Ethics & Business Conduct Program

Report
Supplier Ethics:
Program Checklist
1
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
2
Guidelines
for Program Requirements (cont’d)
• 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
3
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
4
Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Standards and procedures
 Code of Conduct
 Distribution/Access
 Internal Control Procedures
FAR Requirement*
Code of Conduct made available to each
employee working on the contract
 Corporate Policy Statements:
_______________________________
_______________________________
_______________________________
Internal Control System
Defense Industry Initiative
Written policy signed by top official
providing for key elements of program
Code of Conduct, including potential
content
*for contracts of more than $5M and period of performance > 120 days
Note: Bold text indicates minimum program requirement
5
Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Board knowledge and oversight
 Certifications of training
 Frequency of reports to Board:
 Quarterly
 Bi-yearly
 Yearly
 Other: _____________
 Oral report to Board
 Written report to Board
6
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 resources
FAR Requirement
Assignment of responsibility at sufficiently
high level with adequate resources to ensure
effectiveness of program (ICS)
 Budget
 Staff
 Level of person responsible for
ethics__________________________
 Report to CEO
 Hard line
 Dotted line
Defense Industry Initiative
• Defined organizational structure
 Report to Board of Directors
 Hard line
 Dotted line
 Steering Committee
7
Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Due diligence for substantial authority
positions
 Sources of information:
 Background Checks
 Ethics database check
FAR Requirement
Reasonable efforts not to include individual
as a principal, whom due diligence would
have exposed conduct in conflict with Code
(ICS)
 HR hiring processes
 Frequency of checks once in position:
 Upon offer only
 Once a year
 Other _____________________
8
Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Communication and training
 Board of Directors training
FAR Requirement
 Employee training
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
 Code of Conduct (or general
ethics) Training
 Compliance Training
 Training for agents and
subcontractors
 Ethics staff training
 Employee communications
 Ethics messages integrated
 Standalone ethics
communications
• Rules-based compliance training based on
risk assessment
• Ethics awareness training and discussion
• Comprehensive communication plan
9
Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Monitoring, auditing, and periodic
evaluation
 Annual internal controls audit
 Employee survey
 Ethics program assessment
 Frequency:
 Once a year
FAR Requirement
Periodic reviews of business practices,
procedures and internal controls (ICS)
 Every other year
 Other __________________
 External benchmarking
 Ethics metrics review
 Frequency:
Defense Industry Initiative
 Monthly
Regular program assessments,
employee survey, metrics reporting,
internal and external audits
 Quarterly
 Bi-Yearly
 Yearly
 Other __________________
 General internal and external audits
10
Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
System for reporting misconduct or
seeking guidance, without fear of
retaliation
 Anonymous reporting
FAR Requirement
 Help/hotline
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)
 Ethics Officers
 Other _________________________
 Protection against retaliation
 System to report
 System to seek guidance
 System for tracking contacts
Defense Industry Initiative
Place for employees, suppliers,
customers and business relations to
raise concerns / ask questions
11
Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Consistent enforcement
 Disciplinary process for violations
FAR Requirement
Disciplinary actions for improper conduct or
failing to take reasonable steps to prevent
or detect improper conduct (ICS)
 Discipline review committees
 Internal investigations
12
Ethics & Business Conduct Program
Sentencing Guideline Requirement
Ethics & Business Conduct Program
Response to criminal activity
 Audits
 Corrective action analysis
FAR Requirement
 Discipline
Corrective measures are promptly instituted
and carried out (internal controls)
 Internal investigations
 Mandatory Disclosure policy
 Voluntary Disclosure policy
13
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:
 Quarterly
 Bi-yearly
 Yearly
 Other: _____________
 Communication with board
documented in company
policy/procedure:
_______________________________
14
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
 Process for making disclosures
 Policy stating expectations for full
cooperation
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
15
Ethics & Business Conduct Program
Defense Industry initiative
Ethics & Business Conduct Program
Leadership Commitment
 Tone at the top
 Engaged middle management
 Reinforcing messages
16

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