93.15

OPINION NO. 93-15

The University of Maryland College Park (UMCP) has requested advice regarding application of the Public Ethics Law (Article 40A, Annotated Code of Maryland, the Ethics Law) to University programs for providing cash awards to employees. We advise that while this type of activity is not in all instances strictly prohibited by the Ethics Law, it must reflect significant constraints designed to avoid Ethics Law issues for employees.

This request is presented by the University's College Park campus, which apparently has a practice in which individual departments may offer employees cash awards or bonuses that are paid from funds established for the purpose and having a variety of sources. This activity currently operates very informally and the process is apparently quite decentralized. If a particular unit decides that it wants to make an award or give a prize, a recommendation is made to whoever in the University controls the unit's budget. Usually award decisions are made by a committee, based on criteria varying by department and publicized by inclusion in whatever flyer or other communication is generated requesting nominations. The amount of the award, decided by individual departments, may also vary by department and be as high as $1000. Award payments are made through the University payroll system. Funds for these awards are from revolving accounts that do not include University appropriated funds. The fund accounts are also specific to a particular unit or department and may have a variety of sources, including Foundation funds transferred for general use, or other funds such as fees allowed to be collected and retained by a particular unit.

In connection with our consideration of this request, University staff have suggested possible policy guidelines, including for example, that:

— The award in question is administered by the University.

— The nomination process must be well defined and publicized with criteria formalized. All employees who meet the criteria must be considered equally.

— Blanket awards to all employees in a group cannot be made.

— A public ceremony must be held to present the award(s).

— The award is paid for from University funds; State or federal funds may not be used to support award(s); revolving or labor assistance funds must be used.

— While the funds for the award may be provided by an outside organization, including an outside organization doing business with the University, the funds must be paid to the University for subsequent award pursuant to University criteria. Employees may not solicit awards from outside organizations, nor may any outside organization influence an award in violation of the Maryland Public Ethics Law.

— Evidence that the above conditions have been met must be sent along with a one-pay card(s) to the Vice President for Academic Affairs for his review and approval.

— Formal criteria for the award and the amount of the award are approved in advance by the appropriate University authority,

— The awardee is chosen upon the recommendation of a committee whose members make their recommendation on the basis of the approved criteria.

— Any exceptions to the criteria must be approved by the President or his designate.

We have previously considered awards programs, and have also in a variety of circumstances addressed concerns presented by agency use of private funds for the benefit of agency employees. Our review of these issues has involved application of several provisions of the Ethics Law. In particular, §3-104 of the Law prohibits the use of prestige of office for one's own economic gain or that of another and §3-101 bars employees from official participation in matters in which they have an interest. Also, §3-106 of the Law bars employees and officials from soliciting any gifts or accepting gifts from private entities having certain regulatory and economic relationships with the employee or the employee's agency. Based on these provisions of the Law, the Commission has in a variety of situations advised that State employees and public officials should not receive gifts, awards, compensation or other economic benefits directly from entities with which they or their agency interact.

Other general advice given in informal advice letters and policy reviews was that State employees who deal with foundations should not receive bonus compensation or other benefits from these organizations. A general concern has been that employees should not be directly accountable for payment from private parties for doing their State jobs, particularly when the private party has regulatory, contractual or other relationships with their agency. Another concern expressed in this context is the need to ensure that funds intended by donors for more substantive program uses are not diverted to staff prizes, awards or other benefits. We have also addressed salary supplementation with these types of funds. In one situation where an association proposed to significantly supplement the salary of the State employee whose official duties significantly related to the association, concerns were expressed about the process informally and the suggestion was dropped. We also considered informally a plan for a College Foundation to substantially supplement the salary of a College official, advising that this would be barred under the Ethics Law and only allowable if the funds were found by the Attorney General to be compensation for services to the Foundation allowable under special provisions of the Education Article.

We have also specifically addressed the question of employee incentive awards. In a 1988 advisory opinion (No. 88-17), a request was presented by the Motor Vehicle Administrator, who was developing a pilot project of employee incentive awards, which were to be funded by the private sector. The plan was to establish a general pool and solicit contributions from which small tangible awards could be purchased for employee recipients. We advised that the awards, if funded from private sources, would come within the concept of gift as it is defined in §1-201 of the Ethics Law. We agreed, however, that acceptance of such items would be allowable if they were part of an established agency program and came within the constraints defined in the opinion. These constraints were designed to assure agency development and control of a program to protect against a direct relationship between honored employees and the private entities involved in soliciting or donating awards or award sources. (See also Opinion No. 81-34.)

The proposed policies provided by the University seem to reflect a significant effort to develop constraints on this process that are generally consistent with this approach. However, in view of the fact that the awards here are cash awards, great care should be taken to make sure that the provisions of the Ethics Law relating to gifts, participation and use of prestige are not violated. This includes strengthening the current monitoring and substantive controls to ensure that such programs function consistent with the Ethics Law and are not abused. The System Administration and the Board of Regents should be included in this process. Also, in order to protect against such abuse, we believe that, in addition to the plan proposed by UMCP, the following constraints and monitoring controls should be included:

(1) Any award program should be established in writing and approved in writing by a central System-wide authority.

(2) The written program should define the funding source, the eligibility and selection criteria, the award amount and the selection mechanism.

(3) Approval of an awards program should include certification by the Office of the Attorney General that the program is otherwise consistent with State law, as well as the concurrence of appropriate fiscal and personnel officials of the University System.

(4) Funding should come from sources where use for these purposes is consistent with the understanding of the funding entity and its donors.

(5) None of the recipients may have duties relating to any donor, or have duties relating to the award program.

In summary, we believe that this activity can be carried out consistent with the Ethics Law if the utmost care is used. The broader decision as to whether this type of program is appropriate for the University is a matter for the Board of Regents, the Executive and the General Assembly.

Mark C. Medairy, Jr., Chairman
   Shirley P. Hill
   Michael L. May
   Mary M. Thompson

Date: November 17, 1993

——————

1 These issues are also partly addressed in Commission Opinion No. 89-9 relating to foundations.