Bad budget system or unethical behavior? Clarence Cleaver is the budget director for the Harris County School District. Mr. Cleaver recently sent an urgent E-mail message to Sally Simmons, principal of West Harris County High. The message severely reprimanded Ms. Simmons for failing to spend the funds allocated to her to purchase computer equipment. Ms. Simmons responded that her school already has a sufficient supply of computers; indeed, the computer lab is never filled to capacity and usually is less than half filled. Ms. Simmons suggested that she would rather use the funds for teacher training. She argued that the reason the existing computers are not fully utilized is that the teachers lack sufficient computer literacy necessary to make assignments for their students.
Mr. Cleaver responded that it is not Ms. Simmons’s job to decide how the money is to be spent; that is the school board’s job. It is the principal’s job to spend the money as the board directed. He informed Ms. Simmons that if the money is not spent by the fiscal closing date, the school board would likely reduce next year’s budget allotment. To avoid a potential budget cut, Mr. Cleaver reallocated Ms. Simmons’s computer funds to Jules Carrington, principal of East Harris County High. Mr. Carrington knows how to buy computers regardless of whether they are needed. Mr. Cleaver’s final words were, “Don’t blame me if parents of West High students complain that East High has more equipment. If anybody comes to me, I’m telling them that you turned down the money.”
Required
a. Do Mr. Cleaver’s actions violate the standards of ethical conduct shown in Exhibit 1.15 of Chapter 1?
b. Does the Sarbanes-Oxley Act apply to this case? Explain your answer.
c. Explain how participative budgeting could improve the allocation of resources for the Harris County School District.