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New Conflict of Interest Law for Schools

By Jeremy S. Motz / Jan 18, 2013

On January 8, 2013, Governor Snyder approved Public Act 606 of 2012 (the "Act"), with immediate effect.  The Act, which adds Section 1203 to the Revised School Code, places further requirements on school districts, intermediate school districts ("ISD") and public school academies ("PSA") regarding conflicts of interest that board members and legal counsel may have with contracts and other financial transactions presented to the board for approval.

The Act requires that members of the board of education of a school district or ISD or board of directors of a PSA abstain from voting on a contract or other financial transaction that requires board approval, if the board member believes or has reason to believe that he/she has a conflict of interest with regard to that contract or transaction. The Act requires that the board member disclose the specific conflict of interest.

Furthermore, if a person serving as legal counsel, or otherwise acting as an advisor or consultant to the board, believes or has reason to believe that he/she (legal counsel/consultant/advisor) has a conflict of interest in the contract or other financial transaction that requires board approval, that person (legal counsel/consultant/advisor) must disclose the conflict to the board before the vote on the contract or other financial transaction.

The Act provides that a board member/legal counsel/consultant/advisor is presumed to have a conflict of interest if he/she, or his/her family member, has a financial interest, or a competing financial interest, in the contract or other financial transaction.  A board member is also presumed to have a conflict of interest if he/she, or his/her family member, is an employee of the district, ISD, or PSA.  The Act defines "family member" as a spouse, child, sibling, sibling's spouse or child, child's spouse, parent, or parent's spouse, and would include these relationships as created by adoption or marriage.  If a board member has a child who attends the school district, ISD or PSA, that alone does not constitute a conflict of interest.

If a majority of the board members is required to abstain from voting, the members who are not required to abstain would constitute a quorum of the board, and a majority of those members eligible to vote would be required for approval.

These provisions are in addition to the other laws dealing with conflicts of interest applicable to schools.  Generally, these are the Contracts Of Public Servants with Public Entities Act, MCL 15.321 et seq. , which addresses public servants and public entities in general, and Section 634 of the Revised School Code, MCL 380.634, which addresses ISD-specific conflict of interest requirements.  The Act includes certain limited exceptions to the requirements where a conflict is deemed not to exist, and these exceptions are similar to the exceptions contained in the other conflicts of interest laws mentioned above.

Since the Act does not define any limits to the terms "contract" or "other financial transaction," the Act provides broad applicability to any contract or other financial transaction.  For example, if a board member has a "family member" who is a member of a collective bargaining unit of the district, ISD or PSA, that board member must disclose the conflict of interest and abstain from voting on the collective bargaining agreement for that bargaining unit.  Moreover, aside from requiring the legal counsel/consultant/advisor to disclose a conflict to the board, that disclosure alone does not require any board member to abstain from voting on the contract or other financial transaction.

If you have any questions regarding the Act or conflicts of interest laws, please contact your Clark Hill Education Law attorney.