e-Bulletin: AB 1234 Requires Adoption of Reimbursement Policy

A new law applicable to cities, counties and special districts, went into effect on January 1, 2006. AB 1234 requires agencies to provide mandatory ethics training and develop compensation and reimbursement regulations for their agencies. In fact, AB 1234 requires local agencies to adopt a reimbursement policy.

According to the terms of AB 1234, “if a local agency reimburses its legislative body members for actual and necessary expenses incurred in the performance of official duties,” then the local agency is required to adopt a written reimbursement policy.

AB 1234’s reimbursement policy applies to “legislative bodies” as that term is defined in the Ralph M. Brown Act. The reimbursement policy may establish its own reimbursement rates. Otherwise, the Internal Revenue Service reimbursement rates apply. The policy may also define the types of meetings and events for which legislative body members may be reimbursed or provided per diem or compensation for their attendance. However, AB 1234 requires that conference lodging costs cannot exceed the maximum group rate available at the time of booking. Additionally, if group or government rates are available, then the agency must use them. Any requests for reimbursements that are not specifically covered by an agency’s policy must be approved in a public meeting before the expense is incurred.

Under AB 1234, local agencies are also required to provide expense report forms to public officials. These expense reports must then be completed, submitted within a “reasonable time” after incurring the expense, and be accompanied by receipts. Additionally, members have to provide a “brief” report on meetings attended at the expense of the local agency at the next regularly scheduled meeting of the legislative body. Finally, the new law states that all documents related to reimbursable agency expenditures are subject to the Public Records Act. AB 1234 also references possible penalties for the misuse of public resources or falsifying expense reports. These penalties may include: loss of reimbursement privileges, restitution to the local agency, civil penalties up to $1,000 a day, and felony prosecution under Penal Code Section 424.

If your agency has not already adopted a reimbursement policy to comply with AB 1234, now is the time to do so. Below are two sample reimbursement policies that your agency may want to use as a model, incorporating changes that may be necessary for your particular agency. The first sample was drafted by the California Special Districts Association (CSDA) and the second was drafted by Institute for Local Government (ILG), an affiliate of the League of California Cities.

Should your agency desire our assistance to prepare a reimbursement policy please do not hesitate to contact your BB&K attorney or any BB&K Special Districts or Municipal & Redevelopment Practice Group attorney.