Slide Number #1 © 2007 Nan McKay & Associates Cara Gillette Ethics © 2007 Nan McKay & Associates

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© 2007 Nan McKay & Associates

Cara Gillette

EthicsEthics


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IntroductionIntroduction

What we’ll cover: Ethical decision-making Principles of personal and business ethics Procurement ethics Policies that support ethical decisions in the

workplace

October 2007 Ethics 2

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© 2007 Nan McKay & Associates Your Ethical RoleYour Ethical Role

As public housing officials, we are stewards of the public trust

Keep in mind that HUD views ethics violations as a serious crime


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What Is Ethics?What Is Ethics?

It’s knowing right from wrongEthical path not always easy one

There are serious problems in today’s business worldPreserving reputation is important

Yours and the housing authority’s


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Your ChallengeYour Challenge

The first challenge is knowing the “right thing” to do Ignorance of the law is not an excuse You need to consider not only the letter, but

also the spirit of the law Chances are if it feels wrong, there’s a good

chance it is!


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The next challenge is doing what’s right Avoid personal temptations – the “big stuff”

makes the news, but the day-to-day behaviors represent the largest arena for breach in ethics


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The “three R’s” to remember: Respect – people, PHA and your work Responsibility—customers, coworkers,

PHA, yourself Results—consider how something is done

as well as what


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Day-to-day breaches of ethics: Falsifying time sheets Office supplies that end up at home Not taking responsibility when you make a

mistake Reporting sick while out shopping


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Ethical Decision MakingEthical Decision Making

Guidance can be found in: HUD handbooks Housing authority policies Professional codes of ethics Laws

Ethics 9October 2007

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Some questions to ask: Does it violate housing authority policy?

Admin Plan or ACOP PHA personnel policy PHA fraud and ethics policies PHA procurement policy


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Some questions to ask: Does it violate professional codes of ethics? Does it violate the Golden Rule? Are there “shushers”?

If someone is pressuring you keep it secret and not talk about it, chances are it’s unethical


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Some questions to ask: Does it pass the Mom Test? Does it pass the TV Test? Are any person’s, the PHA’s, or another

entity’s rights abridged or violated? The right to know, the right to privacy, the

right to property


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Some questions to ask: Are any duties or responsibilities not met? What if everyone did this? Does it minimize actual or potential harm?

Look again at an ethical decision before acting


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Principles of Personal EthicsPrinciples of Personal Ethics

Ethics is personal because it comes down to you, your conscience, and your behaviors and decisions Willing compliance with the law Basic justice – being fair – and refusing to take

unfair advantage Impartiality – objectivity


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Ethics is personal Openness – full disclosure Confidentiality Due diligence – duty of care Fidelity to personal responsibilities Avoiding potential or apparent conflict of

interest


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In short, doing good and preventing harm is the essence of ethical behavior


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Ethics determines your professional duties: Appropriate professional relations Actions that produce desired outcomes Confidentiality Impartiality


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Case Study #1Case Study #1

You are the waiting list supervisor While attending a college prep meeting at your

son’s high school, the principal, who needs to write your son a recommendation, asks you about her recently divorced daughter who recently applied for Section 8 assistance

How would you handle this?


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Ethics: It’s A Personal DecisionEthics: It’s A Personal Decision

It comes down to you: Are you willing to: Comply with laws Be fair Be objective Disclose dishonesty Maintain confidentiality

Do your duty

Adhere to personal responsibility

Avoid conflict of interest situations

Exhibit concern and respect for others

Be honest

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Ethical ChecklistEthical Checklist

Appendix 1 gives you a good checklist for making ethical decisions


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Business EthicsBusiness Ethics

Attention to business ethics is critical in times of fundamental change Values that were previously taken for granted

are now strongly questioned Attention to ethics is a moral compass and

sensitizes leaders and staff as to how they should act


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Managerial conduct: You have the responsibility to not support

unethical behavior, including: Illegal activity Illegal practices Unethical practices


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PHA policies should give clear instruction on how to deal with persons and agencies who participate in: Wrongful use of resources Mismanagement of contracts Conflicts of interest


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Part of management in PHA PHA need to strive for a more positive public

image PHA’s policies should provide clear and

detailed guidance on ethics


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Myths about Business EthicsMyths about Business Ethics

1. Business ethics is more a matter of religion than management Not trying to change values—managing decisions

and behavior is the goal


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2. Employees are ethical so we don’t need attention to business ethics Ethic dilemmas are complex Many ‘gray areas’

3. Business ethics is an academic or religious discipline


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4. Business ethics is about the obvious: Do good! More than just being honest Code of Ethics provide priority and focus

regarding workplace issues


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5. Ethics is the good guys preaching to the bad guys Good people can make bad decisions

6. Ethics can’t be managed 7. Our PHA is not in trouble so we must

be ethical


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How Do We Benefit From Ethics In The How Do We Benefit From Ethics In The Workplace?Workplace?

Laws now protect workers from abuse and discrimination

Anti-trust laws protect consumers Promotes openness, dialogue and honesty Promotes confidence in our work

environment


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How Do We Benefit From Ethics In The How Do We Benefit From Ethics In The Workplace?Workplace?

Ethics policies are an insurance policy—help ensure policies are legal

Allows PHA to detect ethics issues early on Portrays a strong positive image to the

public Legitimizes management actions


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Ethical DilemmasEthical Dilemmas

Sometimes there isn’t one clear choice Ethical dilemmas faced by

managers are often more real-life and highly complex with no clear guidelines, whether in law or policy


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You know you have a significant ethical conflict when there is presence of: Significant value conflicts among differing

interests Real alternatives that are equally justifiable;

and Significant consequences to stakeholders


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An ethical dilemma exists when you’re faced with having to make a choice among these alternatives


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Ethical Dilemma #1Ethical Dilemma #1

Your boss told you that one of your employees is soon to be laid off, and that you’re not to tell your employee yet – he might tell the whole PHA and get everyone in an uproar

Meanwhile, you heard from your employee that he plans to buy a new car and remodel his house

What should you do?


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Ethical Dilemma #2Ethical Dilemma #2

A colleague told you that she plans to quit the company in two months to take a new job offer

Meanwhile, your boss told you that you didn’t get a promotion because he’s going to give the promotion to your colleague (above)

What should you do?


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Procurement EthicsProcurement Ethics


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Important TermsImportant Terms

Mandatory vs. optional references ‘Shall’ and ‘must’ are mandatory in regs,

handbooks or law ‘Should’ or ‘may’ are guidance and not

requiredPHAs needs to establish policies


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Procurement Laws and RegulationsProcurement Laws and Regulations

Procurement is acquiring goods and services using federal funds

Procurement policy must be compliant with the following mandatory references: Part 85 CFR Handbook 7460.8 State or local law


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Procurement Laws and RegulationsProcurement Laws and Regulations

Part 85 ‘The Common Rule’ has requirements for all entities receiving federal funds and provides guidance on: Development of procurement policy and system Important parts of contract administrative system General guidance for PHAs for standard of conduct Requirements for price and cost analysis


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ProcurementProcurement

HUD Procurement Handbook 7460.8 REV 2 (revised March 2007)

Provides guidance on asset management and project-based management

Does not apply to Indian HAs or HCVFees for COCC not subject to handbook


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ProcurementProcurement

Chapter 4 of the new HUD Handbook 7460.8 REV 2 deals directly with the need to set ethical standards for procurement Appendix 2

We will deal with ethics as it applies throughout the procurement process


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Basics Of ProcurementBasics Of Procurement

Setting the limits Determining who is authorized to make

purchases Distinctions between goods and services Construction Contract management


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State or Local LawState or Local Law

PHAs must comply with state or local laws re: procurement

Some states have more stringent laws PHAs must comply with the stricter law


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Public Access to Procurement Public Access to Procurement InformationInformation

Certain procurement information should be made public according to state laws

Other information is sometimes protected from disclosure and should not be made public

PHAs should exercise caution!


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Public Access to Procurement Public Access to Procurement InformationInformation

Many states have enacted FOI laws Could vary from state to state PHA’s procurement policy must

incorporate the state law


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Procurement and Good BusinessProcurement and Good Business

PHA’s goal should satisfy end users in terms of cost, quality and timeliness while complying with HUD regs and policies

Should exercise personal initiative and sound judgment

When there are doubts, officers should seek advice


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Procurement and Good BusinessProcurement and Good Business

Policy must state who has authority to purchase, what amount, and what approval is required This may change in the transition to project-

based management


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Procurement PolicyProcurement Policy

Sets standards for purchases


Example Procurement PolicyExample Procurement Policy


Purchase Amount

Purchase Authority

Procurement Method

Less than $50

Site Manager

Petty cash. Receipts required and must be logged. Submitted to Regional Manager

$50-$2,000 Site Manager

Micropurchase. 1 reasonable price quote. Purchases should be equally distributed

$2,000 -$100,000

Regional Manager

3 quotes (Fax, written, or email). Oral only for building materials & supplies not services. Purchases equally distributed.

Over $100,000

Asset Manager

Formal advertisement and sealed bid.

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Contracting OfficerContracting Officer

The contracting officer acquires supplies, services and construction needed by PHA Signs contracts, PO’s, agreements At many PHAs, procurement authority is being

“drilled down” to the site Imperative that property managers with

procurement authority understand the rules


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Contracting OfficerContracting Officer

Contracting officer can be centralized, decentralized, or a mix (both at the project with the head officer at the COCC) Analyzes bids/proposals Detects contract irregularities Ratifies unauthorized commitments with

justification


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ContractingContracting Officer Officer

Contracts must comply with… HUD regulations Procurement policy of PHA State or local laws Signature of contracting officer establishes

PHA legal commitment


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Important PointImportant Point

Separation of duties and functions PHAs should ensure that the person who

places purchase orders does not also “receive” the items purchased


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Important PointImportant Point

Records on each procurement must be maintained for at least three years


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The Connection Between The Connection Between Procurement & EthicsProcurement & Ethics

Simply stated, decisions made to purchase goods and services for the agency must be in the best interest of the agency

Each decision must be made without outside influence


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The Connection Between The Connection Between Procurement & EthicsProcurement & Ethics

Keeping ethics on the front burner in all procurement activities means that everyone understands the PHA procurement policy, what it means, the terms, and the consequences of noncompliance


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Important TermsImportant Terms

We’ll go through some of the important terms used in procurement and contract management Anyone purchasing goods or

services needs to understand these terms


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Circumventing Purchasing Circumventing Purchasing AuthorityAuthority

Sanctions must be imposed for circumventing this authority


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Conflict Of InterestConflict Of Interest

Simply stated, we must avoid conflicts of interest, real or perceived


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Conflict Of Interest, What Is It?Conflict Of Interest, What Is It?

A conflict of interest occurs when a PHA employee, officer, or agent, or member of their family, stands to gain financially or otherwise, from a decision made by the PHA


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Conflict of InterestConflict of Interest

PHAs must adhere to conflict of interest prohibitions:

No PHA employee, officer, or agent shall participate in a contract if a conflict of interest, financial or otherwise, real or apparent, would be involved Includes family, partners and organizations


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Neither the PHA, contractors or subcontractors may enter into any contract or connection with PHA during their tenure or 1 year after: Board members of PHA (present or former) or

their immediate family Present and former tenant commissioners are

excepted from this provision not serving on a resident corporation and do not make policy…


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PHA employees who formulate policy or who influence decisions with respect to the project(s), or their immediate family or their partner

Public officials, member of local government, or state or local legislator, or their immediate family, who exercise functions or responsibilities with respect to the project(s) of the PHA


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Conflict of Interest - ExampleConflict of Interest - Example

Joan Johnson, a board member, is the parent of Dwayne Johnson, who is applying to be the PHA’s public housing facilities director


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A former board member, Charles Conrad, whose tenure ended less than a year ago, enters into a contract with the PHA to provide consulting services


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A PHA employee, Dawn Shimoda, is seeking election to the city council, which exercises authority over PHA operations Employees may seek election but if elected

may have to resign


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Conflict Of InterestConflict Of Interest

Let’s take a moment to look at some samples that HUD put together as illustrations of conflict of interest


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Example #1Example #1

Cybil is a commissioner She is also VP of the board of American

Handicapped Citizens of her county She does not receive a salary or any other

compensation for serving on AHC’s board AHC is subrecipient of $25,000 in PHA funds

Is there a problem here?

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Answer #1Answer #1

No – Cybil may continue to serve as a commissioner of the PHA and also as VP of AHC’s Board Cybil has no financial interest in AHC A conflict of interest would arise in this

situation only if Cybil received a salary or other compensation for her AHC board service. 24 CFR § 570.611(b)

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Illustration #2Illustration #2

The PHA wishes to lease office space in the city The PHA will pay the rent The mayor owns the building which the PHA

would like to lease Can the mayor lease office space to the PHA?

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Answer #2Answer #2

No 24 CFR § 92.356(b) & ©

Prohibit a person who is an elected official of a city and in a position to gain inside information from obtaining a financial benefit from such activity

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Gratuities, Kickbacks, and Use of Gratuities, Kickbacks, and Use of Confidential InformationConfidential Information


PHA employees, commissioners, or agents must not accept, solicit, or agree to accept gratuities, favors, or anything of monetary value from contractors or parties with contractual agreements

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GiftsGifts

PHAs may set minimum rules where the financial interest is not substantial or the gift is of nominal value Common PHA policy is to allow

gifts worth under $25 if shared with the whole office


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Kickbacks, Kickbacks, Anti-Competitive PracticesAnti-Competitive Practices

Not always obvious Rebates, coupons, points and discounts,

taken personally, can be considered an anti-competitive practice


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Kickbacks, Kickbacks, Anti-Competitive PracticesAnti-Competitive Practices

An anti-competitive practice would be providing information that would give one firm an advantage over another, for example:

Cost estimates Names of other bidders Other valuable information


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Back Door SellingBack Door Selling

Avoiding the procurement process For example, dealing directly with the

manager intending to use the service Green Lawn Company will provide services

for $500 per month, avoiding the need to bid


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NepotismNepotism

The practice of giving positions in the PHA to relatives or friends rather than to the most qualified The ACC prohibits this

practice


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NepotismNepotism

Applies to any present or former member of the board or employee who formulates policy or who influences decisions Applies throughout tenure or

employment and for one year after


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SanctionsSanctions

The executive director and the board are responsible for establishing sanctions for violations of ethical standards Civil and administrative remedies

HUD may exercise any available remedy as well


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Case StudyCase Study

You are a PHA foreman You own a two-family home and advertise your unit

for rent A mother and her two children want to rent the unit You agree to rent the unit This potential tenant then hands you a HCV voucher

RFTA form from your PHA What do you do?


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Case StudyCase Study

Your supervisor asks you to sell tickets for a councilwoman’s upcoming campaign

You are the procurement officer and you know lots of vendors, so you have the best chance of selling the tickets

How do you avoid this situation and keep your job?


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Procurement CategoriesProcurement Categories

Do’s and don’ts Petty cash Small purchases Sealed bids


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Petty CashPetty Cash

Do Use for small purchases where it may be

impractical to issue a check Don’t

Use for everyday or repeat business


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Sealed Bidding Sealed Bidding

This process if full of potential areas of risk Do

Protect the PHA at all times Protect the “information” in connection with the

bid process Ensure bids are date/time stamped and locked

until bid opening


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Sealed Bidding Sealed Bidding

Do Publicize the Invitation for Bid (IFB) including, if

applicable, the pre-bid conference, as stated in the PHA’s procurement policy

Disclose any conflict of interest, real or perceived, with any potential bidder


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Sealed BiddingSealed Bidding

Don’t Give any potential bidder any information that

not all potential bidders are given Provide any information at the bid opening other

than the name of the bidder and proposed price


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The Envelope Please!The Envelope Please!

Common mistakes Opening envelope prior

to official date and time Accepting a bid after

the official bid opening date and time…


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The Envelope Please!The Envelope Please!

Common mistakes Commenting on the “Winner!” prior to

validation of bid documents and conducting due diligence procedures

Allowing changes in bid documents Providing information to one bidder only


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Unethical ActionsUnethical Actions

Revealing proprietary information

Changing the bid after opening

Attempting to influence the selection of bidder based on known false information


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Disclose Potential ConflictsDisclose Potential Conflicts

Avoid actual conflict of interest

Consider the consequences

State Board Of Ethics Trust your inner voice

Contact HUD Job loss, reputation Contact state office How does it look on

the front page of the paper?


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Competitive Proposals (RFP)Competitive Proposals (RFP)

Professional services (architect, engineer) done through the competitive process

Both technical and price factors are considered Allows discussions with

each offeror

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Competitive Proposals (RFP)Competitive Proposals (RFP)

Do Be very specific in the SOW – describe in

detail the service(s) or good(s) the PHA is soliciting

Don’t Make a decision before best and final offers

are received

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Contract ManagementContract Management

The PHA is obligated to ensure the performance of the contract

Must inspect products when delivered

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Other Areas for Ethics Other Areas for Ethics ManagementManagement

Nondiscrimination Sexual harassment

Human Resources Hiring, promoting,

discipline

Fraud


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Sexual HarassmentSexual Harassment

One of the most common and increasing areas of lawsuits

Violates Title VII, Civil Rights Act of 1964


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Sexual HarassmentSexual Harassment

Sexual harassment is unwelcome behavior that happens to someone because of his or her sex

Most lawsuits based on a “hostile work environment”

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Ethics in Human ResourcesEthics in Human Resources

HR policies and processes should foster ethics in: Getting the best employees Paying employees Training employees Ensuring compliance Ensuring safe work environments Fostering productivity


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Thorough and well-defined hiring practices Background checks References Law enforcement and drug checks Interviews done the same way for all applicants,

with documentation supporting the hire


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Training Ethics policies and procedures are useless

unless all staff members are trained about what they are, how they work, and their roles

The legal system often interprets employee behavior (rather than written policies) as de facto policy


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Training Orient new employees to the PHA’s ethics

policies and procedures during new employee orientation

Review ethics is management training experiences

Involve staff in review of codes and policies …


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Performance evaluations Include ethical performance as a dimension in

performance appraisals


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Discipline How supervisors correct behavioral problems

and make sure staff adheres to rules The purpose is to correct, not to punish or

embarrass An articulated disciplinary policy and process

ensure that the process is ethical

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Often, a positive approach solves the problem without having to discipline

Frequent communication to employees

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Discipline Thorough documentation from the beginning

Includes emails Talk to the employee and document the

conversation

The question the courts ask is whether the employer had “just cause” to discipline

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FraudFraud

Fraud is the intentional, false representation of concealment of a material fact for the purpose of inducing another to act on it, to the injury of an entity or person


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Ethics ResourceEthics Resource

Office Of Inspector General (IG) posted an updated guide on fraud prevention on March 5, 2004 HUD looks for good internal controls Appendix 3


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Conditions That Foster FraudConditions That Foster Fraud

Stress in employees’ personal life Financial troubles

Credit card debt Divorce Addictions

Emotional issues


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Working conditions Employees feel unfairly treated Lack of recognition for the value of their work

Financial compensation Appreciation for the work performed Lack of respect by supervisors and other

employees


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Working conditions “No one cares” - if there is an atmosphere that

no one cares, no one is checking, it doesn’t make any difference

Everyone else is doing it, I might as well get mine


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Fraud PreventionFraud Prevention

Increasing the perception of detection might be the most effective fraud prevention method Controls do little good in forestalling theft and

fraud if those who may be inclined to commit fraud do not know that controls are in place


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Practical Steps – Fraud PreventionPractical Steps – Fraud Prevention

PHA policies clear and up-to-date Personnel, procurement, and ethics ACOP and Admin Plan Nondiscrimination


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Institute good internal control Checks and balances

PO system – who is authorized to purchase, who is authorized to receive goods

Rent collection – who receives rent, who posts Inventory control

Well-defined system, inventory taken regularly


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Internal controls Alter “routine or predictable” systems from time

to time Take notice of employees that never take a

vacation for more than one or two days at a time Conduct random audits, and make it well known Institute an atmosphere of accountability


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Practical Steps – Fraud Prevention Practical Steps – Fraud Prevention

Internal controls Time sheets Sick time claims Patterns of absences


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Practical Steps – Fraud Prevention Practical Steps – Fraud Prevention

Management must set the tone Must inspire staff Must clearly communicate the mission of the

PHA Must establish a system that recognizes

individual accomplishment


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Management must: Promote qualified staff Establish an atmosphere in which honest

employees do not fear reprisals for reporting abuse Anonymous reporting Whistle blower protection provisions


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Guidelines for Managing Ethics in Guidelines for Managing Ethics in the Workplacethe Workplace

PHA policies should be clear, and practice should match policies Only then can PHA

manage ethics


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Recognize that managing ethics is a process Ethics programs may seem more process-

oriented than other management practices The most important aspect from ethics

management is the process of reflection and dialogue that produces results


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Bottom line of managing ethics is accomplishing preferred behaviors in the workplace Ethical policies and rules are meaningless

unless they generate fair and just behaviors Codes of ethics and policies must also

generate procedures and training


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The best way to handle ethical dilemmas is to avoid their occurrence in the first place Codes of ethics and ethics policies sensitize

employees to ethical considerations and minimize the chances of unethical behavior occurring in the first place


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Make ethics decisions in groups, and make decisions public, as appropriate Thus diverse interests and perspectives are

more integrated, and credibility of the decision is increased

Suspicion of unfair bias is decreased


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Integrate ethics management with other management practices For example, when developing personnel

policies, reflect on what ethical values most important in the agency’s culture and then design policies to produce these behaviors


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Use cross-functional teams when developing and implementing ethics policies and procedures PHA employees should feel a sense of

participation and ownership in the ethical values of the PHA


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Value forgiveness Managing ethics may actually increase the number

of ethical issues to be dealt with because people are more sensitive to their occurrence

Help people recognize and address their mistakes and then support them to try to operate ethically


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Trying to operate ethically and making a few mistakes is better than not trying at all All organizations are made up of people People are not perfect Some organizations fear sticking their necks out

because they fear mistakes – it’s the trying that counts


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Ethics ResourceEthics Resource

HUD’s Office of General Counsel and PIH published an ethics reference manual February 2003 Appendix guidance


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Key Roles and Responsibilities in Key Roles and Responsibilities in Ethics ManagementEthics Management

Roles vary according to the size of the PHA The following functions

are responsibilities that should be included somewhere in the agency


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The PHA’s executive director must fully support ethics The ED should announce ethics policies and

procedures, and champion their development and implementation

The ED should always aspire to lead ethically And if a mistake is made, admit it


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The board should approve ethics policies And monitor that policies are implemented


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Consider establishing an ethics management committee The committee would oversee development,

implementation, and training of ethics policies and procedures

Should be comprised of senior management


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Consider assigning/developing an ethics officer or ombudsperson Trained in matter of ethics in the workplace,

particularly about resolving ethical dilemmas


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Q & AQ & A

All questions welcome

Thank you for participating

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Upcoming Lunch ‘n’ LearnsUpcoming Lunch ‘n’ Learns

Nov 30th – Ethics for the PH Manager Dec 6th – HCV Leasing Activities Dec 7th – Effective Property Management Dec 13th - Workflow

Documents

Slide Number #1 © 2007 Nan McKay & Associates Cara Gillette Ethics © 2007 Nan McKay & Associates