Page 27 - Microsoft Word - Lozano Smith Board Member Toolkit 2025

Political Reform Act:

Does a Disqualifying Conflict of Interest Exist?

The Political Reform Act has a four-step process for deciding whether a disqualifying
conflict of interest exists. Each of these four steps involves applying thresholds and
regulatory language, therefore we recommend consulting legal counsel or the Fair
Political Practices Commission if a disqualifying conflict of interest may be present.

Step One:
Is it reasonably foreseeable that the governmental decision will have a financial effect
on any of the public official's financial interests? Remember, the financial interest
could be (1) Business positions, (2) real property, (3) income, (4) gifts, or (5) personal
financial effects.

Step Two:
Will the reasonably foreseeable financial effect be material, as defined in the Political
Reform Act regulations? If the answer is no, there is no conflict of interest under the
Act. If the answer is yes, proceed to Step Three.

Step Three:
Can the public official demonstrate that the material financial effect on his or her
financial interest is indistinguishable from its effect on the public generally? If the
answer is yes, there is no conflict of interest under the Act. If the answer is no, proceed
to Step Four.

Step Four:
If after applying the three-step analysis and determining the public official has a
conflict of interest, absent an exception, he or she may not make, participate in
making, or in any way attempt to use his or her official position to influence the
governmental decision.

Exception:
Is the public official’s participation legally required (a.k.a. rule of necessity)? For
example, the public agency must acquire an essential supply or service, and the
interest board member is the sole source of such supply or service. This exception
rarely applies.

24 Guide to Effective Governance