Governing Board Ethics Training

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PRESENTED BY: JENNIFER MCQUARRIE

THE LAW OFFICE OF JENNIFER MCQUARRIE

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MCQUARRIELAW@GMAIL.COM

805-252-1080

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Ethics Training

• In 2022, legislature passed AB 2158 (adding Charters to the original AB 1234 requirements)
• Requires charter school board members (and designated employees) to receive 2 hours of ethics training every two years
• Receive within 1 year of seating on the board
• Provide the board members with information on available training at least once annually
• Charter school board members must receive initial training by January 1, 2026
• Training records to be kept for five years, subject to the PRA
• Dates of training and entity that provided the training

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Ethics Training Topics

• Laws relating to personal financial gain by board members
• Laws prohibiting bribery
• Conflicts of interest laws
• Laws relating to claiming perquisites of office
• Limits on receipt of gifts
• Honoraria ban
• Misuse of and gifts of public funds
• Mass mailing restrictions
• Acceptance of free/discounted transportation by transport companies

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Ethics Training Topics

• Government transparency laws
• Form 700
• Public Records Act
• Brown Act
• Laws relating to fair processes
• Common law bias prohibitions
• Due process
• Incompatible offices
• Competitive bidding
• Disqualification relating to nepotism

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Ethics Training Additional Resources

• CA Attorney General’s website: www.oag.ca.gov
• Resources for open government, conflict of interest, public records, ethics training
• CA Fair Political Practices Commission website: www.fppc.ca.gov
• Conflict of interest, Form 700, ethics training
• Institute for Local Government website: www.ca-ilg.org
• Ethics self-study training (AB 1234 self study)

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Ethics Training Objectives

• Alert Board Members of

• Avoid prohibited activities
• Comply with disclosure, disqualification and other affirmative ethics law requirements
• Consult with qualified counsel regarding the specifics of situations that may involve prohibited or required conduct

• Advise Board Members of:

• Financial interests, relationships and/or activities
• That are prohibited or trigger disclosure or disqualification obligations under ethics laws

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Ethics Training Concepts

• The contents of this training represent minimum standards
• Simply because something is legal does not mean that it is ethical or that it will be perceived to be so
• The public’s expectations and ethics principles are likely to create a higher standard for behavior
• Newspaper test/smell test
• The principle underlying the training is that the possibility of personal financial gain or loss should not be a factor in your decisions as a public official
• Does a decision before you have the potential to divide your loyalties and compromise your representation of public interests that you are charged with protecting?

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Laws Relating to Personal Financial Gain by Board Members

Prohibition of Bribery – Penal Code, Sec. 68

• “Every executive or ministerial officer, employee . . . who asks, receives, or agrees to receive, any bribe, upon any agreement or understanding that his or her vote, opinion, or action upon any matter then pending, or that may be brought before him or her in his or her official capacity, shall be influenced thereby . . .” likely is guilty of bribery
• Penalties can include prison, fine, loss of office and permanent disqualification from public office

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Commercial Bribery – PC section 641.3

• Solicit, accept, or agree to accept money or a thing of value
• From a person other than the person’s employer
• Not for the benefit of the employer
• Corruptly and without the knowledge/consent of the employer
• For using/agreeing to use the position for the benefit of the other person

• Violation
• Imprisonment < a year if $1000 or less
• Imprisonment for 16 months or 2-3 years if the bribe exceeds $1000

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Conflicts of Interest —General

Generically and broadly defined as:

• Personal or professional interest, financial or otherwise that conflicts with individual’s ability to act in school’s best interest
• In this broad sense of the term, conflicts-of-interest are all around us and extremely common

Multiple public sector and nonprofit sector laws govern conflicts of interest

• These laws are much more specific and detailed than the generic concept

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Conflict of Interest Laws

• Contractual (Government Code sections 1090, et seq.)
• Political Reform Act (Government Code sections 87100, 87103)
• Corporations Code (Corporations Code sections 5233)
• Campaign Contributions (Government Code section 84308)
• Conflicts when Leaving Office (Government Code sections 87406.3, 87407)

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Conflicts of Interest Generally

• Conflict laws
• Restrict an entity from entering into a transaction where a board member or employee has a financial interest
• Articulate rules about how an entity may enter into a transaction where a board member or employee has a financial interest

Government Code Section 1090

• Ultra-strict governmental conflict-of-interest law
• Generally, prohibits a board member, officer, employee from making a contract in which s/he is financially interested
• Focus here is on contracts
• If no contract, no violation
• But “contract” is broadly defined
• Not just voting, section 1090 reaches to preliminary discussions, negotiations, etc.

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Government Code Section 1090: �Board Member Recusal

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Government Code Section 1090: �Financial Interest

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Government Code Section 1090: �Remote or Non-Interests

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Government Code Section 1090: Violations and Penalties

• Contracts made in violation of section 1090 are void and cannot be enforced
• Criminal, civil and administrative sanctions
• Disgorgement of public funds under the contract
• Potentially severe penalties for violation
• Including misdemeanor and felony criminal penalties
• $1,000 or imprisonment
• Forever disqualified from holding any office in the state
• FPPC may levy civil and administrative penalties

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Political Reform Act

• Directors, officers and key staff are prohibited from making, participating in making or influencing or attempting to influence a decision involving a direct or indirect material financial interest
• Follow the recusal process for interested decisions
• Recusal works for this law for board members—unlike section 1090

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Political Reform Act: Definition of Participation

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Political Reform Act: Qualifying Interests

• Investments in business entities
• Interests in real property
• Sources of income
• Sources of gifts and their agents/intermediaries
• Positions with business organizations
• Personal finances of the official and immediate family (spouse and minor children)

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With any Decision, Ask Yourself:

• Does the matter involve:
• Someone who pays you income
• Property that you own, lease or have another interest in
• Your employer
• One of your investments
• Someone who has given you a gift
• Your family's finances
• If the answer is yes, there may be a prohibited conflict of interest or a requirement to recuse yourself from the decision

Conflict of Interest and Campaign Contributions

• As part of the PRA, it is improper to accept, solicit, or direct a contribution of more than $500 from any party/agent if the board member knows or has reason to know the party/agent has a financial interest in a proceeding involving an entitlement for use pending before the board
• Not included:
• Competitively bid contracts
• Labor contracts
• Personal employment contracts
• Contracts valued under $50k
• Contracts where the party receives no financial compensation
• Contracts between 2+ agencies
• Others

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Conflicts of Interest when Leaving Office and Prospective Employers

• Certain local elected officials and top-level managers of certain agencies cannot represent individuals or entities before their agencies for one-year after leaving office (revolving door laws)
• Board members and employees shall not make any decision directly relating to any person with whom the public official is negotiating, or has any arrangement concerning, prospective employment

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Claiming Perquisites of Office

Gift Restrictions

• Gifts: payment or other benefit that confers a personal benefit for which a public official does not provide payment/services of equal or greater value
• Includes rebates or discounts
• Includes gifts to family members (unless no business before the official in 12 months prior or foreseeable future + established relationship)
• Prohibition: Local officials and employees are prohibited from receiving a gift(s) totaling more than $630 in a calendar year from a single source
• Reporting: Gifts aggregating $50+ in the reporting period must be disclosed on Form 700

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Gift Restrictions

• Common Gifts
• Tickets/passes to sporting/entertainment events/ amusement parks
• Parking passes not used in official business
• Food/beverages/ accommodations
• Wedding gifts
• Forgiveness on a loan

• Not Gifts
• Gifts from family
• Informational materials
• Money bequest or inheritance
• Gifts between friends (holidays, home hospitality, birthdays, similar situations – not lobbyists)

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Reporting Travel Restrictions

• Gifts of Travel Generally Reportable
• Advances and reimbursements for travel and related expenses, including lodging and meals
• Travel payments are gifts if there are no services that were equal to or greater in value than the payment received
• Travel payments are income if there are services that were equal to or greater in value than the payment received

• Do Not Disclose
• Payments from state, local or federal government agencies such as reimbursement for travel on agency business
• Payment from state, local or federal government when travel is for education, training or other agency programs/purposes
• Payment from employer in normal course of employment
• Payment from nonprofit entity for which equal or greater consideration

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Gifts of Travel – Gift Limits

• Payments, advances, reimbursements for travel (transport/lodging/food) for school purposes not subject to the gift limit if:
• In connection with a speech given by the school employee/board member and relates to the day before, day of and day after the speech and within the US
• Travel is provided by a government, educational institution, 501(c)(3) organization

• Otherwise, gifts of travel are subject to gift limits ($630) if reported on Form 700
• Not included: travel paid by the school; travel paid by the government for education, training, or other inter-agency programs/purposes; travel paid by a nonprofit entity for which equal or greater consideration is given; other exceptions

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Improper Gift?

• A board member of ABC School has recently lost her home in the Southern California fires. A variety of people have offered the board member free lodging for the board and her family for the next three to four months until the board member can determine what to do next. Is this a reportable gift or an impermissible gift?

Honorarium Restriction

• Honorarium – payment made in consideration for any speech given, article published, attendance at any public/private conference, convention, meeting, social event, meal or like gathering
• Elected officers shall not accept any honorarium
• Applicability to charters??

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Decide Whether and �the Extent to Accept Gifts

• Determine whether and how much to report on your Form 700 (anything $50+ from a single source over a calendar year)
• Avoid exceeding the annual gift limit of $630
• Know when you need to disqualify yourself in matters involving a person who has given you $630 in the preceding 12 months
• Ask the value of all gifts so that you can track and properly report them

Misuse of Public Funds

• Person charged with receipt, safekeeping, transfer, disbursement of public funds, who –
• Without authority of law, appropriates the same to his/her own use or the use of another
• Loans the same, makes a profit out of or uses for any purpose not authorized by law
• Knowingly keeps a false account
• Etc.
• Punishable by 2 – 4 years in prison and disqualification from holding office in the state
• Penal Code 424

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• Unlawful to use public resources for a campaign activity or other personal or other purpose not authorized by law
• Personal enjoyment, private gain/advantage, outside endeavor not related to school business
• Public resources means any property/asset owned by the government including land, buildings, facilities, funds, equipment, supplies, phones, computers, vehicles, etc.
• Government Code section 8314

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Examples of Prosecutions for Misuse of Public Funds

• City official improperly used a city car, entrusted to him for use in connection with official business, to take a pleasure trip from LA to Montana and back
• A city commissioner improperly used official government discounts to purchase items for himself and others. This was a misuse of public resources even though those receiving the discount paid for the items with their own funds 

• A county supervisor improperly used her staff and office facilities for her law practice
• A county supervisor improperly used his county-paid staff to work on his political campaign for lieutenant governor
• County official furnished staff and a county vehicle to transport a political candidate, and candidate's staff and family

Gift of Public Funds

• CA Constitution prohibits gifts of public funds for private purposes
• To avoid an illegal gift:
• Expenditures must serve direct and substantial public purpose within the jurisdiction of the school board
• Board should adopt policies articulating public purposes of expenditures
• School districts may rely on EC 44015 allowing for certain types of expenses (applicability to charters unclear)

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Are these Gifts of Public Funds?

• Flowers sent for a new staff baby arrival?
• Letting Seniors (students) take their school issued laptops with them when they graduate?
• Taking the teachers out for dinner and drinks after the commencement ceremony?
• Paying for a babysitter so that a teacher can attend your “back to school night”?
• Letting teachers take their school issued laptops when they terminate employment?
• Distributing gift cards to teachers for teacher appreciation week?

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Mass Mailing Restrictions

• Items prepared or mailed at state or local public expense may not:
• Feature an elected officer affiliated with the agency
• Include the name/photo, or other reference to an elected officer if the item is prepared in coordination with the elected officer
• Applies if 200+ pieces by mail
• Does not apply to press releases, inter/intra-agency communications, payment/collection of funds, legal notices, essential program mailings, directories, meeting notices
• Penalties: fines up to 3 times the amount of funds spent on the unlawful mailing or $10,000, administrative fines up to $5,000 per violation, possible reimbursement for the costs of any litigation initiated by private individuals, including reasonable attorney fees

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No Free or Discounted Transportation �from Transportation Companies

• CA Constitution:
• A transportation company may not grant free passes or discount to anyone holding an office in this State; acceptance of a pass or discount by a public officer, other than a Public Utilities Commissioner, shall work as a forfeiture of that office
• Applicability to Charters??

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Public Sector Transparency Mandates

Political Reform Act: Filing the Form 700

• Focus is on interests looking backward 12 months
• File each April 1 AND
• Board Members: upon taking/leaving office
• Key Staff: accepting/terminating employment
• These are public documents
• Some of your personal financial data is exposed
• Keep on file with business office
• Most file with county, though may need to file with FPPC in Sacramento if serving multiple counties

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Public Records Act

• Grants public right to access broad range of “records”
• “Records” is very broadly defined
• Exceptions are few and narrow
• Must help person asking to formulate their request
• Generally, must “respond” to request within 10 days,
• Indicating whether you plan to provide records or claim they are not subject to disclosure
• Additional 14 days in “unusual” circumstances
• Actual records production can come later
• Requests often come at the worst possible time
• During legal disputes, union organizing campaigns, media battles, etc.

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Public Records Act: Suggestions

• Be aware of the large financial penalties awarded in recent court cases
• Adopt a board policy
• Train staff and board on when and how to respond and designate one point of contact to help manage the process
• Understand very broad reach (e.g., emails, text messages on personal phone, etc.) as well as common exemptions to allow for rapid response
• If it won’t look good on the front page of the newspaper, don’t write, e-mail, or text it!

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What is the Brown Act?

• “Brown Act” is the name of California’s open public meeting requirement for local governmental legislative bodies
• CA Gov. Code sections 54950, et seq.
• Explicitly applied to charter schools in 2019 (SB 126)

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Open Meetings: Brown Act

• Simple in concept
• All meetings of legislative body must be open, public
• Public comment: public has right to address board
• Notice: provide advance public notice of meetings
• Agenda: including brief description of all items on agenda
• Exceptions: numerous, mostly very limited/narrow
• Complex in practice

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What Constitutes a Meeting?

• Brown Act defines “meeting” broadly:
• Congregation of board majority at the same time and place to hear, discuss or deliberate upon any item within its subject matter jurisdiction
• Includes collective acquisition and exchange of facts before making a decision
• Includes informal and inadvertent meetings
• Serial meetings prohibited

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• Applies to most board-established committees
• Likely applies to most finance committees
• Except ad hoc committees with less than a majority of board

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Three Types of Brown Act Meetings

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Brown Act Compliance: Notice

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Brown Act Compliance: Agenda for Regular, Special Meetings

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Brown Act Compliance: �Items NOT on the Agenda

Board may only discuss items not on the agenda if…

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Brown Act Compliance: �Executive Compensation

• Action on executive compensation must occur during a “regular,” not special meeting
• Salary, benefits
• Must provide oral summary of key terms during regular meeting when board votes

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Brown Act Compliance: Public Participation

Meetings must permit public testimony:

• On any topic within jurisdiction of the board
• Need not be on the agenda
• Before or during the consideration of the item
• Allowable limits:
• Reasonable limits on time (e.g., the number of speakers per item and time per speaker)
• 1-3 minutes/speaker common
• Items already considered by board and public already given opportunity to address the item
• Translation extends time

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Brown Act Compliance: Closed Session

• Closed sessions must be expressly authorized by statute
• Statute strongly favors open meetings
• Just because it’s embarrassing or sensitive doesn’t mean you can go into closed session
• Narrowly construed
• Semi-closed meetings generally not allowed

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Brown Act Compliance: �Permissible Closed Session

• May meet in closed session for:
• Pending or anticipated litigation
• Real property negotiations
• Collective bargaining/labor negotiations
• Personnel (limited)
• Public security
• Student discipline
• Each of these is governed by detailed limits, agenda, and post-session reporting requirements
• Study law carefully and/or obtain legal counsel prior to meeting in closed session

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Brown Act Compliance: �Closed Session Confidentiality

• Person attending may not disclose to a non-attendee
• Info specifically related to the basis for the board meeting in closed session
• Violations enforceable in court
• Injunction
• Disciplinary action
• Grand jury referral

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Brown Act Violations

• Take action to “cure” actual or potential violations or risk
• Civil and criminal penalties (possible, but rare)
• Charter revocation, possible and has occurred
• Opponents of board’s action may seek to have actions declared null and void
• Within 90 days of action, written demand for cure if closed session action
• Within 30 days of action, written demand for cure if open session action
• Suit must be brought within 15 days after cure opportunity expires

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Fair Process Laws

Bias Considerations

• Using board member’s personal or private interests to influence a board member’s decision
• Personal gain
• Personal bias motivations
• Example: A tenant opposed the construction of a new, taller, building which would obstruct his view of the ocean, but still met city requirements.
• The tenant ran successfully for city council.
• The council ultimately turned down the permit for the new building. The owners sued, arguing that the council member/tenant's personal interest in the outcome in the decision constituted a common law conflict of interest. In other words, the decision-maker could not put his personal interest in seeing the project turned down aside and fairly decide whether the project met the city's requirements for such buildings
• The court agreed and invalidated the city's decision

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Fundamental Duties of Board Members

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Ethical Decision Making

Every decision you make as a school leader should be:

• In alignment with the school’s mission
• The best and highest use of school funds and resources
• Legally compliant
• Pass the “above the fold” and “sniff” test

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Due Process

• Legal matters are resolved according to established rules and principles and individuals are treated fairly
• Citizens may not be deprived of life, liberty, property without due process
• Requires:
• Notice of the intended action
• Opportunity to prepare
• Opportunity to be heard
• Fair and impartial hearing

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Incompatible Offices

• Government Code section 1126
• A local agency officer or employee shall not engage in any employment, activity, or enterprise for compensation which is inconsistent, incompatible, in conflict with, or inimical to his or her duties as a local agency officer or employee or with the duties, functions, or responsibilities of his or her appointing power or the agency by which he or she is employed
• Government Code section 1099
• A public officer shall not simultaneously hold two public offices that are incompatible

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Purchasing & Competitive Bids

• Most government agencies in California are subject to Public Contracts Code’s competitive bidding requirements
• Must competitively bid purchases/leases of equipment, materials, supplies
• Above specified threshold (currently $109,300, adjusted annually)
• Separate statutes govern construction/reconstruction of publicly-owned facilities
• Much lower $15,000 threshold, no annual adjustment
• “Prevailing wage” thicket
• Applicability of above to charter schools contested, especially facilities component
• Suggest legal counsel, especially on facilities projects
• Federal laws, regulations generally require LEA to have detailed purchasing policies

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Purchasing & Competitive Bids

• Federal law (“Davis-Bacon) generally requires federal version of “prevailing wage” when spending federal funds on facilities

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• Even if exempt from some or most public sector purchasing/bid laws, recommended school-developed policies as a minimum
• At a minimum seeking best value-for-money using “prudent person” standard

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Nepotism & Cronyism

• Employment, purchasing, and contracting practices that favor personal friends, relatives, and business associates above the interests of the school(s)
• May or may not trigger explicit legal prohibitions
• But smell bad even if technically legal
• Antidotes:
• Open, merit-based policies, practices
• For all major personnel, purchasing, and contracting decisions
• Conflicts of interest identified, mitigated
• Transparency & board oversight

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Corporations Code

• Applies to all nonprofit corporations
• No more than 49% interested directors may be seated on the board (look back 1 year)
• 1090 extends to current interests of the member and spouses; PRA extends to spouses and dependent children
• Corporations Code extends more broadly: brother, sister, ancestor, descendant, spouse, brother-in-law, sister-in-law, son-in-law, daughter-in-law, mother-in-law, or father-in-law

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