Doing the Right Thing is Always the Right Thing to Do! · to do the right thing. But even getting close to a blurry line, much less a bright line, introduces ethical risks. The bar

Doing the Right Thing is Always the Right Thing to Do!

Copyright 2015. Association of Government Accountants. AGA® and the Journal of Government Financial Management® are registered trademarks. Republished with permission. All rights reserved. NDPPS 526453

By Jeffrey C. Steinhoff, CGFM, CPA, CFE, CGMA; and J. Sean Hoffman, CPA

The business of government financial management is steeped in standards, rules, regulations

and leading practices, with ethics an overarching concept conditioning everything we do. But what are ethics? And why do ethical lapses continue to imperil public confidence in government?

The answers can be complicated. Everyone brings their own perspec-tive to what is right and wrong. Some things are clearly right, while some are clearly wrong. But what about the gray areas, which can present ethical dilemmas and lead to wrong choices? At a time when the public fixates on any misstep, promises may be nuanced or not kept, and minimal legal or regu-latory compliance may be viewed as the standard, our premise is simple: “Doing the right thing is always the r ight thing to do.”

This article explores the dilemma faced by

government at a time of low public confidence in public institutions and cynicism about the honesty of public officials. We’ll offer thoughts on the way forward as government accountability professionals strive to always do the right thing in the public interest.

ETHICS CAN MEAN DIFFERENT THINGS TO DIFFERENT PEOPLE

We’re all personally responsible for doing the right thing. This starts at a young age, when values and standards of conduct are first formed.

They evolve over time as we mature and better under-

stand right from wrong. In the end, the ethics of

any organization repre-sent the collective values and conduct of each person at every level of the organi-zation — whether an entry-level employee

or a senior execu-tive. To quote Thomas

Jefferson: “A nation, as a

society, forms a moral person, and every member of it is personally responsible for this society.”

Let’s look at a few dictionary definitions of ethics.

• Merriam-Webster Dictionary: “Rules of behavior based on ideas about what is morally good and bad; an area of study that deals with ideas about what is good and bad behavior; a branch of philosophy dealing with what is morally right or wrong.”1

• Oxford Dictionaries: “Moral principles that govern a person’s or group’s behavior; the moral correctness of specified conduct; the branch of knowledge that deals with moral principles.”2

• BusinessDictionary.com: “The basic concepts and fundamental principles of decent human conduct. It includes study of universal values such as the essential equality of all men and women, human or natural rights, obedience to the law of land, concern for health and safety and, increasingly, also for the natural environment.”3

Doing the Right Thing isAlways the Right Thing to Do!

We serve in a profession where

a high level of trust is a prerequisite, so our ethical

expectations must follow.

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While these definitions include common themes, the language differs somewhat, as might the values someone uses in differentiating right from wrong in given situations. Boundary lines (and deterrents) have to be brightly drawn for some people to do the right thing. But even getting close to a blurry line, much less a bright line, introduces ethical risks. The bar for ethics must be high, and, we submit, much higher than the letter of the law or the floor of standards. These represent minimum require-ments and not the ceiling of doing the right thing. Ethics are the heart of trust. We serve in a profession where a high level of trust is a prerequisite, so our ethical expectations must follow.

Looking back to events sparking the Sarbanes-Oxley Act,4 corporate financial reporting scandals and audit failures exacted a crisis in investor confidence, loss of tens of billions of dollars in investor capital, and demise of major corporations and a major accounting firm. The Pruden-tial Business Ethics Center at Rutgers University5 in a public survey asked: “Other than corporate executives, who is most to blame for corporate scandals?” Accountants received the lion’s share of the blame at 61 percent. Boards of directors were next at 21 percent, followed by bankers at

10 percent, government at 6 percent and lawyers at 3 percent.6 The overwhelming percentage blaming accountants may be impacted by the public expecting much more from the accounting profession than other participants. They placed trust in financial reporting and auditing. The accounting profession rethought its most fundamental principles and practices, and adopted meaningful changes to address breakdowns in the system and regain public trust.

Let’s look at a situation where it would have been prudent to establish an ethical bar higher than what you think the letter of the law technically allows, given what can be blurry lines or differences in interpretation as to intent and legality. As part of his legal defense, the former governor of Virginia, convicted of 11 counts of public corruption for taking gifts and loans from a corporate chief executive officer in exchange for promoting a product of the company, stated there was no quid pro quo. His position is that he never provided the company any more than basic constituent access to the governor’s office. In apol-ogizing for his actions, he empha-sized he did nothing illegal. The case, which has been widely debated in legal circles, is under appeal to the U.S. Supreme Court. Even if the

Supreme Court overturns the convic-tions, the devastating impact on the lives of he and his family remain. Had he set the ethical bar consistent with our professional standards by estab-lishing a bright line of not taking any personal gifts or loans from anyone doing or potentially doing business with the state, this tragic situation could have been avoided altogether.

WHY SHOULD WE BE CONCERNED ABOUT ETHICS?

Ethics is the foundation of our profession. As government account-ability professionals, we work under core values, codes of conduct and professional standards that stress ethics and acting in the public interest, in both fact and appear-ance. From Understanding Accounting Ethics by Mark Cheffers and Michael Pakaluk: “Professionalism is funda-mentally an ethical orientation, implying integrity and adherence to high ideals. Thus, any reform that attempts to articulate, once again, the highest ideals of professionalism for an accountant, must necessarily pay careful attention to ethics. There can be no true professionalism without attention to ethics.”7

In promoting excellence in govern-ment accountability, AGA’s Code of Ethics provides a “standard of behavior to aspire to and a guide for making ethical decisions.”8 There’s an expectation to do the right thing as a matter of personal responsibility. The code includes words and concepts such as trustworthy, public trust, honesty, credibility, professionalism, confidence, integrity, objectivity, due care, diligence, confidentiality, behavior, professional conduct, and responsibilities to others.

WHAT IS THE CURRENT STATE OF ETHICAL BEHAVIOR?

The answer: not where we want it to be. The Ethics Resource Center’s National Business Ethics Survey (NBES) provides U.S. corporate benchmarks on ethical behavior. The 2013 NBES9 found:

In the words of Rev. Theodore M. Hesburgh, President Emeritus, University of Notre Dame: “My basic principle is you don’t make decisions because they are easy; you don’t make them because they are cheap; you don’t make them because they’re popular; you make them because they’re right.”

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• The percentage of workers observing misconduct on the job fell to 41 percent, from a high of 55 percent in 2007.

• Reported pressure to compro-mise standards fell to 9 percent from 11 percent in 2011.

• Sixty percent of reported misconduct involved someone with managerial authority, with 24 percent involving senior managers.

• Twenty-six percent of miscon-duct was reported to be ongoing, with about 12 percent taking place company-wide.

• Of the 41 percent who observed misconduct, 63 percent reported the misconduct, of which 21 percent said they subsequently faced some form of retaliation.

Observed misconduct included:

Categories of Misconduct Percentage

Lying to employees, customers, vendors or the public 27

Stealing/theft, including falsifying time reports/hours worked

19

Abusive behavior/hostile work environment 18

Conflicts of interest 12Discriminating against employees 12

Violating health/safety regulations 10

While the NBES results indicated improvement over previous surveys, serious problems remain, including (1) managers, especially senior managers who set the tone, frequently breaking rules; (2) substantial miscon-duct repeating itself over and over, with some types occurring company-wide; (3) reporting of misconduct essentiality unchanged and subse-quent retaliation remaining high; and (4) certain egregious types of corrup-tion (such as bribery, illegal political contributions, and inappropriate gifts) being primarily at local corporate levels, indicating lax enforcement.

Government faces similar prob-lems. While the actions of a small percentage of the workforce, breaches of public trust seriously affect how

regain public trust that’s plummeted over 50

years. The govern-ment accountability profession is well-posit ioned to lead by example through honest, r e l iable a nd transparent finan-cial and perfor-

mance reporting, combined w it h

highly-competent, independent auditing.

We can continue to make an important difference.

THOUGHTS ON THE ETHICAL WAY FORWARD

Government employees work under strict ethical standards; but is enough being done given the low state of public trust? Are ethical break-downs the result of being complacent or saying it does not happen here, only to be surprised when serious problems come to light? Are they the result of lax enforcement or looking the other way? Do we sometimes fall into the trap of thinking about ethics as a set of rules to follow versus prin-ciples to live by? The headlines from the “Encyclopedia of Ethical Failures” represent bad decisions, combined with bad ethical and control environ-ments that facilitated or permitted those decisions. Ask yourself if there are things you can do to help rebuild public confidence that government can be trusted “to do the right thing all or most of the time.”

Our call to action is to make daily decisions guided by ethical consider-ations of what is right and would be viewed as reasonable by the public. One rule of thumb: Would you be comfortable reading about your or your agency’s decision on the front page of the newspaper or online, or hearing about it on the news? Ethical decisions are not about taking the easiest or most popular route, but doing what is right in the public interest. Never look the other way or rationalize questionable actions.

Everyone must be on board, with senior leaders setting the tone.

everyone in government is viewed. It becomes easy for the public to simply extrapo-late wrong doing to everyone in public service. Here are a few headlines from the 168-page Department of Defense “Ency-clopedia of Ethical Failure,” which high-lights ethical transgres-sions across the federal government.10

• Bribery and fraud land program manager in jail.

• Government official and realtor imprisoned for bribery scheme.

• Awarding contract to spouse earns couple one year in jail.

• Judge imposes steep prison sentence in conflict of interest.

• Accountant goes to jail for misuse of travel card.

• Former government official convicted for filing false financial disclosure report.

• Employee gets 10 years for authorizing fraudulent retirement benefits.

• What do you mean, I can’t sell real estate at work?

• Congressional aide sentenced for corrupt activities.

• 29-year employee loses job over dirty emails.

• A swing and a miss for senior officers using government funds on golf outing.

While ethics is but one component affecting public trust, in a November 2014 analysis, the Pew Research Center found that trust in govern-ment “to do the right thing always or most of the time” had gone from a high of 77 percent in November 1964 to 24 percent in February 2014.11

Thomas Paine, 18th century polit-ical activist, said it well: “Character is much easier kept than recovered.” Government finds itself in a recovery mode, with the bar set even higher to

No matter how talented someone

is, if they lack a strong ethical compass, you don’t

want them in your organization.



Share leading ethical practices and spotlight difficult lessons learned when ethical problems arise.

Provide mandatory ethics update training (at least annually). Make it interesting through case studies or video vignettes, so that staff will view the training as valuable and not just checking the box to demonstrate compliance.

Coordinate with your inspector general, or equivalent, to understand an auditor’s perspectives on ethical problems and vulnerabilities.

Develop programs to monitor ethical conduct. There are tools available to monitor a number of areas that have been vulner-able to ethical breaches in the past, such as purchase and travel card abuse, inappropri-ate internet usage and time-keeping falsification.

Include ethics as a component of employee expectations and performance reviews and a consideration in career advancement. While important at every level, there should be special focus on the actions of those in or being considered for leadership positions.

Final ThoughtWe leave with a final thought that

simply encapsulates the ethics chal-lenge and should serve you well. In the words of Mark Twain: “Always do right. This will gratify some people and astonish the rest.”

Endnotes1. http://www.merriam-webster.com/

dictionary/ethic2. http://www.oxforddictionaries.com/

us/definition/american_english/ethics3. http://www.businessdictionary.com/

definition/ethics.html4. Sarbanes–Oxley Act of 2002 (Public

Law 107–204, 116 Stat. 745, enacted July 30, 2002), also known as the Public Company Accounting Reform and Investor Protection Act.

5. Renamed the Rutgers Institute for Ethical Leadership.

6. Because of rounding, this totals 101 percent.

It starts on day one. Entry-level staff must immediately begin building trust with peers and management. You want everyone to gain confi-dence that, in addition to being highly competent and motivated, you will always do the right thing. No matter what level someone is in an organi-zation, their career can be quickly and irretrievably derailed by ethical lapses and poor judgment.

Always be vigilant. Just because others may do something, doesn’t necessarily make it right. Just because no one may be looking or no one seems to care are never justifica-tions for not doing the right thing. Managers must understand what drives their people, including high performers. No matter how talented someone is, if they lack a strong ethical compass, you don’t want them in your organization. The risk is too high, as invariably problems even-tually arise. Similarly, don’t sweep under the rug unethical transgres-sions by poor performers for fear of litigation or just having to spend time to take action. Doing the right thing and making the right decision may not always be easy, but they represent the real-world application of ethical principles and leadership.

Here are some specific thoughts on the way forward.

Establish strong core values that are widely understood and embraced, and guide what is done every day to instill a strong ethical culture. They should be continually rein-forced and represent the values and ethical glue that holds the organization together, so all actions are considered in the context of core values.

Hire and retain people of high integrity. Establish three fundamental conditions: incen-tives for people to do the right

thing; transparency to help assure they do the right thing; and effective accountability mechanisms if they don’t do the right thing.

Have zero tolerance for signifi-cant ethical violations, regard-less of the individual’s level or position, and make clear the penalties for doing the wrong thing. Face up to any problems, especially with senior manag-ers, rather than sweeping them under the rug or passing them on to someone else.

View open and honest com-munications as prerequisites to engendering respect and trust and as part of core values.

View laws, rules, regulations, and standards as the absolute floor of what is acceptable; instead, seek the ceiling based on core values and ethical principles. Do what is right, not just what is acceptable or expedient. Be concerned with both fact and appearance and with substance over form.

Lead by example, setting your personal bar high and acting with integrity beyond reproach. People take note when things aren’t right. Either they’ll have no respect for the individual or leader, or worse, they may follow a poor example by emulating improper behavior.

Demonstrate respect for others and never tolerate abusive behavior at any level in the organization. Apply the Golden Rule. Treat everyone as a professional, regardless of their level or job in the organization, and show appreciation for their ideas and accomplishments.

Encourage people to come forward when they observe or have concerns about ethical conduct. They have to believe you are sincere in asking for their input and that retaliation will never be tolerated. Gather the facts as needed, take action as appropriate, and always close the loop.

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. This article represents the views of the authors only and not necessarily the views or profes-sional advice of KPMG LLP.

7. Published in 2005, with a second edition in 2007, Allen David Press.

8. AGA Code of Ethics. (https://www.agacgfm.org/AGA/About/Documents/AGA-Code-of-Ethics.pdf).

9. The 2013 NBES is the eighth in the series since 1994. Link to the 2013 NBES Executive Summary at http://www.ethics.org/nbes/wp-content/uploads/2015/07/Reporting_and_Retaliation_Exec_Summary.pdf

10. “Encyclopedia of Ethical Failure,” Department of Defense, Office of the Gen-eral Counsel, Standards of Conduct Office, updated October 2014. (http://comptroller.defense.gov/Portals/45/documents/micp_docs/Reference_Documents/Encyclopedia_of_Ethical_Failure_October_2014.pdf).

11. “Public Trust in Government: 1958–2014,” Pew Research Center, U.S. Poli-tics & Policy, published November 13, 2014 (http://www.people-press.org/2014/11/13/public-trust-in-government/).

Jeffrey C. Steinhoff, CGFM, CPA, CFE, CGMA, an AGA Past National President and member of AGA’s Northern Virginia and Washington DC chapters, is managing director

of the KPMG Government Institute. During a 40-year federal career, where he was assistant comptroller general of the United States for Accounting and Information Management, he led GAO’s largest audit unit, had responsibility for developing Government Auditing and Internal Control Standards, and was a principal architect of the CFO Act and the range of companion financial management legislation. He founded AGA’s CGFM program and is a recipient of Robert W. King Memorial Award, AGA’s highest honor. He is an elected a fellow of the prestigious National Academy of Public Administration, and in 2006 was recognized as the outstanding CPA in the federal government by the AICPA.

Sean Hoffman, CPA, a member of AGA’s Washington, DC chapter, is the National Risk Management Partner for KPMG’s Government and Infrastructure practices, respon-

sible for identifying and formulating approaches to managing business, reputational, professional, and contractual risks. He has served in both KPMG’s Audit practice, specializing in large SEC-regulated financial institution audits, and in the Federal Advisory practice, supporting civilian and defense agencies on a variety of internal control, process analysis and improvement, and IT security issues. As a member of KPMG’s National Office, he developed methodologies and tools supporting engagement delivery and quality.



About the KPMG Government InstituteThe KPMG Government Institute was established to serve as a strategic resource for government at all levels, and also for higher education and nonprofit entities seeking to achieve high standards of accountability, transparency, and performance. The Institute is a forum for ideas, a place to share leading practices, and a source of thought leadership to help governments address difficult challenges such as effective performance management, regulatory compliance, and fully leveraging technology.

http://www.kpmg-institutes.com/institutes/government-institute.html

For more information, contact:

Jeffrey SteinhoffManaging Director KPMG Government Institute T: 703-286-8710 E: [email protected]

Sean HoffmanNational Risk Management Partner KPMG Government and Infrastructure practice T: 703-286-8050 E: [email protected]

kpmg.com
