Conflicts of Interest in School and Government Procurement

The Latest Rules and Regulations That Impact Your Government Entity

As many school district business personnel are aware of, Arizona State Statute 38-509 and Arizona USFR guidelines require each District to maintain a conflict of interest file disclosing substantial conflicts of interest with their employees and board members. However, this can be taken a step further to help protect a City, Town or School District from potential allegations of procurement fraud by developing a disclosure form that every member of a procurement selection committee completes and signs before opening and evaluating formal proposals or bids.

This form – sometimes referred to as the “procurement selection committee disclosure form” – can be a standard form that the City or School District develops and adds to their procurement policies. Before a selection committee begins evaluating each proposal, every member of the committee should complete the form by disclosing all communications, relationships, gifts and/or visits between the committee member and the prospective vendors being evaluated. If a committee member finds that some of the items he or she is disclosing may appear as a conflict to a reasonable member of the public, then they should consider excusing themselves from the evaluation process in order to protect themselves and the District from potential fraud allegations. Lastly, the form should have a statement that the committee member signs representing to the District that they have not withheld any information on the disclosure form that may be relevant to the selection process.

Government employees and selection committee members may not realize that fraud goes beyond that of misstating the financial statements or simply embezzling assets. It also includes corruption and conflicts of interest. Procurement fraud in governments is a highly risky area for a City, Town or School District. The funds that are being used to procure goods and services are public funds, and the employees and governing body need to remember to be good stewards of the public’s money when they are making a selection for a vendor. Public opinion can often be quick to judge, so protect yourself and your government by adding a disclosure form to your procurement process.

By Brian Hemmerle, CPA, CFE