us that various state and federal governmental
entities administer a series of benefit programs designed to assist
low-income individuals and families to meet their basic
necessities. Some of these programs are designed to provide
eligible individuals and families with a monthly grant which the
recipient is then entitled to use as he or she sees fit. Other
programs are intended to meet a particular living expense, so that
the benefits can only be used for that particular purpose.

You also inform us that, for all the programs administered by
the Department, caseworkers in the Department's 48 local offices
determine eligibility and benefit levels pursuant to Department
regulations and written procedures which implement state and
federal law. Caseworkers have direct, face-to-face contact with
welfare clients; their job responsibilities include taking
applications for benefits, calculating eligibility,
interviewing clients for redetermination of benefits, explaining a client's
rights and responsibilities and authorizing appropriate benefit
programs.

Benefits programs can be grouped into two categories: (1)
those programs which provide a cash grant to the recipients, and
(2) those programs in which the benefit can be used only for a
specified purpose.


(1) Cash Grant Programs


Cash Grant programs include Aid to Families with Dependent
Children (AFDC), Emergency Aid to the Elderly, Disabled and
Children (EAEDC), and Supplemental Security Income (SSI). These
programs are designed to meet general subsistence needs. Although
one such need is the cost of housing, the amount of the monthly
benefit paid to eligible recipients does not vary based on actual
housing costs. Thus, you inform us, a family whose rent is $200 per
month will receive the same grant as one whose rent is $400.
However, there may be a small rental "add-on" to the grant for
those living in private, unsubsidized housing.

AFDC is a program administered by the Department in which
eligible families receive two checks per month. The grant is
intended to meet the basic subsistence needs of the family,
including housing, utilities, food, and clothing. Individual
families may, however, choose to allocate the grant amount to meet
their needs. The amount of the grant is fixed according to family
size, and may vary depending on other sources of income. The
program is partially funded by the federal government and is
subject to federal regulations. Although funds have been
appropriated for certain housing assistance "add-ons" for eligible
recipients, the money may be used by the recipients in any way they
wish.

EAEDC replaced the former General Relief program in
Massachusetts. Its primary focus is to assist those who are elderly
or disabled and who do not qualify for SSI, or who have children
and do not qualify for AFDC. The amount of assistance may vary
depending on other sources of income. Similar to AFDC add-on
programs, EAEDC also provides for additional "rent allowances"
which, in actuality, may be used by the recipient in any way they
wish. This program is not subject to federal regulation.

SSI is a federal government program, funded in part by the
Commonwealth. It provides a monthly check to individuals who are
elderly, blind or disabled. The Commonwealth provides a supplement
to the federal basic grant level. The amount of state supplement is
fixed by regulation. A Department caseworker's contact with an SSI
applicant is generally limited to those situations in which the
recipient also receives a benefit that is administered by the
Department, such as Medicaid or Food Stamps. (Eligibility for SSI
automatically qualifies a recipient for Medicaid.)


(2) Targeted Assistance Programs


Targeted assistance programs involve benefits that can be used
only for a specified purpose. Included among the described programs
are those programs which are administered by the Department, but
which may have no relationship to housing. Included among these
programs are Food Stamps, Medicaid, Emergency Assistance (EA),
Housing Subsidies, and Direct Vendor Payments.

Page 457

The Food Stamps program is fully funded by the federal
government but is administered by the Department. It provides foot
coupons which can be exchanged only for food products. The benefit
level is determined by a variety of factors, including the amount
of rent paid by a recipient. Although a food stamps recipient may
also receive AFDC, EAEDC, SSI or Medicaid, that is not necessarily
the case.

Medicaid is a federal/state cost-sharing program administered
by the Department. The program provides for the payment of medical
expenses for eligible recipients. Payments are made directly to the
providers of medical services. Eligibility for Medicaid is
determined by Department workers who review whether an applicant
meets financial and categorical requirements. Families or
individuals who receive AFDC or SSI receive Medicaid automatically.
The amount of a recipient's rent is not a factor in determining
eligibility.

EA is a federal/state cost-sharing program administered by the
Department, and is intended to address one-time crisis situations.
For example, a family facing a utility shut-off for non-payment of
bills can receive a payment to the utility company for the
arrearage. EA payments may also be made directly by the Department
to a landlord to pay up to three months' back rent for recipients
facing imminent eviction. The Department may also make payments for
emergency shelter or mortgage arrearages. These benefits can
generally be provided only once in a twelve month period. In these
cases, the Department pays the actual charges submitted by the
vendor (that is, there is no schedule of charges promulgated by the
Department under such circumstances).

Housing subsidies consist of programs administered or
regulated by the state Executive Office of Communities and
Development (EOCD), or by local housing authorities. Benefits are
designed to help low-income families meet their housing costs.
Eligibility for these subsidies is not determined by Department
staff, although Department staff may assist recipients of
Department programs to apply for housing subsidies.

There are two basic sources of housing subsidies: federal and
state. Federal subsidies (referred to as Section 8 assistance) and
Massachusetts subsidies (described by you as Chapter 707
assistance) are paid by the administering agency directly to
landlords. A recipient cannot receive either subsidy if her rent
exceeds a maximum allowable rent, which is a standard established
for each local community by EOCD or the federal Department of
Housing and Urban Development. The amount of the subsidy is
dependent upon the actual rent (subject to the maximum) and the
recipient's income. For example, an eligible holder of a Chapter
707 certificate will pay thirty percent of her income to the
property owner, with the balance of the monthly rent being paid by
EOCD or the local housing authority. While recipients of such
subsidies may also receive AFDC, EAEDC, SSI, Medicaid, Food Stamps,
or some combination of these programs, subsidies are also available
to those who receive no other public assistance.

Direct vendor payments are designed to assist AFDC or EAEDC
recipients in managing their money so certain expenses, such as
rent, do not go unpaid. Thus, an AFDC or EAEDC recipient who is
having difficulty with cash management can choose to have her rent
deducted from the cash grant and sent directly to the landlord by
the Department. The Department, under certain conditions, may
decide to place a recipient in the program if it determines that
the recipient has mismanaged funds. You inform us that Department
caseworkers make a subjective assessment about the client's ability
to manage funds in such cases.
 


QUESTION:

Given the above facts, under what circumstances may a
Department employee, who owns rental property, rent to recipients
of public assistance benefits? What conditions apply?
 


ANSWER:


A Department employee may rent property to recipients of
public assistance benefits only if the employee complies with all
of the restrictions of G.L. c. 268A, s. 7 and s. 23. In addition,
other restrictions under c. 268A may apply.
 


DISCUSSION:


Section 7


In order to determine whether Department employees may rent
property to Department clients, it is necessary to first determine
whether the public assistance programs described above constitute
"contracts" for purposes of G.L. c. 268A, s. 7.

Page 458
 


Section 7 of c. 268A prohibits a state employee[1] from having
a financial interest, directly or indirectly, in a contract made by
a state agency, in which the Commonwealth or a state agency is an
interested party, of which interest he has knowledge or has reason
to know. See, e.g., EC-COI-92-2. Section 7 does, however,
contain certain exemptions which would permit a state employee to hold such
a financial interest under certain circumstances, as more fully
described below.

Both the courts and this Commission have given the term
"contract" a broad meaning to cover any arrangement in which goods
or services are to be provided in exchange for something of value.
See Quinn v. State Ethics Commission, 401 Mass. 210 (1987); EC-
COI-89-14
(agreement need not be formalized in writing to be a
contract for s. 7 purposes); EC-COI-81- 64 (a state grant is a
contract).

Section 7 does not, however, cover all situations in which a
state employee receives money for goods and services which may be
compensated out of funds derived from the state treasury. For
example, if a state employee rents an apartment to a state
consultant, the state employee will not be regarded as having a
financial interest in the consultant's contract with the state for
s. 7 purposes. The contract between the consultant and the state is
independent of the consultant's lease agreement with the state
employee. See, e.g., EC-COI-83-173.

The critical question in determining whether a contract exists
has always focused upon whether the parties have agreed to an
exchange of goods or services where that exchange is supported by
some consideration. See, e.g., Conley v. Ipswich, 352 Mass. 201
(1967); Quinn, supra; EC-COI-92-1: 89-14: 87 40.

The Commission has previously suggested that the receipt of
money under entitlement programs such as general relief might not
be considered a contract where the funds are made available
pursuant to statutorily defined criteria and eligibility guidelines
and are administered by governmental bodies. EC-COI-87-40 (funds
distributed by agency lottery to award scholarships to eligible
families for daycare were held to constitute a contract because
funds were distributed to private providers who agreed to abide by
a provider agreement in exchange for the funds).

Based upon the present facts, we conclude that cash grant
public assistance program benefits such as AFDC, EAEDC, and SSI (as
currently constituted), which are administered by state or federal
governmental agencies, are not contracts for the purposes of G.L.
c. 268A, s. 7. None of these program benefits is supported by
consideration and each is made available pursuant to statutorily
defined criteria and eligibility guidelines. Thus, no issues will
arise under s. 7 for a state employee who has a direct or an
indirect financial interest in such benefits.
 

On the other hand, several targeted assistance programs,[2]
such as Chapter 707 (state) subsidies,[3] certain EA and direct
vendor payments, do constitute contracts made by a state agency for
purposes of s. 7, see EC-COI-81-189, where a state agency provides
payments directly to a third party in exchange for goods or
services for or on behalf of the recipient.[4] Thus, issues under
s. 7 will arise for a state employee who has a direct or an
indirect financial interest in such benefits. For example, a
Department employee who wishes to rent property to a recipient of
public assistance will (without an available exemption) violate s.
7 if the employee receives payments under Chapter 707 or some other
program where payments are made directly to the employee and are
specifically targeted for housing needs (for example, certain EA
and direct vendor payments).


Possible Exemptions Under Section 7: s. 7(b) and Public
Assistance


Because the Chapter 707 program is administered by a state
agency other than the Department (EOCD), a fulltime Department
employee may rely upon a s. 7(b) exemption in order to rent
property to a Department client (subject to other restrictions
described below).[5] For each of those programs which are
administered by the Department (including certain EA and direct
vendor payments), however, a full-time Department employee must
look to the "public assistance" exemption, if applicable, to
determine whether the s. 7 restrictions apply to them.

The public assistance exemption provides that the
restrictions of s. 7 do not apply to a state employee who
provides services or furnishes supplies, goods and
materials to a recipient of public assistance, provided
that such services or such supplies, goods and materials
are provided in accordance with a schedule of charges

Page 459

promulgated by the department of public welfare or the
rate setting commission and provided, further, that such
recipient has the right under law to choose and in fact
does choose the person or firm that will provide such
services or furnish such supplies, goods and materials.

The Commission has given the public assistance exemption a
reasonable reading in the past, particularly in light of the
purposes of the safeguards which were intended to insure that state
employees do not misuse their insider status to take advantage of
a vulnerable constituency. See EC-COI-86-1. Although the Commission
has not previously addressed whether current Department landlord
payment arrangements are sufficiently "scheduled" or "promulgated"
by the Department for purposes of this exemption, we now conclude
that they are. As long as there exist established Department
standards for rental payment levels, whether on a state-wide or
community-wide basis, the Commission will defer to the Department's
conclusions that the public assistance exemption is satisfied. See
id.[6] However, without such standards, the public assistance
exemption would not be available.

Aside from the public assistance exemption, there are no other
exemptions which would permit a full-time Department employee to
have a financial interest in a contract for direct housing payments
administered by the Department. Other exemptions, however, may
apply to certain Department employees who are not full-time state
employees. See G.L. c. 268A, s. 7(d) and 7(e) (exemptions
applicable to special state employees).[7]


Section 23 and Section 6 (Additional Restrictions)


In addition to the above, additional restrictions will arise
under G.L. c. 268A, s. 23. Section 23 of G.L. c. 268A contains
standards of conduct that apply to all public employees. In
particular, s. 23(b)(2) provides that no public employee may use or
attempt to use his official position to secure unwarranted
privileges of substantial value for himself or others. Section
23(b)(3) prohibits a public employee from engaging in conduct that
gives a reasonable basis for the impression that any person or
entity can improperly influence him or unduly enjoy his favor in
the performance of his official duties.

In EC-COI-92-7, we clarified that a public employee's private
business relationship with a subordinate employee, a vendor whose
contract he supervises, or a person or entity within his regulatory
jurisdiction, violates s. 23, unless (1) the relationship is
entirely voluntary; (2) it was initiated by the person under the
supervisory employee's jurisdiction; and (3) the supervisory
employee's public written disclosure under s. 23(b)(3) states facts
clearly showing elements (1) and (2). Thus, failure to meet
elements (1) or (2) will violate s. 23(b)(2); failure to make the
disclosure required by (3) will violate s. 23(b)(3).

Applying these principles to the present case, we conclude
that Department employees may not initiate private business
dealings (such as the renting of property) with Department clients
with whom they have official dealings or over whom they exercise
any regulatory authority.[8] Moreover, even if the client
voluntarily initiates the business relationship, the Department
employee must make the s. 23(b)(3) disclosure referred to above, in
addition to meeting the s. 7 requirements described above.

Further, s. 23(e) provides, in pertinent part, that nothing in
s. 23 shall preclude any constitutional officer or head of a state
agency from establishing and enforcing additional standards of
conduct. Thus, the Department, if it chooses to do so, could
prohibit all Department employees from having any private business
relationships with Department clients or family members under any
circumstances, regardless of the application of c. 268A.

Finally, given the scope of both s. 7 and s. 23, it is
unnecessary to address fully how s. 6 would also affect Department
employees. Briefly, however, s. 6 would prohibit a Department
employee from participating[9] in any particular matter[10] which
directly or foreseeably will affect his or her own financial
interest, or the financial interest of an immediate family
member.[11] For example, a Department employee could not refer, in
his or her official capacity, a Department client to rental
property owned by the employee or an immediate family member.
Section 6 further provides that any state employee whose duties
would otherwise require him to participate in such a particular
matter must make full disclosure of the financial interest to his
or her appointing authority. The appointing authority would then
have to determine whether the employee may participate in the
matter in question. Copies of the written determination must be
filed with the Commission.

Page 460

---------------

* Pursuant to G.L. c. 268B, s. 3(g), the requesting person has
consented to the publication of this opinion with identifying
information.

[1] A state employee is defined, in relevant part, as a person
performing services for or holding an office, position, employment,
or membership in a state agency, whether by election, appointment,
contract of hire or engagement, whether serving with or without
compensation, on a full, regular, part-time, intermittent or
consultant basis, including members of the general court and
executive council. G.L. c. 268A, s. 1(q).

[2] We find that both Food Stamps and Medicaid payments,
although described as targeted assistance programs, are not
supported by consideration and are made available under statutory
guidelines. Thus, these programs are similar to cash grant programs
and do not constitute a contract made by a state agency under s. 7.
Moreover, neither program implicates a housing subsidy issue under
these facts.

[3] The Commission has previously ruled that Section 8
contracts (federal subsidies) are not considered contracts made by
a state agency for s. 7 purposes. EC-COI-81-189.

[4] We find that a landlord provides "goods or services" by
making an apartment available to a tenant who agrees to pay rent as
consideration. Cf. Boston Housing Authority v. Hemingway, 363 Mass.
184, 190-191 (the Court is willing to imply a warranty of
habitability because it is clear that a lease is essentially a
contract in which the landlord promises to deliver a premises
suitable to the tenant's purposes in exchange for the tenant's
promise to pay rent -- i.e., the landlord and the tenant both have
obligations under the lease agreement).

We also find that a third party arrangement to pay for the
tenant's obligations under the lease constitutes a contract for s.
7 purposes. Cf. EC-COI-89-14 (even where no written agreement
exists, where there remains an expectation among all of the parties
regarding the timing, purpose and ultimate outcome of the
transaction, the Commission may find that the actions of a third
party and a state agency rise to the level of a contract for s. 7
purposes which can affect the state employee).

[5] Section 7(b) provides, in relevant part, that the
restrictions of s. 7 will not apply to a state employee other than
a member of the general court who is not employed by the
contracting agency or an agency which regulates the activities of
the contracting agency and who does not participate in or have
official responsibility for any of the activities of the
contracting agency, if the contract is made after public notice or
where applicable, through competitive bidding, and if the state
employee files with the State Ethics Commission a statement making
full disclosure of his interest and the interests of his immediate
family in the contract. We find that the remaining criteria
described in s. 7(b) do not apply here because Chapter 707
subsidies do not constitute "personal services" contracts.

[6] We note that, because EA payments are based upon actual
charges submitted, EA payments would not be exempt under the public
assistance exemption.

[7] Where the restrictions of s. 7 would create a hardship for
a tenant, however, the Commission has, in the past, been willing to
defer enforcement of s. 7 until the completion of the tenancy. See,
e.g., EC-COI-82-12; 84 105; 84-109; see also EC-COI-91-2.
The
Commission will, under appropriate circumstances, consider such a
deferral of enforcement on a case-by-case basis.

[8] For example, a full-time Department employee who works in
Boston, and who does not have regulatory jurisdiction over
Department clients outside of that area, would not generally be
prohibited from renting property to a Department client who resides
in the Worcester area under this section.

[9] "Participate," participate in agency action or in a
particular matter personally and substantially as a state, county
or municipal employee, through approval, disapproval, decision,
recommendation, the rendering of advice, investigation or
otherwise. G.L. c. 268A, s. 1(j).

[10] "Particular matter," any judicial or other proceeding,
application, submission, request for a ruling or other
determination, contract, claim, controversy, charge, accusation,
arrest, decision, determination, finding, but excluding enactment
of general legislation by the general court and petitions of
cities, towns, counties and districts for special laws related to
their governmental organizations, powers, duties, finances and
property. G.L. c. 268A, s. 1(k).



Page 461

[11] "Immediate family," the employee and his spouse, and
their parents, children, brothers and sisters. G.L. c. 268A, s.
1(e).

Page 462


 

End Of Decision