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2017 ASBO SPRING CONFERENCE • AGENDAS • MINUTES • CONFLICT OF INTEREST Gerry Kaufman ASBSD Director of Policy and Legal Services AGENDA A violation of SDCL 1-25-1.1 is a Class 2 misdemeanor. (up to 30 days and/or $500) AGENDA SDCL 1-25-1.1 All public bodies… shall provide public notice, with proposed agenda, that is visible, readable, and accessible for at least an entire, continuous twenty-four hours immediately preceding any meeting, … AGENDA • by posting a copy of the notice, visible to the public, at the principal office of the public body holding the meeting. AGENDA • The proposed agenda shall include the date, time, and location of the meeting. AGENDA • The notice shall also be posted on the public body's website upon dissemination of the notice, if such a website exists. AGENDA SD OPEN MEETINGS COMMISSION IN THE MATTER OF BUTTE COUNTY COMMISSION, June 23, 2009 AGENDA OMC – Butte County • “The language of SDCL 1-25-1.1 contains no information as to how specific an agenda should be.” • “In particular there is no requirement in SDCL 125-1.1 that the agenda is to indicate whether the listed items are for discussion only or whether the items require a vote at the meeting.” AGENDA OMC – Butte County “Obviously the reason for requiring the posting of an agenda is to apprise the public of the time, place, and nature of the meetings.” AGENDA OMC – Butte County “Accordingly, the agenda must contain sufficient information to advise the public as to each of the issues that will be addressed. In the situation here, the agenda did contain sufficient information so as to advise the public of the time, place, and subject matter of the meeting.” AGENDA OMC – Butte County “The agenda was adequate. In particular, it should be noted that an agenda item stating that interviews would be conducted affords the public with sufficient information to conclude that a hiring decision may be conducted at the meeting.” AGENDA • CAN SOMETHING GET ADDED TO OR REMOVED FROM THE AGENDA AFTER IT HAS BEEN POSTED? • IF SOMETHING CAN BE ADDED TO OR REMOVED FROM THE POSTED AGENDA, WHEN AND HOW IS IT DONE? AGENDA Molden v. Grant-Deuel School Dist. • In 2012, the SD Supreme Court affirmed a South Dakota Circuit Court decision which held that a preliminary agenda may be amended when the board takes action to formally adopt the meeting agenda. AGENDA Open Meetings Brochure • Generally the school board adopts the “final” agenda upon convening the meeting. At this time, the school board may add or delete agenda items and may also change the order of business. AGENDA • BE SPECIFIC IN THE MINUTES WHEN REFERENCING AMENDENTS TO THE POSTED AGENDA – • Identify the changes/amendments • Need more than “adopt agenda as amended” AGENDA • New items cannot be added after the agenda has been adopted by the school board. AGENDA STAY AWAY FROM AGENDA HEADINGS AS: • New Business • Old Business • Other Business FOR EXECUTIVE SESSION, USE FOR EXAMPLE: • “Personnel (SDCL 1-25-2(1))” AGENDA Open Meetings Brochure “Public bodies are strongly encouraged to provide 24 hours notice of all agenda items so as to be fair to the public and to avoid dispute.” AGENDA SDCL 1-25-1.1 • For any special or rescheduled meeting, the information in the notice shall be delivered in person, by mail, by email, or by telephone, to members of the local news media who have requested notice. AGENDA SDCL 1-25-1.1 For any special or rescheduled meeting, each public body shall also comply with the public notice provisions of this section for a regular meeting to the extent that circumstances permit. AGENDA Open Meetings Brochure “For special or rescheduled meetings, public bodies are to comply to the extent circumstances permit. In other words, posting less than 24 hours in advance may be permissible in emergencies.” AGENDA Consult with your school attorney about OMC’s special or rescheduled meetings “emergency” exception in SDCL 1-25-1.1 to the 24 hour prior notice requirement” !!! Minutes ATTORNEY GENERAL OFFICIAL OPINION NO. 74 - 11 Minutes - Minimum Requirements Minutes AGO 74-11 “A school board speaks through its records and such records constitute prima facie evidence of its actions. In general, the minutes of a school board need not be formal or technical in nature.” Minutes AGO 74-11 “The minutes should show what actions were taken by the board and should show that the board acted within the requirements of the statutes.” Minutes AGO 74-11 “They should also show that the required number of votes were cast in favor of each proposal adopted or approved (see SDCL 13-8-33).” [SDCL 13-8-33 was repealed in 1995] Minutes AGO 74-11 “It is my opinion that the statutory requirements for the keeping of minutes is directory and in answer to your specific question No.2, it is my opinion that the above paragraph sets forth the minimum information that must be shown in school boards' minutes in order that such minutes will constitute an adequate official record of the school board.” Minutes SDCL 1-27-1.17 • The unapproved, draft minutes of any public meeting held…shall be available for inspection by any person within ten business days after the meeting. Minutes SDCL 1-27-1.17 • However, this section does not apply if an audio or video recording of the meeting is available to the public on the governing body's website within five business days after the meeting. • Violation is a Class 2 misdemeanor. Minutes SDCL 13-8-35 • Within twenty days after a meeting of the school board, the board shall cause to be published in the designated legal newspaper a full account of the unapproved proceedings of such meeting,… Minutes SDCL 13-8-35 • … giving a detailed statement of all expenditures of money, with the names of persons to whom payment is made, showing the service rendered or goods furnished, a detailed statement of receipts, and balance on hand. Minutes SDCL 13-8-35 • Expenditures and receipts of trust and agency funds may be published in total only. • The business manager shall sign each legal publication submitted to the newspaper. Minutes SDCL 13-8-35 • If the published minutes of the previous meeting of the board are modified, amended, or corrected by such board subsequent to such publication and prior to approval by the board, such changes shall be reflected in the minutes of the meeting at which such modifications, amendments, or corrections are made. Minutes SDCL 13-8-34 • The school board shall approve the minutes of every meeting of the board within forty-five days after such meeting. The presiding officer and the business manager shall sign the minutes of all annual, regular, and special meetings after they have been approved. Minutes SDCL 1-25-1. The official meetings of … political subdivisions …are open to the public unless a specific law is cited by the … the political subdivision … to close the official meeting to the public. SDCL 1-25-2. An executive or closed meeting shall be held only upon a majority vote of the members of such body present and voting, … Minutes SDCL 1-27-18 • The governing body of each …any public corporation … shall promote and implement the principles of efficient records management for local records. The governing body may, as far as practical, follow the program established for the management of state records. Records Management • SD Bureau of Administration • https://boa.sd.gov/ • Records Management Division, Dana Hoffer, Director 773-3589 Records Management • South Dakota Local Schools Retention Manual, Revised 2015 • https://boa.sd.gov/divisions/rec ords/documents/Local_Schools_ 2015_Revised.pdf Conflict of Interest Conflict of Interest SDCL 6-1-1. It is unlawful for any elected or appointed officer of a school district to be interested, either by himself or agent, in any contract entered into by the school district, either for labor or services, or for the purchase of commodities, materials, supplies, or equipment of any kind, which is paid from public funds, or in the purchase of any real or personal property belonging to the school district. Conflict of Interest Such contract shall be null and void from the beginning. Conflict of Interest SDCL 6-1-2. The provisions of § 6-1-1 are not applicable if the contract is made, without fraud or deceit, pursuant to any of the following. The contract is voidable if the provisions of the applicable subdivision are not fully satisfied or present at the time the contract was entered into. (1) Any contract involving $5,000 or less regardless of whether other sources of supply or services are available within the school district, if the consideration for such supplies or services is reasonable and just;… Conflict of Interest SDCL 6-1-17. No … school official may participate in discussing or vote on any issue in which the official has a conflict of interest. Each official shall decide if any potential conflict of interest requires such official to be disqualified from participating in discussion or voting. However, no such official may participate in discussing or vote on an issue if the following circumstances apply: Conflict of Interest (1) The official has a direct pecuniary interest in the matter before the governing body; or (2) At least twothirds of the governing body votes that an official has an identifiable conflict of interest that should prohibit such official from voting on a specific matter. If an official with a direct pecuniary interest participates in discussion or votes on a matter before the governing body, the legal sole remedy is to invalidate that official's vote. Conflict of Interest Hanig v. City of Winner, 2005 SD 10, ¶ 19 (1) (2) (3) (4) “Direct pecuniary interests” “Indirect pecuniary interests” “Direct personal interest” “Indirect Personal Interest” Conflict of Interest HB 1170 and SDCL Ch. 3-23 Conflict of Interest • school board members, business managers, chief financial officers, superintendents, chief executive officers, and any other person with the authority to enter into a contract or spend money in an amount greater than $5,000, … Conflict of Interest • or multiple contracts in an amount greater than five thousand dollars with the same party within a 12 month period, Conflict of Interest •must disclose their personal interest in any contract between their school district and third party. Conflict of Interest the law specifically refers to … (1) a person having “an interest in a contract” the law requires a person who has an interest in a contract disclose that interest, and to … Conflict of Interest (2) a person who “derives a direct benefit from a contract” the law requires the person to disclose the direct benefit and get governing board authorization to derive the direct benefit from the contract. Conflict of Interest Before disclosure in required, there must be 3 things • an interest in a contract, or • a direct benefit from a contract, and Conflict of Interest • the interest or direct benefit must have a value of more than $5,000 (or multiple contracts in an amount greater than $5,000 with the same party within a 12 month period). Conflict of Interest What is meant by “or other person with the authority to enter into a contract or spend money” in an amount greater than $5,000 ? Conflict of Interest ANSWER: A person may have been authorized by the board to enter into contracts and spend school district funds. For example, employees may have been authorized to use a school district credit card, sign vouchers, purchase orders or contracts on behalf of the school district. The disclosure laws would apply to those people. Conflict of Interest What is meant by “multiple contracts” in an amount greater than $5,000 with the same party within a 12 month period? Conflict of Interest ANSWER: multiple contracts within a 12 month period (not calendar or fiscal year) between the school district and a 3rd party, total value greater that $5,000; the person having an interest in or receiving a direct benefit from those contracts must disclose to the school board their interest in, or direct benefit from, the contracts. Interest in the Contract What is meant by “an interest in a contract” and when does it apply? ANSWER: HB 1170, Sec. 12: A person described in § 3-23-6 has an interest in a contract if the person, the person's spouse, or any other person with whom the person lives and commingles assets: Interest in the Contract (1) is employed by a party to any contract with the local service agency, school district, cooperative education service unit, or education service agency; or (2) receives more than nominal compensation or reimbursement for actual expenses for serving on the board of directors of an entity that derives income or commission directly from the contract or acquires property under the contract. Interest in the Contract What must a person who only has an interest in a contract do in order to comply with the law? Answer: The person must disclose the existence of a contract in which the person has an interest and the person's role in the contract. [The law does not require the disclosure of an interest in a contract be in writing; however, ASBSD recommends the disclosure of an interest in a contract be in writing.] Interest in the Contract • ASBSD also recommends that the same 5 things which are required in a disclosure of a direct benefit be included in the disclosure of an interest in a contract: (i) all parties to the contract, (ii) the person's role in the contract, (iii) the purpose or objective of the contract, (iv) the consideration or benefit conferred or agreed to be conferred upon each party, and (v) duration of the contract. Interest in the Contract • The law says disclosure of an interest in a contract is to be given at the annual reorganization meeting if the contract extends into consecutive fiscal years. Interest in the Contract • ASBSD recommends the time frame applicable to disclosure of a direct benefit be used for disclosing an interest in a contract, i.e., given before entering into any contract that requires disclosure or within 45 days after entering into the contract, and if the contract extends into consecutive fiscal years, disclosure is also given at the annual reorganization meeting. Interest in the Contract • No governing board authorization is required after a person discloses an interest in the contract. • The interest disclosure must be included in the official minutes. Schools are not required to send the official minutes to the auditor-general and attorney general. “derive a direct benefit” What is meant by “derive a direct benefit” ? “derive a direct benefit” ANSWER: to receive a direct benefit from a contract between his/her school district and a third party, the person, the person's spouse, or any other person with whom the person lives and commingles assets --(1) must be a party to or intended beneficiary of the contract , or “derive a direct benefit” (2) must have more than a five percent ownership interest in an entity that is a party to the contract, or (3) must acquire property under the contract; or “derive a direct benefit” (4) must receive compensation, commission, promotion, or other monetary benefit directly attributable to any contract. “derive a direct benefit” What does a person who derives a direct benefit from a contract have to do in order to comply with the law? “derive a direct benefit” • The person may derive a direct benefit from a contract that the school district is a party to the contract if disclosure is given and the direct benefit is authorized by the school board. • The disclosure of a direct benefit must be in writing. “derive a direct benefit” Five things must be identified in the disclosure of a direct benefit: (i) all parties to the contract, (ii) the person's role in the contract, (iii) purpose or objective of the contract, (iv) consideration or benefit conferred or agreed to be conferred upon each party, and (v) duration of the contract. “derive a direct benefit” Any person receiving a direct benefit from a contract must submit the authorization request before entering into the contract that requires disclosure or within 45 days after entering into the contract. “derive a direct benefit” If authorization by the governing board is given, no further disclosure or authorization is required unless the contract extends into consecutive fiscal years. If the contract extends into consecutive fiscal years, disclosure shall be made at the annual reorganization meeting. “derive a direct benefit” What must the governing board do when a disclosure is presented from a person who derives a direct benefit from a contract? “derive a direct benefit” (1) After the governing board receives a disclosure of a direct benefit, the governing board must review the disclosure and decide if the terms of the contract are fair and reasonable, and decide if the contract is contrary to the public interest. “derive a direct benefit” (a) If the governing board determines the contract terms from which a direct benefit is derived are fair and reasonable, and that the contract is not contrary to the public interest, the governing board would vote to authorize (approve) the person deriving a direct benefit from the contract. “derive a direct benefit” (b) If the governing board determines the contract terms are not fair and reasonable, or is contrary to the public interest, the governing board would vote to not approve the person to derive a direct benefit from the contract. The contract is voidable and subject to disgorgement (the act of giving up on demand or by legal compulsion something that was obtained illegally or unethically), or the person may resign. “derive a direct benefit” (2) The school board should carefully review each disclosure and decide if the terms of the contract are fair, reasonable, and contrary to the public interest. If the contract terms are fair, reasonable, and not contrary to the public interest, the governing board must authorize the person’s deriving a direct benefit from the contract. If the board voted to deny authorization, the board decision may be appealed to circuit court. “derive a direct benefit” (3) After the governing board acts on the disclosure of a direct benefit, the disclosure and governing board action are public record. The official minutes must include the board action on each disclosure and request for authorization to derive a direct benefit. A copy of the official minutes must be sent to the auditor-general and attorney general. “derive a direct benefit” After the board approves the meeting minutes when the disclosure was presented to the board and acted upon by the board, the minutes are sent to the Auditor-General and Attorney General. The Auditor-General has indicated the minutes may be emailed to the Auditor-General. The Attorney General has indicated the minutes are to be mailed to the Attorney General’s Office. “derive a direct benefit” • The law does not give a time frame within which the minutes must be sent, but minutes should be sent within thirty (30) calendar days of the board meeting when the minutes were approved. • If disclosure of a direct benefit was acted on by the governing board at the same board meeting when there was disclosure of an interest in a contract, the entire minutes could be sent. “derive a direct benefit” (4) “No board member … may participate in or vote upon a decision of a local service agency, school district, cooperative education service unit, or education service agency relating to a matter in which the member derives a direct benefit.” Exceptions Are there any exceptions to the disclosure requirements? ANSWER: Yes. [HB 1170 Sec. 13] If any of the following apply, the person would not have an interest in the contract or derive a direct benefit from a contract, and disclosure (and authorization, if applicable) is not required: Exceptions (1) when the person’s relationship to the contract is based solely on the value associated with the person's publicly-traded investments or holdings, or the investments or holdings of any other person with whom the board member, business manager, chief financial officer, superintendent, or chief executive officer lives or commingles assets; Exceptions (2) when the person’s relationship to the contract is due to participating in a vote or a decision in which the person's only interest arises from an act of general application; Exceptions (3) when the person’s relationship to the contract is due to the person receiving income as an employee or independent contractor of a party with whom the local service agency, school district, cooperative education service unit, or education service agency has a contract, unless … Exceptions … the person receives compensation or a promotion directly attributable to the contract, or unless the person is employed by the party as a board member, executive officer, or other person working for the party in an area related to the contract; Exceptions (4) when the contract is for the sale of goods or services, or for maintenance or repair services, in the regular course of business at a price at or below a price offered to all customers; Exceptions (5) when the contract is subject to a public bidding process; (6) when the contract is with the official depository as set forth in SDCL 6-1-3; Exceptions (7) when the person only receives income or compensation, a per diem authorized by law or reimbursement for actual expenses incurred; or (8) when the total value of the contract or multiple contracts with the same party within a 12 month period with whom the local service agency, school district, cooperative education service unit, or education service agency contracts is less than $5,000. Consequences What are the consequences for not complying with the conflict of interest laws? Consequences ANSWER: Any person who knowingly violates the conflict of interest law must be removed from office or employment and the person is guilty of a Class 1 misdemeanor ($2,000 fine and/or one year in jail). The person is also guilty of theft under the criminal statutes with the criminal penalties increased because of the conflict of interest. Consequences However, the law also says that a person who submitted a good faith disclosure and, if applicable, an authorization request, may not be convicted of a crime. Consequences • Any person convicted of theft [under § 2230A-10] for unlawfully obtaining property of any its political subdivisions, shall, in addition to other criminal and civil penalties, be disqualified from holding any public office, elective or appointive. Consequences • Any benefit derived from the person's knowing violation of the conflict of interest disclosure and authorization requirements is subject to “disgorgement” (the act of giving up on demand or by legal compulsion something that was obtained by illegal or unethical acts). Consequences • Any contract made in violation of the conflict of interest laws is voidable (i.e., the school board may, through formal board action, and unenforceable). *A school board should consult with its attorney before to taking any action to declare the contract void. Conflict of Interest Policy “Each local service agency, school district, cooperative education service unit, or education service agency shall develop a written conflict of interest policy, including any disclosure and authorization form that includes the list of any disclosable interest in contracts or direct benefits covered by this Act.” HB 1170, Sec. 15 QUESTIONS ???? • Agenda • Minutes • Conflict of Interest