Are You Ethical Enough for Government Work?

Are You Ethical Enough for Government Work?

Thomas Marcinko | February 25, 2016

http://blogs.aronsonllc.com/fedpoint/

2© 2016 | www.aronsonllc.com | www.aronsonllc.com/blogs |

Introduction

• Justice Oliver Wendell Holmes famously opined, “Men must turn square corners when they deal with the government.”

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Introduction

• Justice Oliver Wendell Holmes famously opined, “Men must turn square corners when they deal with the government.”

• Benjamin Franklin once wrote that “There is no kind of dishonesty into which otherwise good people more easily fall, than that of defrauding the government.”







Introduction

• Contractors are all crooked and greedy, paying low wages to produce inferior goods and increase profits at the public’s expense.







Introduction

• Contractors are all crooked and greedy, paying low wages to produce inferior goods and increase profits at the public’s expense.

~ Callendar IrvineU.S. Commissary General of Purchases War of 1812







Agenda

• Significant Issue• FAR Compliance Requirements• Benefits of a Formal Compliance Program







Compliance is a Significant Issue

The bad news• 90% of employees in play

– Only 5% had previous fraud related conviction– 82% had employment history devoid of any fraud related activities

• Three types of occupational fraud– Corruption– Asset misappropriation– Financial Statement

• Typical organization loses 5% of revenue each year to fraud• $3.7 trillion dollars worldwide lost to fraud in 2014• The smallest organizations suffer disproportionately







Compliance is a Significant Issue

The good news• Formal compliance programs result in

– Less fraudulent behavior – Fraudulent behavior of shorter duration

• Organization with “hot lines” experienced fraud that was 41% less costly and detected 50% sooner than their counterparts without hot lines

• Formal compliance programs much better at preventing and detecting fraud than– Passive detection methods– External audits







Ethics Policy

• FAR Subpart 3.10 sets forth the Government’s Policy• Contractors must conduct themselves with the highest degree

of integrity and honesty• Contractors should have;– A Written Code of Business Ethics & Conduct– An Employee Ethics & Compliance Training Program– An Internal Control System– This policy is only guidance

• Contractors may be suspended or debarred for failing to disclose violations of criminal law related to government contracts

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Compliance Requirements

• 52.203-14 “Display of Hotline Poster(s)• The Hotline Poster clause is required if– Contract exceeds $5.5 million– The agency has a fraud hotline poster or the contract is

funded with Disaster Assistance Funds– Commercial contracts and contracts performed

overseas are exempt– Flow down to subcontractors required

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• 52.203-14 “Display of Hotline Poster(s)• This Clause Requires the Contractor to;– Display the pertinent agency or DHS hotline poster at

the work site– Display the hotline poster on company website– Contractor can substitute company hotline poster.– DHS poster must be displayed if disaster assistance

funds are used

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• 52.203-13 “Code of Business Ethics & Conduct”• The Code of Conduct clause is required if– The contract exceeds $5.5 million– The period of performance exceeds 120 days

• Clause must be flowed down to subcontractors based on the above thresholds

• Contains requirements that apply to contractors of any size and requirements that only apply to large businesses.

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• 52.203-13 “Code of Business Ethics & Conduct• All contractors must, within 30 days after contract award;– Have a written Code of Business Ethics and Conduct– Make a copy of the Code available to each employee engaged in

the performance of the contract.– The Contracting Officer can extend the 30 day period

• All contractors shall– Exercise due diligence to prevent and detect criminal conduct– Promote a organizational culture that encourages ethical conduct

and compliance with the law

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• Mandatory Disclosure (52.203-13 (b)(3))• What must be disclosed?– Violations of Federal criminal law involving fraud,

conflict of interest, bribery, or gratuities or a violation of the Civil False Claims Act (includes overpayments)• Committed by a principal, employee, agent or

subcontractor• In connection with the award, performance or close

out of this contract

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• Mandatory Disclosure (52.203-13 (b)(3))• When must it be disclosed?– It must be “timely” disclosed whenever the “contractor” has

“credible evidence” that a covered violation has occurred.• Does “timely” allow for an internal investigation prior to

disclosure• Clause does not define “contractor”• Clause does not define “credible evidence”

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• Mandatory Disclosure (52.203-13 (b)(3))• To whom must it be disclosed?– The disclosure must be made in writing to the agency

OIG with a copy to the Contracting Officer. – The Government will endeavor to treat the disclosure as

confidential information exempt from the Freedom of Information Act.

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• 52.203-13 (c) contains additional requirements applicable only to large businesses– Large businesses exempt from requirements if

commercial contract as defined in FAR 2.101• Size is determined by the NAICS Code for the particular

procurement

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• 52.203-13 (c) Large Business Requirements• Large businesses’ must, within 90 days after contract

award;– Establish an ongoing business ethics awareness &

compliance program – Establish an internal control system– The Contracting Officers can extend the 90 day period

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• 52.203-13 (c) Large Business Requirements• An ongoing business ethics awareness & compliance

program consists of;– Periodically communicating the contractor’s compliance

standards and procedures by conducting effective training

– Training must be provided to principals, employees, and as appropriate, agents and subcontractors

– Otherwise disseminating information appropriate to an individual's roles and responsibilities

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• 52.203-13 (c) Large Business Requirements• The contractors internal control system shall;– Facilitate timely discovery of improper conduct in

connection with Government contracts– Ensure corrective measures are promptly implemented– Assign responsibility at a sufficiently high level – Adequate resources to ensure effectiveness of ethics and

compliance awareness program and internal controls– Exercise due diligence to avoid hiring principals who have

previously engaged in conduct that would violate the Code.

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• 52.203-13 (c) Large Business Requirements• The contractor’s internal control system shall include the following;– Periodic reviews of the contractor’s business practices,

procedures, policies, and internal controls for compliance with the Code and other requirements of Government contracting• Monitoring and auditing to detect criminal conduct• Periodic evaluation of the effectiveness of the compliance

program• Periodic assessment of the risk of criminal conduct with

appropriate modifications to the compliance program

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• 52.203-13 (c) Large Business Requirements• The contractor’s internal control system shall include the following;– An internal reporting mechanism (hotline) that allows employees

to anonymously or confidentially report suspected instances of improper conduct

– Instructions that encourage employees to report suspected incidents of improper conduct

– Disciplinary action for improper conduct or for failing to take steps to prevent or detect improper conduct

– Mandatory Disclosure– Full cooperation with any Government agencies responsible for

audits, investigations, or corrective actions

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Benefits of a Compliance Program

• A compliance program fulfils a contractual requirement• Indirect benefits

– Keeps you out of trouble– “McNulty Memo” re: prosecution– Sentencing guidelines








• Compliance is good for business – Better returns for investors– Better performance – The less ethical the culture, the less likely the employees will expend

discretionary effort– Leaders demonstrating character & integrity equates to employee job

satisfaction & commitment








• Compliance is good for business – A Code of Conduct is one hallmark of a well-managed company – A Strong Ethical Culture Contributes to:

• Less Absenteeism• Less Employee Turnover• More Discretionary Effort• Improved Overall Performance

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Conclusion

• Compliance is required







Conclusion

• Compliance is required• Compliance is beneficial







Conclusion

• Compliance is required• Compliance is beneficial• Embrace Compliance

– Justice Holmes would be pleased– Benjamin Franklin would be surprised– Your stakeholders will thank you!







About Aronson LLC

• Thinking ahead for clients for more than 50 years• 225+ professionals located in Rockville, MD• 80+ professionals dedicated to supporting government contractors • Aronson helps clients rethink the way they approach their business

through innovative, industry-specific services and advice:– Assurance and Tax– Deltek Systems and Outsourcing– Financial and Contract Compliance– GSA Schedules

• www.aronsonllc.com/blogs/fedpoint/ – News and trends and insight for today’s savvy government contractor



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Awards / Accolades / Affiliations

The Gazette of Politics & Business Exceptional 53 Business Award In 2012, Aronson received the PB53 award for the third year in a row. The program acknowledges the top businesses and organizations in Maryland based on criteria that includes the company’s annual revenue, employee growth, noteworthy product or service innovations, community service efforts and more.

Accounting Today Top Firm In 2013, Aronson was once again named to Accounting Today’s list of the top 100 firms in the country. Accounting Today is a leading provider of online business news for the tax and accounting community.

Washington Business Journal Top 25 Aronson is ranked #12 on the Washington Business Journal’s Top 25 Accounting Firms in the DC Metropolitan area.

INSIDE Public Accounting Top 100 Once again, Aronson has earned a spot in the top 100 of this prestigious list, released by INSIDE Public Accounting. This is the longest running, most comprehensive and accurate independent analysis focusing on management and operations of America’s large local, regional and national firms.

Washington Business Journal Best Places to Work Aronson has been recognized five times as one of the Metro area’s “Best Places to Work.” The award recognizes a company’s achievements in creating a positive work environment that attracts and retains employees through a combination of employee satisfaction, working conditions and company culture.

Montgomery County Chamber Corporate Social Responsibility AwardIn 2010, Aronson was honored to receive the MCCC’s Corporate Social Responsibility Award based on the depth and breadth of the company’s energetic commitment to support young people, in the areas of education, housing and health.







Tom Marcinko is a principal consultant in Aronson's Government Contract Services Group. He is responsible for providing clients with a broad variety of both pre- and post-award support. With over 30 years of government contracting experience, he specializes in proposal development, contract and subcontract administration, FAR compliance, small business programs, and government audits.Tom is a featured speaker at Aronson events and a frequent guest speaker for numerous organizations, including the GWSCPA, VSCPA, the Northern Virginia Technology Council, the Washington Board of Trade and the NCMA. Tom presents training classes on a variety of subjects, including several courses in the fundamentals of government contracting for the University of Virginia's government contracting certificate program. He has also written articles on government contracting for the NCMA Contract Management magazine and other periodicals.Tom earned his bachelor's degree in accounting from the University of Central Florida and his law degree from the University of Florida. He is a member of the Florida Bar and the National Contract Management Association (NCMA).

Principal Consultant, Government Contract Services Group

301.231.6237

[email protected]

Thomas A. Marcinko







301.231.6237

Contact Thomas Marcinko

[email protected]

https://www.linkedin.com/in/tom-marcinko-9978138







Are You Ethical Enough for Government Work?

Government & Nonprofit

Transcript of Are You Ethical Enough for Government Work?