A Review of State Agencies’ Use of Contract Workers
Executive Summary
Introduction
The PEER Committee conducted this review in response to concerns about the degree of oversight that exists regarding state agencies’ use of contract workers. PEER conducted the review pursuant to the authority granted by MISS. CODE ANN. Section 5-3-57 et seq. (1972).
In conducting this review, PEER reviewed agencies’ expenditures for contract workers for fiscal years 2003 through 2005. Specifically, PEER sought to determine which state agencies use contract workers and the costs of such workers. The review also focused on the type of oversight the state exercises over contract workers.
Background
MISS. CODE ANN. Section 25-9-120 (1972) contains the only references to “contract workers” in state law. This section creates the Personal Service Contract Review Board and limits the state benefits to which contract personnel (i.e., contract workers and independent contractors) are entitled. Subsection (1) of MISS. CODE ANN. Section 25-9-120 (1972) describes contract workers as “contract personnel who do not meet the criteria of independent contractors.” The Internal Revenue Service establishes the guidelines for determining whether an individual is an independent contractor or an employee.
State agencies typically use contract workers to perform part-time, seasonal, and time-limited work. Agencies also report using contract workers to provide health-related services in tight labor market professions, such as nursing and licensed clinical psychology.
State Agencies’ Utilization of Contract Workers
From FY 2003 through FY 2005, fifty state agencies included in the state accounting system used contract workers. Gross wages for these workers totaled $30.5 million in FY 2005.
From FY 2003 through FY 2005, fifty state agencies included in the state accounting system used contract workers. Gross wages for these workers totaled $30,461,048 in FY 2005. The Exhibit below shows total contract worker gross wages, by state agency, for fiscal years 2003, 2004, and 2005.
During FY 2005, eight state agencies accounted for 84% of contract worker gross wages, with each of these agencies exceeding $1 million.
Eight state agencies exceeded $1 million each on contract worker gross wages in FY 2005, accounting for 84% of total contract worker gross wages.
In FY 2005, the Department of Health expended the most on contract worker gross wages (approximately $6.5 million), chiefly on nurses, clerical staff, and other health-related workers. The Military Department expended the second highest amount on contract worker gross wages in FY 2005 (approximately $5.9 million), followed by the Veterans’ Affairs Board (approximately $5.85 million). The Military Department primarily hired contract workers to fill in for deployed personnel, while the majority of contract workers hired by the Veterans’ Affairs Board in FY 2005 were health care professionals who worked in the state veterans’ homes.
Total gross wages for contract workers increased by $16.2 million (113%) from FY 2003 to FY 2005.
Total gross wages for contract workers increased significantly from FY 2003 through FY 2005, from $14.3 million to $30.5 million, a total increase of 113%.
The five agencies with the greatest increases in total gross wages for contract workers during the period of PEER’s review had a combined increase of $15.9 million, accounting for 93% of the total increase of approximately $17.1 million.
Exhibit: Contract Worker Gross Wages by Agency and Fiscal Year (FY 2003 through FY 2005)
| Agency Name | FY2003 | FY2004 | FY2005 | Increase (Decrease) from FY2003 - FY2005 |
| Agricultural Aviation, Board of | $1,196.25 | $742.50 | $0 | $-1,196.25 |
| Agriculture and Commerce, Department of | 101,849.32 | 121,948.23 | 138,746.12 | 36,896.80 |
| Archives & History, Department of | 50,695.52 | 89,274.44 | 117,742.64 | 67,047.12 |
| Arts Commission | 0.00 | 10,489.14 | 1,022.94 | 1,022.94 |
| Athletic Commission | 0.00 | 0.00 | 3,325.00 | 3,325.00 |
| Attorney General, Office of the | 439,646.92 | 550,915.55 | 410,932.18 | -28,714.74 |
| Auditor, Office of the State | 0.00 | 4,160.00 | 7,680.00 | 7,680.00 |
| Capital Post - Conviction Counsel, Office of | 18,090.00 | 32,643.75 | 40,558.20 | 22,468.20 |
| Community & Junior Colleges, Board for | 9,544.00 | 54,559.09 | 36,566.10 | 27,022.10 |
| Corrections, Department of | 100,837.75 | 90,500.37 | 106,331.85 | 5,494.10 |
| Development Authority | 505,284.29 | 330,707.67 | 386,555.51 | -118,728.78 |
| Education, Department of | 1,152,952.37 | 1,729,136.10 | 1,304,523.92 | 151,571.55 |
| Educational Television, Authority for | 275,038.82 | 212,026.45 | 92,256.00 | -182,782.82 |
| Emergency Management Agency | 55,690.05 | 5,672.76 | 38,364.23 | -17,325.82 |
| Engineers & Land Surveyors, Board of Professional | 0.00 | 4,775.00 | 4,475.00 | 4,475.00 |
| Environmental Quality, Department of | 674,249.38 | 783,693.36 | 694,046.72 | 19,797.34 |
| Fair Commission | 232,959.87 | 271,174.18 | 328,971.17 | 96,011.30 |
| Finance and Administration, Department of | 440,622.56 | 378,030.38 | 370,380.96 | -70,241.60 |
| Fire Academy | 66,414.30 | 50,172.50 | 120,846.65 | 54,432.35 |
| Forestry Commission | 10,627.50 | 14,659.51 | 8,130.96 | -2,496.54 |
| Funeral Service, Board of | 5,654.20 | 2,747.20 | 2,656.00 | -2,998.20 |
| Gaming Commission | 6,091.91 | 5,377.11 | 6,540.37 | 448.46 |
| Governor, Office of the - Support | 71,066.25 | 83,302.63 | 93,543.24 | 22,476.99 |
| Health, Department of | 0.00 | 0.00 | 6,452,034.70 | 6,452,034.70 |
| Human Services, Department of | 303.00 | 0.00 | 0.00 | -303.00 |
| Information Technology Services, Department of | 346,813.74 | 323,910.42 | 185,489.34 | -161,324.40 |
| Insurance Department | 0.00 | 23,197.50 | 0.00 | 0.00 |
| Legislature | 24,242.00 | 5,331.54 | 1,167.05 | -23,074.95 |
| Marine Resources, Department of | 86,039.81 | 71,690.55 | 70,873.11 | -15,166.70 |
| Medicaid, Division of | 448,628.77 | 716,797.08 | 1,294,065.44 | 845,436.67 |
| Medical Licensure, Board of | 0.00 | 12,112.08 | 14,278.92 | 14,278.92 |
| Mental Health, Department of | 812,000.60 | 1,292,874.18 | 1,202,573.54 | 390,572.94 |
| Military Department | 1,623,704.46 | 3,057,618.95 | 5,904,390.34 | 4,280,685.88 |
| Oil & Gas Board | 0.00 | 0.00 | 6,504.39 | 6,504.39 |
| Personnel Board | 50,679.61 | 42,043.80 | 67,434.50 | 16,754.89 |
| Physical Therapy, Board of | 0.00 | 0.00 | 270.00 | 270.00 |
| Public Accountancy, Board of | 16,147.37 | 13,270.41 | 8,696.00 | -7,451.37 |
| Public Employees' Retirement System | 16,631.33 | 17,943.71 | 17,273.26 | 641.93 |
| Public Safety, Department of | 571,475.86 | 898,697.83 | 395,907.65 | -175,568.21 |
| Real Estate Appraiser Licensing & Certification Board | 0.00 | 0.00 | 1,595.39 | 1,595.39 |
| Real Estate Commission | 0.00 | 7,817.50 | 17,147.50 | 17,147.50 |
| Rehabilitation Services, Department of | 1,703,546.62 | 1,727,269.41 | 1,878,942.62 | 175,396.00 |
| Secretary of State, Office of the | 118,811.70 | 197,445.77 | 193,487.85 | 74,676.15 |
| Supreme Court Services | 25,472.28 | 33,425.08 | 28,272.32 | 2,800.04 |
| Transportation, Department of | 960,960.04 | 1,310,130.08 | 1,673,064.41 | 712,104.37 |
| Treasurer, Office of the State | 113,176.93 | 82,178.62 | 63,282.00 | -49,894.93 |
| Veterans Affairs Board | 2,253,520.74 | 4,701,179.28 | 5,852,172.30 | 3,598,651.56 |
| Veterans Memorial Stadium Commission | 47,727.40 | 56,374.16 | 14,647.48 | -33,079.92 |
| Veterinary Medicine, Board of | 36,564.90 | 37,884.03 | 41,953.64 | 5,388.74 |
| Wildlife, Fisheries and Parks, Department of | 794,285.36 | 770,823.73 | 761,328.15 | -32,957.21 |
| TOTAL | $14,269,243.78 | $20,226,723.63 | $30,461,047.66 | $16,191,803.88 |
SOURCE: Department of Finance and Administration and PEER analysis.
Oversight of Contract Workers and Associated Expenses
Other than the requirement to have contracts exceeding $100,000 approved by the Personal Service Contract Review Board, state agencies are subject to few limits or controls on their use of contract workers.
Through the State Personnel Board’s administration of the state personnel system and the Legislature’s annual appropriation process, there are controls over the number, qualifications, and salaries of employees in legislatively authorized positions. Conversely, there are few limits or controls over state agencies’ use of contract workers.
Basically, the only limitations are expenditure amounts included in an agency’s contractual services line item established through the appropriations process and the Personal Service Contract Review Board’s oversight of contracts that exceed $100,000. For contracts totaling less than $100,000, there are no external oversight controls regarding whether an agency has a documented need to employ a contract worker, the type of and qualifications of the worker hired, the amount paid to the worker, or the length of time the worker will be employed.
State law requires that the Personal Service Contract Review Board set rules and regulations for solicitation and selection of personal service contracts with the state. The board’s responsibility for contracts of $100,000 or less is limited to setting these rules and regulations; state law requires that the board approve all contracts exceeding $100,000. Several categories of contracts are exempt from the board’s purview.
MISS. CODE ANN. § 25-9-120 (2) (1972) creates the Personal Service Contract Review Board to promulgate rules and regulations governing the solicitation and selection of contractual services personnel and to approve all personal and professional services contracts involving the expenditure of funds exceeding $100,000. The board also has responsibility for developing standards with respect to contracting and documentation of such contracts.
Specifically, with regard to the solicitation and selection of contractual services personnel, the board requires that agencies adopt operational procedures for entering into personal services contracts of $50,000 or less. For contracts greater than $50,000 but not exceeding $100,000, agencies shall at a minimum, solicit three written responses, which shall be made a part of the procurement file. For contracts exceeding $100,000, agencies shall procure such contracts through the use of competitive sealed bidding or proposals. The board’s rules and regulations include specific requirements regarding public notice, bid opening, and bid acceptance and evaluation.
MISS. CODE ANN. § 25-9-120 (3) (a) (1972) exempts from the purview of the Personal Service Contract Review Board computer- or information-technology-related services governed by the Department of Information Technology Services; personal service contracts entered into by the Department of Transportation; or, any contract for attorney, accountant, auditor, physician, dentist, architect, engineer, veterinarian, or utility rate expert services.
During FY 2005, the Personal Service Contract Review Board approved contracts for only 3% of the total contract worker gross wages paid by state agencies, or $853,698 of the total $30.5 million in gross wages.
During FY 2005, the Personal Service Contract Review Board approved requests from eight state agencies for twenty-one contract workers with a total annual value of $853,698. The total contract worker gross wages during FY 2005 amounted to $30.5 million and the value of the contracts required to be approved by the board amounted to only 3% of the total value for FY 2005. Individual state agencies were responsible for establishing their own accountability controls and overseeing the remaining contract worker contracts (representing 97% of the total contract worker gross wages during FY 2005).
Although required by state law to verify state agencies’ compliance with the review board’s rules and regulations, the Department of Finance and Administration has not implemented pre-audit steps for such determination.
Senate Bill 2958 (1997 Regular Session), which created the Personal Service Contract Review Board, amended MISS. CODE ANN. § 7-7-3 (6) (d) (1972) to require the Department of Finance and Administration to “verify compliance with the regulations of the State Personal Service Contract Review Board regarding the execution of any personal service or professional service contracts pursuant to Section 25-9-120 (3).” Other than a computer edit to determine at what point a contract exceeds a cumulative value of $100,000 and must be approved by the Personal Service Contract Review Board, the Department of Finance and Administration has not implemented pre-audit controls to verify state agencies’ compliance with the board’s rules and regulations.
Although state law requires appointing authorities (such as state agencies) and the retirees to notify the Public Employees’ Retirement System upon a retiree’s reemployment as a contract worker, PERS does not perform a cross-check with state payroll data to determine a retiree’s compliance with state retirement laws.
Upon retirement from state employment, retirees may become reemployed with a state agency as a contract worker. As defined in MISS. CODE ANN. Section 25-11-127 (4) (1972), a retired state employee may become reemployed as a part-time or contract worker and continue to draw retirement benefits while reemployed, subject to statutory salary limitations. However, because the PERS database is separate from and independent of the State Payroll and Human Resource System (SPAHRS), the retirement system does not have a cross-check of retirees who become reemployed by a state agency and fail to complete reemployment forms, as required by state law and PERS board regulations.
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