Order Establishing Code of Ethics,

Policies and Procedures for District Financial Affairs and


The Board of Directors (“Board”) of Newport Municipal Utility District  (“District”) met at the Board’s regular meeting place on July 25, 2001 with a quorum of directors present, as follows:

Richard C. Swanson, President  

Jimmy Ray Hembree, Vice President

Marsha E. Moorhead, Secretary

Elwin T. Walker, Assistant Secretary  

Robert Archer, Director

and the following absent:  


when the following business was transacted:  

The Order set out below (“Order”) was introduced for considera­tion of the Board.  It was duly moved and seconded that said Order be adopted; and, after due discussion, said motion carried by the following vote:  

Ayes: All directors present.

Noes: None

The Order thus adopted is as follows:

Any order and amendments thereto, heretofore adopted by the Board, providing for establishing a code of ethics, policies and procedures for District financial affairs and management, is hereby revoked upon the effective date of this Order.

 The Order hereafter set forth shall become effective on July 25, 2001.





Section 1.1 Policy Statement

(a) It is the policy of the District that no officer, director or employee of the District shall have any interest, financial or otherwise, direct or indirect, or engage in any business transaction or professional activity or incur any obligation of any nature which is in substantial conflict with the proper discharge of his or her duties for the District in the public interest.

(b) To implement this policy and to strengthen the faith and confidence of the residents and property owners of the District in the District’s officials and employees, the Board of the District has adopted the following standards of conduct to be observed by all members of the Board in the performance of their official duties.

Section 1.2 Dual Office Holding

Directors shall not hold or exercise at the same time more than one civil office of emolument.

Section 1.3 Open Meetings Act

(a) The Board of the District shall conduct all the affairs and proceedings of the District in accordance with the requirements of the Texas Open Meetings Act.

(b) Every regular, special or called meeting of the Board of the District shall be open to the public, unless, in accordance with the Open Meetings Act, the subject matter of the meeting requires consideration by the Board in a closed or executive session.

Section 1.4 Director Qualifications

(a) To be qualified to serve as a director, a person shall be at least 21 years old, a resident citizen of the State of Texas, and either own land subject to taxation in the District or be a qualified voter within the District.

(b) A director shall not serve as a member of the Board of the District if he or she is related within the third degree of affinity or consanguinity to a developer of property in the District, any other member of the Board, or the manager, engineer, attorney, or any other person providing professional services to the District.

(c) A director shall not be an employee of any developer of property in the District or any other director, manager, engineer, or attorney for the District.

(d) A director shall not be a developer of property in the District.

(e) A director shall not serve as an attorney, consultant, engineer, manager, architect, or in some other professional capacity for the District or a developer of property in the District in connection with the District or property within the District.

(f) A director shall not be a party to a contract with or along with the District except for the purchase of public services furnished by the District to the public generally.

(g) A director shall not be a party to a contract with a developer of property in the District relating to the District or to property within the District (except for contracts limited solely to purchasing or conveying real property for permanent residence, or commercial business, or qualifying as a director).

(h) A director shall be disqualified if, during the term of the director’s office, the director fails to maintain the qualifications required by law to serve as a director.

(i) The Board shall replace a disqualified director within 60 days of determining that a director is disqualified with a person who would not be disqualified.

(j) Any person who wilfully occupies an office as director and exercises the powers and duties of that office when disqualified under the provisions of this section is guilty of a misdemeanor under Texas law, and on conviction, shall be fined not less than $100 nor more than $1,000.00.

Section 1.5 Removal of Director for Failure to Attend Meetings

(a) The Board, by unanimous vote of its remaining members, may remove an otherwise qualified director if that director has missed one-half or more of the regular meetings scheduled during the prior twelve (12) months.

(b) Any director removed under Section 1.5(a) above may file a written appeal with the Texas Natural Resource Conservation Commission within thirty (30) days after receiving written notice of the Board action, pursuant to the procedure set forth by Section 49.052(6)(g), Texas Water Code.

Section 1.6 Conflicts of Interest

(a) A director who is financially interested in any contract with the District, or a director who is an employee of a person who or firm which is financially interested in any contract with the District, shall disclose that fact to the other directors, and the disclosure shall be entered into the minutes of the meeting.

(b) An interested director may not vote on the acceptance of such contract or participate in the discussion on the contract.

(c) If a director or a person related to that director has a substantial interest in a business entity or in real property that would be pecuniarily affected by an official action taken by the Board, the director shall file an affidavit with the official record keeper of the district stating the nature and extent of the interest and shall abstain from further participation in the matter.

(d) A director commits a criminal offense if the director knowingly fails to provide the affidavit as described in Subsection (c) hereof or participates in a vote or decision on a matter if (i) in the case of a business entity in which the director or a person related to that director has a substantial interest, it is reasonably foreseeable that an action on the matter would confer an economic benefit on the business entity that is distinguishable from the effect on the public; or (ii) in the case of a substantial interest in real property, it is reasonably foreseeable that an action on the matter will have a special economic effect on the value of the property distinguishable from its effect on the public.

Section 1.7 Doctrine of Incompatibility

(a) A director shall not hold another office or position where one office is accountable or subordinate to the other, or where there is an overlap of powers and duties such that the director could not independently serve in both positions.

(b) A director shall not hold another office or position that represents interests in conflict with those represented by the other office.

Section 1.8 Nepotism

A director shall not appoint or vote for or confirm the appointment or employment of any relative of any member of the Board to any job or position paid for with public funds.

Section 1.9 Bribery

(a) A director shall not ask for, accept or agree to accept, money or anything of value as considera­tion for a decision or other exercise of discretion as a public servant.

(b) A director shall reject any benefit for his or her past official actions in favor of another person.

Section 1.10 Abuse of Office

(a) A director shall not exercise his or her official powers without authority, fail to perform a required duty, or improperly take or use any District or public property with the intent to obtain a personal benefit.

(b) A director shall not unlawfully take advantage of his or her official capacity either to mistreat or to impede an individual.

(c) A director shall not misuse information that he or she received, in advance of the public, because of the director’s official capacity, and shall not engage in any business activity that might lead to the disclosure of confidential information.

(d) A director shall reject any job, favor, or other benefit that might tend, or is intended, to impair or influence his or her official conduct or independence.

Section 1.11 Registration as Lobbyist

(a) Pursuant to Chapter 305, Texas Government Code, a director must register with the Texas Ethics Commission (the “Ethics Commission”) if he or she makes a total expenditure of an amount determined by Ethics Commission rule, but not less than $200 in a calendar quarter, not including the director’s own travel, food or lodging expenses or the director’s own membership dues, on activities to communicate directly with one or more members of the legislative or executive branch of state government to influence legislation or administrative action.  If required to register under the provisions of this section, a director shall register in accordance with Chapter 305 and the rules of the Ethics Commission.

(b) If required by Ethics Commission rule, a director who communicates directly with a member of the legislative or executive branch concerning legislative or administrative action, other than routine matters, shall file with the Ethics Commission the director’s name, the name of the District, the subject matter of the communication, and other information the Ethics Commission considers relevant.

(c) District funds may not be used to compensate or reimburse the expenses over $50 of any person for the purpose of communicating directly with a member of the legislative branch to influence legislation, unless the person being compensated or reimbursed resides in the district of the member with whom the person communicates, or files a written statement with the secretary of state that includes the person’s name, the amount of compensation or reimbursement, and the name of the District.  This $50 limitation does not apply if the person is registered with the Ethics Commission, holds an elective public office, or is a full-time employee of the District.

(d) A person commits a criminal offense if the person intentionally or knowingly violates a provision of Chapter 305, Texas Government Code.  A person who fails to register as required shall pay a civil penalty in an amount determined by Ethics Commission rule.



Section 2.1 Policy

Upon approval by the Board, a director may be reimbursed for travel or other reasonable expenses incurred on behalf of the District upon presentation of a verified statement showing the number of days actually spent in the service of the District and a general description of the duties performed for each day of service.

Section 2.2 Fees of Office

A director shall receive a fee of office which shall be established by the Board in a separate resolution.  In  no event shall the fee of office exceed the fees of office permitted under Chapter 49 of the Texas Water Code.

Section 2.3 Transportation

The District shall reimburse the actual transportation expenses incurred by a director while performing duties for the District, except that a director may not be reimbursed for transportation expenses on a common carrier in an amount exceeding the lowest available fare.    For travel by automobile, the District will pay a director roundtrip mileage at the current Internal Revenue Service mileage rate for travel by automobile.  Except for an emergency, to be eligible for reimbursement, a director shall submit for Board approval all estimated transportation expenses proposed to be incurred before the travel expense is incurred.

Section 2.4 Meals and Lodging

(a) A director may receive reimbursement for actual and necessary expenses for meals and lodging incurred in the performance of duties for the District.

(b) Expenses incurred by the spouse or children of a director shall not be reimbursable.

(c) Lodging will be paid at the single room rate for the hotel at which a meeting or conference is being held or at any other comparable hotel.

Section 2.5 Reimbursement

Directors attending conferences must obtain approval of the Board of Directors to register for and attend the conferences.  Directors attending Board meetings or conferences must submit an itemized expense report to the Board of Directors of the District before reimbursement is made, subject to rules regarding reasonable advances provided below.  Items on the expense report shall include lodging, meals, reasonable tips, and transportation.  Directors sharing expenses may split reported expenses in any manner they deem equitable, but the District will pay no more than 100% of the actual cost of reimbursable items.  At the discretion of the Board of Directors, directors may receive a reasonable advance to cover anticipated expenditures, provided however that an itemized expense report must be presented to the Board of Directors meeting next following the conference or meeting attended by directors.  Upon approval by the Board of Directors of the expense report, the balance of the reimbursement will be paid by the District.  If the advance received exceeds the actual expenses as reflected on the expense report and approved by the Board of Directors, the director shall promptly remit the balance due to the District.



Section 3.1 Policy Statement

It is the objective of the Board to ensure that the District is receiving the highest quality professional services from its various consultants.  In that regard, the Board shall review the performance of its consultants based upon the terms of the consultants’ contracts, if any, and the customs and standards of the community with respect to the profession of the consultants and the needs of the District.

Section 3.2 Frequency

The Board shall review the performance and contracts of the District’s professional consultants, including but not limited to the attorney, engineer, tax assessor-collector, bookkeeper, operator, financial advisor and any other consultant engaged to perform services for the District at the time for consideration of renewal of a consultant’s contract or at such other time and frequency as shall be determined by the Board.

Section 3.3 Criteria for Review

(a) The Board’s review of a District consultant shall include an evaluation of the specific duties and obligations being rendered by the consultant as called for under the terms of the consultant’s contract.

(b) The review shall also include an evaluation of the quality, economy, responsiveness and completeness of the consultant’s performance of regular or special projects requested by the Board and as to the consultant’s responses to Board requests for reports and specific information within the consultant’s professional area of responsibility.

Section 3.4 Criteria for Selection

It is the intent of the Board when considering a change in consultants to review a minimum of two (2) proposals when selecting a new consultant for the District.

Section 3.5 Professional Contracts

(a) The Board shall engage an architect registered in the State of Texas to prepare any architectural plans and specifications for a new building intended for education, assembly, or office occupancy whose construction costs exceed One Hundred Thousand Dollars ($100,000) and which is to be constructed by the District.

(b) In selecting an attorney, engineer, auditor, financial advisor, or other professional consultant, the Board shall follow the procedures provided in Chapter 2254, Subchapter A, Texas Government Code, the Professional Services Procurement Act.  In making such a selection, the Board shall not use a competitive bidding process but instead shall award contracts and engage services of such professionals on the basis of demonstrated competence and qualifications for the type of professional services to be performed and at fair and reasonable prices, as long as professional fees are consistent with and not higher than the published recommended practices and fees of the various applicable professional associations and do not exceed the maximum provided by any state law.

Section 3.6 Faithful Performance Bonds

(a) The District shall require that any officer, employee, or consultant who collects, pays or handles any funds of the District to furnish or provide a bond, payable to the District, in an amount determined by the Board to be sufficient to safeguard the District.

(b) Such bond shall be conditioned on the faithful performance of that person’s duties and on accounting for all funds and property of the District.  The bond shall be signed or endorsed by a surety company authorized to do business in the State of Texas.

(c) The Board may pay the premium on surety bonds required out of any available funds of the District.



Section 4.1 Policy Statement

It is the objective of the Board to ensure that all appropriate financial data, statistics and reports are made available to the Board regularly and are effectively used by the Board and the District’s consultants to achieve the most efficient and economical performance of all District operations and programs.

Section 4.2 Budgets

The Board shall adopt a detailed budget for the District’s general fund for each fiscal year prior to commencement of the fiscal year, and the Board shall review the District’s performance in comparison to the budget on a regular basis.  The Board shall utilize accepted budgeting practices annually to determine debt service requirements for the following year prior to establishing the annual ad valorem tax rate for the District.

Section 4.3 Audits

(a) The Board or a committee of one or more directors appointed by the Board shall serve as an audit committee of the Board of Directors.  The audit committee shall review engagement proposals from auditors for approval by the Board, and the audit committee shall perform such preliminary review of annual audit reports as may be needed prior to final Board approval to ensure that the audit process results in presentation of complete and accurate audited financial statements of the District’s position.

(b) The District’s books and financial statements shall be prepared and maintained according to accepted principles of municipal finance, including but not limited to “Audits of State and Local Governmental Units” and “Governmental Accounting and Financial Reporting Standards.”

The President or Vice President is authorized to execute and the Secre­tary or Assistant Secretary to attest this Order on behalf of the Board and the District.

Passed and adopted this July 25, 2001.






I, the undersigned secretary of the Board of Directors of Newport Municipal Utility District, hereby certify that the foregoing is a true and correct copy of the Resolution for Adoption of an Order Establishing a Code of Ethics, Policies and Procedures for District Financial Affairs and Management adopted by said Board at its meeting of July 25, 2001, together with excerpts from the minutes of said Board’s meeting on that date showing the adoption of said Resolution as same appear of record in the official minutes of the Board on file in the District’s office.

I further certify that said meeting was open to the public, and that notice thereof was posted in compliance with the provisions of Tex. Gov’t. Code Ann. § 551.001 et seq.

Witness my hand and the official seal of said District, this ____________________.


Code of Ethics