Conflict of interest is defined as an actual or perceived interest by a staff or board member in an action that results in, or has the appearance of resulting in, personal, organizational, or professional gain.

A conflict of interest exists even if no unethical or improper act results from it – is a wise piece of advice. It reminds us that any appearance of impropriety is the beginning of suspect and loss of trust. Conflict of interest can create ethical dilemma and concerns, raise questions about objectivity and fairness and create an appearance of impropriety that can undermine confidence.
Officers and members are obligated to always act in the best interest of the entity or organization they represent. This obligation requires that any officer or member, in the performance of organization duties, seek only the furtherance of the organization mission. Erika Lindeman, NCTE Parliamentarian, further teaches us that , “A conflict of interest exists when a person in a position of trust has competing professional or personal interests. There is nothing shameful in having these competing interests, but they can make it difficult to act impartially. How we acknowledge and act on our conflicts of interest are what bring us credit or condemnation.”

Conflicts of interest (COI) that arise when a person is on the receivership of financial gain or other rewards resulting from a vote, policy, or any action that occurs while serving on a board or committee. It is important to point out that COI will not always involve a financial gain; a conflict can reward someone’s professional standing, give them an exclusive interest in a project or policy, or even effect the advancement of a someone – a close neighbor or someone in their family.
From a larger scope, conflicts of interest can affect not only individuals but also businesses, government bodies, non-profit organizations, and virtually any scenario where a dichotomy between personal interests and professional duties may exist. Lindeman guides us with, “Conflicts of interest that stay hidden are undesirable because they place the interests of one person ahead of the organization’s obligations to its mission and its members. They also reflect poorly on the person involved and on the groups, businesses, and causes with which they are affiliated”. The public of Harbor Springs has witnessed multiple contract jobs given to different committee members without reflection of optics that again, raise questions about objectivity and fairness and create an appearance of impropriety that can undermine public confidence.”

The announcement by the City of Harbor Springs staff that boards and committees encourage and prefer their membership to be professionals or experts in many aspects of business as well as be employed in the very same fields that they are making policy for. Conflicts occur because members have multiple interests, affiliations, and positions of responsibility within these professions and areas they make decisions about. In these situations, a person will sometimes owe identical duties of loyalty to two or more organizations or groups. As a NCTE Parliamentarian, Lindman reminds us, “If we do not acknowledge our competing loyalties, a conflict of interest can create an appearance of impropriety that can undermine confidence in the person, organization, or profession”. If you are a realtor, a builder, or belong to associations or causes that benefit from certain policy, at a very minimum it makes for bad optics. Circumstances make it difficult for the individual to maintain impartiality or make a decision solely on the basis of professional responsibilities and obligations. How does a community know for sure that the same person who depends on a living as a developer is able to separate & ignore that innate drive for potential gain in development options and concentrate on what is best for preserving and protecting the character of the town?

In Harbor Springs, a discussion and “refresher” of COI ensued during the Planning Commission (PC) meeting on February 22, 2024. The request was made for the City Manager (CM) to review COI and how it relates to the PC. The CM began identifying the ByLaw language, the expectation of disclosing and if appropriate the tool of ‘recusal’ of self should be put in place if any detrimental or beneficial effect that zoning changes would have on them. He quickly moved into the “test” of COI as a concept of how a zoning change would or would not effect the novel opportunity a PC member /or family member “uniquely” verses a having a universal opportunity to the Public at large. The CM continued concluding that in the case of the current proposed zoning changes, the public and the PC were being effected the same. They both have the same opportunity.

James Madison emphasized in his warning that legislators should share ‘a communion of interests’ with their constituents. And, in order to receive the communion of interest, we all must have equal advantage.

The CM’s approach of definition of COI is unique in itself with its broad brush stroke. Rather than looking at the individual member on the PC, it speaks to the commission as a whole (they all benefit the same), missing the mark that if the public citizen is not an active board member or on an outside organization benefiting from proposed zoning changes OR if the public citizen is not financially positioned with – for example, vacant land or a larger lot to take financial advantage of new zoning proposals, they are exempt from the same advantages that will capitalize with the new zoning devised in the PC’s plan.

Competing loyalties in organizations with missions that align with PC’s new zoning, professions that will clearly benefit both directly or indirectly such as unique professions like builders, developers, realtors – members who sit and cast vote on multiple committees (such as a subcommittee like a PC member who votes and advises the council and the next day sits on and votes on the council, too) or those who uniquely benefit because of lot or properties who now will take advantage of changes are a few examples that create ethical concerns for the public, raise questions about objectivity and fairness and create an appearance of impropriety that can undermine confidence.

Organizationally, the city of Harbor Springs does not have in place the mandatory individual member’s self disclosure via annual COI disclosure reporting forms that will be made available to view publicly.
Both the use of a COI ‘form’ and ByLaws handbook should be read and signed annually by each acting member of any council, committee or commission. This assures updates are occurring as life events change and new added policies are covered and understood. If something comes up midyear, board members should contact the board officer responsible for updating the form. At times, board members may find themselves in situations that the form does not cover. Therefore, in all meetings, focus (subcommittees) groups, email exchanges, and conferences calls, members should self-identify conflicts of interest when they arise and those will be recorded.

Michigan State University reminds us that “Conflict of interest rules apply to all communities, regardless of size.” MSU guides us about the challenge of being a small community where there may be those directly or indirectly related to others who serve on committees and boards or who hold positions of conflict. “COI means a situation when one is making a decision in their government office capacity which is also impacting one’s: Finances, Relatives/family (employer/employees, business partner), or Proximity (as it influences one’s property value). For example, “proximity” at a minimum means adjacent, as in next door. So if a member of a planning commission has his or her next door neighbor applying for a special use permit, that planning commission (or council) member would have a conflict of interest.”

The City of Harbor Springs, City Council Recently Approved (February 6, 2023) a ‘City of Harbor Springs Boards and Commissions Handbook’ which is to be read, signed and followed by each sitting member serving the community. Within the handbook, Conflict of Interest is outlined in one sentence under Board Responsibilities: To refrain from any act that constitutes a conflict of interest (defined more fully in each board’s bylaws).
An example of a committee guideline is included further below showing the Planning Commission By- Laws which more specially advises COI guidelines. In addition to the specific outline above pertaining to COI the City of Harbor Springs handbook also reminds us that Robert’s Rules of Order will be followed in parliamentary procedures where not
otherwise provided:

**Self Policing – The policy of review determining whether there is a member conflict many times is anineffective layer of policing. The individual is asked to educate self, is asked to refer to a more specific set of expectations (from that handbook which they sign off from), is instructed to voluntarily self police/self report a conflict and either choose to self recuse to be safe or ask their peers/fellow committee/board or commissioners to judge if they should self recuse- these same peers whom they have served with for sometimes years & have established relationships. Imagine this scenario, where someone on a long held committee role speaks up against the other member, particularly when needing to vote on a contentious issue.

These public servants are also offered by the city of Harbor Springs, specific training in ethics at the expense of the city, but few accept the offer to fortify their knowledge and skillset. Why decline?

Should a community member suspect an action has ‘set up’ a committee member to reap a gain or has resulted in, or has the appearance of resulting in, personal, organizational, or professional gain, it is advised to approach the board or the manager to report such action or actions. Many community members feel this is unsatisfactory. Reporting protocol that requests a person with concerns about a board/committee member bias or untoward motivations is not only Asking the fox to guard the henhouse but it is uncomfortably difficult in a small community. The Concern also involves the likelihood that due diligence may not be served unless the citizen or citizen group continues to invest time, energy and organization to relentlessly keep a finger on the pulse to assure the conflict of interest is attended to in a way that protects the public’s sense of trust.

As given to those before us, we all could be reminded that, Solomon was granted the same gift “I shall give you a wise and discernible heart.” The broad assumption is that members have both a discernible heart and the wisdom to identify self interest verses in the best interest of those they serve.

A conflict of interest exists even if no unethical or improper act results from it is a wise piece of advice because of the human condition. Providing clear examples and tools to guide the member is a more helpful, healthy basis for prevention through due diligence. The human condition and human nature is a result of long ago urges to resource grab for a myriad of reasons: What’s in it for me, I owe it to them, I scratch their back they scratch mine, this could make or brake my business, etc. And to some it is the deeper urge to gain respect of peers; the eternal quest for recognition and affirmation.

Suggestions to the City of Harbor Springs to rebuild trust and function pertaining to COI:
Develop a role that consistently identifies any potential appearance of COI and gives a confidential process to report concerns.
Implement annual member forms (example below) to acknowledge and list COI disclosures, turn trainings into an expectation rather than choice (neighboring municipalities like the City of Petoskey has robust interest & participation in municipal trainings). Rethink, rework the policy within the law about supporting competitive interests in potential members (rethink the inclusion of developers, builders, housing committee members, realtors) to reduce COI potential and rebuild the policing policy so that it is both effective and functioning. Comfortably/actively follow the State’s protocol: (9) The legislative body may remove a member of the planning commission for misfeasance, malfeasance, or nonfeasance in office upon written charges and after a public hearing. Before casting a vote on a matter on which a member may reasonably be considered to have a conflict of interest, the member shall disclose the potential conflict of interest to the planning commission. The member is disqualified from voting on the matter if so provided by the bylaws or by a majority vote of the remaining members of the planning commission. Failure of a member to disclose a potential conflict of interest as required by this subsection constitutes malfeasance in office. Unless the legislative body, by ordinance, defines conflict of interest for the purposes of this subsection, the planning commission shall do so in its bylaws.

Common Types of Corruption in Local Government & examples

Understanding specific forms of corruption can help to make the concept of corruption more tangible. Below are four common types of corruption, with examples. In many of the cases described, officials participated in multiple forms of corruption at once.

Conflict of Interest – When an elected official makes decisions based on their own personal gain rather than on the well-being of their community, they are becoming involved in a conflict of interest.

One notable example of a conflict of interest concerns the case of the former mayor of New Orleans, Ray Nagin. In 2014, Ray Nagin was convicted of 20 charges, including bribery, money laundering, and conspiracy. Nagin used his official capacity to give favorable treatment to individuals who provided him with money and services. He also misused his power to benefit his granite company, Stone Age LLC. By making decisions based on their benefit to his personal supporters and company, rather than on their benefit to New Orleans, Nagin failed to fulfill his responsibilities as mayor.

Embezzlement- Embezzlement is the intentional misuse or misappropriation of funds or property entrusted to an official’s care. In many cases, embezzlement occurs when an official transfers government funds to their personal accounts.

One example of embezzlement concerns Rita Crundwell, the former comptroller of Dixon, Illinois. In 2013, Crundwell was sentenced to over 19 years in prison for stealing $53.7 million from the city of Dixon. As comptroller, Crundwell’s job had been to oversee the city government’s financial activity. Starting in 1990, Crundwell transferred money from city accounts to a secret account which only she could access. She then used the money to finance her quarter horse business and make expensive purchases, including trucks and luxury vehicles. This case of embezzlement diverted millions of dollars that should have been serving the needs of the people of Dixon.

Fraud – Fraud is a broad term which describes intentional deception or the deliberate misrepresentation of facts and information for personal gain. One specific type of fraud is wire fraud, which refers to the use of electronic communication to deceive or misrepresent information. This can include communication over phone calls, via email, or through other electronic means.

The San Francisco City Hall corruption scandal is one recent example of fraud in local government. In 2020, the scandal began when the FBI arrested Mohammed Nuru, the head of San Francisco’s public works department, on charges of attempted bribery. Authorities arrested numerous other city officials after Nuru. The officials’ crimes included using municipal funds to reward supporters and exorbitantly overcharging residents for garbage collection services. By deceiving citizens for personal gain, Nuru and other officials were committing fraud.

Nepotism- Nepotism means giving an unfair advantage to family members or friends in employment or other opportunities.

An example of nepotism is the case of the “clout farms” in Cook County, Illinois. In 2009, a civic watchdog group and the media exposed multiple townships within the county as “a cash crop” for local politicians, many of whom received multiple salaries and pensions. Many of the local politicians were also relatives of one another. In Leyden township, just eight families made up 18 elected positions. Critics observed that an unfair advantage had been given to the relatives of those already in power.

Identifying Red Flags and Signs of Corruption

The examples of corruption described above can occur in many different scenarios. In each of the examples mentioned, the citizens of the affected communities suffered because of the corrupt practices of their public officials. Most often, resources that were meant to serve the needs of the community were instead used to benefit only the corrupt individuals.

Identifying red flags is the first step to recognizing and then combating corruption in local government. Note that these red flags may not always mean corruption is taking place. A red flag is not a guarantee of corruption. Instead, a red flag is a sign that more investigation may be required. Examples:

Sudden or Unexplained Wealth

If elected officials or public servants suddenly or inexplicably gain a considerable amount of wealth, their communities may want to investigate further. Officials who amass wealth through embezzlement or fraud may begin to lead lavish lifestyles. They may make expensive purchases, such as buying luxury vehicles or large homes.

Irregular Financial Activity

Another sign of embezzlement or fraud is irregular financial activity. There may be unauthorized expenditures, unexplained budget overruns, or discrepancies between financial records. Government funds may also be diverted in unexplained ways. If citizens can assess their local government’s financial activity, they can more easily identify signs of corruption. Transparency and and accountability are essential here.

Favoritism

Which companies or contractors do local government officials hire to perform work? Which people are appointed or hired for positions? If the same companies or contractors are hired over and over again — and especially if they produce subpar work, or if they are connected to one of the government officials — favoritism may be occurring.

The same principle applies to the people appointed or hired by the local government. Citizens can watch out for new appointees or hires who lack the proper qualifications, or who are closely connected to people in power. These kinds of favoritism could be a sign of nepotism, cronyism, or a conflict of interest.

Inflated Costs

Citizens can also watch out for public services whose costs keep increasing. In this case, it can be helpful to compare the costs of services — such as waste management — to those of neighboring communities.

Lack of Transparency

Transparency is one of the best ways for local governments to avoid corruption. By providing citizens with accurate public information and financial records, officials can remain accountable to their communities. If officials refuse to disclose information that should be public, corruption may be occurring.

Failure to Address Concerns

Have any members of your community already raised concerns about potential corruption? If yes, how have officials responded to those concerns? If accusations or complaints have been brushed aside without investigation, it may be worth taking a closer look. It is essential that we hold our elected officials accountable for their actions.

How to Report Corruption in Local Government

If you have identified a red flag, looked into the concern, and are worried that corruption could be taking place, reporting and becoming a whistleblower could be the next step. Here are five steps to keep in mind as you report corruption:

#1: Identify Reporting Procedures and Channels

Procedures for reporting your concerns vary from place to place. Do your research and identify what channel seems most secure, appropriate, and effective. You can look for public corruption or whistleblower hotlines. You can also contact an ombudsman, whose job it is to investigate complaints, or other internal agencies.

#2: Ensure Anonymity and Protection

Ensuring anonymity can be important for keeping yourself safe and out of the spotlight. Look into your state’s whistleblower protection policies and be sure of your rights before reporting suspected corruption.

#3: Gather Evidence

Find out what information is publicly available concerning your complaint. If you are a member of a government organization, you may have access to additional information that can support your claims.

#4: Collaborate with Advocacy Organizations and Media

Advocacy organizations and the media can play an important role in publicizing corruption concerns and pushing for further investigation. Reaching out to watchdog groups or investigative journalists can give your case valuable resources.

#5: Make Your Report
Using the evidence and resources you have gathered, file your report of suspected corruption.

#6: Monitor Progress and Follow Up

After filing your report, follow up with the agency or organization you contacted and make sure your complaint has been processed. If any investigations develop, or if you receive requests for additional information, follow up and cooperate to the best of your ability.

Sources and Tools

https://www.canr.msu.edu/news/ conflict_of_interest_rules_apply_to_all_communities_regardless_of_size

https://goodparty.org/blog/article/reporting-corruption-in-local-government-a-guide-to-promoting- transparency

Conflict of Interest

https://boardsource.org/resources/nonprofit-laws-and-regulations-faqs/

https://ncte.org/wp-content/uploads/2020/01/Implementing_Board_COI_PolicyJan2020.pdfhttps:// www.brotherhoodmutual.com/resources/safety-library/risk-management-forms/conflict-of-interest- disclosure-annual-sample-form/

City of Harbor Springs Planning Commission ByLaw of Conflict of Interest

MICHIGAN PLANNING ENABLING ACT (EXCERPT) Act 33 of 2008

125.3815 Planning commission; membership; appointment; terms; vacancy; representation; qualifications; ex-officio members; board serving as planning commission; removal of member; conditions; conflict of interest; additional requirements.

Sec. 15. (1) In a municipality, the chief elected official shall appoint members of the planning commission, subject to approval by a majority vote of the members of the legislative body elected and serving. In a county, the county board of commissioners shall determine the method of appointment of members of the planning commission by resolution of a majority of the full membership of the county board.

(2) A city, village, or township planning commission shall consist of 5, 7, or 9 members. A county planning commission shall consist of 5, 7, 9, or 11 members. Members of a planning commission other than ex officio members under subsection (5) shall be appointed for 3-year terms. However, of the members of the planning commission, other than ex officio members, first appointed, a number shall be appointed to 1-year or 2-year terms such that, as nearly as possible, the terms of 1/3 of all the planning commission members will expire each year. If a vacancy occurs on a planning commission, the vacancy shall be filled for the unexpired term in the same manner as provided for an original appointment. A member shall hold office until his or her successor is appointed.

(3) The membership of a planning commission shall be representative of important segments of the community, such as the economic, governmental, educational, and social development of the local unit of government, in accordance with the major interests as they exist in the local unit of government, such as agriculture, natural resources, recreation, education, public health, government, transportation, industry, and commerce. The membership shall also be representative of the entire territory of the local unit of government to the extent practicable.

(4) Members of a planning commission shall be qualified electors of the local unit of government, except that the following number of planning commission members may be individuals who are not qualified electors of the local unit of government but are qualified electors of another local unit of government:

(a) 3, in a city that on September 1, 2008 had a population of more than 2,700 but less than 2,800.

(b) 2, in a city or village that has, or on September 1, 2008 had, a population of less than 5,000, except as provided in subdivision (a).

(c) 1, in local units of government other than those described in subdivision (a) or (b).

(5) In a township that on September 1, 2008 had a planning commission created under former 1931 PA 285, 1 member of the legislative body or the chief elected official, or both, may be appointed to the planning commission, as ex officio members. In any other township, 1 member of the legislative body shall be appointed to the planning commission, as an ex officio member. In a city, village, or county, the chief administrative official or a person designated by the chief administrative official, if any, the chief elected official, 1 or more members of the legislative body, or any combination thereof, may be appointed to the planning commission, as ex officio members, unless prohibited by charter. However, in a city, village, or county, not more than 1/3 of the members of the planning commission may be ex officio members. Except as provided in this subsection, an elected officer or employee of the local unit of government is not eligible to be a member of the planning commission. The term of an ex officio member of a planning commission shall be as follows:

(a) The term of a chief elected official shall correspond to his or her term as chief elected official.

(b) The term of a chief administrative official shall expire with the term of the chief elected official that appointed him or her as chief administrative official.

(c) The term of a member of the legislative body shall expire with his or her term on the legislative body.

(6) For a county planning commission, the county shall make every reasonable effort to ensure that the membership of the county planning commission includes a member of a public school board or an administrative employee of a school district included, in whole or in part, within the county’s boundaries. The requirements of this subsection apply whenever an appointment is to be made to the planning commission, unless an incumbent is being reappointed or an ex officio member is being appointed under subsection (5).

(7) Subject to subsection (8), a city or village that has a population of less than 5,000, and that has not created a planning commission by charter, may by an ordinance adopted under section 11(1) provide that 1 of the following boards serve as its planning commission:

(a) The board of directors of the economic development corporation of the city or village created under the economic development corporations act, 1974 PA 338, MCL 125.1601 to 125.1636.

(b) The board of a downtown development authority created under 1975 PA 197, MCL 125.1651 to 125.1681, if the boundaries of the downtown district are the same as the boundaries of the city or village. Rendered Thursday, April 11, 2024 Page 1 Michigan Compiled Laws Complete Through PA 35 of 2024

© Courtesy of www.legislature.mi.gov

Sample Form: Conflict of Interest Disclosure—Annual

This sample annual conflict of interest disclosure form can be used by your church, school, college, camp, or nonprofit to solicit information from the ministry’s directors, officers, employees, volunteers, or other organization representatives to help uncover potential conflict of interests and comply with the organization’s own internal governance policies, as well as meet governance expectations of federal and state government agencies. This sample disclosure form should be reviewed and approved by your local attorney prior to use to ensure the document complies with applicable local and state laws.

In compliance with [insert organization name]’s Conflict of Interest Policy (“Policy”) located [insert location of the Policy such as in your operational manual, employment handbook, bylaws, website, etc.], Representative (as that term is defined in the Policy) must annually disclose all actual, potential, or perceived conflicts of interests with the organization by completing the questionnaire below.

Questionnaire

Name:_________________________________________________________________ Date: _____________________ Position with [insert name of organization]: __________________________________________________________________

Please answer the following questions related to real or potential conflicts of interests involving [insert name of organization] to the best of your ability.

1. 1)  Please describe any situation that you believe could create a real or potential conflict of interest with [insert name of organization], as described in the Policy.

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2. 2)  Please list all other entities for which you serve or anticipate serving as a director, officer, employee, volunteer, or in another capacity, or have financial, business, personal, or relational interest in, and describe any compensation arrangement you may have with the entity that could create a conflict of interest with the organization.

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3. 3)  Please describe anything that you or any party related to you sold or provided to or purchased from the organization in the past year.

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4. 4)  Please describe any financial assistance that you or any party related to you received in the past year from the organization.

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