Below you will find information to help school board members and administrators navigate the complex Conflict of Interest law.
The Conflict of Interest Law
The law requires 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 or enter into multiple contracts in an amount greater than $5,000 with the same party within a twelve-month period, to disclose their personal interest in any contract between their school district and a third party.
A personal interest in a contract may be in the form of an “interest in a contract” – i.e. an indirect benefit/indirect interest in a contract – or a “direct benefit from a contract” – i.e. the person is a direct beneficiary of the contract.
A person has an interest in a contract entered into by their school district and a third party if the person, the person’s spouse, or any other person with whom the person lives and commingles assets and:
- The person, the person’s spouse, or any other person with whom the person lives and commingles assets, is employed by a party to any contract with the local service agency, school district, cooperative education service unit, or education service agency; OR
- The person, the person’s spouse, or any other person with whom the person lives and commingles assets, 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.
A person who derives a direct benefit from a contract must disclose the existence of the contract and direct benefit and receive school board authorization in order to receive the direct benefit from the contract.
The disclosure of a direct benefit must be in writing and must include:
- All parties to the contract;
- The person’s role in the contract:
- The purpose or objective of the contract;
- The consideration or benefit conferred or agreed to be conferred upon each party; and
- The duration of the contract.
A person who only has an interest in a contract must disclose the existence of a contract in which the person has an interest and the person’s role in the contract, but no governing board authorization is required after a person discloses the interest in the contract.
The interest disclosure must be included in the official minutes of the governing board, but the official minutes are not required to be sent to the auditor-general and attorney general.
Submitting Official Minutes
In the minutes, the school board will have determined whether the contract terms from which a direct benefit is derived are fair and reasonable, and, if the contract is not contrary to the public interest, the school board would vote to approve the person deriving a direct benefit from the contract.
The direct benefit disclosure must be given prior to entering into the contract or within forty-five days after entering into the contract and must be reviewed by the school board with the official minutes of board’s action submitted to the South Dakota Auditor-General and South Dakota Attorney General.
Minutes also must be submitted to the South Dakota Attorney General’s office via email at: ATGMinutes@state.sd.us; OR by mail to: Office of the Attorney General, 1302 E. Hwy 14, Suite #1, Pierre SD 57501.
Conflict of Interest Q and A designed to help school board members and administrators navigate House Bill 1170, which amended and clarified the complex conflict of interest law.
ASBSD has sample policy: AH Conflict of Interest Disclosure and Authorization and two new forms: AH-E(1) Conflict of Interest Disclosure and AH-E(2) School Board Action on Conflict of Interest Disclosure of a Direct Benefit.
To access the new sample policy and accompanying forms, school board members and administrators must login to the ASBSD Online Policy Reference Manual at http://policy.asbsd.org. Your district’s login and password information has been previously provided to your district’s administration.