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Michelle Fortnam

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Michelle Fortnam. Associate Director of Internal Audit and. University Compliance Officer ... The Responsible Use of University Funds: A ... Marsh McClennan ... – PowerPoint PPT presentation

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Title: Michelle Fortnam


1
The Code of Conduct The Responsible Use of
University Funds A Timely Friendly Reminder
Michelle Fortnam Associate Director of Internal
Audit and University Compliance Officer Patti
McCabe Director of Training Office of Research
Administration Debra Zumwalt Vice President and
General Counsel   Office of the General
Counsel February 7, 2005  
2
Code of Conduct
  • You come to a job with your sense of ethical
    values
  • based on upbringing
  • life experiences
  • Stanford has developed the Code of Conduct to
    set clear ethical standards for its Community

3
Provost John Etchemendy
  • This code is based on high ideals, Stanford
    could not claim to be a world-class institution
    if, in the pursuit of our mission or in the
    conduct of any of our business, we as faculty and
    staff did not act with integrity.

4
The Stanford Code of Conduct
  • Outlines the overarching core values of the
    university
  • Reflects the university's high ethical
    expectations
  • Guides all work-related activities

5
Members of the Stanford University Community
  • Are responsible for sustaining the highest
    ethical standards of this institution
  • Must be cognizant of and comply with all relevant
    policies, standards, laws and regulations that
    guide our work
  • Must avoid even the appearance of misconduct or
    impropriety
  • Are individually and collectively accountable for
    our behavior

6
Eight Categories
  • The code consists of provisions that fall under
    eight general categories
  • Standards of integrity and quality
  • Confidentiality and privacy
  • Conflict of interest and commitment
  • Human resources
  • Financial reporting
  • Compliance with law
  • Use of university resources
  • Reporting suspected violations

7
Reporting Suspected Violations
  • The revised code emphasizes that reporting
    concerns will not have negative repercussions
  • Raising them is a service to the university and
    will not put anyone's job in jeopardy
  • Reports of alleged or actual violations, as well
    as subsequent investigations, will be kept
    confidential or anonymous (if requested)

8
The Current Environment
  • Corporate - Governance scandals and reform
    efforts
  • Enron, Global Crossing, Tyco
  • Martha Stewart
  • Marsh McClennan
  • IRS - Increasing concern about personal
    inurement violations in the non-profit sector
  • Nature Conservancy
  • Religious and charitable organizations
  • Stanford - Affirming a commitment to maintaining
    the highest ethical standards
  • Code of Conduct
  • Cabinet meeting

9
Higher Ed Not Immune
  • Recent Wall Street Journal article revealed the
    forced resignation of a very visible faculty
    member (leader in corporate governance reforms)
    at Yale University for alleged financial
    irregularities involving 150K in travel expense
    reimbursements
  • CFO at CalTech dismissed last year for personal
    use of university resources
  • Dean of Divinity School at Ivy League school
    dismissed for financial irregularities

10
Stanfords Privileges and Risks
  • World-class research and educational institution
  • Intense scrutiny by the media and Aunt Emma
  • Constant presence of external auditors (DCAA,
    etc.)
  • Recipient of significant sponsor and donor funds
  • Tax exempt institution
  • IRS regulations and audits

11
Categories and Sources of Funds (FY04)
  • Restricted can be spent only in accordance with
    the wishes of a sponsoring agency or donor
  • Direct costs of sponsored projects (760M
    including SLAC)
  • Endowment income (400M)
  • Expendable gifts (105M)
  • Unrestricted may be used for any institutional
    purpose
  • Tuition and fees (332M )
  • Indirect cost recovery (164M)
  • Returns earned on unrestricted fund investments
    (77M)

12
Responsibility for University Funds
  • The Board of Trustees has delegated to deans,
    department chairs, directors, principal
    investigators and other University officers the
    responsibility for the management of funds.
  • These officers have the authority to expend these
    funds to accomplish their assigned
    responsibilities, and are responsible for
    assuring that expenditures charged are
  • Consistent with established University policies
    and practices applicable to the work of the
    University, including instruction, research, and
    public service.
  • Consistent with sponsor or donor expenditure
    restrictions.
  • Reasonable and necessary

Administrative Guide Memo 36
13
Determining A Reasonable Cost
  • A cost is reasonable if a prudent person would
    purchase the item at that price, under the
    circumstance prevailing at that time
  • Determine whether a cost is reasonable by
    considering whether
  • The cost is necessary for the performance of the
    activity
  • Incurrence of the cost is consistent with
    established institutional polices and practices

14
Stanford Policy
  • The University authorizes reimbursement of
    reasonable and necessary business expenses
  • The person who incurs the expenses the approver
    are responsible for ensuring maximum practical
    economy in the expenditure of funds
  • The price paid by the individual is compared with
    the price that would have been paid by the
    University in a similar situation
  • When the price paid by the individual exceeds
    that
  • which would have been paid by the University,
    the lesser
  • amount will be reimbursed

Administrative Guide Memo 36.4
15
Reasonable
  • Is the expense a reasonable expense for
    reimbursement by
  • The Federal government
  • A donor
  • The University

16
IRS Restrictions
  • Difference between a business expense and a
    personal expensealways an interest of IRS
  • Limit on what gifts employees can be given
    without it being considered income subject to tax
    (25 guideline)
  • IRS recently announced it will conduct audits of
    2000 nonprofits, focusing on compensation. Some
    universities already being audited.

17
Litmus Tests
  • When charging items to the University, ask
    yourself these four questions
  • Is this the right thing to?
  • Does it comply with applicable restrictions
    (IRS/ sponsor regulations, donor restrictions, SU
    policy, etc.) and the Stanford Code of Conduct?
  • Is this something your administrative assistant,
    or other staff in central offices, would clearly
    see as a Stanford business expense?
  • Would you be unconcerned reading about it in the
    Stanford Daily or Wall Street Journal? Would
    your family be at ease?
  • If an IRS auditor picks it as part of the IRSs
    sample of extra benefit transactions for
    executives, would you be free from worry?

18
Pop Quiz
  • A research lab wants to encourage discussion
    about research findings so it hosts a monthly
    happy hour. How would you handle the expense?
  • Charge it to the sponsored project that benefited
    from the discussion
  • Charge it to the gift fund that benefited
  • Charge the food to the sponsored project but not
    the alcohol
  • Charge it to a Department fund
  • Advise the PI that she should cover the cost of
    the happy hour

19
Pop Quiz
  • Professor Sharon Stone is late in registering for
    a conference at a major hotel in downtown NYC.
    The hotel rooms are fully booked up at the 200
    rate. Concerned about safety, Prof. Stone, opts
    for the available more expensive suite _at_ 450
    instead of booking a hotel five blocks down the
    street that would have cost 225 per night. Is
    this reasonable?
  • yes
  • no

20
FY03 University Expenditures
  • What would you do with
  • Recurring restaurant dinners with colleagues from
    outside the University
  • Expensive wine purchased for meals at home with
    colleagues
  • Taking research lab staff, with spouses, to a
    concert
  • Dinners with very expensive wine at upscale
    restaurants with Stanford colleagues, spouses,
    children, etc.
  • Gifts for employee weddings and baby showers
  • Taking departmental administrators on a Bay
    dinner cruise
  • Recurring faculty club lunches (60 in a year for
    one individual)
  • Subscription to an airline Club Room service
  • Purchase of an espresso machine (over 1k) to
    equip a new lab

21
Call to Action
  • Maintain your integrity and that of the
    University
  • Give some thought to your business expense
    reimbursements and those you processapply a
    cognitive process
  • Weigh the use of every dollar spent
  • Use the litmus test questions just listed
  • If you or the person being reimbursed cant
    answer Yes! to each question dont approve the
    expense. If youre still uncertain call for
    advice.

22
What You Can Do?
  • Read the Code of Conduct and use it to guide your
    behavior
  • Support your coworkers in this effort
  • Report suspected violations to general counsel or
    institutional compliance after discussing with
    management

23
Questions?
  • fortnam_at_stanford.edu
  • zumwalt_at_stanford.edu
  • pmccabe_at_stanford.edu
  • http//institutionalcompliance.stanford.edu
  • http//codeofconduct.stanford.edu
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