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© Copyright 2008 Nan McKay & Associates
1
Making Ethical Making Ethical DecisionsDecisions
Patti Zatarian MenardPatti Zatarian Menard
© Copyright 2008 Nan McKay & Associates
© Copyright 2008 Nan McKay & Associates
Course Objectives
Understand relevant laws Understand how to develop policies that support
ethical decisions Learn how the agency’s leadership and structure
supports ethical decision-making Recognize unethical decisions and conflict of
interest
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© Copyright 2008 Nan McKay & Associates
Your Ethical Role
As public housing officials, we are stewards of the public trust
HUDs reviews cover procurement, fair housing, PHA policies, occupancy practices
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© Copyright 2008 Nan McKay & Associates
What Is Ethics?
Knowing what is right and doing it!Sometimes “what’s right” is clear… sometimes it’s not!
Preserving the public trust is extremely important
In you In your housing authority
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Does it break the lawDoes violate policyDoes it hurt another personDoes it hurt the PHA
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Do it right!Do good!Do no harm!
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© Copyright 2008 Nan McKay & Associates
Your Challenge Doing what is right!
Pressures of daily livingComing in late, leaving early, taking paper
Unusual circumstances Divorce, college tuition, credit problems
TemptationsTaking money to move a family in… Taking a car from a contractor
© Copyright 2008 Nan McKay & Associates
Ethical Decision MakingDirection is in…
LawFederalState
RegulationsGuidance Can Be Found In…
PHA policies PHA Professional Code Of
Ethics
Ethics 8October 2007
© Copyright 2008 Nan McKay & Associates
Ethical Decision Making
Support is found in… Corporate culture Open communication Joint decision making Respect for employees
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Ethics in Business
Law, regulation, and policy help guide agency in times of struggle and change Provides strong moral compass Provides clear roadmap for action
© Copyright 2008 Nan McKay & Associates
Ethics in Business
Most businesses have Code of Ethics Codes of Conduct Ethics Committees Policies and procedures for ethical decisions Procedures to resolve ethical dilemmas Ethics training…like this!
© Copyright 2008 Nan McKay & Associates
Busting The Myths
Business Ethics Is More A Matter Of Religion Its managing ethical
decisions
© Copyright 2008 Nan McKay & Associates
Busting The Myths
Our employees are ethical Most situations are
complex People have different
beliefs that are equally ethical
© Copyright 2008 Nan McKay & Associates
Busting The Myths
Ethics Is for philosophers Its management with Programmatic
choices and Practical tools
© Copyright 2008 Nan McKay & Associates
Busting The Myths
Ethics Can’t Be Managed Ethics are always
managed…just managed poorly sometimes
© Copyright 2008 Nan McKay & Associates
Busting The Myths
Our Agency Is Not In Trouble …We Must Be Ethical Its possible to be
unethical AND operate within the law!
© Copyright 2008 Nan McKay & Associates
Benefits of Ethics In Workplace
Protect workers Protect customersPromotes confidence Saves agency money Clients more willing with ethical agencies
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Case Study # 1 You have 25 reexams to process, because
you are so busy, you fail to obtain third party verification for three files. You decide to use the pay stubs that the resident provided.
Is this an ethical course of action?
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Does it break the lawDoes it violate a regulationDoes violate policyDoes it hurt another personDoes it hurt the PHA
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Do it right!Do good!Do no harm!
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© Copyright 2008 Nan McKay & Associates
Case Study # 2
You are the waiting list supervisor. While attending a college prep meeting at the high school the principal asks you about her recently divorced daughter who applied for Section 8 assistance.
This principal also needs to write your son a recommendation to college.
Would it be ethical to tell the principal about her daughter’s status?
© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Does it break the lawDoes it violate a regulationDoes violate policyDoes it hurt another personDoes it hurt the PHA
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Do it right!Do good!Do no harm!
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© Copyright 2008 Nan McKay & Associates
PHA Policies
Procurement Policy Personnel Policy Code Of Ethics ACOP and Admin Plan Drug Free Workplace Policy
© Copyright 2008 Nan McKay & Associates
Applicable Regulations
24 CFR 85.36 (ACC and related regs) HUD Procurement Handbook 7460.8
REV 2 (March 2007) Section 103 of 1989 HUD Reform Act U.S.C. 201 Bribery of Public Officials 24 CFR 964.145 Resident Councils
© Copyright 2008 Nan McKay & Associates
Applicable Regulations
24 CFR 85.36 HUD Procurement Handbook
7460.8 REV 2 (March 2007)
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CFR Part 85
Part 85 known as
“The Common Rule” Admin requirements for
entities (PHAs) receiving federal funds
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CFR Part 85
“Common Rule” If Federal standards are stricter than State or
local laws, Federal laws prevail If State/local laws are stricter than Federal
standards, State/local prevails
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CFR Part 85
Procurement policy/system Contract administration
system Requirements for price and
cost analysis Guidance on standard of
conduct
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CFR Part 85 Code of Standards
PHA must maintain a written code of standards governing their employees engaged in contracts
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CFR Part 85 Conflict Of Interest
Simply stated PHA must avoid conflicts of interest
Real or perceived
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CFR Part 85 Conflict Of Interest
No employee, officer or agent shall participate in selection, award, or administration of a contract if conflict of interest is involved if…
© Copyright 2008 Nan McKay & Associates
CFR Part 85 Conflict Of Interest
Any of the following has a financial or other interest in a firm selected for contract PHA employee, officer or agent, Any member of his immediate family His or her partner, or Organization which employs, or is about to
employ, any of the above
© Copyright 2008 Nan McKay & Associates
CFR Part 85 Conflict Of Interest
PHA […] may not enter into a contract in which the following has an interest….
Officer, employee, public official and their family members
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CFR Part 85 Conflict Of Interest
Employee, officer or agent may not sell supplies, services, or construction to the PHA for one year after separation from PHA
© Copyright 2008 Nan McKay & Associates
CFR Part 85 Conflict Of Interest
PHA […] may not enter into a contract (employment or otherwise) in which the following has an interest….
Officer, employee, public official and their family members
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CFR Part 85 Conflict Of Interest
Family members are... Mother, father, brother, sister, daughter, son,
step, and half... Policy...
© Copyright 2008 Nan McKay & Associates
Conflict Of Interest, What Is It?
Occurs when PHA employee, officer, or agent, or member of their family, stands to gain financially or otherwise, from PHA decision
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Conflict of Interest
HUD samples of Conflict Of Interest
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Conflict of Interest
HUD samples of Conflict Of Interest PHA hires facilities director who is
the daughter of a Board member PHA employee is a Board member PHA awards a contract to a former
Board member who resigned six months ago
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© Copyright 2008 Nan McKay & Associates
Case Study #3
Cybil Civic is a Commissioner at the PHA. Cybil is also Vice-president of the Board of
Directors of American Handicapped Citizens of Fort Travis County (AHC).
She does not receive a salary or any other compensation for serving on AHC’s Board.
AHC is receives $25,000 in CDBG grant funds from the County.
Is there conflict of interest problem here?
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Does it break the lawDoes it violate a regulationDoes violate policyDoes it hurt another personDoes it hurt the PHA
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Do it right!Do good!Do no harm!
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© Copyright 2008 Nan McKay & Associates Case Study # 3 Answer
Is there conflict of interest problem here?NOCybil may continue to serve as a County
Commissioner of the County and also as VP of AHC’s Board.
Cybil has no financial interest in AHC.A conflict of interest occurs only if Cybil receives
a salary or other compensation for her AHC Board service. 24 CFR § 570.611(b)
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© Copyright 2008 Nan McKay & Associates
Case Study #4You are a foreman in the maintenance
department. You own a two bedroom rental. A mother and two children want to rent it. You determine they would be good tenants.
You agree to rent to them and Mom hands you a HCV Tenancy approval form from your PHA.
What do you do? What are the issues?
October 2007 Ethics 45
© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Does it break the lawDoes it violate a regulationDoes violate policyDoes it hurt another personDoes it hurt the PHA
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Do it right!Do good!Do no harm!
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CFR Part 85 Gratuities, Kickbacks
Confidential Information Solicitations and contracts
over “small purchase” must advise of regulations Gifts Kickbacks Use of information
© Copyright 2008 Nan McKay & Associates
CFR Part 85 Gratuities and Kickbacks
Employees, officers, agents must not accept Gratuities Favors Anything of value
From contractors or parties with contractual agreements
© Copyright 2008 Nan McKay & Associates
CFR Part 85 Gifts - PHA May Set Rules
Where gift is not substantial
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CFR Part 85 Kickbacks
Not always obvious Rebates Coupons Points Discounts can be considered as an
Anti-Competitive Practice
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© Copyright 2008 Nan McKay & Associates
Case Study #5 You are a case worker for the PHA. You are
inspecting a client’s unit when she asks you to move an air conditioner from her window to the closet for storage.
She tells you that last year she had to pay $100 to get it done. You feel bad for her and so you move the air conditioner.
The resident is so thankful she insists that you take $25 for your trouble. You don’t want to hurt her feelings so you take the money!
I This O.K.?
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Does it break the lawDoes it violate a regulationDoes violate policyDoes it hurt another personDoes it hurt the PHA
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Do it right!Do good!Do no harm!
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© Copyright 2008 Nan McKay & AssociatesCFR Part 85 Use of Confidential
Information Cannot give information that provides
unfair advantage Information Like
Cost Estimates Names Of Other Bidders Other Valuable Information
© Copyright 2008 Nan McKay & Associates
CFR Part 85 Back Door Selling
Avoiding procurement process Green Lawn will
provide services @ $500 Per Month if avoid need to bid
© Copyright 2008 Nan McKay & Associates
CFR Part 85 Nepotism
Hiring family members or friends Rather than most
qualified ACC prohibits this
practice
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Nepotism
Applies to… Members Of Board Employees who make
policy or Employees who
influence decisions While at PHA and one
year after
© Copyright 2008 Nan McKay & Associates
CFR Part 85Sanctions
PHA must adopt and enforce sanctions for violations of ethical standards Oral and written reprimands Suspension Termination Dismissal from office
© Copyright 2008 Nan McKay & Associates
Applicable Regulations
24 CFR 85.36 HUD Procurement Handbook
7460.8 REV 2 (March 2007) Section 103 of 1989 HUD Reform
Act U.S.C. 201 Bribery of Public
Officials
© Copyright 2008 Nan McKay & Associates
HUD Handbook 7460.8
Provides guidance on all phases of procurement and contract management
Revised March 2007
© Copyright 2008 Nan McKay & Associates
HUD Handbook 7460.8
Includes samples PHAs may use to
support procurement policy
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HUD Handbook 7460.8
Incorporates guidance on asset management and project-based management
Applies to PH Development Capital Funds
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HUD Handbook 7460.8
Doesn’t apply to… IHAs HCV Fees earned by
COCC
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PHA Must Develop Policy
Chapter 4 HUD Handbook 7460.8 rev 2 Deals Directly with
need to set policies for procurement
© Copyright 2008 Nan McKay & Associates
PHA Must Develop Policy
Procurement Methods And Procedures Contractor Qualifications Types of Contracts Specifications/Statement Of Work Appeals & Remedies Assistance to Small & Other Businesses Statement of Ethics
© Copyright 2008 Nan McKay & Associates
PHA Must Develop Policy
Ensures public access to procurement information provided only when appropriate Conforms To State Law Freedom Of Information Right To Privacy
© Copyright 2008 Nan McKay & Associates
PHA Must Develop Policy
Ensures public an equal opportunity for all to participate in business with PHA
Incorporates standards for ethical behavior
© Copyright 2008 Nan McKay & Associates
PHA Must Develop Policy
Setting limits Determining who is
authorized Draw distinctions
between goods and services
Construction
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Contracting Officer Acquires supplies, services
and construction Signs contracts, PO’s,
agreements Analyzes bids/proposals Detects contract irregularities Approves unauthorized
commitments with justification
© Copyright 2008 Nan McKay & Associates
Contracting Officer Duties
Exercises good judgment Ensures contractors
receive fair treatment Requests/considers advice
of specialists Provides assistance to
other divisions on procurement
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Contracting Officer Signature establishes PHA
legal commitment Contracts must comply
with… HUD regulations Procurement Policy of PHA State or local laws
© Copyright 2008 Nan McKay & Associates
PHA Must Develop Policy Sample Procurement
Policy
© Copyright 2008 Nan McKay & Associates
PHA Must Comply with Regulations
Under “Small Purchases” limit Petty Cash Purchase Orders
Over “Small Purchases” limit Sealed Bidding Competitive Bids Non-Competitive Bids
© Copyright 2008 Nan McKay & Associates
Connection Between Procurement & Ethics
Decisions to purchase goods and services for PHA must be in best interest of PHA
Each decision must be Made without outside influence Made in accordance with law, regulation, and
policy Transparent, defendable, ethical
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© Copyright 2008 Nan McKay & Associates
Connection Between Procurement & Ethics
Decisions to purchase goods and services for PHA must be in best interest of PHA
Each decision must be Made without outside influence Made in accordance with law, regulation, and
policy Transparent, defendable, ethical
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© Copyright 2008 Nan McKay & Associates
Connection Between Procurement & Ethics
Influence When Purchasing Goods & Services Members Of The Board Government Officials Supervisors Self Promotion Those With A Vested Interest
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© Copyright 2008 Nan McKay & AssociatesConnection Between Procurement & Ethics
How The Influence Game Works
You will be rewarded Money Things of Value Promotion Raise Travel Discounts Freebee’s
You will be punished Loss of Money Loss of Job Demotion Poor Assignments Loss of Promotion Increased Scrutiny Humiliation
© Copyright 2008 Nan McKay & Associates
Case Study #6
The Chief Operating Officer of your PHA asks you to sell tickets for Council Woman Apple’s upcoming campaign event.
You are the procurement officer for the PHA and are most familiar with the vendors for the PHA and those most likely to buy tickets to the event.
Is their an ethical issue? What is it and what could be done?
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Does it break the lawDoes it violate a regulationDoes violate policyDoes it hurt another personDoes it hurt the PHA
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© Copyright 2008 Nan McKay & Associates
Your Challenge
Knowing what is right! Do it right!Do good!Do no harm!
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© Copyright 2008 Nan McKay & Associates
Connection Between Procurement & Ethics
The Envelop Please! Common Mistakes
Opening Envelop too early Accepting bid after opening
date Commenting on the
“Winner”! Allowing changes in bid
documents Providing info to one bidder
only
© Copyright 2008 Nan McKay & Associates
Connection Between Procurement & Ethics
Unethical Actions Revealing proprietary
information Changing bid after opening Attempting to influence
selection of bidder based on known false information
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Avoid Unethical Practices
General Comply with all regulations Have good policies Train staff on policies Keep open communication
© Copyright 2008 Nan McKay & Associates
Avoid Unethical Practices
Key Points to Combat Influence Agency Structure
Well Defined Structure Shared Decisions
Public Awareness
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Avoid Unethical Practices
Important Points Separation of duties/functions
Person who places purchase orders does not also “receive” the items purchased
Person who receives order does not also sign invoice
Person posting is different than both
© Copyright 2008 Nan McKay & Associates
Avoid Unethical Practices
Important Points Records on each procurement must be
maintained for at least three years
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Avoid Unethical Practices
Disclose Potential Conflicts PHA management State Board Of Ethics HUD OIG
© Copyright 2008 Nan McKay & Associates
Detecting and Preventing Fraud
OIG Posted Updated Fraud Guide 3-5-04 HUD strongly suggests Fraud Policy
Creates aggressive environment Sets internal controls Clarifies consequences and procedures
Crimes Such As Bribery, Kickbacks, Bid Rigging, Embezzlement, And False Claims
© Copyright 2008 Nan McKay & Associates
Detecting and Preventing Fraud
Fraud is… Intentional, false representation or
concealment of a material fact In order to get someone to act on that to
their injury
© Copyright 2008 Nan McKay & AssociatesConditions That Foster Fraud
Stress In Employees Personal Life Debt Divorce Addictions Poor Health
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© Copyright 2008 Nan McKay & AssociatesConditions That Foster Fraud
“No One Cares” “I Just Want It!” “Everyone Else Is
Doing It, I Might As Well Get Mine”
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© Copyright 2008 Nan McKay & Associates
Conditions That Foster Fraud
Working ConditionsEmployees Unfairly
Treated Lack Of
Recognition Financial Appreciation
Lack Of Respect
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© Copyright 2008 Nan McKay & Associates
How Can We Combat The Fraud?
Commitment by Management Set the tone! Improve hiring practices Train and reward employees Prevent rather than detect Be aggressive Improve policies and procedures…
© Copyright 2008 Nan McKay & Associates
How Can We Combat The Fraud?
Institute internal controls Random audits Purchase Order System – Who signs, receives,
posts Rent Collection - Who collects and who posts Inventory Control - well defined system
© Copyright 2008 Nan McKay & Associates
How Can We Combat The Fraud?
Institute internal controls Alter predictable systems Notice employees who never miss a day Atmosphere of accountability
Time Sheets Sick Time Claims Patterns Of Absences
© Copyright 2008 Nan McKay & Associates
Employees Must Not Fear Reprisals
Anonymous reporting
Whistle Blower protection
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© Copyright 2008 Nan McKay & AssociatesInternal Controls GAO Suggests
GAO 01-1008G Create a culture Set policy and organization structure Allow open review Quickly follow up on violations Set goals and objectives Measure and reward progress Assess risks Develop info systems Communicate
© Copyright 2008 Nan McKay & Associates
Important! Management Must Set The Tone
Foster A Spirit Of Excellence Do the “Right Thing” Inspire Staff
October 2007 Ethics 99
© Copyright 2008 Nan McKay & Associates
Upcoming Lunch ‘n’ Learns
HCV Homeownership – July 25, 2008 Factors of Eligibility for Public Housing &
Housing Choice Voucher – Aug. 1, 2008 EIV for Public Housing & Housing Choice
Voucher – Aug. 15, 2008