ATC 7-5 Ethical Dilemma 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 se- verely 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; in- deed, the computer lab is never filled to capacity and usually is less than half filled. Ms. Simmons sug- gested 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' 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 reallo- cated Ms. Simmons' 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 fi- nal 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 professional practice shown in Exhibit 1.17 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. 22 Chapter 1 EXHIBIT 1.17 Statement of Ethical Professional Practice Members of IMA shall be have ethically. A commitment to ethical professional practice includes overarching principles that express our values, and standards that guide our conduct. IMA's overarching ethical principles include: Honesty, Faimess, Objectivity, and Responsibility, Members shall act in accordance with these principles and shall encourage others within their organizations to adhere to them. A member's failure to comply with the following standards may result in disciplinary action. Competence Each member has a responsibility to Maintain an appropriate level of professional expertise by continually developing knowledge and skills Perform professional duties in accordance with relevant laws, regulations, and technical standards Provide decision support information and recommendations that are accurate, clear, concise, and timely Recognize and communicate professional limitations or other constraints that would preclude responsible judgment or successful performance of an activity Confidentiality Each member has a responsibility to Keep information confidential except when disclosure is authorized or legally required. Inform all relevant parties regarding appropriate use of confidential information. Monitor subordinates' activities to ensure compliance. Refrain from using confidentialinformation for unethical or illegal advantage. Integrity Each member has a responsibility to Mitigate actual conflicts of interest and avoid apparent conflicts of interest. Advise all parties of any potential conflicts. Refrain from engaging in any conduct that would prejudice carrying out duties ethically. Abstain from engaging in or supporting any activity that might discredit the profession Credibility Each member has a responsibility to Communicate information fairly and objectively. Disclose all relevant information that could reasonably be expected to influence an intended user's understanding of the reports, analyses, or recommendations. Disclose delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law. Resolution of Ethical Conflict in applying these standards, you may encounter problems identifying unethical behavior or resolving an ethical conflict. When faced with ethical issues, follow your organization's established policies on the resolution of such conflict. If these policies do not resolve the ethical conflict, consider the following courses of action: Discuss the issue with your immediate supervisor except when it appears that the supervisor is involved. In that case, present the issue to the next level. If you cannot achieve a satisfactory resolution, submit the issue to the next management level. Communication of such problems to authorities or individuals not employed or engaged by the organization is not considered appropriate, unless you believe there is a clear violation of the law. Clarify relevant ethical issues by initiating a confidential discussion with an IMA Ethics Counselor or other impartial advisor to obtain a better understanding of possible courses of action. Consult your own attorney as to legal obligations and rights concerning the ethical conflict. Source: Institute of Management Accountants, Inc