1 supplier ethics: program checklist. 2 guidelines for program requirements federal sentencing...
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Guidelines for Program Requirements
• Federal Sentencing Guidelines (FSG)– Last amended 2010– Effective Compliance and Ethics Program (Chapter 8, Part B, Section 2)
• Due diligence to prevent and detect criminal conduct• Promote organizational culture encouraging ethical
conduct and compliance with law
• Defense Industry Initiative on BUSINESS ETHICS AND CONDUCT (DII)– Creating and Maintaining an Effective Ethics and Business
Conduct Program• Suggestions for each element of an effective program• Good resource for possible additions / enhancements
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• FAR Clause 52.203-13 “Contractor Code of Business Ethics and Conduct”
– Requires government contractors to:• Exercise due diligence to prevent and detect criminal
conduct• Promote an organizational culture that encourages ethics
and compliance• Submit mandatory disclosures to the government
– Mandates:• Code of Business Ethics and Conduct• Business Ethics Awareness and Compliance Program • Internal Control System
– Subcontract Flowdown
Guidelines for Program Requirements (cont’d)
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Checklist
• Checklist maps requirements of FSG and FAR, as well as DII recommendations, against program elements
• Reviewers should refer to the source documents for more detail
• Links to Source Documents– Federal Sentencing Guidelines §8B2– FAR Clause 52.203-13 “Contractor Code of Business
Ethics and Conduct” • DII
Creating and Maintaining an Effective Ethics and Business Conduct Program
• Note both potential gaps and highlights/best practices
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Ethics & Business Conduct ProgramSentencing Guideline Requirement Ethics & Business Conduct Program
Standards and procedures Code of ConductDistribution/Access
Internal Control Procedures
Corporate Policy Statements: _____________________________________________________________________________________________
FAR Requirement*
Code of Conduct made available to each employee working on the contract
Internal Control System
Defense Industry Initiative
Written policy signed by top official providing for key elements of program
Code of Conduct, including potential content
Note: Bold text indicates minimum program requirement
*for contracts of more than $5M and period of performance > 120 days
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Ethics & Business Conduct Program
Sentencing Guideline Requirement Ethics & Business Conduct Program
Board knowledge and oversight Certifications of training
Frequency of reports to Board:QuarterlyBi-yearlyYearlyOther: _____________
Oral report to Board
Written report to Board
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Ethics & Business Conduct Program
Sentencing Guideline Requirement Ethics & Business Conduct Program
High-level person responsible for program• Report to executives and Board• Resources, authority and access
Access to company resourcesBudgetStaff
Level of person responsible for ethics__________________________
Report to CEOHard lineDotted line
Report to Board of DirectorsHard lineDotted line
Steering Committee
FAR Requirement
Assignment of responsibility at sufficiently high level with adequate resources to ensure effectiveness of program (ICS)
Defense Industry Initiative
• Defined organizational structure
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Ethics & Business Conduct Program
Sentencing Guideline Requirement Ethics & Business Conduct Program
Due diligence for substantial authority positions
Sources of information:Background ChecksEthics database checkHR hiring processes
Frequency of checks once in position:Upon offer onlyOnce a yearOther _____________________
FAR Requirement
Reasonable efforts not to include individual as a principal, whom due diligence would have exposed conduct in conflict with Code (ICS)
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Ethics & Business Conduct ProgramSentencing Guideline Requirement Ethics & Business Conduct Program
Communication and training Board of Directors training
Employee trainingCode of Conduct (or general
ethics) TrainingCompliance Training
Training for agents and subcontractors
Ethics staff training
Employee communicationsEthics messages integratedStandalone ethics
communications
FAR Requirement
Ongoing ethics awareness and compliance program
• Reasonable steps to communicate periodically and in practical manner Contractor’s standards and procedures by
– conducting effective training programs– otherwise disseminating information
appropriate to individual’s respective roles and responsibilities
• Training for contractor’s principals and employees and, as appropriate, contractor’s agents and subcontractors
Defense Industry Initiative
• Rules-based compliance training based on risk assessment• Ethics awareness training and discussion• Comprehensive communication plan
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Ethics & Business Conduct ProgramSentencing Guideline Requirement Ethics & Business Conduct Program
Monitoring, auditing, and periodic evaluation
Annual internal controls audit Employee survey Ethics program assessment
Frequency: Once a year Every other year Other __________________
External benchmarking Ethics metrics review
Frequency: Monthly Quarterly Bi-Yearly Yearly Other __________________
General internal and external audits
FAR Requirement
Periodic reviews of business practices, procedures and internal controls (ICS)
Defense Industry Initiative
Regular program assessments, employee survey, metrics reporting, internal and external audits
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Ethics & Business Conduct ProgramSentencing Guideline Requirement Ethics & Business Conduct Program
System for reporting misconduct or seeking guidance, without fear of retaliation
Anonymous reporting
Ethics Officers
Help/hotline
Other _________________________
Protection against retaliation
System to report
System to seek guidance
System for tracking contacts
FAR Requirement
Standards and procedures to facilitate timely discovery of improper conduct (internal controls)
Internal reporting mechanism, such as hotlines, to report suspected misconduct and instructions that encourage employees to make reports (ICS)
Defense Industry Initiative
Place for employees, suppliers, customers and business relations to raise concerns / ask questions
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Ethics & Business Conduct Program
Sentencing Guideline Requirement Ethics & Business Conduct Program
Consistent enforcement Disciplinary process for violations
Discipline review committees
Internal investigationsFAR Requirement
Disciplinary actions for improper conduct or failing to take reasonable steps to prevent or detect improper conduct (ICS)
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Ethics & Business Conduct Program
Sentencing Guideline Requirement Ethics & Business Conduct Program
Response to criminal activity Audits
Corrective action analysis
Discipline
Internal investigations
Mandatory Disclosure policy
Voluntary Disclosure policy
FAR Requirement
Corrective measures are promptly instituted and carried out (internal controls)
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Ethics & Business Conduct Program
Sentencing Guideline Requirement Ethics & Business Conduct Program
NEW (as of 2010): Obligation to communicate directly with the Board or a sub-group of the Board
Periodic reports (oral and written) to Board committee: _______________________________
Frequency of reports to Board:QuarterlyBi-yearlyYearlyOther: _____________
Communication with board documented in company policy/procedure: _______________________________
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Ethics & Business Conduct Program
FAR Requirement Ethics & Business Conduct Program
Disclosures of violations of the civil False Claims Act or Federal criminal law shall be directed to the agency Inspector General, with a copy to the Contracting Officer
Timely disclosure to the agency Inspector General of certain violations of law by principal, employee, agent or subcontractor
Full cooperation with government agencies for audits, investigations and actions
Process for making disclosuresPolicy stating expectations for full
cooperation
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Ethics & Business Conduct Program
Defense Industry initiative Ethics & Business Conduct Program
Leadership Commitment Tone at the topEngaged middle managementReinforcing messages