Many nonprofits may encounter a new compliance requirement that doesn’t make a lot of sense. The 2015 Texas legislative session saw a lot of activity regarding the contracting and procurement procedures of state and local government agencies. One result was the passage of House Bill 1295, which requires filing with the Texas Ethics Commission the new Form 1295 detailing the business or nonprofit organization entering into a contract of $1 million or more with a state or local government entity.
The statute, affecting contracts beginning this year, is at Texas Government Code Section 2252.908. The Ethics Commission has issued rules clarifying the new law and describing the process to comply at 1 Texas Administrative Code Section 46.1.
Interestingly, the administrative rule includes nonprofit organizations within the meaning of a “business entity” that must report the details and also the names of each “interested party” in the contract. HB 1295 did not list nonprofits and charities as business entities, so it makes little sense to include them in the Rule 46.3(b), which says a nonprofit’s board members and officers must be listed along with their addresses. These folks will not receive any direct benefit from a contract nor do they “own” or have a financial interest in the contracting nonprofit corporation that would logically trigger an Ethics Commission disclosure.
A number of vendors using multi-party co-contractors have already questioned the cumbersome process to determine who and what to report on the Form 1295, which includes a sworn statement to be filed online in conjunction with the contracting public agency. Maybe nonprofit board members should also be objecting.
If you think your organization’s contracts might be included in the scope of the new Form 1295 process, it’s wise to clarify the issue rather than risk becoming an Ethics Commission rule violator!