Grant Administration: Section 4.6 Conflict of Interest

CDFA policy requires that conflicts of interest on CDBG projects be disclosed. These requirements apply to the procurement of supplies, equipment, construction services and professional services, the acquisition or disposition of real property, and providing direct benefits to municipal officials, sub-recipient officials, or persons administering the CDBG project. Federal and state guidelines stipulate that no person who performs any CDBG function or who has any CDBG responsibility, who is in a decision-making position, or who has inside information may obtain a financial interest or benefit from an activity funded in whole or in part with CDBG funds. 24 CFR §570.611 and 24 CFR §570.489(h)

In general, a conflict of interest would exist if any municipal employee or a person in a program decision-making capacity signs a contract funded with any portion of the CDBG State Program – including rehabilitation and consulting. This follows from the municipality’s signed assistance agreement and from HUD regulations at 24 CFR §570.611.

In certain circumstances, CDFA may waive conflict of interest if specific criteria are met:
1. A disclosure of the nature of the conflict, including an assurance that there has been public disclosure of the conflict and a description of how the public disclosure was made.
2. A legal opinion (from local Counsel) is submitted stating that the potential for conflict of interest is minimal and that the situation does not violate either local or state conflict statutes or rulings.
3. The person applying for the waiver meets other program requirements. For example, low/moderate income guidelines for housing rehabilitation.
4. The person applying for the waiver is not in a decision-making position in the CDBG Program, either with the municipality or sub-recipient.
5. The municipality must certify to all of the above, and also demonstrate that a system has been established to guarantee that no preferential treatment to the applicant has occurred. This might require a numbered and dated system for accepting and processing applications, for example.
6. Finally, the municipality must submit a formal request to CDFA seeking a waiver of conflict of interest requirements based on the above criteria. The waiver request should describe the circumstances for all five elements above. See  Attachment 4-12: CDFA Waiver Request Form  for the CDFA Waiver Request Form.

After review of the supporting documentation, if CDFA agrees that the potential for conflict of interest is minimal and if the applicant meets the above criteria for a waiver, staff will recommend approval.

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