Disposing and Purchasing of Personal Property of School Districts- April 24, 2014

1. Disposing and Purchasing of Personal Property of School Districts- April 24, 2014 Bonnie P. Granger, Esq. Young Law Group, PLLC 601-354-3660

2. Who makes the rules and why is properly disposing of assets important? • Office of the State Auditor publishes the MISSISSIPPI PUBLIC SCHOOL ASSET MANAGEMENT MANUAL located at http://www.osa.ms.gov/documents/property/PublicSchMan08.pdf • School Districts are required to safeguard all assets on their inventory. • OSA does asset audits with their MSIS audits and publishes reports of findings on their website.

3. Cost Thresholds for Equipment • Cost Threshold - All school districts are required to have and maintain complete and current lists of each property item with a cost to the school district of $1000 or more. If an item is donated, the school district shall include items on its property inventory with a fair market value (at the time the donation is received) of $1000 or more.

4. “Highly Walkable Items” • Required Inventory Items - The following property items shall be included on a school district inventory regardless of the price paid by the school district to acquire the item or the fair market value of the item: • Weapons • Cameras and camera equipment (equal to or greater than $250) • Two way radio equipment • Televisions (equal to or greater than $250) • Lawn maintenance equipment • Computer and computer equipment (equal to or greater than $250) • Chain saws • Air compressors • Welding machines • Generators • Motorized vehicles • Cellular phones

5. Also in Manual – Use for Monitors and Computer Equipment under Threshold • Labels for Items Not on Inventory - School districts should label property items not included on their inventory lists with tags "Property of (Name of School)." These tags should be different in color than those used to indicate inventory number.

6. Fixed Asset Accounting Manual • Request for disposal of property should be submitted to the property manager before the items are discarded. This will insure proper documentation is available for school boards to make an informed actions regarding fixed assets. Disposal and deletion of fixed assets must be authorized by the school district board.

7. Fixed Asset Accounting Manual • Stolen and Missing Items - Notarized Affidavit is a written statement notarized by a notary public detailing the loss of equipment. Stolen Property shall be reported to the Sheriff's Office. Items identified need to be entered in the National Crime Information Center (NCIC). Disposition of stolen property shall be reported on the board minutes.

8. Fixed Asset Accounting Manual • Lost Property shall be reported to the property manager and must be accompanied by a notarized affidavit signed by the responsible party assigned the property. Disposition of lost property shall be reported on the board minutes.

9. Who Has Custody? Sample Forms are in the Fixed Asset Accounting Manual • Assignment of Property - The property manager should have signatures for property assigned to departments, divisions or personnel. • Permanent Transfers of assets to other departments or individuals should indicate the identification of the asset, who is assigned the asset and who is accepting responsibility for the asset. Transfer information should be submitted to the district property manager to update the property data base. • Hand Receipts - The property manager should be notified when property is temporarily loaned or transferred to a person other than the party who is responsible for the safekeeping of said property. Signature must be obtained by the party assuming temporary responsibility.

10. Former Hollandale Principal Indicted for Embezzlement (Jackson, Miss.) - State Auditor Stacey Pickering announced that Roger Liddell, former principal of Simmons High School in the Hollandale School System in Washington County, has been indicted on the charge of embezzlement. Deputies with the Washington County Sheriff’s Department served Liddell last week and he was released on his own recognizance. On August 24, 2011, the State Auditor issued a demand against Liddell in the amount of $111,581.38. A complaint received in 2009 started the investigation into missing computers, televisions and video equipment. The amount of inventory missing from the Hollandale School District is valued at $73,032.88. “Roger Liddell has been indicted on the charge that from 1996 through 2009, he allegedly embezzled 5 cameras, 6 camcorders, 10 desktop computers; 7 laptop computers; 8 DVD/CD players; 7 televisions and computer monitors; 9 printers; 4 projects and 3 DVD/CD writers, all valued at $500 or more each and converted that equipment to his own use,” said State Auditor Stacey Pickering. “I appreciate the work of District Attorney Dewayne Richardson for putting this case before the grand jury. Our schools are looking for ways to cut costs and do more with less. I am committed to holding individuals accountable when they steal from our children’s education.” October 17, 2011

11. Former Brookhaven School District Employee Arrested for Grand Larceny (Jackson, Miss.) State Auditor Stacey Pickering announced today the arrest of Lavon D. Smith, 20, of Brookhaven. A special agent with the State Auditor’s Office along with the Brookhaven City Police arrested Smith in Brookhaven on Wednesday, May 16, 2012. Smith is charged with one count of grand larceny as a result of the Auditor’s investigation. Additional unrelated charges were filed by the City of Brookhaven Police Department following the arrest. Smith, a former maintenance employee with the Brookhaven School District, allegedly stole metal filing cabinets, desks and chairs belonging to the school district and sold them to a local salvage yard on May 4, 2012. “At the State Auditor’s Office, we have a zero-tolerance policy for fraud in local and state government,” said State Auditor Stacey Pickering. “Recently, the State Auditor’s Office has investigated several cases involving fraud at local school districts, and the recent arrests should serve as a warning that we are tough on crime, especially when funds are being taken away from our children and local schools.”Lavon Smith was arrested and booked at the Lincoln County Jail and bond was set at $1500. The disposed equipment included items that could have been used by the school district as well as items intended for donation to a local government agency. Smith was terminated by the Brookhaven School District following the May 4 incident. - May 17, 2012

12. How Do We Dispose of Items Still in the District? • Sections 37-7-455, 17-25-25, 37-7-457 and 37-7-479 as well as 37-27-47 (Agricultural High Schools) of the Mississippi Code (State Law) sets out the following with regard to disposing of surplus personal property of school districts. • Some of these code sections are changing yearly so it is important to know the current law. • Excerpts provided below relate to personal property. The complete law can be found at http://www.sos.ms.gov/education_and_publications_mscode.aspx .

13. Section 37-7-455 • (1) Any land, buildings or other property that is not used for school purposes and which is not needed in the operation of the schools of the district may be sold in the manner established in this section but only after each charter school located in the school district has notified the school board that it is not exercising its right of first refusal on the property, as provided under Section 37-28-61.

14. Section 37-7-455 • Except as otherwise provided in subsections (2) and (3) of this section, all such land, buildings or other property shall be sold only after the receipt of sealed bids therefor after the time and place of making such sale has been duly advertised in some newspaper having a general circulation in the county in which the property is located once each week for three (3) consecutive weeks with the first publication to be made not less than fifteen (15) days prior to the date upon which such bids are to be received and opened.

15. Section 37-7-455 • The property shall be sold to the highest and best bidder for cash, but the school board shall have the right to reject any and all bids. If the property is not sold pursuant to such advertisement, the school board, by resolution, may set a date for an open meeting of the school board to be held within sixty (60) days after the date upon which the bids were opened.

16. Section 37-7-455 • At the meeting held pursuant to such resolution, the school board may sell by auction the property for a consideration not less than the highest sealed bid previously received pursuant to the advertisement. At the meeting, any interested party may bid for cash, and the property shall be sold to the highest and best bidder for cash, but the school board shall have the right to reject any and all bids.

17. Section 37-7-455 • The school board may require a written confirmation of bids received at such called meeting before selling the property at auction, but it shall not be necessary that sealed bids be received before conducting the auction.

18. Section 37-7-455 • (2)  As an alternative to the procedures established under subsection (1) of this section, the school board of a school district may elect, in its discretion, to sell by public auction any property, other than real property or buildings of the school district, which is not used for school or related school purposes and not needed in the operation of the schools, according to the procedure in Section 17-25-25.

19. Section 17-25-25 • (1) General. The governing authority of a county or municipality may sell or dispose of any personal property or real property belonging to the governing authority when the property has ceased to be used for public purposes or when, in the authority's judgment, a sale thereof would promote the best interest of the governing authority. For purposes of this section, the term "personal property," includes, but is not limited to, equipment, vehicles, fixtures, furniture, firearms and commodities.

20. Section 17-25-25 • (2) Public sale. At least ten (10) days before bid opening, the governing authority shall advertise its acceptance of bids by posting notices at three (3) public places located in the county or municipality that the governing authority serves. One (1) of the three (3) notices shall be posted at the governing authority's main office. The governing authority may designate the manner by which the bids will be received, including, but not limited to, bids sealed in an envelope, bids made electronically or bids made by any other method that promotes open competition.

21. Section 17-25-25 • The proceeds of the sale shall be placed in a properly approved depository to the credit of the proper fund. • (3) Private sale. Where the personal property does not exceed One Thousand Dollars ($ 1,000.00) in value, the governing authority, by a unanimous approval of its members, may sell or dispose of the property at a private sale. The proceeds of the sale shall be placed in a properly approved depository to the credit of the proper fund. Note: To have unanimous consent of all members, all members must be present and vote affirmatively.

22. Section 17-25-25 • (4) Public auction. The governing authority of a county or municipality may sell or dispose of any surplus personal or real property at a public auction that shall be conducted by an auctioneer or auction company that meets the standards established by the State Department of Audit and is hired by the governing authority of a county or municipality.

23. Section 17-25-25 • (5) If the governing authority finds that the fair market value of the personal property or real property is zero and this finding is entered on the minutes of the authority, then the governing authority may dispose of such property in the manner it deems appropriate and in its best interest, but no official or employee of the governing authority shall derive any personal economic benefit from such disposal.

24. Section 17-25-25 • (6) If the property may be of use or benefit to any federal agency or authority, another governing authority or state agency of the State of Mississippi, or a state agency or governing authority of another state, it may be disposed of in accordance with Section 31-7-13(m)(vi).

25. Section 37-7-457 • All conveyances of property under the authority of Section 37-7-455 shall be for a cash consideration. The proceeds of such sale shall be placed in the maintenance fund of the school district. (Other information if sale involves realty.)

26. Section 37-7-479 • Any group of persons, any association, club or corporation, or any county, municipality or other political subdivision having acquired school buildings, land, property or related facilities under the provisions of Sections 37-7-471 through 37-7-483, may, by resolution duly adopted at a regular or special meeting called and convened for such purpose, determine that such school buildings, land, property or related facilities, or any portion thereof, are no longer needed or used for the purpose for which such was acquired, and may by such resolution provide for the sale of such school buildings, land, property or related facilities, or any portion thereof.

27. Agricultural High Schools – Section 37-27-47 • All such land, buildings or other property to be sold pursuant to the authority granted in Section 37-27-43, shall be sold only after the receipt of sealed bids therefor after the time and place of making such sale shall have been duly advertised in some newspaper having a general circulation in the county in which the property is located once each week for three consecutive weeks with the first publication to be made not less than fifteen days prior to the date upon which such bids are to be received and opened.

28. Agricultural High Schools – Section 37-27-47 • The property shall be sold to the highest and best bidder for cash, but the board of trustees shall have the right to reject any and all bids. If the property be not sold pursuant to such advertisement, the board of trustees may, by resolution, set a date for an open meeting of said board of trustees to be held within sixty days after the date upon which the bids were opened.

29. Agricultural High Schools – Section 37-27-47 • At the meeting held pursuant to such resolution the board of trustees may sell by auction the said property for a consideration not less than the highest sealed bid previously received pursuant to said advertisement. At the meeting called pursuant to said resolution any interested party may bid for cash and the property shall be sold to the highest and best bidder for cash, but the board of trustees shall have the right to reject any and all bids.

30. Agricultural High Schools – Section 37-27-47 • The board of trustees may require a written confirmation of bids received at such called meeting before selling the property at auction, but it shall not be necessary that sealed bids be received before conducting the auction. When the sale of such property shall be authorized and approved by the board of trustees the president of the board of trustees shall be authorized and empowered to execute a conveyance of said property upon the terms and for the consideration fixed by the board.

31. 31-7-13 (m) (v) Intergovernmental Sales and Transfers • (vi) Intergovernmental sales and transfers. Purchases, sales, transfers or trades by governing authorities or state agencies when such purchases, sales, transfers or trades are made by a private treaty agreement or through means of negotiation, from any federal agency or authority, another governing authority or state agency of the State of Mississippi, or any state agency or governing authority of another state. Nothing in this section shall permit such purchases through public auction except as provided for in subparagraph (v) of this section. It is the intent of this section to allow governmental entities to dispose of and/or purchase commodities from other governmental entities at a price that is agreed to by both parties.

32. 31-7-13 Intergovernmental Transfers • This shall allow for purchases and/or sales at prices which may be determined to be below the market value if the selling entity determines that the sale at below market value is in the best interest of the taxpayers of the state. Governing authorities shall place the terms of the agreement and any justification on the minutes, and state agencies shall obtain approval from the Department of Finance and Administration, prior to releasing or taking possession of the commodities.

33. What Are Most District’s Doing? • Advertise for three weeks and open sealed bids and award to the highest bidder – if any bids are received. • Make sure to call anyone who may bid on them – even as a group or lump sum for multiple items such as monitors – even call salvage vendors. • If no bids are received, we have been declaring the items as having “no value”. Even though this law was changed recently, we are procuring an Attorney General’s opinion to enable districts to now do this under Section 17-25-25 (5) and disposing in the most efficient manner.

34. Don’t Forget About Ethics (Mississippi Ethics Commission) • Section 25-4-105, Miss. Code Ann. (1972), states: (b) Be a purchaser, direct or indirect, at any sale made by him in his official capacity or by the governmental entity of which he is an officer or employee, except in respect of the sale of goods or services when provided as public utilities or offered to the general public on a uniform price schedule. • No school board member or school employee or any member of their immediate family can purchase surplus school district property –even at a private auction. – AG Opinion.

35. Purchasing Overview Mississippi State Statutes: - 31-7-1 Definitions (commodities) - 31-7-13 – General Purchasing Law Purchasing with Federal Funds • Must follow both federal and state law – Mississippi Code exempts pure services but Federal law does not. EDGAR requires all purchases to be reasonable and necessary. (Also has thresholds). • District must prove purchase price was reasonable for all items purchased with federal funds. (Includes Title funds, special education funds, food service funds, etc.) Local districts can have tighter policies than law that must be followed. For example, lower thresholds, more requirements, etc.

36. 31-7-1 Definitions (e) "Commodities" means and includes the various commodities, goods, merchandise, furniture, equipment, automotive equipment of every kind, and other personal property purchased by the agencies of the state and governing authorities, but not commodities purchased for resale or raw materials converted into products for resale. (i) "Equipment" shall be construed to include: automobiles, trucks, tractors, office appliances and all other equipment of every kind and description. (ii) "Furniture" shall be construed to include: desks, chairs, tables, seats, filing cabinets, bookcases and all other items of a similar nature as well as dormitory furniture, appliances, carpets and all other items of personal property generally referred to as home, office or school furniture.

37. 31-7-1 Definitions •  (h) "Purchase" means buying, renting, leasing or otherwise acquiring. - What about copy machines being leased or rented? - What about renting mats, mops, uniforms, etc. from linen companies?

38. State of MS Purchasing Thresholds • $5,000 – $50,000 – Two quotes (on letterhead and signed is General Rule). • Over $50,000 – Formal bid after advertising once a week for two consecutive weeks and opening bids not less than 7 working days after the final notice. • Must evaluate bids using only factors put in the specifications. • School board must approve all bids before they are awarded. • Quotes must be approved by school board but they can allow a purchasing agent to order upon receipt of quotes – depending on the policy of the school board.

39. Purchasing Exception – Express Products Lists • If federal purchase - must get at least two written quotes signed by vendor – for purchases up to $100,000. • If using state funds – must get at least one quote if purchase exceeds $5,000. • The federal monitors and annual auditors verify the quotes are in place. The second quote is required to prove the price is reasonable as well as meet procurement guidelines.

40. Sole Source Items • Federal purchases – How do you prove the price is reasonable? • Federal Program Directors are being told that “sole source” really does not exist. Even though some are using it for state law, they must still have documentation showing the purchase was reasonable and necessary. • Auditors will question the purchases that lack documentation.

41. Disclaimer This presentation is intended solely to provide general information and does not constitute legal advice.  Attendance at the presentation or later review of these printed materials does not create an attorney-client relationship with Young Law Group, PLLC.  You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances. Laws in this area change often.