Office of General Counsel
Conflicts of Interest
What is the most common conflicts of interest rule?
May an ASU employee do business with ASU?
What other conflicts of interest rules apply to ASU employees?
Introduction
There are certain conflicts of interest situations that must be avoided by ASU faculty and staff. These situations are prescribed by Arizona state law. The Office of General Counsel has developed this Briefing Paper in question and answer format to help faculty and staff understand their obligations under the policy.
It is the responsibility of every staff member working for ASU to be familiar with the ASU Conflict of Interest Policy. Under the policy and state law, it is the obligation of the employee to recognize a potential conflict of interest, and to disclose that interest using the University’s Disclosure of Substantial Interest Form.(Word) or (PDF).
The ASU conflicts of interest policy for both staff and faculty is found at Academic Affairs Manual.
If after reviewing the policy, the briefing paper, and the disclosure form, you still have questions about your responsibilities, please contact the Office of General Counsel.
Who is covered by the conflict of interest rules and who is responsible for compliance with them?
Arizona's conflict of interest statutes apply to "all public officers and employees . . . of the State" which includes all ASU employees. Consequently, it is the responsibility of each ASU faculty and staff member:
- to be aware of the conflicts of interest requirements of state law.
- to recognize conflicts of interest situations.
- to take the required action in each conflicts of interest situation.
What are the possible consequences of not complying with the conflicts of interest rules?
Violation of the conflicts of interest rules may result in employee discipline; including dismissal, as well as criminal prosecution.
Are there any conflicts of interest considerations when ASU faculty or other ASU employees desire to do work for another Arizona public entity?
Yes. If an ASU employee desires to work for another Arizona public entity, the ASU faculty member or other employee should consider the application of the Arizona conflicts of interest laws in two respects. First, the ASU employee should evaluate how the conflicts of interest laws apply to him or her as an ASU employee. Second, the ASU employee should consider how the Arizona conflicts of interest laws apply to this or her role with the other Arizona public entity.
Conflicts of Interest Rules
What is the most common conflicts of interest rule?
Rule One (A.R.S. § 38-503 A and B)
An ASU employee who has, or whose relative has, a substantial interest in any contract with, sale to, purchase from, service for, or decision by ASU, must do two things:
- the employee must disclose the substantial interest to ASU by completing a Disclosure of Substantial Interest form (Word) or (PDF). The completed form must be filed with the ASU Office of General Counsel
and - the employee must refrain from participating in any manner in the contract, sale, purchase, or decision.
Even if the ASU employee is confident that he or she can be objective in the matter and that the public interest would not be harmed by his or her participation, the ASU employee must disclose the substantial interest and not participate in the matter.
This rule is complex due to very broad definitions of "relative" and "substantial interest".
A "relative" of an ASU employee includes:
- The employee's spouse,
- The employee's children, grandchildren, parents, grandparents, brothers and sisters (including half brothers and half sisters)
- The spouses of each person mentioned in the second bullet point
- The employee spouse's parents, brothers, sisters and children
A "substantial interest" is any pecuniary interest or proprietary interest, direct or indirect, other than a remote interest.
"Pecuniary interest" means money. Anytime an ASU employee or a relative of an ASU employee might benefit monetarily by an ASU contract, purchase, sale or decision, the employee or relative has a substantial interest. The monetary benefit to the ASU employee or relative may be direct or indirect or even remote. For example, if the ASU employee "moonlights" for an employer that is about to enter into a transaction with ASU, the ASU employee has a monetary interest because the ASU employee earns compensation from the company. Likewise, if an ASU employee's spouse or other relative works for an employer that is about to enter into a transaction with ASU, the spouse or relative has a monetary interest in the transaction because the spouse or relative receives compensation from the employer.
"Proprietary interest" means ownership. Anytime an ASU employee or a relative of an ASU employee holds an ownership interest in a corporation, partnership or other legal entity that is about to enter into a transaction with ASU, the ASU employee or relative has a proprietary interest.
"Remote interest" means the following:
- Nonprofit Corporation
An ASU employee or a relative of an ASU employee who is a non-salaried officer of a nonprofit corporation has a remote interest in any ASU contract with or decision affecting that corporation. - Landlord/Tenant of a Contracting Party. An ASU employee or relative of an ASU employee who is a landlord or tenant of another party has a remote interest in any ASU contract with or decision affecting the other party.
- Attorney of a Contracting Party
An ASU employee or relative of an ASU employee who is an attorney for a client has a remote interest in any ASU contract with or decision affecting the client. - Nonprofit Cooperative Marketing Association
An ASU employee or relative of an ASU employee who is a member of a nonprofit cooperative marketing association has a remote interest in any ASU contract with or decision affecting that association. - Insignificant Stock Ownership
An ASU employee or relative of an ASU employee who owns shares of a for-profit corporation has a remote interest in any ASU contract with or decision affecting the corporation, if three conditions are satisfied.- First, ownership is less than three percent of the shares of the corporation.
- Second, the dividends (including the value of stock dividends) from the corporation do not exceed five percent of the person's total annual income.
- Third, any other payments made to the person by the corporation do not exceed five percent of the person's total annual income.
- Reimbursement of Expenses
An ASU employee or relative of an ASU employee being reimbursed for actual and necessary expenses incurred in the performance of official duty has a remote interest in any decision affecting the reimbursement. - Recipient of Public Services Generally Available
An ASU employee or relative of an ASU employee who receives public services provided to the general public by a government or governmental agency in which he or she is employed has a remote interest in any contract with or decision affecting services to the employee or relative. The services must on the same terms and conditions as non-employees. - Public School Board Member
The interest of a public school board member is a remote interest when the decision involves a relative who is not a dependent or a spouse. - Public Agency Employee
The interest of an ASU employee or relative of an ASU employee is a remote interest when the transaction with ASU or the ASU decision indirectly affects that person as a public officer or employee of another public agency or political subdivision and does not confer a direct economic benefit or detriment upon the ASU employee or relative. - Class Interests
An ASU employee or relative of an ASU employee who is a member of a trade, business, profession or other class of persons of at least ten members with an interest no greater than the interest of the other members of the class has a remote interest in a decision by ASU affecting the class.
When must the ASU employee disclose the substantial interest?
The ASU employee must file the substantial interest disclosure form before ASU enters into the contract, makes the purchase or sale, receives the service or before ASU makes the decision.
In many cases, the ASU employee will not know precisely when ASU is about to enter into a contract, make a purchase or sale, receive a service or make a decision. Therefore, it is a good idea to file a substantial interest disclosure form as soon as the ASU employee becomes aware of the substantial interest.
Does it make a difference if the ASU employee and the ASU employee's unit are not involved in the contract, purchase, sale, services or decision?
A literal reading of the statute says that if an ASU employee or a relative of an ASU employee has a substantial interest in a contract with, sale to, purchase from, service for or decision by ASU, the employee is required to file a substantial interest disclosure form. This is regardless of whether the employee or the employee's unit is involved in the contract, purchase, sale, service or decision. The employee and the employee's unit may be far removed from the ASU decision-making process.
What is meant by the requirement to "not participate in the contract, purchase, sale or decision"?
The general rule is that an ASU employee participates in the contract, purchase, sale or decision, if the ASU employee does any of the following:
- The ASU employee initiates the internal ASU decision-making process on the contract, sale, purchase or decision.
- The ASU employee analyzes for ASU or otherwise gives advice to ASU about the contract, sale, purchase or decision.
- The ASU employee makes a recommendation or otherwise communicates in any manner with anyone involved in the ASU decision-making process. The ASU employee makes the final decision on the contract, sale, purchase or decision.
- The ASU employee is involved in any other way in the ASU decision-making process.
However, the following will not be considered by ASU as "participating in the contract, purchase, sale or decision":
- An ASU employee may tell appropriate persons within ASU that a contract, purchase, sale, service or decision is needed by ASU when this is within the ASU employee's job responsibilities.
- An ASU employee may tell appropriate persons within ASU about the availability of a contract, purchase, sale or service.
What if the ASU employee reporting the substantial interest is the person who normally would make the decision for ASU or who would normally handle the contract, purchase or sale for ASU?
The ASU employee who reported the substantial interest may not make the decision or handle the contract, purchase or sale. These actions should be done by another person who has authority to do them.
May the spouse of an ASU employee do business with ASU?
Yes. The standard rule applies. The employee must complete and file a disclosure of substantial interest form. In addition, the employee must not participate in the decision-making process.
Are the Disclosure of Substantial Interest forms that are filed kept confidential?
No. Each Disclosure of Substantial Interest form is a public record of ASU and, as such, is available for public inspection upon request.
Must I ever update a Disclosure of Substantial Interest form after I have filed one?
Yes. Each ASU employee is under a continuing obligation to keep his or her disclosures of substantial interests current. Accordingly, an ASU employee should file a corrected or updated Disclosure of Substantial Interest form with the ASU Office of General Counsel whenever information relevant to his or her disclosure changes. If an employee's substantial interest ceases to exist, the employee may but is not required to notify the ASU Office of General Counsel in writing so that ASU may note that in its records.
May an ASU employee do business with ASU? Are there any special requirements?
Rule Two (A.R.S. § 38-503 C)
Yes. However, an ASU employee may supply equipment, material, supplies or services to ASU only if the contract is awarded after public competitive bidding. Please contact the ASU Purchasing and Business Services Department for a description of the competitive bidding requirements.
Please note that when an ASU employee does business with ASU, the employee has a substantial interest and the disclosure and non-participation requirements above also apply.
What other conflicts of interest rules apply to ASU employees?
Rule Three (A.R.S. § 38-504 A)
During ASU employment and for 12 months after leaving ASU employment, an ASU employee may not represent another person for compensation before ASU on a matter:
- if the ASU employee was directly concerned with the matter while an ASU employee,
and - if the ASU employee personally participated in the matter during his or her ASU employment by a substantial and material exercise of administrative discretion.
Rule Four (A.R.S. § 38-504 B)
During ASU employment and for two years after leaving ASU, an ASU employee may not disclose or use for his or her personal profit any information disclosed to him or her in the course of his or her official ASU duties that has been clearly designated to him or her as confidential or that is declared confidential by law.
Exception: A current or former ASU employee may obtain appropriate authorization for the disclosure of the information or use of the information for his or her own personal profit.
Rule Five (A.R.S. § 38-505 A)
An ASU employee may not receive or agree to receive directly or indirectly compensation (other than as provided by law) for any service rendered or to be rendered by him or her in any matter pending at ASU.
Rule Six (A.R.S. § 38-504 A)
An ASU employee may not use or attempt to use his or her official position to secure any valuable thing or benefit that would not ordinarily accrue to the employee in the performance of his or her official duties, if the thing or benefit is of such character as to manifest a substantial and improper influence on the ASU employee with respect to the employee's official duties.
Rule Seven (A.R.S. § 38-511)
If an ASU employee is significantly involved in initiating, negotiating, securing, drafting, or creating a contract on behalf of ASU, ASU has the right to cancel the contract:
- If the ASU employee is or becomes an employee or agent of any other party to the contract while the contract or any extension of the contract is in effect or
- If the ASU employee is or becomes a consultant with respect to the subject matter of the contract to any other party to the contract while the contract or any extension of the contract is in effect.
Some of the legal material found at this site has been abridged from laws, regulations, court decisions, administrative rulings, ABOR and ASU policies and other sources. Further details may be necessary for complete analysis and understanding in particular matters. The information contained at this site, and related links, is not a substitute for professional legal counsel. Any discrepancy between the information at this site and ASU policy is not intended to alter or amend official ASU policy or procedure.
Any links to non-Arizona State University information are provided as a courtesy. They are not intended to nor do they constitute an endorsement by the Arizona Board of Regents or Arizona State University of the linked materials.