FACTS: *

The Office for Children (OFC) has developed a pilot project whereby a lottery is held to award scholarships to eligible families for daycare. Eligibility guidelines have been established based on family size and income. The commonwealth distributes money to child care resource and referral agencies (providers) which are responsible for the implementation of the project. Specifically, OFC will distribute money only to those providers which have a contractual relationship with OFC to provide information, statistical and referral services. Any provider which accepts the distribution of the grant must agree to be a "voucher management recipient" and thereby subject to a "provider agreement" with a voucher management agency. A provider agreement details reporting, case management and billing procedures. The care provider must also be licensed or registered with OFC.

Approximately 100 to 150 families in six areas of the state will be selected. The families do not receive any of the money directly. Rather, the providers receive a scholarship fund from their local voucher management agency. Each of the providers currently participating in the program will be able to fund approximately 10-20 children.  If selected, a family must agree to participate in an evaluation nine months after the scholarship begins. The family must also agree to sign a day care fee agreement which sets forth the amount the scholarship pays and the amount the parent pays.

Providers must assume responsibilities in the implementation of the program. They must distribute information sheets to interested families, publicize the program in their area, assist selected families in completing the application process which includes: income verification, fee assessment, completing vouchers, and assigning "child codes", and selecting potential recipients using a random drawing system. The providers must also maintain a waiting list and assist OFC in its nine-month evaluation of families participating in the program.

QUESTIONS:

  1. Can employees of OFC participate in the daycare scholarship program and accept the benefits of the OFC grants?
  2. Can employees of state agencies other than OFC participate in the day care scholarship program and accept the benefits of the OFC grants?

ANSWERS:

  1. No, absent an exemption from the Governor, pursuant to G.L. c. 268A, §7(e).
  2. Yes.

DISCUSSION:

Section 7 of c. 268A prohibits a state employee from having a "financial interest, directly or indirectly, in a contract made by a state agency in which the common­ wealth or a state agency is an interested party . . ."It is clear that an OFC employee would have a direct or in­ direct financial interest in the receipt of the benefits of the OFC grant.  Specifically, you estimate that the financial interests of the employee would range between $10 and 64 per week, depending on the employee's income and family size. The determinative issue is whether the financial interests of the employee would be "in a contract made by a state agency."

The Commission has taken a broad view of what constitutes a contract for c. 268A purposes. In prior advisory opinions, the Commission has determined that the term contract is not limited to a formal, written document setting forth two or more parties' agreement. Rather, any type of agreement or arrangement between two or more parties under which each undertakes certain obligations in consideration of the promises of the others constitutes a contract for §7 purposes. The Commission has specifically ruled that a state grant subject to super• vision by a state agency is a contract, see, EC-COI-81-64, and has also concluded that an arrangement by which a state agency provides funds to a non-profit agency from a state funded program for daily training to a retarded child constitutes a contract, see, EC-COI-82-24. In EC-COI-81-64, a supervised research grant to an associate professor was deemed a contract. In EC-COI-82•24, a grant from the Department of Social Services (DSS) to a Home Care Project which would be used to fund providers of services to retarded children was deemed a contract between DSS and the funded non-profit agency. In this case, the arrangement by which OFC provides a grant to a specific provider is essentially contractual in nature. The day care provider agrees to certain requirements in exchange for receipt of scholarship funds from the local voucher management agency. This exchange supported by consideration therefore constitutes a con• tract for the purposes of G.L. c. 268A, §7.

The particular grant in this case has some of the characteristics of an entitlement program, given its remedial purpose and the establishment of clearly defined eligibility guidelines. The Commission has not decided, and does not decide herein, that entitlement programs of general applicability administered by state agencies constitute contracts upon acceptance of benefits. Entitlement programs, such as general relief, are not grants, are made available pursuant to statutorily defined criteria and eligibility guidelines and are administered by governmental bodies. The grant in this case is administered by private non-profit organizations, which are not accountable to the public or the General Court, or subject to laws designed for the protection of the public.1

A private recipient of a grant is subject to the obligations of a private contract and otherwise has no obligation to the public. Further, the grant in this case is not pursuant to a specific declaration of the General Court and is not universally available to qualified daycare providers or families. Therefore, although the funding in this case has some of the characteristics of an entitlement program, we conclude, on balance, that the funding is more in the nature of a specific conditional grant to a private non-profit organization which the Commission has historically construed as a contract for purposes of §7.

The §7 restriction detailed above will apply only to employees of OFC.  Any other state employee would be eligible to participate in the program pursuant to the exemption standards in §7(b),2 assuming the program is sufficiently publicized.

The sole exception which would allow an OFC employee to indirectly receive the benefit of program funds would be G.L. c. 268A, §7(e). This exception would require that the employee file a statement with the State Ethics Commission disclosing her interest in the program scholarship and that she obtain an exemption from the Governor, with the advice and consent of the Executive Council.

 

DATE AUTHORIZED: October 26, 1987

                                                                               

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

1 E.g., open meeting laws, public record laws.

2 §7(b) states that the restriction of §7 does not apply "to a state employee other than a member of the general court who is not employed by the contract• ing 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  ..."

End of Opinion