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AMENDMENTS TO FPPC CONFLICT OF INTREST MATERIALITY STANDARDS FOR SOURCE OF INCOME, SOURCE OF GIFT, AND PERSONAL FINANCES
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AMENDMENTS TO FPPC CONFLICT OF INTREST MATERIALITY STANDARDS FOR SOURCE OF INCOME, SOURCE OF GIFT, AND PERSONAL FINANCES
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7/19/2019 1:35:36 PM
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City Clerk
Date
3/10/2015
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1 yk <br />BEST BEST & KRIEGER <br />ATTORNEYS AT LAW <br />The Act provides that a public official is prohibited from making, participating in <br />making, or attempting to influence a governmental decision if it is reasonably <br />foreseeable that the decision will have a material financial effect on the official <br />distinguishable from its effect on the public generally. (Gov. Code §§ 87100 and 87103.) <br />Under the prior source of income and source of gift materiality standards, whether an <br />official's financial interest was material was determined by whether the interest was <br />"directly" or "indirectly" involved in the governmental decision. (Former Regs. 18704 and <br />18704.1.) The directly involved/indirectly involved test used bright line rules (for <br />example, the 500 foot boundary for real property interests) to determine materiality. If an <br />interest was directly involved, the financial effect of a decision was presumed to be <br />material, unless the decision would cause no financial effect (the one -penny rule). The <br />new regulations eliminate the directly involved/indirectly involved test as well as the <br />corresponding presumption of materiality under the one -penny rule. The new language <br />states that a financial effect is not considered material under any of the standards if the <br />financial effect is "nominal, inconsequential, insignificant, or immeasurable." (Reg. <br />18702.) <br />Four new regulations went into effect on March 4, 2015, Regulations 18702.3, <br />18702.4, 18702.5, and 18702, and are discussed below. <br />Regulation 18702.3 — Source of Income <br />Under the prior Regulation, a decision had a material financial effect on a source <br />of income when the source was directly involved unless there was no financial effect <br />(the one -penny rule). When a source of income was indirectly involved, different <br />materiality standards applied depending on the nature of the source. If the source was a <br />business entity, the business entity materiality standards applied. If the source was a <br />nonprofit or government entity, materiality was based on the gross annual revenues of <br />the entity and the impact on its finances. If the source was an individual, the effect was <br />material if it impacted the individual's assets and liabilities by $1,000 or more, or had a <br />-2- <br />93939.00001A9613114.1 <br />
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