A Local Government Association Board Member's Possible Conflicts

According to an article yesterday on seacoastonline.com, a committee of the Select Board of North Hampton, NH (pop. 4,500) brought to the Select Board its concern about the town administrator dealing with health insurance issues when he was on the board of the state's Local Government Center, a local government association that makes available to towns in the state a health insurance plan, among other services. The concern was whether the administrator could be "objective in his investigation of alternatives to that organization handling the town's health care benefit program."

The Select Board decided that there was no conflict. "On the contrary," the Board wrote, "we feel fortunate that [the administrator] has voluntarily decided to spend the extra time and effort to represent the interests and concerns of the town of North Hampton."

There is an apparent conflict in this situation. There is also a potential conflict. But why is it not an actual conflict? And how should it be handled?

A local government official's obligation is to get his government employees the best price for the level of insurance determined by the government. Does the board member of a local government association have a conflicting obligation? For example, is it a board member's obligation to get as many local governments as possible signed up for its insurance plans, so that the organization can prosper? Not really. Such a board member should be representing its government on the board, and the government representatives on the board should be seeking to create the best-priced insurance plans that would be sustainable. They are there not to represent the association against their governments, but to represent their governments to make the association work for them.

As long as the board member is representing its government on the board, and not the association's interests separate from the governments, there is no actual conflict. If, however, an administrator were to prevent other insurers from bidding on her town's insurance plan, that would be evidence that the administrator was favoring the association's interests over the town's.

A Built-in Conflict
The apparent conflict here is an odd one. An official on the board of a local government association gets no concrete benefit from this position. And the local government stands in a different position vis à vis a local government association than it does with other nonprofits doing business with the government, because the government is not simply a purchaser, but a member that helps determine what the services are and how much they will cost. By its very nature, a local government association cannot have an arm's-length relationship with a local government. Generally, conflict laws are intended to prevent relationships that are not arm's-length, but there are such relationships that are beneficial to a government. And this is one. The relationship has a built-in conflict, but it is not harmful to the local government, at least by its nature.

By having a board member, a town actually has more control over its vendor than it otherwise would. So as long as an official is representing the best interests of her government, as she should be, since that is her only reason for being on the board, then there is no conflict that could be harmful to the public or to its trust in its government officials.

Possible Problems
But it's important to be realistic. Anyone who gets involved in an association of her professional peers can get carried away not only with the interests of the association, but also with her position in her professional community. For example, a town administrator might use her position on the board to be recognized by her peers in larger towns and cities in the state, so that when a higher-paying position opens up, she will be more likely to be recommended for it, and chosen. An elected official might use his position on the board to garner support from other elected officials in the state to help further his political career at the state level. And every organization has its own internal forces that create feelings of loyalty that can conflict with an official's obligations to her town.

However, these are not conflicts that should lead to the administrator's recusal in the North Hampton situation. The local government association is not an independent organization seeking a contract with the town, but rather a membership organization in which the town itself has special influence. One must assume that one's representative on the board of the organization, whether an appointee or elected official, is representing the town's interests on the board.

A Different Angle
A different angle on this situation can be seen by what happened in my own town a few years ago, when I discovered the opposite problem. Our first selectman, who had responsibility for bidding out contracts, allowed the specifications of a non-health insurance bid to exclude the state local government association's insurance plan, even though he sat on its board (and it was the least expensive insurance plan available). Even his board position did not cause him to put the interests of his town first. His act of favoritism went against what might be perceived as a conflict. What is important is that this favoritism, which did not benefit himself personally (although possibly others), harmed the town.

This would also be the case if the administrator were to favor the association's health plan in a way that harmed the town. It would not be due to a conflict, but rather due to favoritism that was harmful to the town, favoritism that was either due to institutional pressures and loyalties or to furthering his own career.

Dealing Responsibly with the Apparent Conflict
It's important to distinguish between actual conflicts and situations that might appear to be conflicts, but are not. Not only is this fair to officials, but it educates them about what conflicts of interest are. However, even situations that are not conflicts, but might appear to be, need to be handled responsibly.

The best way to deal with this potential, but unlikely problem is to have someone ensure that the specifications for the health insurance bid are neutral, and to handle the bid with the utmost transparency. Since the administrator is not likely an insurance expert, some neutral professional should be involved anyway. It would be best if the administrator did not select the insurance consultant who would be looking over his shoulder. That would provide sufficient protection to the town.

Robert Wechsler
Director of Research-Retired, City Ethics

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