Valuing your Values: A Written Code of Ethics

Having a written code of ethics is an important part of an effective system of internal control.  A code of ethics guides how you want employees to behave in situations that may be morally complex.  A code of ethics should comprehend the following:

• Personal responsibility;
• Compliance with the law;
• Relation with the public;
• Limitation in accepting gifts, rewards, hospitality and discounts;
• Conduct in money matters;
• Confidentiality and use of official information;
• Use of official property and services;
• Private purchase of government property by employees; and
• Work environment.

Related to ethics, below we review how a code of ethics fits into the COSO internal control framework, what California State law requires, and the responsibilities of the governing body and the Chief Executive Officer.  We also provide a sample code of ethics that can be used as a starting point to tailor a code of ethics for your government. 
 
COSO
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) develops guidelines for organizations to design and implement systems of internal control over financial reporting and to assess their effectiveness.  In 1992 (re-released in 2013), COSO published Internal Control - Integrated Framework, commonly referenced as the “COSO Framework”.  The first and most important element of the COSO control framework is the “control environment”.  (The other elements of COSO are not contemplated by this discussion).
 
The control environment is the set of standards, processes, and structures that provide the basis for carrying out internal control across the organization. The control environment has a pervasive impact on the overall system of internal control.  The control environment comprises the:

• Integrity and ethical values of the organization;
• Parameters enabling the governing body to carry out its governance oversight responsibilities;
• Organizational struc­ture and assignment of authority and responsibility;
• Process for attracting, develop­ing, and retaining competent individuals; and
• Rigor around performance measures, incentives, and rewards to drive accountability for performance.

Tone at the top is the most important element of the control environment.  The governing body and senior management establish the “tone at the top” regarding the importance of inter­nal control including expected standards of conduct. “Tone at the top” refers to an organization’s leadership and their commitment to being honest and ethical.  Tone at the top sets forth the organization’s control environment and values.  Management reinforces ethical and behavioral expecta­tions at the various levels of the organization.
 
California State Law
The State of California requires most public officials to file annual conflict of interest statements with the Fair Political Practices Commission. Public officials so required include members of planning commissions, members of the board of supervisors, district attorneys, county counsels, county treasurers, and chief administrative officers of counties; mayors, city managers, city attorneys, city treasurers, chief administrative officers and members of city councils of cities; public officials who manage public investments; and candidates for any of these offices.  The conflict of interest statements require filers to list the companies they own or have invested in, real estate owned, and gifts received.  [Note: conflict of interest statements required by State law do not qualify as a code of ethics because conflict of interest is only one part of an ethical environment.]
 
Governing Body
Tone at the top is ultimately the responsibility of the governing body.  The governing body must ensure that ethical objectives are built into the actions and the strategy of the government, and that they are not merely a statement of good intentions.  The governing body is responsible for hiring the CEO (City Manager, County Executive, General Manager, Executive Director), approving strategy, monitoring execution of the plan, setting risk appetite, and exercising appropriate oversight regarding risk mitigations.  Although each of these responsibilities impact tone at the top, no single decision drives tone at the top more than the selection of the CEO. That selection focuses on competence, character, and chemistry of the candidates, but frequently places too much emphasis on competence and not enough on character.
 
CEO
Although the governing body has ultimate responsibility for tone at the top, the CEO is responsible for day-to-day activities that implement and support the governing body’s tone.  Establishing the right tone fortifies the organization’s reputation and its relationship with stakeholders. Many governments perform poorly when CEOs fail to prioritize the development of a culture of integrity. Since the CEO is the face of the organization to whom employees look for vision, guidance, and leadership, the CEO must openly and continually communicate their values, using different communication methods. While communicating about values is critical, a CEO’s behavior also tells employees what behavior is rewarded and punished. Unfortunately, many governments under-communicate values by a significant factor.
 
Summary
Creating and maintaining the right tone at the top is an essential first step in creating an effective control environment.  A written code of ethics is an important element in establishing the tone because it describes in very clear terms the standard of behavior for all employees. 
 
Therefore all governments that don’t already have a written code of ethics should develop and adopt one right away.
 
Attached is a simple example of a code of ethics that can be tailored to your government’s circumstances.
 

 
Sample Code of Ethics 
Adopted _____, 2023
 
Purpose
 
The public and stakeholders of the City are entitled to responsible, fair and honest government that operates in an atmosphere of respect and civility. Accordingly, the City Council adopts this code to:

• Describe the standards of behavior to which its officials and employees aspire;
• Provide guidance to officials and employees in their day-to-day activities; and
• Promote and maintain a culture of ethics.

 
This Code of Ethics applies to all City appointed officials and employees, and members of any of its boards, commissions, committees, and task forces (collectively hereafter, “staff”).
 
        Ethics and Conduct
 
To ensure that the City operates in a fair, ethical and accountable manner, staff shall:

• Comply with both the letter and spirit of the laws and policies affecting the operations of the City;
• Are independent, impartial and fair in their judgment and actions;
• Use their public office for the public good, not for personal gain; and
• Conduct public deliberations and processes openly, unless required by law to be confidential, in an atmosphere of respect and civility.

 
Therefore, staff shall conduct themselves in accordance with the following ethical standards:
 

1. Act in the public interest. Recognizing that stewardship of the public interest must be their primary concern, staff will work for the common good of the public and not for any private or personal interest, and they will assure fair and equal treatment of all persons, claims and transactions coming before them.
2. Comply with laws and policies. Staff shall comply with both the spirit and the letter of the laws of the nation and the State of California, and with policies of the City in the performance of their public duties.
3. Conduct at public meetings. When participating in public meetings, staff shall prepare themselves for public issues; listen courteously and attentively to all public discussions before the body; and focus on the business at hand.
4. Conflict of Interest. The professional and personal conduct of staff while exercising their office must be above reproach and avoid even the appearance of impropriety. Staff shall not use their official positions to influence government decisions in which they have (a) a material financial interest, (b) an organizational responsibility or personal relationship which may give the appearance of a conflict of interest, or (c) a strong personal bias.
5. Gifts and favors. Staff shall not take any special advantage of services or opportunities for personal gain, by virtue of their public office that is not available to the public in general. They shall refrain from accepting gifts, favors or promises of future benefits which might compromise their independence of judgment or action or give the appearance of being compromised.
6. Confidential information. Staff must maintain the confidentiality of all written materials and verbal information provided to members which is confidential or privileged. Staff shall neither disclose confidential information without proper legal authorization, nor use such information to advance their personal, financial or other private interests.
7. Use of public resources. Staff shall not use public resources which are not available to the public in general (e.g., City staff time, equipment, supplies or facilities) for private gain or for personal purposes not otherwise authorized by law.
8. Positive work environment. Staff shall support the maintenance of a positive and constructive work place environment for employees and the public.  Staff shall refrain from abusive conduct, personal charges or verbal attacks upon the character or motives of other staff or members of the public.
9. Lobbying.  Staff shall not, for a period of two years following the termination of their office or employment, represent, appear or lobby before any City body, agency, official or employee.  "Lobby" shall mean making any oral or written communication directly or indirectly to an official of the City, in an effort to influence or persuade the official to favor or oppose, recommend or not recommend, vote for or against, or take or refrain from taking action on any public policy issue of a discretionary nature.
10. Future employment.  Staff shall not, for a period of two years following the termination of their office or employment, accept employment or otherwise receive compensation from a person or organization that entered into a contract with the City within one year prior to the termination of the office or employment, where the former official or employee personally and substantially participated in the award of the contract.  Staff shall not, for a period of two years following the termination of their office, participate as a competitor in any competitive selection process for a City contract where the former official or employee recommended or approved the project or the work that is the subject of the contract, nor shall any City contract be awarded to such a former official or employee.  The provisions of this section shall not preclude the hiring of a former City employee as a consultant, provided that such hiring is approved in advance by the Commission.
11. Whistle blower protection.  To the extent not otherwise prohibited by State law, staff shall not use or threaten to use any official authority or influence to discourage, restrain or interfere with or to effect a reprisal against any person, for the purpose or with the intent of preventing such person from acting in good faith to report or otherwise bring to the attention of the City or other appropriate agency, any information that, if true, would constitute a gross waste of City funds, a gross abuse of authority, a specified and substantial danger to public health or safety due to any act or omission of a City official or employee, or the use of a City position or resources for personal gain.

Acknowledgement
All current City employees and officials including members of boards, commissions, committees, and task forces, will be given a copy of this Code of Ethics and asked to sign an Acknowledgement of Receipt form (see Attachment).
 
All new employees of the City will be given a copy of the Code of Ethics and asked to sign an Acknowledgement of Receipt form (attached) as part of their new employee orientation.  Each new member of a board, committee, or task force will be given a copy of the Code of Ethics and asked to sign an Acknowledgement of Receipt form at their first meeting.
 
Acknowledgment of Receipt forms for officials, employees and members of boards, committees and task forces shall be maintained on file by the City.

                                                                                                                                                                                              ATTACHMENT
CODE OF ETHICS
ACKNOWLEDGMENT OF RECEIPT FORM
 
Name: ________________________________________                     
 
Title: _________________________________________                                                                                                          
Department/Position: ____________________________
                                                                                                    Signature: _____________________________________                                                                       
Date: _________________________________________