Conflicts of Interest & Related Party Purchases

Dear Employees:

Each year we are required by compliance to ensure reasonable oversight and monitoring of conflicts of interest and related-party transactions. The Public Officers' and Employees' Ethics Act, USOE Educator Standards rule, Generally Accepted Accounting Principles, and Generally Accepted Government Auditing Standards have application to this inquiry.

Conflicts of Interest: State law specifically indicates:

No public officer or public employee shall have personal investments in any business entity which will create a substantial conflict between his private interests and his public duties.

Administrators and personnel should insure conflicts of interest as defined by 67-16-9 are prohibited in practice and should never occur.

Related-Party Transactions: In addition, employees are required to disclose to the district office all related-party transactions with schools, programs, and/or the district. Related-party transactions are defined as a transaction in which an employee has influence over the purchasing decision or transaction of the school/program/district and which a conflict of interest may exist.

We generally see related-party transactions at the school level where the school is making a purchase from a company that is owned or significantly influenced by a district/school employee. Related-party transactions are not illegal nor prohibited per se, but they do require legitimate purchasing procedures and oversight as well as full-disclosure to the district, the district's audit committee, and the district's auditors.

Administrators should work with employees to identify conflicts of interest and related-party transactions. Once identified the employee(s) and school/program must in writing or e-mail:

  1. Notify the district office of the related party transaction--who, what, when, where, why, and how.

  2. Provide the documentation to support the purchasing decision(s)

  3. Provide the name(s) of those in the school/program who were involved in the purchasing transaction--i.e. final decision for vendor selection, processing of purchase order, etc.

As a matter of best practices and to protect employees who may be involved with a company doing business with the school/program/district, the employee who is directly involved with the company should not participate in a school or program's bid process or purchasing decision with the company, and full-disclosure to the district office of each related-party transaction should occur.

This means that if a company owned or influenced by an employee (or close family member) submits a bid for a purchase, the employee may not participate in the decision as to which vendor is selected for the purchase by the school/program--a matter of checks and balances and internal control. They may still submit a bid, but cannot be involved in the purchasing decision.

67-16-9. Conflict of interests prohibited.