1. Ethical Disclosures REGION 20 EDUCATION SERVICE CENTER [Wednesday, March 2, 2016]

2. Disclosure of Interested Parties REGION 20 EDUCATION SERVICE CENTER [Wednesday, March 2, 2016] Texas Government Code Section 2252.908 added by House Bill 1295

3. HB 1295 Beginning January 1, 2016, a governmental entity may not enter into a contract with a business entity that, (1) requires an action or vote by the governing body of the entity before the contract may be signed; or (2) has a value of at least $1 million, unless the business entity submits a disclosure of interested parties to the government entity at the time the business entity submits the signed contract. School board by itself School board with an Educational Consultant Search Firm 1 © WALSH GALLEGOS 2016

4. What is a business entity? A business entity is defined in the statute as: “any entity recognized by law through which business is conducted, including a sole proprietorship, partnership, or corporation. The term does not include a governmental entity or state agency. 2 © WALSH GALLEGOS 2016

5. Applicability to School Districts HB 1295 applies to school districts when: the board takes action on a contract with a business entity; or a contract with a business entity has a value of at least $1 million. 3 © WALSH GALLEGOS 2016

6. Applicability to School Districts HB 1295 applies to school districts when: the board takes action on a contract with a business entity; or A contract does not require an action or vote by the governing board of a governmental entity if: (1) the governing body has legal authority to delegate to its staff the authority to execute the contract; (2) the governing body has delegated to its staff the authority to execute the contract; and (3) the governing body does not participate in the selection of the business entity with which the contract is entered into. See Board Policy CH(LOCAL) to determine what authority has been delegated by the Board in your District. a contract with a business entity has a value of at least $1 million. 4 © WALSH GALLEGOS 2016

7. District’s Responsibilities After receiving the signed and notarized copy of the disclosure form and the signed contract, the District must acknowledge receipt of the disclosure form not later than the 30th day after the date the contract binds all parties to the contract. After being acknowledged by the District, the Ethics Commission is required to post the electronically filed disclosure on its website within 7 business days. 5 © WALSH GALLEGOS 2016

8. Conflict of Interest REGION 20 EDUCATION SERVICE CENTER [Wednesday, March 2, 2016] Texas Government Code Chapter 176 as amended by House Bill 23

9. Reporting Requirement A Local Government Officer (“LGO”) must file a conflicts disclosure statement if the LGO has an employment or other business relationship with a vendor that results in the LGO (or their parents and children): Receiving taxable income (other than investment income) that exceeds $2,500; Receives gifts that have an aggregate value of more than $100 during the 12-month period before the date the LGO becomes aware that: The District has entered into a contract with the Vendor, or The District is considering entering into a contract with the Vendor; or Has a family relationship with an LGO. 1 © WALSH GALLEGOS 2016

10. Definitions Members of the Board of Trustees, the Superintendent and an agent or employee who “exercises discretion in the planning, recommending, selecting, or contracting” with a Vendor are all Local Government Official’s. A “gift” is a benefit offered by a person, including food, lodging, transportation, and entertainment accepted as a guest. The term does not include a benefit offered on account of kinship or a personal, professional, or business relationship independent of the official status of the recipient. A “family relationship” is a relationship within the third degree by consanguinity (blood) or the second degree by affinity (marriage) 2 © WALSH GALLEGOS 2016

11. Exceptions to the Reporting Requirement Political Contributions. Food accepted as a guest. “As a guest” means the Vendor has to be present. Previously, the exception was for food, lodging, transportation or entertainment accepted as a guest. Benefit offered on account of kinship or a personal, professional, or business relationship independent of the official status of the LGO. 3 © WALSH GALLEGOS 2016

12. Filing Issues If a LGO is required to file a disclosure, the LGO would file Texas Ethics Commission’s Form CIS, and provide it to the District’s Records Administrator. Filing is required not later than 5:00 PM on the seventh business day after the date the LGO becomes aware of the facts that require the filing of the Statement. A district that maintains a website, shall post on its website any disclosure statements required to be filed with the records administrator. 4 © WALSH GALLEGOS 2016

13. Penalty? For failing to File the Conflicts Disclosure Statement If the contract amount is less than $ 1 million: Class C Misdemeanor (Fine not to exceed $500). If the contract amount is at least $ 1 million but less than $ 5 million: Class B Misdemeanor (Fine not to exceed $2,000 or jail not to exceed 180 days, or both). If the contract amount is $ 5 million or more: Class A Misdemeanor (Fine not to exceed $4,000 or jail not to exceed one year, or both). The District may reprimand, suspend or terminate the employment of an employee who knowingly fails to comply with these requirements. 5 © WALSH GALLEGOS 2016

14. Items to Consider Q: The school district’s educational foundation puts on an annual golf tournament as a fund raising event. The primary donor to the tournament is an accounting firm the school district does business with. Other school district Vendors (engineers, architects, contractors, etc.) make a donation to play in the event. The accounting firm makes a donation on behalf of employees of the school district so the employee plays for free. Do the school district’s employees have to report the value of the golf game? A: Unknown. Arguably the “gift” is from the educational foundation, not a Vendor, so it wouldn’t have to be reported. However, if the accounting firm is paying for the golf game, it is an indirect gift. Until there is clarification from the Texas Ethics Commission or the Texas Attorney General, report the entertainment. 6 © WALSH GALLEGOS 2016

15. Items to Consider Q: Several times a year, one of the school district’s Vendors delivers breakfast tacos, cookies and other sweets to a school. The treats aren’t to a specific person and are placed in a common area for any administrator or teacher to eat. The Vendor is not present. Do the school’s employees have to report the value of the treats? A: The treats do not fall under the exception “food accepted as a guest” because the Vendor is not present. However, the gift would only have to be reported by employees who exercises discretion in the planning, recommending, selecting, or contracting with a Vendor, and only if the value of the food is greater than $100. 7 © WALSH GALLEGOS 2016

16. Items to Consider Q: I exercise discretion for one type of purchase, athletic equipment. I do not exercise discretion on any other school district purchase or contract. Do I only count business relationships, gifts and family relationships with Vendors of athletic equipment, or do I have to report them from all Vendors? A: Unknown. Until there is clarification from the Texas Ethics Commission or the Texas Attorney General, report for all Vendors. 8 © WALSH GALLEGOS 2016

17. Items to Consider Q: The school district’s educational foundation auctions off a hunting/fishing trip with the Superintendent that was donated by a local architect. The local doctor bids on, and wins the trip. Does the Superintendent have to submit a disclosure? A: If the hunting/fishing trip is valued at more than $100, a disclosure is likely required. Prior to the recent amendment, this entertainment would have fit into an exception to the disclosure requirement if the doctor attended the trip with the Superintendent. Now, under the new requirements, it appears this is entertainment that must be disclosed. 9 © WALSH GALLEGOS 2016

18. The information in this presentation was prepared by Walsh Gallegos Treviño Russo & Kyle P.C. It is intended to be used for general information only and is not to be considered specific legal advice. If specific legal advice is sought, consult an attorney.