GFOA Code of Professional Ethics: Anchor in a Sea of Change
Johnson, Eric R., Government Finance Review
The integrity of financial professionals recently has come under attack in the wake of a series of corporate accounting scandals. Finance officers must assign renewed emphasis to the GEOA Code of Professional Ethics if they are to maintain the confidence of government stake holders.
In a period when corporate accounting practices and financial disclosures have sensitized the nation to illegal and unethical behavior, government finance officers face a significant challenge in maintaining the trust of bondholders, taxpayers, customers, and other stakeholders. Although recent media attention has focused on corporate wrongdoings, government is not without its own cases of mismanagement, lack of integrity, and fraud. Such cases can taint an individual's career and damage the reputation of the organization he or she represents (or, more likely, used to represent). Even when a public official is cleared of charges of malfeasance--whether on the merits or on a technicality--public mistrust of both the individual and the organization can linger indefinitely.
Issues and circumstances much less sensational than those that surface in the media can challenge professional integrity. Indeed, the so-called "little things" are much more likely to trip up the average finance professional than behavior that is clearly outside the lines of ethical conduct. The GFOA Code of Professional Ethics addresses ethical issues both large and small, providing a useful benchmark against which government finance officers can measure their professional integrity. This article reviews this important yet often overlooked document.
First Some Perspective
In 1938, GFOA's predecessor, the Municipal Finance Officers Association, adopted the first code of ethics for the public finance profession. As with other such codes of that era, the MFOA code reflected expectations of conduct, but was not specific enough to provide practical guidance. (1) In 1987, the GFOA Executive Board established an ad hoc ethics committee to update the 49-year-old Code of Professional Ethics. Then-President Betty Jo Harker appointed the members of the committee, with Past President John Walsh serving as the chair. Following a series of internal drafts, the committee issued an exposure draft in May 1988 that was sent to all GFOA members for feedback. A revised code was approved by the membership at the annual conference in Seattle on June 6, 1989. The new code enjoined government finance officers "to adhere to legal, moral, and professional standards of conduct in the fulfillment of their professional responsibilities. " (2)
A code of ethics is one of the factors that differentiate professions from other skilled occupations. Many other professional associations have adopted codes of ethics specific to their needs. For government finance officials, the GFOA Code of Professional Ethics supplements any existing civil and criminal statutes restricting the conduct of government officials, including finance officials. Statutory restrictions set limits that, if violated, may result in civil action or criminal prosecution. Statutory constraints are important, but they often set relatively low standards for acceptable behavior. A professional who meets minimum statutory requirements may be safe from prosecution, but may still be viewed as unethical in his or her conduct and may subject his or her organization to the same label.
As a supplement to statutory requirements, the adoption of a code of ethics encourages a higher standard of conduct by the members of a profession. It is important to note that like other codes of ethics, the GFOA Code of Professional Ethics stops short of specifying limits. This is analogous to hurdle events in track and field. While a runner may attempt to barely clear a hurdle in order to maximize his or her speed, that runner risks being tripped up by the hurdle itself. In contrast, a code of ethics encourages the clearing of hurdles by a safe margin to avoid stumbling. What better way to encourage as high a standard of behavior as possible than by not pre-establishing minimum levels of acceptable professional conduct? Finance officers should perform their duties with as much integrity and professionalism as possible in order to earn and then maintain the public trust.
In updating GFOA's code, John Walsh emphasized that broad participation by members in the revision process led to an expectation of a high level of self-enforcement. As a result, the code did not prescribe sanctions for code violations. (3) Since the adoption of the revised code, GFOA's membership has continued to grow and diversify. It is incumbent upon current GFOA members to recognize the importance of the Code of Professional Ethics as they fulfill their professional responsibilities. The decision to rely on self-enforcement in lieu of sanctions will be valid as long as members accept and adhere to the tenets of the code.
Tenents of GFOA's Code of Professional Ethics
The GFOA Code of Professional Ethics is divided into six sections: 1) Personal Standards, 2) Responsibility as Public Officials, 3) Professional Development, 4) Professional Integrity--Information, 5) Professional Integrity--Relationships, and 6) Conflict of Interest. Each of these sections represents a different aspect of--and a different hurdle for--appropriate professional conduct by government finance officers.
This section emphasizes the need to "merit the respect, trust, and confidence" of government stakeholders and to "abide by approved professional practices and recommended standards." As such, this section ties well to the work of the GFOA standing committees, which effectively set these standards in the form of recommended practices and public policy statements. Recommended practices and public policy statements are developed by the standing committees and approved by the Executive Board. Policy statements are formally adopted by the GFOA membership during the business meeting at each annual conference.
Each standing committee is composed of up to 25 active members, ex-officio members from the Executive Board, and advisors from academia and/or the private sector. At least one GFOA staff member provides support to each committee. The six standing committees are:
* Committee on Accounting, Auditing and Financial Reporting
* Committee on Canadian Issues
* Committee on Cash Management
* Committee on Governmental Budgeting and Management
* Committee on Governmental Debt and Fiscal Policy
* Committee on Retirement and Benefits Administration
Supplementing the work of the standing committees is the Technology Resource Group. The Technology Resource Group's membership overlaps that of standing committees to ensure coordination among the committees on common issues regarding the use of technology in public finance. In addition, the Black Caucus and the Women's Public Finance Network advise the standing committees and the Executive Board on issues of concern to their constituencies.
The standing committees provide opportunities for GFOA members to participate in the development of the recommended practices addressed in the Code of Professional Ethics based on committee members' own professional experiences. Given the diverse responsibilities of government finance officers, not all of the recommended practices are applicable to all GFOA members. However, each recommended practice reflects both the experience of practitioners and the knowledge of experts in each of the functional disciplines of public finance. Both the code of ethics and the recommended practices are available on the GFOA Web site (www.gfoa.org).
One excellent example of GFOA's role in raising the standards of the public finance profession through recommended practices was the development of recommended budget practices by the National Advisory Council on State and Local Government Budgeting. The NACSLB was a joint effort of professional organizations representing elected officials, appointed managers, finance officers, labor and industry representatives, and academics. In 1998, the NACSLB published a framework of 59 recommended practices covering the spectrum of budgeting. These practices have been incorporated into GFOA training seminars and publications, and referenced individually and in whole in GFOA recommended practices.
Responsibility as Public Officials
This hurdle addresses the responsibility of finance officers to uphold both the letter and the spirit of the law, as well as the rights of the public. This includes the reporting of violations of the law to the appropriate authorities. For finance officers, most of whom are not experts on civil and criminal codes, this requirement can be particularly challenging. When is it necessary to seek expert opinion on whether an appointed or elected official has crossed the line and violated the law? Will such action result in retribution? Although there are laws to protect whistleblowers, this responsibility weighs heavily on anyone who must make the call. Underlying everything must be the recognition that the public has entrusted government with the responsibility to prudently manage public funds.
The third hurdle for finance officers is that of maintaining their professional competence in a field subject to changing standards, technological advances, legislative changes, and other factors. This hurdle also includes the responsibility to enhance the professional development of other finance officers and to encourage those considering government finance as a profession. To this end, GFOA offers a variety of development opportunities, including publications, training programs, certification, and recognition programs.
In terms of publications, GFOA continues to update key texts to reflect changes in professional standards and practices. The best-known example is the 2001 revision of the seminal publication on governmental accounting: Governmental Accounting, Auditing, and Financial Reporting or, as it is more commonly called, the "Blue Book." Three years earlier, GFOA released the second edition of another industry-leading publication: Investing Public Funds. Other resources include a series of pamphlets geared toward the needs of elected officials, a series for small governments, a series on implementing recommended budget practices, and much more.
The ever-evolving national training seminars and the Advanced Government Finance Institute have been supplemented by satellite videoconferences and Internet training that allow busy finance officers to receive training close to their offices. GFOA's new Chicago headquarters provides a permanent training facility that can host advanced training seminars such as "Implementing Performance Measurement Systems." The annual conference continues to address timely, cutting-edge advice on the most pressing issues in public finance, while the pre-conference seminars offer expanded training opportunities for attendees. Finally, GFOA staff regularly participates in and facilitates local and national training events sponsored by the state/provincial GFOA affiliates and other organizations.
Although GFOA supported state certification programs in the past, the association responded to members' interest in a portable certification program by creating the Certified Public Finance Officer program in 1995. The CPFO designation provides objective verification of an individual's knowledge of the core competencies of public finance. Like a code of ethics, certification is another distinguishing characteristic of a profession.
Recognition programs continue to play an important role in advancing the practice of state and local government financial management. The Certificate of Achievement for Excellence in Financial Reporting, the Distinguished Budget Presentation Award, the Award for Outstanding Achievement in Popular Annual Financial Reporting, and the Award for Excellence recognize governments that adhere to the highest standards of professionalism. These programs improve the quality of government financial management and build public confidence in elected and appointed government officials.
This hurdle covers both the issuance and management of information. It precludes any involvement by finance officers in misstatements or omissions, requires the protection of privileged information to which they have access, and calls for sensitivity and responsiveness in addressing information inquiries by stakeholders and the media. The protection of privileged information has meaning today that could not have been anticipated at the time GFOA updated the Code of Professional Ethics. Consider the following examples:
* Electronic transfer of data has progressed exponentially and the challenges of data transfer have been compounded by legislative changes such as the Health Insurance Portability and Accountability Act of 1996.
* Tax collection systems must protect the confidentiality of proprietary data yet still provide the information required for governmental audits. This confidentiality applies, for example, to information on the level of taxable sales reported to a state or local government by a particular vendor. Taking that issue to the next level, governments have been working in conjunction with businesses on a proposal to streamline sales tax collection systems. The streamlining will require the ability to calculate and collect taxes on electronic commerce transactions without capturing customer-specific information that could be used to build customer profiles.
The most frequent challenges in protecting information reflect more mundane issues. For example, what kinds of information requests should be documented in writing before information is released? What kinds of information should be excluded from responses? How is information presented and is it consistent with accepted practices?
This hurdle also addresses misstatements and errors of omission. Open, honest communication between finance officers and government stakeholders is expected. Responsiveness reflects not only what is provided, but how quickly. Intentionally missing a reporter's deadline clearly falls outside the context of professional integrity.
The Distinguished Budget Presentation Awards Program includes a mandatory criterion that budget documents include a budget message "that articulates priorities and issues for the budget for the new year." This criterion is intended to ensure that key changes in priorities are disclosed so that stakeholders do not miss the most critical issues in what might otherwise be an imposing document.
This hurdle addresses several issues. It demands impartiality and fairness in personnel matters, including promotion of equal employment opportunities and opposition to discrimination and harassment. These issues have continued to be defined by the courts in the years since GFOA's Code of Professional Ethics was revised. Some actions that may not have been defined as constituting harassment in 1989 would not escape that characterization today. The standards of professional conduct rise as societal expectations rise; that is, the hurdle is raised. This area of the code also calls for loyalty to the government one serves and respect for one's peers.
Conflicts of Interest
This final hurdle represents what most finance officers would expect to find in a code of ethics: the obligation to discharge one's duties without favoritism, personal use of public property, or seeking personal gain. This is an area, however, where the lack of specific limits in the code may result in different interpretations of where a finance officer draws the line. What makes this type of hurdle particularly difficult is that not only is it improper to accept personal gain that influences one's conduct, but it is improper (i.e., unethical) to accept personal gain that appears to influence one's conduct. There are varying analogies used to describe how one determines where an action crosses the line of what is ethical versus unethical. For example, would you want to see it in tomorrow's headlines?
The GFOA Code of Professional Ethics is both an obligation and a tool for finance officers. As described, the tenets of the code are akin to a series of hurdles that must be cleared by finance officers as they fulfill their daily job responsibilities. Because the height of each of these hurdles is not known, finance officers must act in such a manner as to clear the hurdles with plenty of room to spare. The absence of minimum requirements in the code encourages a higher level of professional behavior. The code was meant to be self-enforced, implying the expectation that finance officials meet the spirit of each of the six sections. Despite the technological changes, societal changes, and legal interpretations that have occurred since the updated code was adopted in 1989, the Code of Professional Ethics continues to be a relevant and useful standard for government finance officers.
(1.) John Walsh, "New GFOA Code of Professional Ethics Provides Guidance, Direction," Government Finance Review 5, no. 5 (October 1989): 3.
(2.) GFOA Code of Professional Ethics (available online at www.gfoa.org).
ERIC R. JOHNSON is director of management and budget for Hillsborough County, Florida. A member of the GFOA Executive Board, he has been an active member of GFOA for 13 years. He has contributed several articles to this publication and has participated in various training seminars and annual conference sessions.…
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Publication information: Article title: GFOA Code of Professional Ethics: Anchor in a Sea of Change. Contributors: Johnson, Eric R. - Author. Magazine title: Government Finance Review. Volume: 18. Issue: 6 Publication date: December 2002. Page number: 10+. © 1999 Government Finance Officers Association. COPYRIGHT 2002 Gale Group.
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