Association of Local Government Auditors

Does auditors' work encourage government employees to perform their duties in a more ethical manner?  I sought to answer this question during my dissertation research.  I expected to learn that audits are important in promoting good ethics, and audits do appear to influence employee behavior.  But the research participants said that ethics codes and training have a greater impact, with ethical leadership being the most critical component that determines whether employees will practice ethical behavior.

This research began with a nationwide survey of city auditors and finance directors for municipal governments with a population over 100,000.  The survey asked the 133 respondents to rank ethical leadership, ethics codes, ethics training, and audits from 1 to 4, with 1 corresponding to the item that was most important in promoting ethical behavior and 4 corresponding to the least important item.  Ethical leadership was ranked as the most important with an average ranking of 1.3.  Ethics codes were second with an average ranking of 1.74.  Ethics training was third with an average ranking of 2.01.  Audits were regarded as the least important with an average ranking of 3.0.

I expected city auditors to assign greater importance to their work.  Instead, the survey responses indicated that they consider their audits a limited tool for positively influencing a governmental organization's ethical climate.  To explore these results, I interviewed 64 employees at two municipal governments in the Midwest.  These employees included managers and non-managers from various departments.

The interviewees stressed that ethical leadership is the most important factor in determining whether a government organization will conduct its work ethically.  Fifty-eight credited their leaders with providing cues about expected behavior, and they use these cues to guide the way they execute their duties.  Just six of the 64 interviewees said the actions of their leadership do not influence the way they perform their jobs.  One interviewee summed it up well when he said the following:

"You have to have a culture that will promote the kind of values that will generate the kind of environment where you have persons that are behaving in a way that is ethical...It is a culture that leadership embraces and they model it so that it's not something where these are things that you said but you never see it demonstrated.  You need to have a culture where you have values that demonstrate ethical behaviors and you have leaders that model that.  I think that is crucial in creating a sustainable ethical environment.  Legally we should have regulations or policies because the law requires that, and those things should be in place.  But the most important thing is having that culture and that leadership that models it."

The interviewees also described ethics codes and training as important tools for promoting ethical behavior.  They explained that codes specify the behaviors expected of them and training explains how to adhere to the codes. 

Some of the interviewees said that audits can be useful, with 17 individuals noting they do their work more carefully because they know that they could be audited.  But others said that audits have little or no influence on how they do their work, and 31 interviewees argued that even if there was no possibility their work would be audited, they would continue to do it in the same manner.   

This information indicated that audits may not be a critical tool for promoting ethical behavior among government employees.  To explore this further, I contacted 25 city audit shops in ten states.  The city auditors also argued that ethical leadership is the most important component for promoting ethical behavior.  As one explained,

"When a department lacks ethical leadership, the entire organization suffers, the customers suffer, the citizens suffer...It's a key to governance in its entirety.  Internal control override is probably the first thing that happens.  When employees see managers override controls, there is a powerful message received-that the rules don't apply to everyone.  Some people will just do whatever it takes to get the job done, and doing the right thing becomes not so important."

Most of the city auditors agreed that ethics codes and training also are important to ensure that employees know what behaviors are expected of them.  They explained that codes provide a written guideline for how employees should behave, and training teaches them how to abide by the codes. 

But, again, even city auditors argued that audits are the least important tool for promoting an ethical culture.  Several auditors described leadership, codes, and training as proactive elements of an ethical culture, while audits are a reactive element designed to detect issues and recommend improvements.  One auditor stated that ethical leadership is "very critically important," and she noted that ethical leaders need to use codes and training to teach their employees how to behave and to emphasize that being ethical is important.  But she argued that audits have a limited role to play in this process.  As she explained,

"We're that oversight.  We're that extra push in that to make sure that everybody is falling in line.  But how can we come in as auditors and say something is wrong if we've never implemented a code of conduct, if we've never told them or trained them on what they should be doing correctly?"

By the conclusion of my research, I had interacted with over 200 individuals and found that a strong majority agreed that ethical leadership, bolstered by ethics codes and training, is the most important factor in determining whether a government organization will have an ethical culture.  Why is ethical leadership so critical in this regard?

According to various scholars (i.e., Johnson 2009, Brown et al. 2005, Neubert et al. 2009, and Grojean et al. 2004) this can be explained by social learning theory, which argues that individuals learn by observing the behavior of others and the resulting consequences.  If the behavior produces outcomes the individuals value, they are likely to model that behavior.  In the workplace, employees follow the cues of their leaders, often copying their behavior.  As such, if employee behavior is to be ethical, their leaders must demonstrate ethical behavior.

Does this mean audits have no value in promoting an ethical organizational culture?  No.  Auditors can assist government leaders to develop an ethical organizational culture.  How can this be achieved?  Based on these research results, auditors can take actions to help implement and nurture an ethical culture in their organizations.  For example, they can:

• Recommend that governments have ethics codes and assist in developing these codes by providing feedback on constituent's values identified during audit fieldwork.
• Recommend that ethics codes are updated as necessary to reflect changes in constituent's values and technology that may influence how government work is performed.
• When beginning an audit, determine which issues covered by the ethics code are germane to the audit scope. As much as practical, review these items as part of the audit fieldwork. In this way, auditors will be able to give ethics greater emphasis in their work and keep the attention of government leaders and employees focused on ethics.
• Recommend ethics training and work with leadership to ensure the training includes appropriate content and is delivered in a manner that makes it relevant to those being trained.
• Sponsor hot lines that allow employees and citizens to contact their government regarding ethical concerns and possible ethics violations. When calls are received, auditors can take the lead on investigating the issues reported.
• Write a column for their government's newsletter that includes discussions of ethical issues.
• Be advocates for ethics. Ensure that audit reports have the attention of leadership and emphasize any ethical concerns identified during the audit.
• Provide press releases that cover audit findings and mention any ethical concerns identified during an audit.

Do such actions really make a difference in an organization's ethical culture?  According to city auditors who already practice these measures, the answer is yes.  As one auditor noted, "If an audit is out there promoting to do things the right way, and leadership is promoting to do things ethically the right way and leadership also promotes our audits, I think it all goes hand in hand as far as promoting it and the likelihood that the environment as a whole will go back to 'let's do things the right way'."

Another city auditor noted that auditors can "promote the ethical environment by keeping attention on ethical behaviors and continuing the discussion, communication of ethical issues within the organization."  This auditor noted that "ethics management is a journey, not a destination."