TEXAS COUNCIL Board Training: Trustee Roles and Responsibilities

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1 TEXAS COUNCIL Board Training: Trustee Roles and Responsibilities June 26, 2013 Presented by: Carvan Adkins, Legal Counsel Taylor, Olson, Adkins, Sralla, & Elam LLP 6000 Western Place, Suite 200 Fort Worth, Texas

2 Authorized local agencies to assume administration of MHMR services Created Texas Department of MHMR Established partnerships between local agencies, the State, the Federal Government Vague in terms of legal definition and authority of local entity 2

3 Authorizes county, municipality, hospital district, school district [or organizational combination] to establish and operate a Community Center. Community Center plan requires state approval Once approved, Center functions as unit of local government subject to the Open Meetings Act, the Public Information Act and other rules and regulations designed to safeguard the public s property. 3

4 A Community Center is 1. An agency of the state, a governmental unit and a unit of local government as defined and specified by Chapters 101 and 102, Civil Practice and Remedies Code (tort claims protection); 2. A local government as defined by Section , Government Code (Interlocal Cooperation Act); 3. A local government for the purposes of Chapter 2259, Government Code (allows for self insurance by governmental entities); and 4. A political subdivision for the purposes of Chapter 172, Local Government Code (allows for group benefits programs). 4

5 (a) A community center created under this subchapter is intended to be a vital component in a continuum of services for persons in this state who are mentally ill or mentally retarded. (b) It is the policy of this state that community centers strive to develop services for persons who are mentally ill or mentally retarded, and may provide requested services to persons with developmental disabilities or with chemical dependencies, that are effective alternative to treatment in a large residential facility. 5

6 (e) Except as provided by this section, a Community Center operating under this subchapter may operate only for the purposes and perform only the functions defined in the center s plan. In addition to the services described in the center s plan, the center may provide other health and human services and supports as provided by a contract with or a grant received from a local, state, or federal agency. 6

7 (f) Each function performed by a community center under this title is a governmental function if the function is required or affirmatively approved by any statute of this state or of the United States or by a regulatory agency of this state or of the United States duly acting under any constitutional or statutory authority vesting the agency with such power. Notwithstanding any other law, a community center is subject to Chapter 554, Government Code. 7

8 ADMINISTRATION BY BOARD (a) The board of trustees is responsible for the effective administration of the community center. (b) The board of trustees shall make policies that are consistent with the department s rules and standards. 8

9 Department of State Health Services: 25 TAC Rule Department of Aging and Disability Services: 40 TAC Rule

10 1. Govern organization by establishing broad policies and providing strategic direction; 2. Select, appoint, support and review the performance of the Executive Director; 3. Ensure the availability of adequate financial resources; 4. Approve annual budgets; 5. Account to stakeholders for organization s performance. 10

11 Fiduciary Responsibility In law, a person who is obliged to discharge faithfully a responsibility of trust toward another. One that stands in a special relation of trust, confidence, or responsibility in certain obligations to others. 11

12 Basic Obligations Attend all meetings Prepare for meetings Be attentive and actively participate Ensure information is available for informed decisions Examine the information thoroughly Request more information if materials raise issues or highlight problems Do not passively await signs of problems or red flags 12

13 Business Judgment Rule In retrospect, decisions made may be judged right or wrong. The fiduciary obligation requires that decisions are arrived at in an appropriate way not that decisions are always right. 13

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16 Follows Part VI of the Form 990 IRS says since 2008 their agents have completed this check list for every 501(c)(3) audit/exam. The questions include: Does the organization have a written mission statement that articulates its current 501(c)(3) purposes? Does the authorized body (e.g., the board) rely on comparability data in making compensation determinations? Did any of the organization s voting board members have a family relationship or outside business relationship with any other voting or non-voting board member, officer, director, trustee or key employee? Does effective control of the organization rest with a single or select few individuals? Does the organization have a written conflict of interest policy? Are there systems or procedures in place intended to make sure assets are properly used, consistent with the organization s mission? Prior to filing, was the Form 990 reviewed by the full board or a designated committee? 16

17 IRS concludes there is a statistically significant correlation between questions related to some governance practices and tax compliance. Organizations with a written mission statement are more likely to be compliant. Organizations that always use comparability data when making compensation decisions are more likely to be compliant. Organizations with procedures in place for the proper use of charitable assets are more likely to be compliant. Organizations where the 990 was reviewed by the entire board of directors are more likely to be compliant. This indicates that having the entire board engaged in what is being reported on the 990 is not only helpful, but correlates to better compliance. 17

18 All decision makers should know the following: o Legal form of the organization o Mission of the organization o Provisions of the Articles of Incorporation/Certificate of Formation o Provisions of Bylaws o Any policies affecting decision makers (e.g. Conflict of Interest Policy) o Financial Picture (budget and financials) 18

19 o Most recent 990 o Existence/operations of related entities o Activities being conducted by the organization o Where the organization is conducting those activities o Tax status and applicable legal requirements of the organization o Management structure o Key employees o Committee Structure o How directors and officers are selected 19

20 A director should seek to do the following: o Familiarize herself with material aspects of the organization o Faithfully attend meetings o Read materials and prepare for meetings o Ask questions before, during and after meetings o Exercise independent judgment o Rely on appropriate sources of information o Review minutes of the board o Seek to stay informed as to legal obligations and good governance o With other members of the Board develop scheduled for review and approval of the strategic direction of the organization, executive compensation, legal compliance and budget 20

21 o Keep the following information accessible in a Board/Director s Notebook: o Articles of Incorporation/Certificate of Formation o Bylaws o Conflict of Interest Policy o Minutes for the previous year o Most recent audit/review o Budget and most recent financials 21

22 Panel on the Nonprofit Section October 2007 Published Principles for Good Governance and Ethical Practice A Guide for Charities and Foundations

23 What constitutes a conflict of interest and the rules governing conflicts are found in section of the Health & Safety Code. It is grounds for removal if you violate the provisions referenced in this section. 23

24 The prohibitions regarding nepotism are found in section of the Health and Safety Code. An officer or employee who is related to a member of the board of trustees in a prohibited manner defined in section may continue to be employed if the related person began his or her employment at least 31 days before the member of the board was appointed. However, the related officer or employee must abstain from the deliberation of or voting on an issue that is specifically applicable to the officer or employee related to a member. 24

25 EXECUTIVE DIRECTOR. (a) The board of trustees shall appoint an executive director for the Community Center. (b) The board of trustees shall: (1) adopt a written policy governing the powers that may be delegated to the executive director; and (2) annually report to each local agency that appoints the members the executive director s total compensation and benefits. 25

26 Executive Director (CEO) implements policy and budgetary directives of full Board as expressed by majority vote at properly posted meetings. Is liaison between Board and Staff Responsible for employment of all other Center employees. Generally serves as spokesperson for the Center. 26

27 Board of Trustees Hires Executive Director 27

28 PERSONNEL (a) The executive director shall employ and train personnel to administer programs and services; (b) The board shall provide employees appropriate rights, privileges and benefits; (c) The board may provide worker s compensation benefits; (d) The board shall prescribe the number of employees and salaries using a market analysis, internal salary study or (e) state position classification plan and the General Appropriations Act; (f) during management audit the department is entitled to confirm the method used to determine salaries and benefits. 28

29 Executive Director Staff 29

30 Board Executive Director Staff 30

31 Board Executive Director Staff 31

32 MEETINGS (a) The board of trustees shall adopt rules holding regular and special meetings. (b) Board meetings are open to public to extent required by and in accordance with Chapter 551, Government Code. (c) The board of trustees shall keep a record of its proceedings in accordance with Chapter 551, Government Code. The record is open for public inspection in accordance with that law. 32

33 Board acts only by majority vote at a meeting posted in accordance with the Texas Open Meetings Act in which a quorum of the Board is present. Individual Board members, including the Chair, have no express authority. Action, or votes, may only be taken on properly posted items, which usually means listed on the Agenda. 33

34 Every meeting of a governmental body is open to the public Board of trustees must keep minutes or tape recordings of its meetings A quorum must be present for a meeting to begin If officials gather in numbers of less than a quorum with the intent of circumventing the Act, criminal penalties may be imposed 34

35 Board of Trustees shall send to the department of each appointing local agency a copy of approved board meeting minutes. 35

36 A meeting occurs when a quorum of a governmental body is present and discusses public business, including a gathering: conducted by the governmental body; and at which members receive or give information about public business or public policy over which the body has control Formal action is not required 36

37 Defined as a simple majority under the Act, but may be dictated by Board bylaws or other similar local governance document, such as your inter-local agreement. 37

38 Defined as a verbal exchange ( giving and receiving of spoken words ) during a gathering of a governmental body concerning an issue within the jurisdiction of the governmental body or any public business. 38

39 Where no formal actions are taken and the discussion of public business is incidental to the events, the following are exceptions: purely social gatherings; attendance of public officials at conferences or training; and closed meetings/executive sessions; where permissible by law. 39

40 The Act does apply to: workshop meetings town hall meetings informal gatherings before or after meeting in a quorum to discuss center business Board retreats 40

41 Does not apply to purely advisory committees, unless: Board of trustees generally rubber stamps action Inter-local or similar governing agreement renders committees subject to Act Other state law or regulation requires compliance with the Act Committee has tradition of complying with Act 41

42 However, the Attorney General s Office recently held that if a quorum of the governing board attends a committee meeting and deliberation occurs about public business or public policy over which the board has supervision or control, the committee meeting will constitute a meeting of the governing board under the Act such that notice must be sent and all other aspects of the Act must be complied with. Op. Tex. Att'y Gen. No. GA-0957 (2012) 42

43 A member of a governmental body may leave an open meeting to confer privately with employees or staff of that governmental body without violating the Act. Op. Tex. Att'y Gen. No. GA-0989 (February 19, 2013) 43

44 Efforts to invalidate parts of the Act based on an argument that it is an unconstitutional restriction on the free speech rights of members of a governing body have thus far failed. The Fifth Circuit held recently that absent a knowing effort to violate the Act, one member of a governing body may contact another member without violating the Act. The criminal sanctions only apply when there is an intentional effort to discuss items of business outside of the confines of the Act. Thus there is no restriction on free speech because the members are free to discuss what they wish so long as they do not do so with the intent of circumventing the Act. Asgeirsson v. Abbott, 773 F. Supp. 2d 684, 707 (W.D. Tex. 2011) aff'd, 696 F.3d 454 (5th Cir. 2012) cert. denied, 133 S. Ct. 1634, 185 L. Ed. 2d 616 (U.S. 2013) 44

45 Foreman v. Whitty, 392 S.W.3d 265, 268 (Tex. App. San Antonio 2012, no pet.) by one member of a governing board to the other members is not a violation of the Act. However, a violation may occur if other members reply all to the such that an exchange of ideas or a deliberation occurs. The Court stated, One board member asking another board member her opinion on a matter does not constitute a deliberation of public business. 45

46 There is very little guidance specifically governing text messages sent between members during meetings, but beware of the walking quorum issue which has been held to violate the Act. 46

47 An example of a walking quorum that was held to violate the Act is as follows: The night before an open city council meeting was to be held, the mayor met with several city council members in the city manager s office and spoke with others by telephone about the city budget. A decision was made that night and ratified at the public meeting the next day. The key is your intent. If you send text messages to intentionally get around the open meetings act, it would likely be found to be a violation of the Act. Esperanza Peace & Justice Ctr. v. City of San Antonio, 316 F. Supp. 2d 433, 476 (W.D. Tex. 2001) 47

48 H.B. 2414, Effective immediately. Amends sections and of the Open Meetings Act. Defines videoconference call and allows a member or employee of a governmental body to participate remotely in a meeting of the governmental body by means of a videoconference call if the video and audio feed of the member s or employee s participation is broadcast live at the meeting. 48

49 A member of a governmental body who participates in a meeting by videoconference call shall be counted as present at the meeting for all purposes. The bill requires certain accommodations to be in place before a governmental body can conduct a meeting via videoconference call. Must have a physical location for the public to meet that provides a microphone so the public can participate. The notice must include this physical location. 49

50 S.B. 471, Effective Immediately. Recording of Meeting. Amends section of the Open Meetings Act Defines the term recording, in regard to meetings, to mean a tangible medium on which audio or a combination of audio and video is recorded, including a disc, tape, wire, film, electronic storage drive, or other medium now existing or later developed. 50

51 S.B Effective September 1, Electronic Communications. Adds section to the Open Meetings Act. Allows members of a governing body to communicate with each other via an internet message board that is viewable and searchable by the public without violating the Open Meetings Act. 51

52 A governmental body may have only one online message board. It must be owned or controlled by the governmental body, prominently displayed on the body s primary Internet web page, and no more than one click away from the body s primary Internet web page. The online message board may be restricted to use only by members of the governmental body or staff members of the body who have received specific authorization from a member of the body, and who include their name and title in the post. Provides a retention period of 6 years for the posting and that the posting is public information. 52

53 The Act requires the Board to provide the public notice of any scheduled meeting. Notice of the meeting must contain: a description of each subject that will be deliberated in sufficient specificity to alert the public, in general terms, of matters to be considered at the meeting 53

54 Descriptions such as old business or staff reports are not sufficient courts have held that the more important an issue is to the public, the more specific the notice must be 54

55 Cannot deliberate or decide items not posted If public brings up unposted item, board may only: request to place item or subject matter on next agenda make statement of factual information recite existing policy 55

56 Action is necessary because of an imminent threat to public health and safety or because of a reasonably unforeseeable situation Notice must be posted at least two hours in advance of the meeting, and the notice must clearly identify with specificity the nature of the emergency 56

57 Courts have found that the issue of whether an emergency or urgent public necessity existed would be a mixed question of law and fact. Torres v. City Council of Uvalde, CV, 1998 WL (Tex. App. San Antonio Apr. 8, 1998, no pet.) Dismissal of a city manager in an emergency meeting was held not to be an emergency under the Act as a matter of law. Garcia v. City of Kingsville, 641 S.W.2d 339, 341 (Tex. App. Corpus Christi 1982, no writ) 57

58 A closed meeting is a meeting to which the public does not have access No action may be taken in a closed meeting Members may indicate how they intend to vote, but the courts and the Attorney General have ruled no straw votes 58

59 First convene in a properly posted open meeting Chair announces the closed session and identifies the section or sections of the Act that authorize the session In the session, the Chair must announce the date and time the session starts End of the session, the Chair must again announce the date and time 59

60 Must maintain a record of closed meetings except for consultation with an attorney certified agendas tape recordings Must be preserved for two years from the date of the meeting May not be disclosed except upon the order of a court 60

61 Except disclosure of tape or certified agenda, no criminal penalty All Board members have fiduciary duty to the Center and should not disclose substance of discussion May be civilly liable if cause harm to government entity because of disclosure 61

62 May waive attorney/client privilege Malfeasance in office removal by appointing authority Stifles questions and information 62

63 The courts are not exactly clear on this. The courts seem to uphold actions by a governing body when challenged as violating the Act for exceeding the scope of an executive session so long as the record reflects that the final decision was arrived at in the open meeting. Texas State Bd. of Pub. Accountancy v. Bass, 366 S.W.3d 751, 764 (Tex. App. Austin 2012, no pet.) 63

64 The Act has been held not to prohibit members in an executive session from expressing their opinions on an issue or even implying as to how they might vote in open session so long as the actual vote or decision is made in the open session. Thompson v. City of Austin, 979 S.W.2d 676, 685 (Tex. App. Austin 1998, no pet.) 64

65 A Texas court of appeals recently held that a violation of the Act occurs when topics outside the scope of the legal advice exception are discussed and that an attorney s presence does not save the governmental body from a violation of the Act if the discussion moves away from legal advice. In other words, the Board cannot use the presence of an attorney as cover to discuss business of the Board or merits of a certain proposal or decision outside of an open meeting. Killam Ranch Properties, Ltd. v. Webb County, 376 S.W.3d 146, 157 (Tex. App. San Antonio 2012, pet. denied) 65

66 Some violations are criminal offenses (With a penalty of a fine of $100 to $500, up to 6 months in jail, or both) a member participates in any way in an unauthorized closed meeting meet in numbers of less than a quorum for the purpose of circumventing the Act Ignorance is no defense 66

67 Other violations participating in a closed meeting knowing that a certified agenda or tape recording is not being made: Class C misdemeanor, with a fine up to $500 releasing a copy of the certified agenda or tape recording of a closed meeting: Class B misdemeanor, with a fine up to $2,000, up to 6 months in jail, or both 67

68 It is an affirmative defense to criminal liability if you attended an illegal executive session upon the reasonable reliance of a court order, written opinion of court of record, Attorney General opinion, or Center s general counsel. 68

69 No right to speak under the Act Public hearings may be required under other laws Courts recognize constitutional right to address and petition governing body If permitted to speak, limitations may be established and all speakers should be treated equally 69

70 Texas Penal Code provides: Class B misdemeanor if a person with intent to disrupt, obstructs or interferes with a lawful meeting by physical action or verbal utterance (subject to First Amendment) Class A misdemeanor if the person has been warned 70

71 Provides that public records are generally open and available to the public for inspection and duplication What is public information recorded information in any medium including electronic, paper, video tape includes 71

72 includes most personnel notes related to Center business (unless invasion of privacy or clearly for personal use) may include information on personal computer related to Center business AG has ruled: mayor s personal journal is subject to open records request if it contains details about his official duties and relates to city business. Op. Tex. Att'y Gen. No. OR (2004) 72

73 (a) Each community center shall annually provide to each local agency that appoints members to the board of trustees a copy of the center s: (1) approved fiscal year operating budget; (2) most recent annual financial audit; and (3) staff salaries by position. (b) The board of trustees shall annually submit to each local agency that appoints the members a request for funds or in-kind assistance to support the center. 73

74 (a) A community center may purchase or lease-purchase real and personal property and may construct buildings and facilities. (b) The board of trustees shall require that an appraiser certified by the Texas Appraisers Licensing and Certification Board conduct an independent appraisal of real estate the community center intends to purchase. The board of trustees may waive this requirement if the purchase price is less than the value listed for the property by the local appraisal district and the property has been appraised by the local appraisal district within the preceding two years. (c) The board of trustees shall establish in accordance with relevant department rules competitive bidding procedures and practices for capital purchases and for purchases involving department funds or required local matching funds. 74

75 (a) A community center must receive from the department prior written approval to acquire real property, including a building, if the acquisition involves the use of department funds or local funds required to match department funds. In addition, for acquisition of nonresidential property, the community center must notify each local agency that appoints members to the board of trustees not later than the 31 st day before it enters into a binding obligation to acquire the property. (b) A community center must notify the department and each local agency that appoints members to the board of trustees not later than the 31 st day before it enters into a binding obligation to acquire real property, including a building, if the acquisition does not involve the use of department funds or local funds required to match department funds. The commissioner, on request, may waive the 30-day requirement on a case-by-case basis. (c) The board shall adopt rules relating to the approval and notification process. 75

76 Presented by: Carvan Adkins, Legal Counsel Taylor, Olson, Adkins, Sralla, & Elam LLP 6000 Western Place, Suite 200 Fort Worth, Texas