This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on July 12, 2002, basing its approval solely on the facts and circumstances stated herein.

 
May a state commission enter into a contract with the spouse of its director of finance and administration to coordinate a project operated by the state commission with federal funds?

State law restricts the Mississippi Ethics Commission to interpreting and issuing opinions on Sections 25-4-101 through 25-4-119, 1972 Mississippi Code Annotated and Article IV, Section 109, Mississippi Constitution of 1890.  Therefore, this opinion does not address the Mississippi laws outside the Commission’s jurisdiction nor the governmental entity’s internal rules and regulations.

The pertinent conflict of interest laws to be considered here are:

Code Section 25-4-103(a), (c), (d), (e), (f)(i)(ii), (g)(v), (h), (i), (k)(i)(ii)(iii)(iv), (l), (p)(i)(ii)(iii) and (q) states:
 

“(a) ‘Authority’ means any component unit of a governmental entity.

(c) ‘Business’ means any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, holding company,  self-employed individual, joint stock company, receivership, trust or other legal entity or undertaking organized for economic gain, a  nonprofit corporation or other such entity, association or organization receiving public funds.

 
(d) ‘Business with which he is associated’ means any business of which a public servant or his relative is an officer, director, owner, partner, employee or is a holder of more than ten percent (10%) of the fair market value or from which he or his relative derives more than One Thousand Dollars ($1,000.00) in annual income or over which such public servant or his relative exercises control.

(e) ‘Compensation’ mean money or thing of value received, or to be received, from any person for services rendered.

(f) ‘Contract’ means:
 

(i) Any agreement to which the government is a party; or

(ii) Any agreement on behalf of the government which involves the payment of public funds.

(g) ‘Governmental’ means the state and all political entities thereof, both collectively and separately, including but not limited to:
 

(v) Any department, agency, board, commission, institution, instrumentality, or legislative or administrative body of the state, counties or municipalities created by statute, ordinance or executive order including all units that expend public funds.

(h) ‘Governmental entity’ means the state, a county, a municipality or any other separate political subdivision authorized by law to exercise a part of the sovereign power of the state.
 

(i) ‘Income’ means money or thing of value received, or to be received, from any source derived, including but not limited to, any salary, wage, advance, payment, dividend, interest, rent, forgiveness of debt, fee, royalty, commission or any combination thereof.

(k) ‘Material financial interest’ means a personal and pecuniary interest, direct or indirect, accruing to a public servant or spouse, either individually or in combination with each other.  Notwithstanding the foregoing, the following shall not be deemed to be a material financial interest with respect to a business with which a public servant may be associated:

 

(i)  Ownership of any interest of less than ten percent (10%) in a business where the aggregate annual net income to the public servant therefrom is less than One Thousand Dollars ($1,000.00);

(ii) Ownership of any interest of less than two percent (2%) in a business where the aggregate annual net income to the public servant therefrom is less than Five Thousand Dollars ($5,000.00);

(iii) The income as an employee of a relative if neither the public servant or relative is an officer, director or partner in the business and any ownership interest would not be deemed material pursuant to subparagraph (i) or (ii) herein; or

(iv) The income of the spouse of a public servant when such spouse is a contractor, subcontractor or vendor with the governmental entity that employs the public servant and the public servant exercises no control, direct or indirect, over the contract between the spouse and such governmental entity.

(l) ‘Pecuniary benefit’ means benefit in the form of money, property, commercial interests or anything else the primary significance of which is economic gain.  Expenses associated with social occasions afforded public servants shall not be deemed a pecuniary benefit.

(p) ‘Public servant’ means:
 

(i) Any elected or appointed official of the government;

(ii) Any officer, director, commissioner, supervisor, chief,  head, agent or employee of the government or any agency thereof, or of any public entity created by or under the laws of the State of Mississippi or created by an agency or governmental entity thereof, any of which is funded by public funds or which expends, authorizes or recommends the use of public funds; or

(iii) Any individual who receives a salary, per diem or expenses paid in whole or in part out of funds authorized to be expended by the government.

(q) ‘Relative’ means the spouse, child or parent.”

 
Code Section 25-4-105(1), (3)(a) and (4)(b)(d) states:
 

“(1) No public servant shall use his official position to obtain pecuniary benefit for himself other than that compensation provided for by law, or to obtain pecuniary benefit for any relative or any business with which he is associated.

(3) No public servant shall:
 

(a) Be a contractor, subcontractor or vendor with the governmental entity of which he is a member, officer, employee or agent, other than in his contract of employment, or have a material financial interest in any business which is a contractor, subcontractor or vendor with the  governmental entity of which he is a member, officer, employee or agent.

(4) Notwithstanding the provisions of subsection (3) of this section, a public servant or his relative:
 

(b) May be a contractor or vendor with any authority of the governmental entity other than the authority of the governmental entity of which he is a member, officer, employee or agent or have a material financial interest in a business which he is a member, officer, employee or agent where such contract is let to the lowest and best bidder after competitive bidding and three (3) or more legitimate bids are received or where the goods, services or property involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws.

(d) May be a contractor, subcontractor or vendor with any authority of the governmental entity of which he is a member, officer, employee or agent or have a material financial interest in a business which is a contractor, subcontractor or vendor with any  authority of the governmental entity of which he is a member, officer, employee or agent: (i) where such goods or services involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws; or (ii) where the contractual relationship involves the further research, development, testing, promotion or merchandising of an intellectual property created by the public servant.”

I am writing to request a written opinion with regards to the following subject matter:

Currently, my wife is employed at a state institution on a full-time basis as a director.  Effective July 1, 2002, she will no longer work full-time and will be assigned another position on contractual part-time basis.  This move is being done to accommodate the personal care attention that our young child needs, who is currently spending in excess of nine hours per day at daycare.

I request your opinion on the following matter:

Currently, the state commission [an entity operating under the auspices of another state agency] has federal contractual funds to coordinate a project.  My wife is interested in contracting with the state commission to coordinate this project on a part-time basis (not more than 15 hours per week). What are the legal parameters surrounding this situation?

The following additional information was provided by the requestor to the Commission’s staff.  The requestor is the director of finance and administration for the state commission. The requestor’s spouse’s contract to coordinate the federally funded project, if approved, will be under the direct supervision of the state commission’s training and communication division. Also, the requestor advised that the state commission does not provide services to the state institution that currently employs the requestor’s spouse.

Based solely on the facts and circumstances presented by the requestor, the Commission’s opinion is as follows.

Code Section 25-4-105(3)(a), cited above, prohibits a public servant, including the requestor as the state commission’s director of finance and administration, from having a material financial interest in any business that is a contractor with the state, especially the state commission.

Code Section 25-4-103(c), cited above, defines “business” to include a “self-employed individual.”  Therefore, the requestor’s spouse, as a self-employed individual, would be a “business” for purposes of the state conflict of interest laws.

Also, the requestor’s spouse would be a contractor with the state by way of her contract with the state commission to coordinate the federally funded project should it be approved.
 
In addition, Code Section 25-4-105(k), cited above, provides that a “‘material financial interest’ means a personal and pecuniary interest, direct or indirect, accruing to a public servant or spouse, either individually or in combination with each other.” [Emphasis added to bold text]

Since the requestor’s spouse will be a business that is a contractor with the state by way of her contract, if approved, with the state commission, then the question that remains to be answered is whether the requestor, as the state commission’s director of finance and administration, will have a material financial interest in his spouse’s business, i. e. a self-employed individual, if she becomes a contractor with the state commission.

In this instance, the applicable law to consider in determining if the requestor, as the state commission’s director of finance and administration, will have a material financial interest is the above cited Code Section 25-4-103(k)(iv).

Code Section 25-4-103(k)(iv) provides an exception to a public servant having a material financial interest in a business when the income in question is that of the spouse of the public servant.

Specifically, Code Section 25-4-103(k)(iv) provides that a public servant is not considered to have a material financial interest in a business by way of the income of the spouse of the public servant when such spouse is a contractor, subcontractor or vendor with the governmental entity that employs the public servant if the public servant exercises no control, direct or indirect, over the contract between the spouse and such governmental entity. [Emphasis added to bold text]

Clearly, a director of finance and administration of a state entity has the overall responsibility and duty to pre-audit and otherwise verify that all invoices submitted by contractors or vendors with his state entity are correct and that the quantity and quality of the work or commodity provided is satisfactory.  Also, as in this instance, where federal funds are involved, a director of finance and administration has a shared duty to see that the terms and requirements of the contract or grant with the federal government are met before the federal funds are expended. Clearly, a director of finance and administration has indirect, if not direct, control over contracts with his state entity by way of the approval and payment of invoices associated therewith.

 
Therefore, a violation of Code Section 25-4-105(3)(a) will occur if and when the requestor’s spouse becomes a contractor with the state commission by way of a contract to provide coordination services on the federally funded project.  The violation resulting from the requestor serving as the state commission’s director of finance and administration and his control over the pre-audit of invoices submitted by contractors with his state commission and the approval of payments related thereto.

In this instance, the only possible exception to a violation of Code Section 25-4-105(3)(a) is set forth in the above cited Code Section 25-4-105(4)(d).  This exception would be where the goods or services being provided are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws.  It is this Commission’s position that the service of coordinating the federally funded project is available from more than two (2) or fewer commercial sources, and therefore, the exception in Code Section 25-4-105(4)(d) is not applicable in this instance.

Having answered the above referenced question in the negative, the Commission finds the requestor’s general question regarding a part-time employee of one state agency being a contractor with a separate state agency to now be moot.

As an additional reason to avoid the above described contract, the requestor is advised that his approval and authorization of payments of invoices submitted by his spouse for work performed for the state commission is also very likely to result in a violation of the above cited Code Section 25-4-105(1).

Code Section 25-4-105(1) prohibits a public servant, including a state commission’s director of finance and administration, from using his official position to obtain pecuniary benefit for himself other than that compensation provided for by law, or to obtain pecuniary benefit for any relative or any business with which he is associated. [Emphasis added to bold text]

The requestor’s spouse is a “relative” within the meaning set forth in the above cited Code Section 25-4-103(q).

Also, the requestor’s spouse’s self-employed business would be “a business with which he is associated” within the meaning set forth in the above cited Code Section 25-4-103(d).
 
 
 

Scott Rankin
Executive Director