Scott Simpson, CPA, is a Chief Financial Officer for the city of Greenland. Scott oversees three accountants who are responsible for investing, city budgeting, record keeping, and financial reporting. Scott also serves as an adjunct accounting professor at a local university. Although he has no spare time and often fees overwhelmed, Scott enjoys teaching and receiving a 50% tuition reduction for his two children. During his 5 years as CFO, Greenland has received unqualified opinion on its financial statements and Government Finance Officers Association awards for reporting and budgeting.

Greenland tries to maintain $3 million in unrestricted general funds at all times to offset potential cash flow timing issues and unforeseen fluctuations in revenues and expenditures. During this years budgetary approval meeting, Scott Simpson reported to the city council that the city had $3.8 million in unrestricted funds. City council members were excited and decided to include additional appropriations for police, fire, and emergency vehicles that were that were omitted from the budget in prior years.

At the beginning of the 3rd quarter, an internal auditor discovered that the unrestricted fund balance at the beginning of the year was overstated by nearly $1 million. Assigned fudns to repay the citys economic development bonds were unintentionally intermingled with the restricted funds. Because of the declining sales tax revenues, increased expenditures including overtime pay for police officers, and the additional spending for city vehicles, the unrestricted fund balance had fallen to $1.5 million, dangerously low to sustain city operations.

The council is now meeting with Scott Simpson and the mayor to address the situation. Agenda topics include possible sanitation personnel cuts, discontinuation of police overtime pay, transportation department cuts, and substantial reductions in parks and recreation programs.

CASE QUESTIONS Ethics

1. What are the ethical issues, if any?

2. Who are the affected parties (stakeholders)?

3. What are the professional and personal obligations of the individual(s) facing the dilemma?

4. What are the potential options and course of action? List the options and the potential ethical and/or practical ramifications for each option.

5. Select a course of action, including steps to resolve the issue.