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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 5685

April 9, 1980

MENTAL HEALTH:

Community mental health boards

PUBLIC OFFICES AND OFFICERS:

Conflict of interest

Members of a county community mental health board may not serve as members of a nonprofit corporation which leases property to the county community mental health board. This statutory prohibition may not be avoided through disclosure of the interest, abstention from voting and approval of the lease or contract for rental by more than two-thirds of the full membership of the board.

The Department of Mental Health may determine that such lease or rental contract is in violation of the Mental Health Code and may withhold state funds to pay the state share of such lease or rental expense.

Dr. Frank M. Ochberg

Director

Michigan Department of Mental Health

Lewis Cass Building

Lansing, Michigan 48926

Your predecessor in office has asked my opinion on the following questions:

1. May members of a county community mental health board also serve as members of a non-profit corporation that leases/rents property to the county community mental health board?

2. If an individual in a dual board membership position were to abstain from voting on issues affected by the dual membership, would this resolve any potential conflict of interest question?

3. May the Department of Mental Health legally withhold State funding of a county community mental health program if it is determined that the county fails to comply with established standards for State financial support or it has been determined by the Department that a conflict of interest regarding board membership exists?

4. May the Department of Mental Health withhold funding if the community mental health board or the county commissioners do not take action to resolve what the Department presently feels is a conflict of interest?

5. May the Department of Mental Health withhold funding and thus curtail county community mental health programming if it believes the community mental health board is acting in a manner which has been determined to be in conflict with a section of (Mental Health Code)?'

1974 PA 258; MCLA 330.1001 et seq; MSA 14.800(1) et seq; is known as the Mental Health Code. In 1974 PA 258, supra, Sec. 222(3), the Legislature has provided:

'A board member shall have his primary place of residence in the county he represents. An employee of the department, an employee of the county program, or an employee or representative of an agency having a contractual relationship with the county program may not be appointed to serve on a board.' (Emphasis added)

This provision of the Mental Health Code, supra, was construed in OAG, 1978-1979, No 5408, p ___ (December 18, 1978), to prohibit a community mental health board from contracting with an agency when a member of the community mental health board is an employee or representative of that agency. In this opinion it is stated:

'A statute must be construed to effectuate its spirit and purpose. Aikens v Department of Conservation, 387 Mich 495, 499; 198 NW2d 304, 306 (1972). The purpose of 1974 PA 258, supra, Sec. 222 is to prevent a person who represents one party to a contract from attempting to represent the interests of the other party at the same time. When a contractual relationship already exists between a community mental health board and another agency, the statute prohibits the appointment of an employee of that agency to the board. To effectuate its purpose, Sec. 222 must be read to also prohibit the board from entering into a contract with an agency when a member of the board is already an employee of the agency.'

It is, therefore, my opinion in response to your first question that members of a county community mental health board may not serve as members of a nonprofit corporation which leases rents property to the county community mental health board.

In response to your second question, consideration must be given to 1968 PA 317, Sec. 3; MCLA 15.323; MSA 4.1700(53), which permits a county officer working less than an average of 25 hours per week to have an interest in a contract if his or her pecuniary interest in the contract is disclosed and the contract is approved by a vote of two-thirds of the full membership of the approving body without the vote of a member thereof making such disclosure. While this statute would suggest that a member of a county community health board may have an interest in a contract with the board if he discloses his interest and the board approves the contract by two-thirds vote, without the vote of the member making such disclosure, it must be noted that 1968 PA 317, Sec. 3, supra, is in conflict with 1974 PA 258, Sec. 222(3), supra. The later statute, 1974 PA 258, Sec. 222(3), supra, must prevail.

It is, therefore, my opinion in response to your second question that a county community mental health board may not contract with a nonprofit corporation, agents of which are members of the county community mental health board, even though such members disclose their interest, abstain from participating in the decision-making process relative to the contract and the contract is approved by a vote of two-thirds of the membership of the county community mental health board.

Your last three questions, relate to the circumstances under which state financial support may be withheld from the county mental health program. 1974 PA 258, supra, Secs. 202 and 242 are applicable to those questions. They provide as follows:

'Sec. 202. The state shall financially support, in accordance with chapter 3, county community mental health programs that have been established and that are administered pursuant to the provisions of this chapter.

'Sec. 242. The following expenditures by a county program are not eligible for state financial support:

'(a) The construction, purchase, remodeling, or any similar capital cost of a building or facility, except that such cost shall be eligible for state financial support on an annual expense basis in an amount equal to a fair rental value of the space or building being utilized.

'(b) The capital cost of equipment or similar items in an amount greater than that established by the department.

'(c) Any cost item that does not represent or constitute a real or actual expenditure by the county program.

'(d) That part of any expenditure that is obviously and manifestly extravagant in relation to its specific objective and context.

'(e) Any category of expenditure or any portion of any category of expenditure whose ineligibility the department shall determine is necessary and appropriate to assure the reasonable use of state funds or to assure a legitimate interest of the state and which determination is in accord with the intent and provisions of this chapter. This subdivision shall be effectuated by officially adopted rules of the department.' [Emphasis supplied]

It is evident that the State has an obligation to provide financial support for county community mental health programs. Section 242 enumerates those expenditures by a county program which are not eligible for State financial support. The Department has effectuated the statutory provision by promulgating an administrative rule which states in part:

'Programs ineligible for state financial support.

'A program ineligible for state financial support shall include:

(b) Programs and services which directly or indirectly violate the act and the rules promulgated thereunder.' 1979 AACS, R 330.2058

The contractual arrangement in question falls within the prohibition of 1974 PA 258, Sec. 222(3), supra. Thus, the Department may determine that the expenditure of monies to pay the lease rentals is not a reasonable use of state funds and is contrary to a legitimate interest of the state in accordance with 1974 PA 258, Sec. 242, supra, and Rule 2058.

Under such circumstances, 1974 PA 258, supra, Sec. 236 is applicable. It provides in pertinent part as follows:

'The department may withdraw funds that have been allocated to a county program when such funds are being expended in a manner not provided for in the approved plan and budget.'

This provision of the Mental Health code was construed in OAG, 1980-1981, No 5665, p ___ (February 22, 1980). In view of the foregoing, the Department may withhold funds that have been allocated to pay lease rentals which the Department has determined to not constitute a reasonable use of state funds and are contrary to a legitimate interest of the state. It should also be noted that in 1974 PA 258, supra, Sec. 238, the legislature has provided that if a county director or board 'specifically so requests,' any action by the Department involving, inter alia, a withdrawal of funds 'shall be reviewed in consultation with the affected county director of board before such action shall be considered final,' and that at the consultation 'the representative of the county program shall be afforded full opportunity to present his position.'

It is therefore my opinion, in summary, that members of a county community mental health board may not serve as members of a nonprofit corporation that leases/rents property to the county community mental health board and that the Department may withhold funds allocated for such purposes.

Frank J. Kelley

Attorney General


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