Related Party Vendors (Act 1599)

By Arkansas State statute, employees and school board members of a school district are required to disclose personal relationships with vendors before the district enters into a contract or services are performed. Vendors with relationships to a district are referred to as related party vendors.

Employees with a personal relationship to a vendor must complete the Form B disclosure form and send it to the Business Office Attn: Accounts Payable. Failure to disclose a personal relationship with a vendor could result in criminal felony charges being brought against an employee.

Examples of related party vendors include:

• One spouse owns a business and the other spouse works for the district.
• A board member or employee owns a business with which the school conducts business.

Two questions to ask to determine if a vendor is a related party vendor are:

1. Does any employee or school board member have ownership in the company that wants to conduct business with the school district?
2. Will the employee’s or school board member’s household benefit by the district conducting business with this company?

If the answer to either of these questions is yes, then the relationship must be disclosed to the public in a school board meeting.

Once it has been determined that the vendor is a related party, then one of two things must occur before the transaction may take place:

• At least one other bid must be obtained and the related party vendor must be the low bid, or
• The related party vendor must be a sole source of the product being purchased.

The listing of related party vendors is constantly changing, so this list will need to be monitored on an ongoing basis.