The Gift That Keeps on Giving: Changes to the Gift Rules, PART 2 OF 2
This column is a service of the Institute for Local Government (ILG) Ethics Project, which offers resources on public service ethics for local officials. For more information, visit www.ca-ilg.org/trust. ILG gratefully acknowledges Michael Martello's assistance with this column. Martello is city attorney of Mountain View and chairs the League's City Attorneys Department Fair Political Practices Commission (FPPC) Committee.
Question Posed in Part 1
I understand there are a number of new regulations that modify the Fair Political Practices Commission's gift rules. Can you provide a summary? Why are these rules so complicated?
Part One of this article (April 2009, on-line at www.westerncity.com) explored the issues associated with gifts to individuals. This column focuses on the issues related to gifts given to a public agency.
In 2008, the Fair Political Practices Com mission (FPPC) modified the Political Reform Act's gift rules. Some of these changes narrow the previous exceptions to the gift reporting and limit requirements. As always, local officials are encouraged to consult with their agency attorneys or the FPPC on specific questions regarding Political Reform Act requirements. Many of these regulations are very complex, and their application in any given situation is not always entirely clear.
Gifts to an Agency
Individuals or companies sometimes give a gift to a public agency, as opposed to an individual public official. Some gifts, such as land for a new library or ballpark, aren't used by public officials on an individual basis. Other kinds of gifts, such as a voucher for a night at a hotel or a discounted lease rate on vehicles, are more typically used by individual officials as part of doing their job for the agency.
The FPPC made significant changes to the rules on how public agencies treat these gifts. In addition to limiting how the gifts may be used, the changes require local agencies to adopt policies and disclose both the policies and how individual gifts are handled.
Non-Ticket Gifts to an Agency
Any time a public agency receives a gift, it must report:
- The gift amount and the date it was received;
- Who gave the gift and their address. If the gift-giver is not an individual, the nature and interests of the entity that gave the gift;
- Whether the person or entity providing the gift raised funds from others in order to give the gift and information about these contributing individuals or companies;
- How the agency used the gift, including whether the gift was used for travel, the date and place(s) of travel, and a breakdown of total expenses for transportation, lodging, meals and other expenses; and
- The name, title and department of the official who used the gift.1
This report must be made within 30 days of using the gift.2 The report is a public record3 and must be accessible through the agency website; if the agency doesn't have a website, the report must be accessible from the FPPC website.4 These forms must be kept on file for four years.5
The rules also limit who may use the gift. The gift-giver may not designate by name or type of position who may use the gift.6 The agency head decides who will use it7 --- but may not use it personally.8
Special rules apply to who may use gifts of travel, meals or beverages. In the past, elected or other high-level officials would use those gifts (for example, to study a development project similar to one being proposed in their jurisdiction). Under the new regulation, elected officials and certain department heads9 cannot use a gift if it involves travel, meals or beverages.10 Gifts of travel also cannot exceed the agency's adopted reimbursement rates.11 And, of course, the gift must be used for official agency business.12
The rules include exceptions for higher education research projects and federal payments for education or other interagency programs.13
Ticket Gifts to an Agency
Special rules apply if a public agency receives tickets or passes from outside entities. The threshold question is who should use the tickets. As with any use of public resources, the answer hinges on the agency's analysis of what identifiable, worthy public purposes might be served in how the tickets are used. For example:
- The agency might re-gift the passes by giving them to a community group or others. For example, the Police Athletic League might be able to enhance its program supporting physical activity, teamwork and sportsmanship if the tickets are to a sporting event involving teams that can help underscore these themes.
- If the agency has an "Employee of the Month" program designed to recognize superior performance and good ethics, using the tickets to recognize such performance might be a worthwhile public purpose.
- If there are employees whose job responsibilities require them to be at the event, then having them attend satisfies a public purpose. Note that such responsibilities must be in writing.
The public agency's key task is to identify underlying, worthwhile public purposes for using any ticket gifts and articulate them in a policy that is posted on the agency's website.14 The FPPC rules explain what the policy must contain.
If such use involves public officials who are otherwise subject to the gift limit and reporting requirements, the tickets are not subject to the limit and reporting requirements if:
- The agency decides who should use the ticket or pass consistent with its adopted policy; and
- The gift-giver plays no role in the decision on who should use the ticket.15
No matter who uses the tickets, the agency must disclose publicly on its website (using a form provided by the FPPC) how it used the tickets.16 If the agency doesn't have a website, it must post the disclosure on the FPPC site.
Gifts of Tickets from Private Individuals or Entities
Special rules apply to gifts of tickets that give a public official admission to a facility, event, show, performance or similar events. If the gift is from a person or company, the official must report the face value of the ticket on his or her Statement of Economic Interests. An exception occurs when the official can demonstrate that he or she performed a role or function at the event, in which case the official is in essence showing that he or she received the ticket in exchange for services performed at the event.17
Valuing the Cost of Traveling on Private Aircraft
Gifts of travel to individual officials are also reportable and subject to the annual limit. The value of travel given on a commercial aircraft is the value of the fare the commercial airline would charge a member of the public. In terms of valuing travel received on non-commercial aircraft, the FPPC amended the regulations to include this equation for calculating the value of a seat or seats on the plane:
The normal charter fare or rental charge for an airplane of comparable size
The number of public officials (as defined) on the flight.18
Then the official needs to add the value of any additional benefits (food, beverages and entertainment), unless that is already included in the commercial or charter fare.19
Why Are These Rules So Complicated?
Originally, the FPPC carved out broader exceptions to the gift reporting rules for tickets to fundraisers, as well as for gifts to and from public agencies. Some people interpret the recent amendments to the rules as an indication that the FPPC believed that these exceptions (some might call them "loopholes") were being abused - hence, the narrowing of the exceptions.
This underscores a general dynamic with respect to ethics regulations. Most started out as fairly general and straightforward. Regulators added layers of complexity in response to charges that, in essence, the rules were not fully doing the job of promoting public trust and confidence in public officials. This usually is because the regulators receive reports of instances in which public officials engage in conduct that may not conflict with the letter of the rules, but does conflict with the spirit of the rules.
This dynamic and the frustrations that such complex rules create for local officials are two important reasons why it is wise for public officials to set their sights higher than the law's minimum requirements when faced with a situation that could potentially diminish the public's trust. Walking too close to the line that divides legal from illegal conduct is not only a legally risky strategy (because the rules are sufficiently complex that this line is not always clear), but it also invites further regulation.
Add an Ethics Section to the Public Agency's Website
The FPPC's rules place a heavy emphasis on posting information on agency websites.
With this in mind, consider creating a section on the public agency website that includes all ethics-related information about the agency. Examples could include any ethics-oriented mission and values statements, any agency-adopted code of ethics, any signed statements from public officials agreeing to abide by the code of ethics, Statements of Economic Interests and, of course, the policies and disclosures required by FPPC rules to be posted on the agency website. This puts the required postings in context with the agency's overall commitment to ethics.
When It Is Better To Neither Give Nor Receive
The law is clear that any use of public resources must serve public --- as opposed to personal or political --- purposes.20 This is one of the reasons that even charitable contributions by a public agency should be accompanied by findings on how supporting that charity benefits the taxpayers in the agency's jurisdiction.
Furthermore, personal or political use of public resources subjects an official to both fines and jail time.21
The new Fair Political Practices Commission rules seem to say that any time a public agency uses resources to benefit an official, as opposed to the public, the official must consider those benefits a gift subject to the reporting requirements and gift limits. More specifically, the rule says that any time an agency pays for an official's food, beverages, entertainment, goods or services, those payments must be reported by the official as a gift, unless the payment is a lawful expenditure of public money.22 The rule includes an exception for nominal amounts.
Local agency attorneys believe that the regulation is designed to prevent paying for things that benefit a public official personally without any corresponding public benefit. Examples might include purely social dinners, greens fees for golfing or a birthday present. Local agency attorneys interpret this regulation as not precluding such things as working lunches or dinner before a meeting.
1 2 Cal. Code Regs. § 18944.2(c)(3).
2 2 Cal. Code Regs. § 18944.2(c)(3).
3 2 Cal. Code Regs. § 18944.2(c)(3)(D).
4 2 Cal. Code Regs. § 18944.2(c)(3)(F).
5 2 Cal. Code Regs. § 18944.2(c)(3)(G).
6 2 Cal. Code Regs. § 18944.2(c)(1).
7 See 2 Cal. Code Regs. § 18944.2(b)(1) (Note that section 18944.2 (c)(1) refers to the agency controlling the use of the "payment." Section 18944.2(b)(1) defines "payment" as including a monetary payment for, or provision of goods and services to, an agency).
8 2 Cal. Code Regs. § 18944.2(c)(1).
9 2 Cal. Code Regs. § 18944.2(d)(1) (section 87200 filers).
10 2 Cal. Code Regs. § 18944.2(d)(1).
11 2 Cal. Code Regs. § 18944.2(d)(2).
12 2 Cal. Code Regs. § 18944.2(c)(2).
13 2 Cal. Code Regs. § 18944.2(e) and (f).
14 2 Cal. Code Regs. § 18944.1(c).
15 2 Cal. Code Regs. § 18944.1(b)(2).
16 2 Cal. Code Regs. § 18944.1(d).
17 2 Cal. Code Regs. § 18944.1(a).
18 2 Cal. Code Regs. § 18946.6(b).
19 2 Cal. Code Regs. § 18946.6(c).
20 See Cal. Gov't Code § 8314(c); Cal Penal Code § 424(a).
21 See Cal. Gov't Code § 8314(c); Cal Penal Code § 424.
22 2 Cal. Code Regs. § 18944.3.