Can a Mississippi county outsource employee payroll to a third-party processing company?

Plain-English summary

Hinds County asked whether it could move its employee payroll to a third-party payroll processing company. The pitch is the modern back-office outsourcing model: the county sends a bulk transfer of payroll funds to a vendor, the vendor cuts the checks (or pushes the direct deposits) and handles tax filings.

The AG said no.

Mississippi law assigns specific duties to the chancery clerk. Under § 19-11-13 the chancery clerk keeps the county's uniform system of accounts and complies with State Auditor regulations. Under § 19-13-29 the chancery clerk maintains the claims docket, including payroll, and issues warrants to pay claims as ordered by the board. § 19-13-31(2) authorizes a streamlined process: the board can authorize the chancery clerk to issue pay certificates for salaried and hourly employees without prior board approval of each claim, as long as the salary or hourly rate is on the minutes. Hinds County uses that streamlined § 19-13-31(2) path.

The duty to issue pay certificates is the chancery clerk's, by statute. The board of supervisors cannot contract for services that infringe on the chancery clerk's exercise of statutory duties. The AG had said exactly that in MS AG Op., Goodwin (Mar. 30, 2001) and reinforced it in MS AG Op., Miller (Apr. 18, 2003), where it noted that even a hired county bookkeeper authorized under § 19-3-61 cannot do work that infringes on the chancery clerk's duties.

So Hinds County cannot delegate payroll generation, pay-certificate issuance, or the underlying recordkeeping to a third-party processor. The chancery clerk has to do it.

The county tried to lean on MS AG Op., Kellar (Aug. 23, 2013), which allowed a vendor to authorize a third-party processor to act as the receiver of funds owed (so a county could ACH-pay a vendor's third-party billing service rather than the vendor itself). The AG distinguished Kellar: the vendor in Kellar gave authorization, and the third party was just a receiver of funds. Here the county is trying to make the third party assume the chancery clerk's duties, not act as a receiver for an authorizing vendor. Different question, different answer.

Goodwin (2001) remains the rule: the board cannot contract for services that infringe on the chancery clerk's statutory duties.

Question two (what conditions would have to be met for the outsourcing to work) was rendered moot by the AG's no on question one.

What this means for you

If you are a Mississippi county administrator considering payroll outsourcing

You cannot. The chancery clerk has the statutory duty to issue pay certificates for county employees, and the board cannot contract that duty out to a private vendor. This is true whether you call the third party a "payroll service," "professional employer organization," "co-employer," or anything else. The functional question is who is generating the pay certificates and maintaining the claims docket. If it is a private vendor, the arrangement violates state law.

What you can do: invest in technology and software that the chancery clerk uses. The clerk can use modern payroll software, electronic-payment infrastructure, time-tracking integration, and tax-filing tools. Vendor contracts that supply the clerk's office with these tools (without the vendor performing the statutory function) are permissible. Vendor contracts that have the vendor perform the function are not.

If you are a chancery clerk

Your statutory duties are not delegable to a private vendor. If your board is considering a third-party payroll service, your obligation is to flag the legal problem and propose alternatives that keep the duty in your office. You can buy software, hire support staff, contract for IT services, and use electronic payment rails, all in service of your office performing the statutory work.

Document on your minutes how the payroll process flows: where time data comes from, how pay certificates are generated, how the disbursement happens. The State Auditor will look for this audit trail. If the board votes to bring in an outside vendor anyway, you have grounds to refuse to sign or to seek formal AG review.

If you are a county supervisor on a board considering outsourcing

The board's authority to contract under § 19-3-61 and the general procurement statutes does not reach the chancery clerk's statutory functions. The Goodwin (2001) and Miller (2003) opinions are explicit. A vendor contract that requires or attempts to perform pay-certificate issuance is unenforceable to that extent and exposes the county to audit findings and potential personal liability for the supervisors who voted for it.

Look at the cost-saving claim carefully. The savings from outsourcing typically come from reducing in-house payroll staff and eliminating in-house software. Both are legitimate avenues for the chancery clerk's office, not for a third-party vendor. Direct the savings exercise at the chancery clerk: ask what software, automation, or shared-services arrangement (e.g., with a Mississippi Department of Audit-approved system) would let the clerk perform the function more efficiently.

If you are a payroll-software vendor pitching to Mississippi counties

Sell software to the chancery clerk. Do not pitch the county on outsourcing the function itself. The legal architecture in Mississippi assigns statutory duties to the chancery clerk that cannot be transferred to a private party. Your contract has to be a service-and-software supply agreement to the clerk's office, not a take-over of the function. Counties that have signed take-over arrangements have legal exposure.

If you are the State Auditor's office or a county audit team

Watch for arrangements that label themselves as "payroll services" but functionally have a private vendor performing pay-certificate issuance and the underlying recordkeeping that § 19-11-13 and § 19-13-29 assign to the chancery clerk. The Jones (2023) opinion is the clearest statement to date that those arrangements are not authorized.

Vendor-receiver arrangements (Kellar (2013)) are still permissible for vendor payments where the vendor authorizes a third party to receive funds owed. The distinction is whether the third party is performing a statutory function (not allowed) or receiving funds with vendor authorization (allowed).

Common questions

Q: What about ADP, Paychex, or similar national payroll services?
A: They cannot perform the statutory pay-certificate function for a Mississippi county. They can supply software the chancery clerk uses, run the back-end payroll processing as the clerk's tool, or be the recipient of authorized vendor payments. They cannot replace the clerk for employee payroll.

Q: Can the board of supervisors hire a private bookkeeper to assist with payroll?
A: § 19-3-61 authorizes a county bookkeeper. The Miller (2003) opinion clarified that even a § 19-3-61 bookkeeper cannot infringe on the chancery clerk's statutory duties, including the audit and clerk-of-the-board functions under § 19-11-13. A bookkeeper can do support work; the clerk still issues the pay certificates.

Q: What if the board approves a written agreement assigning some payroll tasks to a vendor?
A: A written agreement does not override the statute. The arrangement is unenforceable to the extent it transfers the statutory function. Goodwin (2001) and Miller (2003) say boards cannot contract around the chancery clerk's duties.

Q: Can the chancery clerk hire the third-party vendor directly?
A: That is a different question. The opinion does not address it directly. The clerk has authority over their office's staffing within the budget. A vendor providing software or IT services to the clerk is different from a vendor performing the statutory function. The line between "tool" and "performance of duty" is the issue. Get specific advice before structuring this.

Q: What about direct deposit through a bank?
A: Banks process the direct-deposit transactions but do not issue pay certificates. The clerk issues the certificate (or its electronic equivalent) and instructs the bank to execute the transfer. That arrangement is permitted because the bank is a payment rail, not a function performer.

Q: Does this apply to municipalities and other local governments too?
A: This opinion is about counties and chancery clerks. Municipalities and special-purpose districts have different statutory officers (city clerk, treasurer) with their own duty assignments. The same reasoning probably applies, but the specific statutes differ. Check the statute for the entity in question.

Q: What about ARPA or other federal grant compliance work?
A: Counties commonly hire compliance vendors for federal grant work. The line: a vendor advising or performing compliance reporting is permitted; a vendor signing certifications or making expenditures on the county's behalf is not. The chancery clerk and the board retain the statutory functions.

Background and statutory framework

The chancery clerk is the county's statutory recordkeeper, claims-docket maintainer, and warrant issuer. § 19-11-13 ties the office to the State Auditor's uniform system of accounts. § 19-13-29 makes the clerk responsible for the claims docket, including payroll. § 19-13-31(2) lets the board authorize the clerk to issue pay certificates for salaried and hourly employees on a streamlined basis (no prior board approval of each pay run), provided the underlying salary or rate is on the board's minutes.

The board of supervisors has broad contracting authority under various statutes including § 19-3-61, but its contracting power does not reach into the chancery clerk's statutory duties. The line was set in MS AG Op., Goodwin (Mar. 30, 2001): "[t]he board of supervisors cannot contract for services that may infringe on the exercise by the chancery clerk of his statutory duties." Miller (2003) reinforced it for hired bookkeepers; Jones (2023) reinforces it for payroll processors.

The Kellar (2013) line is distinct. There, the AG said a county could pay a vendor by electronic transfer to a third-party processor that the vendor authorized to receive funds, subject to State Auditor procedures under § 7-7-211. That involves the vendor authorizing a receiver, not the county delegating a statutory function.

The State Auditor's regulations and the uniform system of accounts ride on top of all this. Even an arrangement that survives the statutory analysis still has to satisfy Auditor controls.

Citations

• Miss. Code Ann. § 19-3-61 (county bookkeeper)
• Miss. Code Ann. § 19-11-13 (chancery clerk's accounts and Auditor regulations)
• Miss. Code Ann. § 19-13-29 (chancery clerk's claims docket and warrant issuance)
• Miss. Code Ann. § 19-13-31(2) (streamlined pay-certificate process)
• Miss. Code Ann. § 7-7-211 (State Auditor electronic-payment procedures)
• MS AG Op., Goodwin (Mar. 30, 2001) (board cannot contract around chancery clerk duties)
• MS AG Op., Miller (Apr. 18, 2003) (county bookkeeper cannot infringe on chancery clerk duties)
• MS AG Op., Allen (May 4, 2012) (board may pay employees via claims docket or § 19-13-31(2))
• MS AG Op., Kellar (Aug. 23, 2013) (vendor may authorize third-party processor to receive funds)

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/01/2022-00074-Jones.pdf

Original opinion text

January 9, 2023
Kenneth Wayne Jones
Hinds County Administrator
Post Office Box 1727
Jackson, Mississippi 39215-1727
Re:

Payroll Processing Company

Dear Mr. Jones:
The Office of the Attorney General has received your request for an official opinion.

Questions Presented
1. Can Hinds County transfer county funds budgeted for county employee payroll to a third-party payroll processing company who in turn would use the county funds to pay county
employees?
2. If the answer to question one is yes, what conditions must be met in order to do so?
3. How is MS AG Op., Kellar (Aug. 23, 2013) distinguishable from the scenario in question
one?
4. Does MS AG Op., Goodwin (Mar. 30, 2001) apply to the ability of Hinds County to make
payments to a payroll processing company to pay county employees?
Brief Response
1. No. The chancery clerk has the statutory duty to issue pay certificates for county
employees. Hinds County has no authority to delegate to a third party the duty to pay
county employees.
2. The response to your first question renders your second question moot.
3. In MS AG Op., Kellar (Aug. 23, 2013), this office opined that a vendor could authorize a
third party to act as a receiver of funds owed. In your request, you are asking whether Hinds
County can allow a third-party processor to assume the payroll duties of the chancery clerk,
which is not permissible for the reasons stated in our response to your first question and
further discussed below.
4. The opinion in MS AG Op., Goodwin (Mar. 30, 2001) that a board of supervisors cannot
contract for services that may infringe on the exercise by the chancery clerk of his statutory
duties remains the opinion of this office.
Applicable Law and Discussion
The chancery clerk is statutorily obligated to keep a uniform system of accounts and must comply
with all corresponding regulations adopted by the State Auditor pursuant to Section 19-11-13 of
the Mississippi Code. The chancery clerk maintains the claims docket, including payroll, and
issues warrants to pay claims as ordered by the board of supervisors in accordance with Section
19-13-29. "[T]he board of supervisors has the option of paying employees either by way of the
claims docket . . . or using the more streamlined system outlined in 19-13-31(2) without going
through the claims process." MS AG Op., Allen at 1 (May 4, 2012). According to your facts,
Hinds County pays its county employees pursuant to Section 19-13-31(2), which provides:
Notwithstanding the provisions of this section to the contrary, the chancery clerk
may be authorized by an order of the board of supervisors entered upon its minutes,
to issue pay certificates against the legal and proper fund for the salaries of officials
and employees of the county or any department, office or official thereof without
prior approval by the board of supervisors as required by this section for other
claims, provided the amount of the salary has been previously entered upon the
minutes by an order of the board of supervisors, or by inclusion in the current fiscal
year budget and provided the payment thereof is otherwise in conformity with law
and is the proper amount of a salaried employee and for hourly employees for the
number of hours worked at the hourly rate approved on the minutes.
This office has previously opined that "[t]he board of supervisors cannot contract for services that
may infringe on the exercise by the chancery clerk of his statutory duties. Such duties include but
are not limited to the issuance of warrants under the seal of his office. . . ." MS AG Op., Goodwin
at 1 (Mar. 30, 2001). This office was previously asked about a situation in which a county hired
a bookkeeper as specifically allowed under Section 19-3-61. MS AG Op., Miller at 1 (Apr. 18,
2003). We reiterated "that the chancery clerk remains, by law, the county auditor and clerk of the
board of supervisors" and that the assignment of bookkeeping functions to the county bookkeeper
may not infringe upon the chancery clerk's exercise of his statutory duties, including those under
the above cited Section 19-11-13. Miller at 1. Accordingly, Hinds County may not delegate the
performance of the county's or the chancery clerk's statutory payroll duties and responsibilities to
a private entity.
In your third and fourth questions, you ask how two prior Attorney General opinions are
distinguishable or harmonious to your current opinion request. In MS AG Op., Kellar (Aug. 23,
2013), this office opined that "a county, upon agreement of the vendor authorizing the third party
processor to act as the authorized receiver of funds owed, may make payments to a third party
processor by electronic transfer, subject to the systems and procedures established by the
Department of Audit pursuant to Section 7-7-211." Kellar at 1. However, your present question
is not about the ability of a third party to receive payments on behalf of a vendor. Rather, you are
seeking to have a third-party processor assume the statutory duties of the chancery clerk with
respect to payment of employee salaries. As discussed above, the chancery clerk must issue pay
certificates in accordance with the specific procedure outlined in Section 19-13-31. Thus, Kellar
does not apply to your situation. In MS AG Op., Goodwin (Mar. 30, 2001), this office opined that
"[t]he board of supervisors cannot contract for services that may infringe on the exercise by the
chancery clerk of his statutory duties." Goodwin at 1. This remains the opinion of this office.
If this office may be of any further assistance to you, please do not hesitate to contact us.
Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By:

/s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General