Ethical decision-making timely reporting of sustainability budget problems A dilemma that individuals face is whether to be truthful when

            Ethical decision-making timely reporting of sustainability budget problems

A dilemma that individuals face is whether to be truthful when it appears that a project is over budget. Being over budget typically means that actual costs exceed budgeted costs or that a planned timeline will not be met. People often delay reporting an over-budget condition either because they believe they can catch up later or because they wish to delay negative repercussions. Unfortunately, information delays prevent managers from responding rapidly and decisively to delays in project timing and cost overruns, leading to additional dissatisfaction and inefficiencies.

Suppose an energy company establishes a budget of professional hours for a particular sustainability audit job. The hours are broken down by audit area with one area being the valuation of ‘clean energy’ inventory and cost of goods sold. During the last year, the audit client adopted new procedures for assigning product costs to individual units. The audit budget includes extra hours for the estimated time needed to document and assess the reasonableness of the new method.

Many factors could cause this part of the audit to be over budget. Consider the following two scenarios:

1.       The client failed to establish appropriate records needed to easily audit the new method, and this part of the audit will require more than the budgeted time to complete.

2.       The auditor assigned to this part of the audit is inexperienced and is unable to complete the work in the budgeted time.

Regardless of the reason for the overage, managers in charge of the audit need to be notified as soon as possible so that they can consider possible ways to realign staff and complete the total job on time. In addition, in the first scenario the audit entity might be able to bill the client for the extra work involved if the audit contract includes a provision for such price adjustments. However, this scenario would most likely require the client to be notified promptly, while the work is still being performed. In the second scenario, the overage may result in a poor performance evaluation, especially if the auditor has similar problems in other audit areas. Yet the overage may be considered reasonable in light of the auditor’s inexperience. Even so, the auditor should be able to accomplish the following:

·           develop alternative estimates of time and resource requirements for a project

·           effectively facilitate and control the project process and take corrective action as needed

Therefore, the auditor must quickly recognise an impending overage and formulate appropriate strategies for completing the task as efficiently as possible. The auditor also needs to keep her supervisor apprised of the situation and seek help, when needed.

Required

(a)     Have you ever failed to meet a deadline on a group project? If so, what were the reasons for the delay? When and how did you report the delay to your team members? Has someone else ever failed to meet a deadline? Does a failure to meet an agreed-upon deadline create an ethical problem? Why?

(b)     Explore the responsibilities, expectations, assumptions, incentives, and consequences for this problem from different perspectives, including:

§  the team member who is late

§  other team members

§  the team’s client.

(c)     Draft a policy statement that you could adopt with future team members to handle project delays. How might this policy lead to improved team performance?

(d)     Think about your future career. How can you work toward developing your professional responsibility as a member of a work team?

(LO 2 and 5)