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Running head: ETHICAL DECISION MAKING
Ethical Decision Making Employment Shortfall at DBED: Who is Monitoring the MITP Grants? Darla M. Garrett Department of Business and Economic Development Director, Finance Programs Accounting and Administration University of Baltimore
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Ethical Decision Making Today’s public administrator faces many diverse and complex problems. Changes in political leadership, shifting priorities, laws, regulations, public demands, and limited resources are all competing factors that the public administrator must consider in his or her decision making process. The primary mission of the Maryland Department of Business and Economic Development (DBED) is job creation and retention. This is accomplished through a variety of Departmental activities that include financial incentives to Maryland businesses. This paper will examine the ethical decision-making processes of the public administrators at DBED in response to an internal audit performed by the Division of Finance (DOF). The audit performed was of the Maryland Industrial Training Program (MITP), a grant program offered through the Regional Development Division at DBED. The MITP program is designed to improve the quality and availability of skilled workers by providing grant funds to Maryland businesses to support their training activities. What is ethics and how is applied? According to White (1988), ethics is the evaluation of human actions. In doing so, we evaluate behavior as “right” or “wrong,” “good” or “bad,” “acceptable,” or “unacceptable” according to the perspective of a moral principle or an ethical guideline. Ethical teachings are formulated using three approaches: “character-based ethics (Aristotle 340 BC virtue ethics), rule-based ethics (Kant, 1785 deontology), and results-based ethics (Mill 1863-utilitarism)” (Vance & Trani, 2008, p. 375). Each of these teachings has its advantages and disadvantages. Vance and Trani stated that virtue ethics focuses on the person rather than the person’s actions. This makes it difficult to “obtain consensus and even more
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difficult to resolve ethical conflict” (p. 373). As will be presented in the DBED case study virtuous thoughts and beliefs were very strong at the initial finding of the audit and while those beliefs were argued, they were not ultimately used to solve the problem. Conversely, Vance and Trani clarified that rule-based ethics is concerned with actions not the person. They argued that rule-based ethics helps coordinate behavior and makes expectations clear. However, at DBED, the rules were in place for the MITP program but they were not followed. The final ethical approach is results-based ethics, which focuses on two theories of thinking: “ends justify the means” and “utilitarianism” (p. 374). Both are concerned with the consequences in determining the right action. However, the right action under utilitarianism is the result that produces the “greatest good for the greatest number” (Vance & Trani, p. 374). The action or result under “ends justify the mean” often benefits the individual. Ultimately, a mix of rule based and results based decision making was used to resolve the audit issue at DBED. Case Study Employment Shortfall at DBED: Who is Monitoring the MITP Grants? In early 2008, two grant administrators for the Regional Division at DBED were reassigned to DOF as part of organization realignment. They were responsible for administering two of DBED’s grant programs the Partnership for Workforce Quality and the Maryland Industrial Training Program (MITP). The MITP program had specific employment goals and reporting requirements similar to one of DOF's financial incentive programs. Therefore, DOF management recommended a parallel procedure for employment monitoring be followed for the MITP grants and that an audit of each training transaction be conducted to determine a starting point for the collection of employment data.
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The grant administrator and the former manager of the MITP program were responsible for ensuring the compliance of the employment requirements and reporting under the MITP grant agreements. Companies were required to report and certify annually the number of employees currently employed at their Maryland (facility) location. If the companies meet the employment goals as stated in the MITP agreement, the grant was forgiven. However, if the company failed to meet its employment goals, the company was expected to payback a portion of the grant funds based on the employment shortfall. On some occasions, an extension would be approved to allow the company more time to meet the expected employment goals stated in the agreement. DOF’s Director of Accounting and Administration conducted an audit of the MITP program activity. Employment validation memos were prepared for each MITP file. Ninety-six companies were audited. Of the ninety-six companies, forty-three required actions either due to several years of missing reports or owed money due to employment shortfalls. The potential repayment back to DBED because of these deficiencies was approximately $2.5 million. This information was presented to the Secretary of DBED in April of 2008. Several meetings were held to determine the best approach to correct these deficiencies. A training committee was formed comprising of finance staff and regional development field staff. The committee’s task was to develop new guidelines for approving training projects. The DOF administrative staff was given responsibility for maintaining the compliance and reporting of the MITP grants. Finance offered to take the lead in collecting the employment shortfall payments and the delinquent reports. They had experience in this area with other finance programs and the processes and the procedures in place to manage the MITP project. However, regional management and the field staff objected. They wanted to maintain control of the MITP program and objected to Finance
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collecting the employment shortfall repayments. They wanted to either forgive the deficient grants or offer extensions. Some of the delinquent reporting and employment shortfalls went as far back as 2001. For the next year DOF staff would continue to maintain the existing MITP portfolio and reporting. In January of 2009, DBED’s Secretary resigned and a new Secretary was appointed. The Department was also reorganized and a new Assistant Secretary was appointed to oversee the Regional and the Finance divisions. At this point, no action had been taken on collecting any of the missing reports or the $2.5 million. As the economy faltered and the budget crisis loomed, finding money and demonstrating job creation and retention became a priority. DOF presented the MITP information again to its new Secretary and new Assistant Secretary. The Assistant Secretary in an attempt to show progress at DBED mentioned potential for collection of funds at a State Stat meeting. However, the State Stat committee was not aware of the background information surrounding the MITP program. If they did, they would have concluded that the money owed under MITP was due to a complete programmatic failure. All the State Stat committee knew was that there was the potential to collect $2.5 million. DOF management tried to downplay the discussion in the meeting because they knew the likelihood of collecting the entire amount was unlikely and did not want to disclose the full background information. In October of 2009, more than a year after the process began, DOF was finally given full authority to collect past due reporting and request repayment of grant funds for employment shortfalls. Moreover, the Program Manager of DOF was given delegated authority to approve all training program transactions, removing the authority from regional management. As a result, DOF collected over $300 thousand and successfully began to collect past due reporting which would satisfy the compliance in the grant agreements. DOF now has complete control over the
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approval and compliance process of the MITP training program. It should be noted however, that no one was terminated or disciplined as a result of DOF’s audit findings. Unfortunately, the problem stretched over four different DBED Secretaries and several Assistant Secretaries, so it is difficult to point the finger at any one person. Moreover, many of the people who were complacent and had knowledge of these compliance issues are still at DBED. Since MITP is not a program guided by statute but a line item in the budget, management was free to use their discretion in managing the program. Furthermore, the regional division had a silo mentality, and was not forthcoming in sharing information. They were very reluctant to turn over the MITP program to finance. The initial reaction by DOF staff was anger and they wanted accountability. This clearly was a gross mismanagement of the MITP program by the Regional management and staff. How could this have happen? Where was the oversight? What would the taxpayers think given the current budget situation? How will the business community react when they receive a letter requesting repayment or reporting from several years past? DBED management had to make a series of decisions in order to resolve this issue to ensure that this would never happen again.
The first question of “how” falls back to the public administrators accountability, oversight and discretion. Dubnick (2003) argued that it is not enough for public administrators to do what is right; “in accord with democratic morality” thus external controls are required to ensure public officials act responsibly in a moral way (p. 405). The external controls under the MITP program should have been the grant administrator and the grant manager who were responsible for maintaining the compliance of the grants, defined in the grant agreements.
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However, regional management and regional field staff often interfered with the process for a variety of reasons. A part of the ethical decision making process is accountability, which can be linked to our constitutional history and our system of checks and balances (Dubnick, 2003). The grant administrator, was supposed to be the “check” and manage the terms of the grant agreement. Instead, the line was blurred, and the grant administrator’s ability to manage the compliance properly was comprised. The legal agreements, which outline the requirements or “rules,” were disregarded. No one involved at DBED purposely set out to mismanage the MITP program. All the stakeholders involved believed they were doing what was best for the companies. The grant administrator did not have the proper tools in place to effectively monitor the employment compliance. Furthermore, she did not have the authority to override management or field staff decisions to extend agreements or to ignore compliance issues. Compliance was not a priority. Regional management and the field staff believed they had the discretionary authority to make decisions and thought they were doing what was in the best interest of the company. While regional management did have the discretion regarding program activities, they failed to properly document their decisions or give clear direction to the grant administrator as to their actions, so even if their decisions were legitimate, they could not be supported. Public administrators are entrusted with discretionary authority allowing them to perform their duties efficiently and expediently. For example, DBED Program Managers have authority over program funds and make decisions daily on how those funds will be allocated and for what projects. How public administrators come to make decisions and if there is a consistent ethical decision-making (EDM) model that professionals can use, has been the topic of much debate (Miner & Petocz, 2003). Haque (2004) argued that there is a constant battle for public
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administrators in clearly defining and maintaining a high level of ethical behavior among government employees. One way to achieve ethical behavior is through professional codes and disclosure. Through Executive Order 01.01.2007.01, Maryland’s Governor Martin O’Malley spells out the expected conduct for his Executive Branch Employees. However, there has been much debate about whether “administrative responsibility can be achieved by reliance on internal checks (personal) or if it requires external (legal-institutional) checks and sanctions” (Haque, 2004, p. 701). Both administrative responsibility and external checks failed in the management of the MITP program and to some extent internal checks too. What is the best ethical decision making model to use for public administrators? What model could DBED have used to avoid its MITP problem? What model should it use to develop a solution? Lewis and Gilman (2005) discussed ten models for ethical decision making, however only three models will be covered below. The first model “Assess Roles Using Role Diagnosis” requires the public administrators to examine the different roles played and the importance of “competing ethical claims” (p. 314). This model would seem to be effective in assisting public administrators in understanding their different roles, but it is too simplistic and one role cannot cancel out the importance of another role (Lewis & Gilman, 2005). This model may have helped DBED staff to understand their roles better but it really did not get to the heart of decisionmaking. Another model discussed by Lewis and Gilman is “Go/No-Go.” This model poses three questions: Is it legal? Is it ethical? Is it effective? While this model may seem simple, it “helps decision-makers act on legal obligations without devaluing other core concerns” (p. 65). The Go/No-Go model would be useful at DBED, as it required “thinking through the falsification of public documents” (p. 65). While DBED’s problem was not a document falsification issue, there were problems with following the grant document rules and proper documentation of the files.
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The Go/No-Go model required a deeper questioning of ethical decisions. The third model “Creativity Lead” expected the public administrator to go beyond the minimum requirement of doing no harm (Lewis & Gilman). Here the public administrator must truly be a leader, and combine values of what is good and what is bad, with the understanding of other stakeholder’s feelings, with fairness and impartiality, and with utility, which results in positive outcomes (Lewis & Gilman). DBED’s resolution to its MITP problem encompassed most of the “creativity lead” model. Unfortunately, there is no “best” EDM model. Part of the problem is that there is limited research into EDM and the three approaches mentioned earlier, virtue, deontology, and utilitarianism, “none stands as full justified and universally accepted” (Miner & Petocz, 2003, p.11). For example, had DOF management allowed their personal feelings to guide their actions and exposed the MITP audit outside of the Department, individuals might have been terminated, the Department’s reputation damaged, and the repayment of funds for the employment shortfalls may never have been collected. O’Kelly and Dubnick (2006) described this kind of decision making as “thin” moral concepts because the focus is primarily on the general terms such as “good” or “wrong” and are applied universally. The constitution, administrative law, and human rights are universal principles that apply to everyone. However, universality leaves out an important component, personal experience. Brady (2003) stated, that public administrators needed to look at the particulars or the extenuating circumstances when applying solutions to problems not just the universal solution. DOF could not simply state that the regional staff did wrong and therefore should be terminated and let the problem be exposed to the world. The problem at hand was more complex than a simple right or wrong response. Decisions, according to O’Kelly and Dubnick, should be guided by “think” concepts that are “factually world guided”
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and thus, “action guiding concepts” (p. 396). Therefore, the guiding solutions to DBED’s problem could neither be one of virtuous thinking on simple “thin” concepts based on right and wrong. While rule making may be effective at resolving problems in the future, it did nothing for the current problem at hand with DBED’s MITP program. Clearly, the rules in place were not followed, and regional management overstepped its discretionary authority. The solution was beyond rule-making and emotional frustrations. Utilitarianism the third ethical approach was results based and was intended to seek the best solution that results in the greatest good (Lewis & Gilman, 2005). DBED’s solution had to be one that encompassed fairness in that the process applied had to be universal for each company but also allowed DOF management enough discretion to manage any unique circumstances. The results had to be beneficial to the Department in that it could demonstrate that it took appropriate actions to resolve the problems and that the requirements in the grant agreements were back in compliance. Furthermore, there had to be a consensus among management to support the decisions of DOF in resolving the employment shortfall problems. Going back and collecting money from companies from prior years was an extremely sensitive matter and each case had to be examined carefully. Consequently, had the MITP program been managed more effectively with the focus being on the performance requirements, and had the proper follow-up on reporting and documentation, this problem could have been avoided completely. There is no one ethical model that public administrator can look to in their decisionmaking process. As Miner and Petocz (2003) pointed out attempts to integrate moral theory and EDM processes fail because the incorrect model is used, underlying assumptions were ignored, and the EDM models produced are not comprehensive enough to make a “fully informed”
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decision. It seems further research in this area is warranted. Moreover, more training and education needs to be a priority of public administrators. As noted by Haque (2004) “respect for the law and democratic principles may be said to underlie both the professional and the personal dimensions” of ethical decision-making (p. 701). Regional management obviously was misusing their discretionary authority in order to avoid confrontation with the companies awarded grants. They failed to demonstrate good judgment in managing the program effectively and they forgot that this was the taxpayers’ money. The question for DBED now becomes how to keep this type of problem from happening again in other areas of the Department. For now, the problem is resolved because DOF has oversight of the MITP program and there are clearly defined processes and procedures in place to manage the compliance. However, management at DBED should use the MITP problem as a learning tool to ensure that conflicts between administrators, field staff, and management do not interfere with the proper administration of the DBED’s programs. In addition, open discussion on the ethical implications of programmatic decisions should occur on a regular basis to foster a culture of ethical behavior. Management with discretionary authority over funding decisions should fully understand the consequences of their actions or failure of their inactions.
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References Brady, F. N. (2003). “Publics” administration and the ethics of particularity. Public Administrative Review, 63(5), 525-534. Retrieved October 8, 2009, from ABI/INFORM Global. (Document ID: 417644611). Dubnick, M. J. (2003). Accountability and ethics: Reconsidering the relationships. International Journal of Organizational Theory and Behavior, 6(3), 405-441. Retrieved October 8, 2009, from ABI/INFORM Global. (Document ID: 411396481). Haque, A. (2004). Ethics and administrative discretion in a unified administration: A Burkean perspective. Administrative & Society, 35(6), 701-716. Retrieved October 8, 2009, from ADI/INFORM Global. (Document ID: 547790351). Lewis, C. W., & Gilman, S. C. (2005). The ethics challenge in public service: A problem solving guide (2nd. ed.). San Francisco: Jossey-Bass. Miner, M. & Petocz, A. (2003). Moral theory in ethical decision-making: Problems, clarifications and recommendations from a psychological perspective. Journal of Business Ethics, 42(1), 11-25. Retrieved October 8, 2009, from ABI/INFORM Global. (Document ID: 455363391). O’Kelly, C., & Dubnick M. J. (2006). Taking tough choices seriously: Public administration
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and individual moral agency. Journal of Public Administration Research and Theory, 16(3), 393-415. Retrieved October 8, 2009, from ABI/INFORM Global. (Document ID: 411396481). Vance, N., & Trani, B. (2008). The ethical grounding to 21st century public leadership. International Journal of Organization Theory and Behavior, 11(3), 372-380. Retrieved October 8, 2009, from ABI/INFORM Global. (Document ID: 1536919851). White, T. I. (1988). Right and wrong. A brief guide to understanding ethics. Englewood Cliffs: Prentice-Hall.