Page 21 - Lozano Smith Board Member Toolkit 2026

> Reimbursement of an officer’s actual and necessary expenses incurred in the
performance of official duties;
> A recipient of public services generally provided by the public body or board of
which he or she is a member, on the same terms and conditions as if he or she
were not a member of the body or board;
> An officer who owns less than 3% of a corporation’s for-profit shares, provided that
the total annual income to the officer from dividends and any other payments from
the corporation does not exceed 5% of his or her total annual income;
> Interests of the spouse of an officer or employee of a public agency, in the
spouse’s employment or office holding, if the spouse’s employment has existed
for one year prior to the public official’s election or employment;
> Interests of a non-salaried member of a nonprofit corporation, provided that the
interest is disclosed to the board at the time the contract is first considered, and is
noted in official records;
> Interests of a non-compensated officer of a nonprofit, tax-exempt corporation,
which, as one of its primary purposes, supports the functions of the body or board,
provided that this interest is noted in its official records.

Contractors and Consultants
A contractor or consultant may be subject to Government Code section 1090 when
they engage in or advise on public contracting on behalf of the public entity, meaning
they have prepared or assisted with any portion of the preparation of a request for
proposals, request for qualifications, or any other solicitation regarding a subsequent
or additional contract with the agency. However, there is no violation of Government
Code section 1090 when the following conditions are met:

o The contractor or consultant participated in the planning, discussions, or
drawing of plans or specifications during an initial stage of a project;
o Their participation was limited to conceptual, preliminary, or initial plans or
specifications; and,
o All bidders or proposers for any subsequent contract have access to the same
information, including all conceptual, preliminary, or initial plans or
specifications.

Statutory language can be incorporated into the initial contract to help avoid Section
1090 issues.

Rule of Necessity

The rule of necessity is a judicially-recognized exception to the conflict of interest
prohibitions. Under the rule, if an official has a financial interest in a contract, the
agency itself is not powerless to proceed if the contract is necessary to carry out
the agency’s statutory duties and powers. If the rule of necessity applies, the
Board may act with the interested party abstaining, without nullifying the contract
or any other consequences. The rule of necessity is to reflect actual necessity after
all possible alternatives have been explored.

18 Guide to Effective Governance