Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) The conflict of interest provisions of
this section shall apply to verification bodies, lead verifiers, and verifiers
accredited by ARB to perform verification services for reporting entities. Any
individual person or company that is hired by a reporting entity to contract
with a verification body on behalf of the reporting entity is subject to the
conflict of interest assessment in this article. In such instances, the
verification body must assess the potential conflict of interest between itself
and the contracting entity as well as between itself and the reporting entity,
and must also address the potential conflict of interest between the
contracting entity and the reporting entity, including a written assessment
provided and signed by the contracting entity.
(b) The potential for a conflict of interest
must be deemed to be high where:
(1) The
verification body and reporting entity share any management staff or board of
directors membership, or any of the senior management staff of the reporting
entity have been employed by the verification body, or vice versa, within the
previous five years; or
(2) Any
employee of the verification body, or any employee of a related entity, or a
subcontractor who is a member of the verification team has provided to the
reporting entity any of the following services within the previous five years:
(A) Designing, developing, implementing,
reviewing, or maintaining an inventory or information or data management system
for facility air emissions, or, where applicable, electricity or fuel
transactions, unless the review was part of providing greenhouse gas
verification services;
(B)
Developing greenhouse gas emission factors or other greenhouse gas-related
engineering analysis, including developing or reviewing a California
Environmental Quality Act (CEQA) greenhouse gas analysis that includes facility
specific information;
(C) Designing
energy efficiency, renewable power, or other projects which explicitly identify
greenhouse gas reductions as a benefit;
(D) Designing, developing, implementing,
conducting an internal audit, consulting, or maintaining a GHG emissions
reduction or GHG removal offset project as defined in the cap-and-trade
regulation;
(E) Owning, buying,
selling, trading, or retiring shares, stocks, or emissions reduction credits
from an offset project that was developed by or resulting reduction credits are
owned by the reporting entity;
(F)
Dealing in or being a promoter of credits on behalf of an offset project
operator or authorized project designee where the credits are owned by or the
offset project was developed by the reporting entity;
(G) Preparing or producing greenhouse
gas-related manuals, handbooks, or procedures specifically for the reporting
entity;
(H) Appraisal services of
carbon or greenhouse gas liabilities or assets;
(I) Brokering in, advising on, or assisting
in any way in carbon or greenhouse gas-related markets;
(J) Directly managing any health, environment
or safety functions for the reporting entity;
(K) Bookkeeping or other services related to
accounting records or financial statements;
(L) Any service related to development of
information systems, including consulting on the development of environmental
management systems, such as those conforming to ISO 14001 or energy management
systems such as those conforming to ISO 50001, unless those systems will not be
part of the verification process;
(M) Appraisal and valuation services, both
tangible and intangible;
(N)
Fairness opinions and contribution-in-kind reports in which the verification
body has provided its opinion on the adequacy of consideration in a
transaction, unless the resulting services will not be part of the verification
process;
(O) Any actuarially
oriented advisory service involving the determination of amounts recorded in
financial statements and related accounts;
(P) Any internal audit service that has been
outsourced by the reporting entity or offset project operator that relates to
the reporting entity's internal accounting controls, financial systems or
financial statements, unless the result of those services will not be part of
the verification process;
(Q)
Acting as a broker-dealer (registered or unregistered), promoter or underwriter
on behalf of the reporting entity;
(R) Any legal services;
(S) Expert services to the reporting entity,
a trade or membership group to which the reporting entity belongs, or a legal
representative for the purpose of advocating the reporting entity's interests
in litigation or in a regulatory or administrative proceeding or
investigation.
(T) Verification
services that are not conducted in accordance with, or equivalent to, section
95133 requirements, unless the
systems and data reviewed during those services, as well as the result of those
services, will not be part of the verification process.
"Member" for the purposes of this section means any
employee or subcontractor of the verification body or related entities of the
verification body. "Member" also includes any individual with majority equity
share in the verification body or its related entities. "Related entity" for
the purposes of this section means any direct parent company, direct
subsidiary, or sister company.
(3) The potential for conflict of interest
shall be deemed to be high when any staff member of the verification body
provides any type of non-monetary incentive to a reporting entity to secure a
verification services contract.
(4)
The potential for a conflict of interest shall also be deemed to be high where
any staff member of the verification body has provided verification services
for the reporting entity except within the time periods in which the reporting
entity is allowed to use the same verification body as specified in section
95130(a).
(c) The potential for a conflict of interest
shall be deemed to be low where the following conditions are met:
(1) No potential for a high conflict of
interest is found pursuant to section
95133(b);
and
(2) Any services provided by
any member of the verification body or verification team to the reporting
entity, within the last five years, are valued at less than 20 percent of the
fee for the proposed verification services. Any verification conducted in
accordance with, or equivalent to, section
95133 provided by the verification
body or verification team outside the jurisdiction of ARB is excluded from this
financial assessment but must be disclosed to ARB in accordance with section
95133(e).
(3) Non-ARB verification services are deemed
to be low risk if those services are conducted in accordance with, or
equivalent to, section
95133, including, but not limited
to, third-party certification of environmental management system under ISO
14001 or energy management system under 50001 standards.
(d) The potential for a conflict of interest
shall be deemed to be medium where the potential for a conflict of interest is
not deemed to be either high or low as specified in sections
95133(b) and
95133(c). The
potential for conflict of interest will also be deemed to be medium where there
are any instances of personal or familial relationships between the members of
the verification body and management or staff of the reporting entity, and when
a conflict of interest self-evaluation is submitted pursuant to section
95133(h).
(1) If a verification body identifies a
medium potential for conflict of interest and intends to provide verification
services for the reporting entity, the verification body shall submit, in
addition to the submittal requirements specified in section
95133(e), a plan
to avoid, neutralize, or mitigate the potential conflict of interest situation.
At a minimum, the conflict of interest mitigation plan shall include:
(A) A demonstration that any individuals with
potential conflicts have been removed and insulated from the project.
(B) An explanation of any changes to the
organizational structure or verification body to remove the potential conflict
of interest. A demonstration that any unit with potential conflicts has been
divested or moved into an independent entity or any subcontractor with
potential conflicts has been removed.
(C) Any other circumstance that specifically
addresses other sources for potential conflict of interest.
(2) As provided in section
95133(f)(4), the
Executive Officer shall evaluate the conflict of interest mitigation plan and
determine whether verification services may proceed.
(e)
Conflict of Interest Submittal
Requirements for Accredited Verification Bodies.
(1) Before the start of any work related to
providing verification services to a reporting entity, a verification body must
first be authorized in writing by the Executive Officer to provide verification
services. To obtain authorization the verification body shall submit to the
Executive Officer a self-evaluation of the potential for any conflict of
interest that the verification body, related entities, or any subcontractors
performing verification services may have with the reporting entity for which
it will perform verification services. The submittal shall include the
following:
(A) Identification of whether the
potential for conflict of interest is high, low, or medium based on factors
specified in sections
95133(b), (c), and
(d);
(B) Identification of whether the
verification body, related entities, or any member of the verification team has
previously provided verification services for the reporting entity or related
entities and, if so, provide a description of such services and the years in
which such services were provided;
(C) Identification of whether any member of
the verification team, verification body, or related entity has engaged in
services of any nature, other than ARB verification services, with the
reporting entity or related entities either within or outside California during
the previous five years. If services other than ARB verification services have
previously been provided, the following information shall also be submitted:
1. Identification of the nature and location
of the work performed for the reporting entity or related entity and whether
the work is similar to the type of work to be performed during verification,
such as emissions inventory, auditing, energy efficiency, renewable energy, or
other work with implications for the reporting entity's greenhouse gas
emissions pursuant to this article;
2. The nature of past, present or future
relationships of any member of the verification team, verification body, or
related entities with the reporting entity or related entities including:
a. Instances when any member of the
verification team, verification body, or related entities has performed or
intends to perform work for the reporting entity or related entities;
b. Identification of whether work is
currently being performed for the reporting entity or related entities, and if
so, the nature of the work;
c. How
much work was performed for the reporting entity or related entities in the
last five years, in dollars;
d.
Whether any member of the verification team, verification body, or related
entities has contracts or other arrangements to perform work for the reporting
entity or a related entity;
e. How
much work related to greenhouse gases the verification team has performed for
the reporting entity or related entities in the last five years, in
dollars.
3. Explanation
of how the amount and nature of work previously performed is such that any
member of the verification team's credibility and lack of bias should not be
under question.
(D) A
list of names of the staff that would perform verification services for the
reporting entity, and a description of any instances of personal or family
relationships with management or employees of the reporting entity that
potentially represent a conflict of interest; and,
(E) Identification of any other circumstances
known to the verification body, or reporting entity that could result in a
conflict of interest.
(F) Attest,
in writing, to ARB as follows:
"I certify under penalty of perjury under the laws of
the State of California the information provided in the Conflict of Interest
submittal is true, accurate, and
complete."
(f)
Conflict of Interest
Determinations. The Executive Officer must review the self-evaluation
submitted by the verification body and determine whether the verification body
is authorized to perform verification services for the reporting entity.
(1) The Executive Officer shall notify the
verification body in writing when the conflict of interest evaluation
information submitted under section
95133(e) is
deemed complete. Within 20 days of deeming the information complete, the
Executive Officer shall determine whether the verification body is authorized
to proceed with verification and must so notify the verification
body.
(2) If the Executive Officer
determines the verification body or any member of the verification team meets
the criteria specified in section
95133(b), the
Executive Officer shall find a high potential conflict of interest and
verification services may not proceed.
(3) If the Executive Officer determines that
there is a low potential conflict of interest, verification services may
proceed.
(4) If the Executive
Officer determines that the verification body and verification team have a
medium potential for a conflict of interest, the Executive Officer shall
evaluate the conflict of interest mitigation plan submitted pursuant to
sections 95133(d), and may
request additional information from the applicant to complete the
determination. In determining whether verification services may proceed, the
Executive Officer may consider factors including, but not limited to, the
nature of previous work performed, the current and past relationships between
the verification body, related entities, and its subcontractors with the
reporting entity and related entities, and the cost of the verification
services to be performed. If the Executive Officer determines that these
factors when considered in combination demonstrate an acceptable level of
potential conflict of interest, the Executive Officer will authorize the
verification body to provide verification services.
(g)
Monitoring Conflict of Interest
Situations.
(1) After commencement of
verification services, the verification body shall monitor and immediately make
full disclosure in writing to the Executive Officer regarding any potential for
a conflict of interest situation that arises. This disclosure shall include a
description of actions that the verification body has taken or proposes to take
to avoid, neutralize, or mitigate the potential for a conflict of
interest.
(2) The verification body
shall continue to monitor arrangements or relationships that may be present for
a period of one year after the completion of verification services. During that
period, within 30 days of the verification body or any verification team member
entering into any contract with the reporting entity or related entity for
which the body has provided verification services, the verification body shall
notify the Executive Officer of the contract and the nature of the work to be
performed, and revenue received. The Executive Officer, within 30 days, will
determine the level of conflict using the criteria in section
95133(a)-(d), if
the reporting entity must reverify their emissions data report, and if
accreditation revocation is warranted.
(3) The verification body shall notify the
Executive Office, within 30 days, of any emerging conflicts of interest during
the time verification services are being provided.
(A) If the Executive Officer determines that
a disclosed emerging potential conflict is medium risk and this risk can be
mitigated, the verification body is deemed to have met the conflict of interest
requirements to continue to provide verification services to the reporting
entity and will not be subject to suspension or revocation of accreditation as
specified in section
95132(d).
(B) If the Executive Officer determines that
a disclosed emerging potential conflict is medium or high risk and this risk
cannot be mitigated, the verification body will not be able to continue to
provide verification services to the reporting entity, and may be subject to
suspension or revocation of accreditation under section
95132(d).
(4) The verification body shall report to the
Executive Officer any changes in its organizational structure, including
mergers, acquisitions, or divestitures, for one year after completion of
verification services.
(5) The
Executive Officer may invalidate a verification finding if a potential conflict
of interest has arisen for any member of the verification team. In such a case,
the reporting entity shall be provided 90 days to complete
re-verification.
(6) If the
verification body or its subcontractor(s) are found to have violated the
conflict of interest requirements of this article, the Executive Officer may
rescind accreditation of the body, its verifier staff, or its subcontractor(s)
as provided in section
95132(d).
(h)
Specific Requirements for Air
Quality Management Districts and Air Pollution Control Districts.
(1) If an air district has provided or is
providing any services listed in section
95133(b)(2) as
part of its regulatory duties, those services do not constitute
non-verification services or a potential for high conflict of interest for
purposes of this subarticle;
(2)
Before providing verification services, an air district shall either submit a
conflict of interest self-evaluation pursuant to section
95133(e) for each
reporting entity for which it intends to provide verification services, or
shall submit an annual self-evaluation to ARB no later than April 10 of each
calendar year containing the information specified in section
95133(e)(1)(A)-(F)
for all reporting entities for which it intends to provide verification
services;
(3) As part of its
conflict of interest self-evaluation submittal under section
95133(e), the air
district shall certify that it will prevent conflicts of interests and resolve
potential conflict of interest situations pursuant to its policies and
mechanisms submitted under section
95132(b)(1)(G);
(4) If an air district hires a subcontractor
who is not an air district employee to provide verification services, the air
district shall be subject to all of the requirements of section
95133.
1. New
section filed 12-2-2008; operative 1-1-2009 (Register 2008, No.
49).
2. Amendment of section and NOTE filed 12-14-2011; operative
1-1-2012 pursuant to Government Code section
11343.4
(Register 2011, No. 50).
3. Amendment of subsections (b)(1)-(2) and
(c), new subsections (c)(1)-(2), amendment of subsections (e)(1)-(e)(1)(C)2.e.,
(f)(4) and (g)(2) filed 12-19-2012; operative 1-1-2013 pursuant to Government
Code section
11343.4
(Register 2012, No. 51).
4. Amendment of subsections (a), (b)(2) and
(b)(2)(L), new subsection (b)(2)(T), amendment of subsection (c)(2), new
subsection (c)(3) and amendment of subsection (g)(2) filed 12-31-2013;
operative 1-1-2014 pursuant to Government Code section
11343.4(b)(3)
(Register 2014, No. 1).
5. Amendment of subsections (a) and
(b)(2)(S) filed 12-31-2014; operative 1-1-2015 pursuant to Government Code
section
11343.4(b)(3)
(Register 2015, No. 1).
6. Amendment of subsections (f)(1) and
(g)(2) filed 9-1-2017; operative 1-1-2018 (Register 2017, No.
35).
Note: Authority cited: Sections
38510,
38530,
39600,
39601,
39607,
39607.4
and
41511,
Health and Safety Code. Reference: Sections
38530,
39600
and
41511,
Health and Safety Code.
