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

The opinion holds the chancery clerk has the statutory duty to issue pay certificates for county employees, and that Hinds County "has no authority to delegate to a third party the duty to pay county employees." It relies on Goodwin for the rule that the board "cannot contract for services that may infringe on the exercise by the chancery clerk of his statutory duties."

If you are a chancery clerk

Under the opinion, the county's and the chancery clerk's statutory payroll duties may not be delegated to a private entity. The opinion ties those duties to keeping the uniform system of accounts under § 19-11-13, maintaining the claims docket under § 19-13-29, and issuing pay certificates under § 19-13-31(2).

If you are a county supervisor on a board considering outsourcing

The opinion holds the board's contracting authority (it cites § 19-3-61, the county-bookkeeper statute) does not reach the chancery clerk's statutory functions. Goodwin holds the board cannot contract for services that infringe on those duties, and Miller holds even a § 19-3-61 bookkeeper may not infringe on the clerk's duties. The opinion's conclusion is that the county may not delegate the payroll duties to a private entity.

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

The opinion holds a private third party cannot assume the chancery clerk's statutory pay-certificate duties. It distinguishes Kellar, where the AG opined a county could pay a vendor by electronic transfer to a third-party processor the vendor authorized to receive funds, subject to the Department of Audit procedures under § 7-7-211; the opinion treats that vendor-receiver situation as different from a third party performing the chancery clerk's statutory function.

Common questions

Q: Can a national payroll-processing company pay Mississippi county employees?
A: Under the opinion, no. The chancery clerk has the statutory duty to issue pay certificates for county employees, and the county has no authority to delegate that duty to a third-party processor.

Q: Can the board of supervisors hire a private bookkeeper to assist with payroll?
A: § 19-3-61 authorizes a county bookkeeper, but the opinion relies on Miller for the point that even a § 19-3-61 bookkeeper may not infringe on the chancery clerk's statutory duties, including those under § 19-11-13.

Q: What if the board approves a written agreement assigning some payroll tasks to a vendor?
A: The opinion holds the board "cannot contract for services that may infringe on the exercise by the chancery clerk of his statutory duties" (Goodwin), and that the county may not delegate those payroll duties to a private entity.

Q: How is this different from the Kellar opinion the county cited?
A: The opinion explains that Kellar addressed a vendor authorizing a third party to act as the receiver of funds owed, which is permitted under the Department of Audit procedures in § 7-7-211. The question here was whether a third-party processor could assume the chancery clerk's statutory payroll duties, which the opinion holds it cannot.

Q: Does this apply to municipalities and other local governments too?
A: The opinion is about counties and chancery clerks. Municipalities and special-purpose districts have their own statutory officers and duty assignments, so the specific statutes differ; the opinion does not address them.

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
5. 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.
6. The response to your first question renders your second question moot.
7. 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.
8. 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