STATE OF NEW YORK
STATE ETHICS COMMISSION

Advisory Opinion No. 90-15: Application of the financial disclosure filing requirements of §73-a of the Public Officers Law to individuals serving in academic titles at the State University of New York and City University of New York.

INTRODUCTION

The following advisory opinion is issued in response to a request from the State University of New York ("State University"), the City University of New York ("City University"), and the employee organizations which represent individuals serving in "academic" titles.1 These organizations requested that academic employees, who would otherwise be required to file an Annual Statement of Financial Disclosure, be exempted from the requirement to file such Statement imposed by §73-a of the Public Officers Law. Pending an investigation and determination by the State Ethics Commission, those individuals were not required to file a financial disclosure statement.

Pursuant to the authority vested in the State Ethics Commission ("Commission") by §94(15) of the Executive Law, the Commission hereby renders its opinion on the application of §73-a to such State employees.

BACKGROUND

The Ethics in Government Act of 1987, effective January 1, 1989, imposed for the first time the requirement that certain State officers and employees submit Annual Statements of Financial Disclosure to the Commission. Under the definitions of §73-a, employees of the State University and the City University are among those to whom the filing requirement applies.2

Pursuant to §94(9)(k) of the Executive Law, the Commission is empowered to grant exemptions from the filing requirement

where, in the discretion of the commission, public interest does not require disclosure and the applicant's duties do not involve the negotiation, authorization or approval of:

  1. contracts, leases, franchises, revocable consents, concessions, variances, special permits, or licenses as defined in section seventy-three of the public officers law;

  2. the purchase, sale, rental or lease of real property, goods or services, or a contract therefor;

  3. the obtaining of grants of money or loans; or

  4. the adoption or repeal of any rule or regulation having the force and effect of law.

The new financial disclosure filing requirement imposed by the Ethics in Government Act was aimed, in part, at restoring the public's confidence and trust in the integrity of individuals who serve as State officers and employees. By providing required information to the Commission, much of which is available then for public inspection, the public can determine whether public servants are acting in the interests of the State and not for their own personal gain.

Representatives of the Commission met with representatives of both the State University and City University, and of each of the employee organizations representing academic employees at the Universities, to ascertain the extent to which academic employees have independence in determining whether to apply for grants of money and to whom; the percentage of academic employees who applied for such grants in 1988; the oversight, if any, which the State University Research Foundation and its City University counterpart has over the application for, negotiation and expenditure of grant money received by the University; the controls, if any, against conflicts of interest by grant recipients in relation to the research, its product and the grant provider; and, the reporting requirements which academic employees have to the University(ies).

In addition, the Commission considered procedures or rules which the State University or City University have concerning the topic of conflicts of interest in the academic setting.

Both State University and City University and the employee organizations stated that very few other states impose such a statutorily defined financial disclosure requirement. To require it in New York, they argued, would place the State University and City University at a competitive disadvantage in trying to attract the best talent to serve, considering that each University recruits nationwide and other universities have no such requirement.

After a full review of the material and information submitted, the Commission has determined that it will not require academic employees to file the Annual Statement of Financial Disclosure as required by §73-a of the Public Officers Law. However, it will require that academic employees of the State University and City University file an annual statement described below which shall include information about outside activities, outside interests and employment and honoraria.

The State of Illinois, along with California, are two states which statutorily subject their academic employees to regulation of conflicts of interest laws, much in the way New York does. C. Kristina Gunsalus, Associate Vice-Chancellor for Research at the University of Illinois at Urbana-Champaign, writes:

Potential conflicts of interest don't disappear simply because they go unacknowledged. On the other hand, discovering potential conflicts need not result in the termination of entrepreneurial activities. On the contrary, with appropriate protective mechanisms and safeguards, some arrangements may become possible that would otherwise be untenable. In this way, dealing openly and directly with potential conflicts can improve the flow of technology and protect both individuals and constitutions . . . To minimize the risks, institutions must have -- and enforce -- a conflict of interest policy. If such a policy is to work, it must include a thorough reporting and disclosure program. . . . But it is extremely difficult for the most honest and upright of scholars to acknowledge their own conflicts for what they are. The most important single step an institution can take is to sensitize its faculty and administrators to the possibilities of conflict, and to provide them with the tools and examples they will need if they are to recognize it and rationally weigh the risks.3
The Commission recognizes that academic employees comprise a unique category of employee. But, considering the intent of the Ethics in Government Act, which imposed new restrictions on business and professional activities and continued the code of ethics, the Commission concludes it is essential for the City University and State University to require that certain financial information be reported by academic employees.

STATE UNIVERSITY and CITY UNIVERSITY POLICY

Employee organizations, representing State University and City University academic employees, and the Universities argue that only a small percentage of the institutions or academic employees apply for research grants each year. The Commission investigated this issue because of the possibility that the application and negotiation of research grants of money would prohibit the granting of an exemption under §94(9)(k) of the Executive Law.

Although academic employees of State University and City University must conduct research as part of their professional responsibility, the required research does not mandate the procurement of research grants.4 In fact, much research can be conducted without the need for such grants of money.

According to the facts provided to the Commission, while 24.2 percent of the teaching faculty in the State University system applied for external funding, only 21.5 percent were supported in part by sponsored program grants and contracts during Fiscal Year 88-89; 35.4 percent of the faculty on the doctoral campuses received such support, while only 7.6 percent of the faculty on the university colleges did.5

In the City University system, an average of 18 percent of the teaching faculty apply annually for funding, including about 30 percent of the faculty at the senior colleges and graduate center. Of those applying, 19 percent received external funding. The statistics bear out the contentions of the parties that a small percentage of the total faculty apply for such grants; and, even a smaller percentage receive them.

Further, a faculty member at each University cannot apply on his or her own behalf for a research grant.6 The application must not only be approved by the department, or other academic review at the college or University; it must be processed through the Research Foundation for each respective institution. The Research Foundation, in each case, is a not-for-profit corporation, which serves as the fiscal agent for the respective University.7 The application is approved and filed by the Research Foundation, although the academic employee is instrumental in discussing the application, negotiating its allocated amount and reaching a final appropriate budget with the granting agency.

The application for a grant of money is an application for money to come to the State--even though, for fiscal convenience, the money flows through the Research Foundation.8 This method of fiscal process is utilized to allow a freer ability of faculty at these Universities to appropriate and utilize the grant money without going through the procedures required by the State Finance Law and the Comptroller for the expenditure of appropriated State funds.

One important point which the Commission has considered is that a large portion of the grant money received by these institutions is received from federal government agencies. In this regard, the federal government demands some accounting for the expenditure of the grant; however, its oversight does not presently extend to conflicts of interest which may occur. There has been ongoing debate about this issue in Congress and at the National Institute of Health, although no policy has been promulgated to this point.

It should be noted that the City University has implemented a Conflict of Interest Policy Statement, containing guidelines concerning conflict of interests applicable to funded activities. (Policy 522, issued 3/12/81, attached at Appendix B.)

WHAT OTHER UNIVERSITIES DO

Much of the literature available, addressing "conflicts of interest" in the university setting, defines the term to include the situations when an academic employee is or may be in a position to influence the university business, research or other decisions in ways that could lead to any form of personal gain for the academic staff member or his or her family, or give improper advantage to others to the university's detriment.9
The term conflict of interest in science refers to situations in which financial or other personal considerations may compromise, or have the appearance of compromising, an investigator's professional judgment in conducting or reporting research. . . . Such conflicts become detrimental when the potential rewards, financial or otherwise, cause deviation from absolute objectivity in the design, interpretation, and publication of research activities or in other academic and professional decisions.10
A "subset" of the definition of conflicts of interest is usually made in the definition of "conflicts of commitment," which exist when the external or other activities and undertakings of an academic staff member are so substantial or demanding of the staff member's time and attention as to interfere, or appear to interfere, with the individual's responsibilities to the unit to which the individual is assigned, or to students, or to the University.11
The term conflict of commitment relates to an individual faculty member's distribution of effort between obligations to one's academic appointment and one's commitment to "outside" activities. These latter may include professionally-related and generally encouraged activities such as consulting, textbook authorship, involvement with professional societies, and participation on review panels.12 . . . A conflict of commitment arises when these or professionally removed activities (e.g., outside teaching or business) come to interfere with the paramount obligations to students, colleagues, and the primary missions of the academic institution by which one is appointed and salaried.13
In the Spring of 1988, a survey was conducted of 392 Deans whose institutions are affiliated with the Council of Graduate Schools, as part of a project on professional values and ethical issues in the graduate education of scientists and engineers.14
The data indicate that half of the institutions have had no reported instances of conflict of interest or commitment, while 39% have had one to five. Conflict of interest or commitment appears to be strongly associated with research intensiveness and level of external funding. Of 55 institutions receiving more than $50 million research funding annually from external sources, 69% reported that one or more instances of alleged faculty conflict had occurred during the last five years. This contrasts markedly with the incidence of 80 institutions receiving less than $5 million in external research funding, where only 25% reported instances of possible faculty conflict of interest/commitment.15
According to the survey, the majority of reported instances of conflict of interest/commitment are investigated. The proportions of institutions which followed up every reported case were 49 percent for public institutions and 69 percent for private institutions.

Most institutions responding, irrespective of type, have policies that govern faculty consulting or conflict of interest. In the case of faculty conflict of interest/commitment, public institutions are more likely to show levels of activity.

We would not interpret this as an indication that public institutions are somehow more ethical than private, but that their public accountability requires them to deal with these issues in a more open way.16
The Deans' responses indicate that, although the number of reported ethical problems is relatively low, most institutions are attempting to deal with misconduct, conflict of interest and conflict of commitment, both in terms of policy development and investigation of alleged incidents.17

As the authors of the survey note, the existence of university policies does not guarantee ethical behavior or provide certainty that problems will be recognized and dealt with appropriately. Policies may, however, provide an environment for improving institutional influence over behavior by raising awareness of ethical standards and controlling those who deviate from standards. At a minimum, a clear requirement for certain financial disclosure would enable academic administrators to assess the effect of outside activities on the individual's ability to carry out university obligations.

CONCLUSION

The Required Filing.

The Commission concludes that academic employees will not be required to file the Annual Statement of Financial Disclosure set forth in §73-a of the Public Officers Law. In reaching this conclusion, the Commission considered the nature of an academic institution which differs from government in general; the fact that a minority of academic employees actually file for or receive research grants of money; and the public interest does not require such complete disclosure from academic employees.18

A technical argument could be made that the negotiation and application for research grants of money would require the filing of the complete Annual Statement of Financial Disclosure. The Commission does not think that the public interest requires that complete filing--considering the number of applications for such grants and the policies of universities across the country.

However, the Commission determines that it is in the public interest that a general disclosure filing be required for covered academic employees. Furthermore, given the potential for actual or apparent conflicts of interest by an academic employee who applies for a research grant, particularly where he or she may be involved in outside employment or have certain outside interests, additional disclosure will be imposed as described below.

In January, 1989, when the Commission promulgated its rules and regulations on the procedure governing requests for exemption from filing a financial disclosure statement, it took into consideration the possibility that the public interest might not require filing of the §73-a statement in all cases. (19 NYCRR Part 935.) Part 935.3(d)(3) states:

Where the Commission determines that it is in the public interest to require that an individual file a financial disclosure statement even though the duties may not exclude an exemption, or where the Commission determines that the duties of a position require the filing of a disclosure statement and the requirement to file the disclosure statement as set forth in §73-a of the Public Officers Law may not be in the public interest, the Commission may require the individual(s) to file a short form financial disclosure statement which shall contain only that information from the financial disclosure statement required by §73-a which the Commission determines is appropriate and necessary for that title or job classification.
Implementation of the short-form reporting requirement described below will benefit both the Universities and the academic employees and satisfy the public interest that some disclosure occur in this area. Reporting will help shape a response to the potential concern that public resources may be used for private gain. Providing this information will serve the public interest in knowing that academic employees are motivated in their State positions by public purposes and not personal benefit. Recent press coverage concerning the potential for conflicts and actual conflicts, arising from research, and the use of such research grants for personal gain highlight the need for disclosure by academic employees of certain financial information.19

The Content.

The Commission will require academic employees at both City and State University who earn compensation at an annual rate greater than the filing rate set by §73-a (this year, $53,171) to file annual statements with their appointing authority at the University, which shall contain information similar to question 13 of the Annual Statement of Financial Disclosure, pertaining to the academic employee only. Although the Commission's requirement will extend only to those employees who earn in excess of the filing rate, the Commission recommends to the Universities and employee organizations that they consider extending the requirement to all academic employees.

In addition, each faculty member who applies for a research grant shall, at the time the request for University approval is submitted, provide additional information to his or her appointing authority, which shall include information similar to that requested in questions 4, 5, and 16.

One employee organization suggested that, instead of the more generalized listing of information, which the Commission may impose, a "transactional" disclosure be made. The Commission considered the suggestion and decided not to adopt it. Transactional disclosure depends solely on the filing individual knowing what his or her holdings are, and that such holdings may result in a conflict. Today, one may not know the extensive involvements of large corporations or conglomerates in which he or she may have interests. Appearances of conflict may be as much of a problem, if not more so, than actual conflicts. The fact that one does not know that a holding may have a conflict does not relieve him or her from responsibility. The Commission believes it is preferable to establish a filing requirement and thereby avoid the mishap of the failure of knowledge of the extent of one's holdings.

The Commission will not require the reporting of the "category of value" with respect to any of the information sought. Pursuant to §94(17)(a)(1) of the Executive Law, categories of value are deleted from the forms of those State officers and employees which the Commission makes available for public inspection.20 The Commission does not believe that the reporting of the "category of value" is necessary for these reports to the State or City University. In the area of research grants, if the question of a conflict is raised, the amount or value of a particular holding would be incidental. The purpose of the filing is to determine whether the academic employee or his or her spouse may personally gain from the research in ways that are not permissible. Revealing the conflict, or revealing that there is not a conflict, is what is important.

The Commission shall provide each University with the content of the disclosure required to be filed.21 Both Universities, in consultation with the Commission, may work within existing procedures to implement the required reporting. These statements shall be filed with the appropriate appointing authority or his or her designee.

The Commission recognizes that the Universities follow a different calendar from other State agencies. Therefore, for 1990, the general filing shall be due within thirty days after the forms are distributed by each campus. In subsequent years, the general filing will be due within thirty days of commencement of the fall semester at each campus. The required disclosure related to grant application shall be made by individual academic employees when they apply for a grant.

Review and Enforcement.

Based upon its review of the required filings, the appointing authority at each University shall be responsible to ascertain whether any conflict or potential conflict of interest exists for that faculty member. If he or she believes such a conflict exists, it should be reported to the Commission for appropriate action.

The Universities should monitor the receipt of the disclosure statements from the academic employees required by this opinion. The academic community is unique, and research shows that universities would in the best position to understand and judge the conduct of its employees. Should the Commission receive any information concerning university-related conflicts, it still would have the authority to investigate and dispose of the complaints accordingly.

The filing required in this opinion will satisfy the requirements of §73-a of the Public Officers Law for academic employees required to file. Individuals who fail to file the required information with the Universities, or who file a deficient statement, shall be subject to the same penalties provided in §94 of the Executive Law for the failure to file an Annual Statement of Financial Disclosure under §73-a. The Universities shall notify the Commission of such failures to file or deficient filings, and the Commission shall proceed as it would for other State employees required to file.

This procedure will be placed into effect by the Commission for a two year period, commencing September, 1990 until August, 1992. At that time the Commission will determine if the procedure is effective, and, if so, will issue permanent rules and regulations to continue it.

This opinion, until and unless amended or revoked, shall be binding on the Commission in any subsequent proceeding concerning the individual who requested the opinion and who acted in good faith, unless material facts were omitted or misstated.

All concur:

Elizabeth D. Moore, Chair

Angelo A. Costanza
Norman Lamm
Robert B. McKay, Members

Dated: June 21, 1990


ENDNOTES

1. "Academic" titles include, among others, the faculty ranks of professor, associate professor, assistant professor, instructor, lecturer, and all of the foregoing whose appointments contain such terms as research, adjunct, visiting, or clinical.

The employee organizations include United University Professions ("UUP"), which represents academic employees in State University of New York and Professional Staff Congress ("PSC"), which represents academic employees in the City University of New York. Both organizations are affiliated with the New York State United Teachers, which also appeared in support of UUP and PSC.

Academic employees would be required to file, assuming no exemption was granted, only if (1) for the first year in which a financial disclosure filing was imposed, they received annual compensation in excess of $30,000, or (2) for the second year in which filing was imposed, they earned annual compensation at the rate of $53,171 as of April 1, 1990. None of the individuals serving as academic employees at either university was designated as serving in a policy-making position.

2. 73-a(1) provides . . .

"(b) The term `state agency' shall mean any state department, . . . or the state university of New York or the city university of New York, including all their constituent units except community colleges and the independent institutions operating statutory or contract colleges on behalf of the state.

"(c) The term `state officer or employee' shall mean: . . . (ii) officers and employees of state departments, . . . or other state agencies, who receive annual compensation in excess of the filing rate established by paragraph (l) of this subdivision [thirty thousand dollars, originally; now, the salary rate of SG 24, or $53, 171 as of April 1, 1990] or who hold policymaking positions, as annually determined by the appointing authority . . ."

3. Gunsalus, C.K., and Rowan, J. "I Know It When I See It: Conflict of Interest in the University Setting" University of Illinois at Urbana-Champaign, p. 2. (undated).

4. See, e.g., the Policies of the State University Board of Trustees, 8 NYCRR Part 336.

5. Fiscal Year 1988-89 was selected because it is the first reporting year for financial disclosure under the Ethics in Government Act of 1987.

6. See Appendix A for policies of the SUNY Research Foundation.

7. The Research Foundation of State University of New York, Inc., and the Research Foundation of the City University of New York, Inc.

8.The State Finance Law recognizes the procedure for the Research Foundation of State University to act as its fiscal agent. The policy of the State is to support this method of receipt of research dollars, as employees of the Research Foundation are expressly permitted to participate in the State retirement systems. State Finance Law, §53-a; Retirement and Social Security Law, §31.

9. See Ikenberry, S., "Interim Guidelines and Procedures on Conflicts of Interests Policies," University of Illinois, April 1988.

10. "Guidelines for Dealing with Faculty Conflicts of Commitment and Conflicts of Interest in Research," Association of American Medical Colleges, (February 1990), p. 6.

11. See Ikenberry, S., "Interim Guidelines and Procedures on Conflicts of Interests Policies," the University of Illinois, April 1988, p. 4.

12. Such activities are usually expected of faculty members to promote professional development and to enrich their contributions to the institution, to their profession, and to the community. [footnote within text]

13. "Guidelines for Dealing with Faculty Conflicts of Commitment and Conflicts of Interest in Research," Association of American Medical Colleges, February 1990, p. 6.

14. Louis, K., Swazey, J., and Anderson, M. "University Policies and Ethical Issues in Research and Graduate Education"; unpublished paper available from the authors. Usable surveys numbered 259.

15. Swazey, J., Louis, K., and Anderson, M. "University Policies and Ethical Issues in Research and Graduate Education: Highlights of the CGS Deans' Survey," CGS Communicator, Volume XXII, No. 3, p.3.

16.Louis, K., p. 23.

17. Louis, K., p. 26.

18. It must be noted that certain administrative employees of both State University and City University are required to file the Annual Statement of Financial Disclosure as required by §73-a. This Advisory Opinion does not affect that requirement. And, the Commission believes that the duties and responsibilities of such administrative employees are similar in terms of policy or activity to other State officers or employees to warrant such filing.

19. See, e.g., the recent Albany Times Union coverage of a research-related conflict of interest situation involving a State University professor, and the television program "Sixty Minutes" concerning the potential for private gain from University-sponsored research on retin-a and its use.

20. The State Ethics Commission is specifically exempted from the application of the Freedom of Information Law. (§94(17)(a) of the Executive Law.)

21. See Appendix C for a proposal for the content of questions imposed by the Commission to be completed by academic employees, as described.


APPENDIX A

Extracts from the SUNY Research Foundation manual indicate that all applications for sponsored programs are made by the State University of New York through the Research Foundation of the State University of New York, a private non-profit corporation, pursuant to the Agreement between SUNY and the Foundation. Endorsing designees (an individual designated by the campus administrative officer and approved by the Research Foundation) are responsible to ensure all applications are in accordance with Research Foundation, SUNY and sponsor policies. Applications are signed by endorsing designees from both the campus and the foundation.

SUNY Central Administration must review and approve applications which (1) commit matching funds in excess of $50,000 from the current operating budget; (2) commit a future university operating budget.

In compliance with federal regulations, the Foundation's Board of Directors developed a "Conflict of Interest Statement."

Extracts from the SUNY Research Foundation manual indicate that contracts, sub-contracts and other sponsored program documents requiring negotiation and/or acceptance by the Research Foundation of sponsored programs terms and conditions are negotiated and executed by the Campus in accordance with Research Foundation, SUNY and sponsor policies. In compliance with federal regulations, the Foundation's Board of Directors developed a conflict of interest statement.

The campus has the authority to negotiate and execute contracts, sub-contracts and other sponsored program documents requiring the negotiation and/or acceptance by the Research Foundation of terms and conditions, except for the following: Contracts, subcontracts or other documents . . . which will result in a total award of $1,000,000; any document involving an international program; any document requiring the signature of a specific research foundation official, such as a corporate officer or certification by a research foundation attorney; any contract, sub-contract or other sponsored program document which contains clauses of which differ from the intent of the RF standard approved clauses; and, leases.


APPENDIX C

QUESTION FOR ALL COVERED ACADEMIC EMPLOYEES

Question similar to Question 13:
List below the nature and source of any outside employment and sources of honoraria, consultant or lecture fees, whether public or private, for the academic year 1989-1990 and anticipated for the academic year 1990-1991. DO NOT LIST AMOUNTS OF SUCH ITEMS UNLESS OTHERWISE REQUIRED BY THE UNIVERSITY.

QUESTIONS FOR GRANT APPLICANTS

Question similar to Question 4:
List any office, trusteeship, directorship, partnership, or position of any nature, whether or not compensated, held by you or your spouse with any firm, corporation, association, partnership or other organization other than the [State/City] University or State of New York.
Question similar to Question 5:
List name and description of any employment or occupation of spouse.
Question similar to Question 16:
List name of warrants or stocks, investment interests in limited or general partnerships owned by you or your spouse or both at time of filing for research grant. DO NOT LIST AMOUNTS OF SUCH ITEMS UNLESS OTHERWISE REQUIRED BY THE UNIVERSITY.