Identify the ethical dilemma or issue and the consequences to the organization’s personnel and policies/program and consequences to the public.

QUESTION

The New Hope/Solebury School District serves students in part of Bucks County, Pennsylvania. The county, just north of Philadelphia, has been a peaceful refuge since its colonial beginnings as a stopover on the road between New York and Philadelphia. But modern telemarketing reaches even the quietest parts of the county and can expose even the most straightforward budget-execution tasks to million-dollar fraud.

The scam involved the business manager of the district, Kathryn Hock, and American Corporate Supplies, an office supplies distributor operated as a telemarketer by Marc and Teresa Suckman. The district serves about 825 students, with an annual budget of $6.6 million. Hock, business manager since 1978, had worked her way up from school secretary. Some school board members had questioned her ability to deal with more sophisticated accounting systems and methods and had expressed ·doubt about her qualifications. She had managed to keep her job, although uneasily. The firm, located in California, made phone calls to prospective purchasers (public, private, nonprofit, it mattered not) around the country offering products at discount. Often the discounts were from artificially inflated prices. Their business was to induce customers to purchase felt-tip pens from them; the scam was that the pens: often had not been ordered or if ordered were never delivered. Their business was good: Along with the district, victims included an Idaho priest ($66,000), a St. Louis businessman ($40,000), and a Pennsylvania man ($155,000). But the $2 million from the district apparently was their best.

Hock received a long-distance call from American Corporate Supplies in 1983, offering green felt-tipped pens. Because district teachers had requested the color, she placed an order. The shipment arrived as promised, and she paid the bill.

Through the year, the business manager made more pen orders. Eventually her contact, William Chester of American Corporate (possibly Suckman), informed her that her good customer status entitled her to receive a pocket tape recorder, a gift that she accepted. That put Hock in jeopardy, although she did not realize it. After a few weeks, Chester called in regards to filling her back order. There actually was none, but he convinced her that such an order did exist and that she had legal obligation to complete the order. Mr. Chester then proceeded to call one or two times each month to obtain a new order from her.

By April 1984, the district definitely needed no more markers. They had arrived in regular batches, and there was room for little else in the storage closet. Hock tried to stop the flow, but Chester told her that the district had an outstanding balance of $3,547.14 and that she should send a check to close the account. The claim was excessive, and Hock objected. But Chester threatened to tell the school board about the gift she had accepted for placing the orders, which he said would cause her to be fired, so she settled the account and stopped the orders.

Or so she thought. A month later, Chester called again, this time with an outstanding balance of $4,229.53. She again objected, but Chester threatened to inform both the school board and the police, now about the unauthorized payment for goods not received. The stakes for her were higher!

Hock fell in even greater jeopardy, and because of this vulnerability, she was going to be called on to provide even greater sums of money. She was in over her head and didn’t know how to handle it. She paid that bill, and then another the following month, and dozens more- sometimes three in a month. When the amounts Chester demanded escalated as high as $30,000, she started breaking up the payments with several different checks so they would be easier to hide in the books. She had authority to sign checks and stamp them with the signatures of two board officials. When the canceled checks came back from the bank she would white out American Corporate Supplies and type in the name of the local fuel oil company and other regular suppliers, inflating their costs. Then she would alter the computerized accounts accordingly.

1. Identify the ethical dilemma or issue and the consequences to the organization’s personnel and policies/program and consequences to the public. 2. Explicitly relate the issue and/or consequences to that module’s reading by citing the readings. Citations should be meaningful and reflect comprehension of reading. 3. Discuss and explain your solution. Be sure to think broadly: personnel, public, policy, and program. 200-400 words.

ANSWER

Unveiling the Ethical Dilemma and Proposing Solutions for Fraud in the New Hope/Solebury School District

Introduction

The case of fraud involving Kathryn Hock, the business manager of the New Hope/Solebury School District, and American Corporate Supplies highlights a significant ethical dilemma that had far-reaching consequences for the organization’s personnel, policies/programs, and the public. This essay will identify the ethical issue and its consequences, relate it to relevant module readings, and propose a comprehensive solution that encompasses personnel, public, policy, and program aspects.

Ethical Dilemma and Consequences

The ethical dilemma in this case revolves around Hock’s involvement in a fraudulent scheme orchestrated by American Corporate Supplies. Initially deceived into placing orders for pens that were either never ordered or delivered, Hock became entangled in a web of deceit when she accepted a gift from the supplier. As a result, she felt coerced into continuing the fraudulent activity to prevent her actions from being exposed.

Consequences to Organization’s Personnel

Kathryn Hock: Hock’s reputation and professional competence were compromised, as some school board members had already expressed doubts about her qualifications. Her involvement in the fraudulent scheme further undermined her credibility and subjected her to significant personal and legal risks.

School Board Members: The school board members who had questioned Hock’s qualifications might face scrutiny for not thoroughly vetting her abilities or addressing potential concerns earlier. They may also be held responsible for overseeing financial controls within the organization.

Consequences to Policies/Programs

Financial Integrity: The fraud jeopardized the financial integrity of the New Hope/Solebury School District. Hock’s unauthorized payments and subsequent manipulation of financial records violated the organization’s policies and compromised its ability to maintain accurate financial reporting.

Internal Controls: The fraudulent activities revealed weaknesses in the district’s internal control system, as Hock was able to bypass safeguards, including check signing procedures and account reconciliation processes. This exposes the need for more robust financial controls and oversight mechanisms.

Consequences to the Public

Misappropriation of Funds: The diversion of funds from the school district’s budget undermined the public’s trust in the organization. This not only impacted the delivery of quality education but also wasted taxpayer money that could have been utilized for legitimate educational purposes.

Reputation: The fraud case tarnished the reputation of the New Hope/Solebury School District. The negative publicity surrounding the incident could lead to a loss of confidence in the district’s ability to manage public funds effectively, potentially affecting enrollment rates and community support.

Relating to Module Readings

The ethical dilemma in this case can be connected to several module readings that explore fraud, ethics, and financial accountability:

Fraud and Abuse: This case exemplifies the occurrence of fraudulent activities within an organization, highlighting the need for preventive measures, internal controls, and ethical behavior (Reading: “Preventing and Detecting Fraud”).

Ethical Decision Making: Hock faced a series of ethical decisions as she became entangled in the fraudulent scheme. The case underscores the importance of ethical decision-making frameworks and the consequences of succumbing to unethical pressures (Reading: “Ethical Decision Making and Ethical Leadership”).

Financial Accountability: The fraudulent actions of Hock underscore the significance of financial accountability in organizations. This case demonstrates the consequences of failing to establish adequate financial controls and oversight mechanisms (Reading: “Accountability and Transparency”).

Proposed Solution

To address the ethical dilemma and its consequences comprehensively, a multifaceted solution is required:

Personnel: The New Hope/Solebury School District should conduct a thorough review of its personnel policies and hiring practices to ensure that employees possess the necessary qualifications and expertise to handle their roles effectively. Regular training on ethics, fraud prevention, and financial accountability should be provided to all employees, including business managers, to enhance awareness and promote ethical decision-making.

Public: The district should adopt a transparent and proactive approach to rebuild public trust. Openly communicate the incident, the actions taken to address it, and the steps implemented to prevent future fraud. Engage with the community through public forums and establish a system for addressing concerns and suggestions regarding financial management.

Policy: Strengthen the district’s internal control system and financial oversight mechanisms. Implement strict procurement procedures, including competitive bidding processes, to prevent fraudulent schemes. Segregate financial duties to ensure checks and balances, conduct regular internal and external audits, and establish a robust reporting system for suspicious activities. Implement whistleblower protection policies to encourage employees to report unethical behavior without fear of retaliation.

Program: Allocate resources to address the financial losses incurred due to the fraud. Develop a strategic plan to enhance educational programs, upgrade facilities, and invest in professional development opportunities for teachers. This will ensure that the educational quality provided by the district is not compromised and that the students continue to receive an excellent education.

Conclusion

The fraudulent activities within the New Hope/Solebury School District involving Kathryn Hock and American Corporate Supplies raised significant ethical concerns and resulted in severe consequences for the organization’s personnel, policies/programs, and the public. By implementing a comprehensive solution that encompasses personnel training, public engagement, policy improvements, and program enhancements, the district can rebuild trust, strengthen financial accountability, and safeguard against future fraud. Upholding ethical standards and promoting a culture of transparency and accountability will be pivotal in restoring the district’s reputation and ensuring its long-term success.