Eric Feldman, Senior Vice President at Affiliated Monitors, Inc. discusses with me why third party assessments are essential to meeting the obligations outlined by the Federal Sentencing Guidelines. We also discuss the barriers to making a decision to conduct third-party assessments that executives sometimes create for themselves.
Third-party assessments can bring to leaders attention information that internal auditors or departments would rather not emphasize. What you don’t know can hurt you. Business leaders are held responsible for bad actors (or bad actions or facts) within their organizations that they do not personally know.
It is human nature to look at the world with an optimistic bias. Business leaders often unconsciously assume that not knowing about bad facts within their organization means that these facts do not exist. Leaders sometimes make the mistake of believing they cannot be held responsible for bad actions they do not know.
The line between what a business leader is held responsible for is not whether or not they had a knowledge of bad facts, but whether he or she could have known the facts using common techniques to find out. Federal Sentencing Guidelines state this expectation in Section 8.2.B.1(a)(1), an organization shall exercise due diligence to prevent and detect criminal conduct.
The DOJ wants to see companies have an evolving, continuously improving compliance program, not a perfect one. The Federal Sentencing Guidelines includes the requirement of periodic assessment of compliance programs as part of program of continuous improvement in Section 8.2.B.19(c)(1):
[T]he organization shall periodically assess the risk of criminal conduct and shall take appropriate steps to design, implement, or modify each requirement set forth in subsection (b) to reduce the risk of criminal conduct identified through this process.
Companies need to identify whether various parts of compliance programs are working, and how the programs are impacting corporate culture. It is important to have a third party to take a look to see whether what you are doing to make sure the company is getting accurate and complete information.
Eric R. Feldman, CFE, CIG retired from the Central Intelligence Agency (CIA) in 2011 with over 32 years of experience in Inspector General oversight and federal auditing, in both the Executive and Legislative branches of government. He has served in executive positions with Offices of Inspector General at the Department of Defense, Defense Intelligence Agency, and CIA, and was the longest serving Inspector General of the National Reconnaissance Office (NRO) from 2003-2009. At the NRO, he presided over a highly successful procurement fraud prevention and detection program, widely recognized by the Department of Justice as a model throughout the federal government.
While serving as a Federal Inspector General, Mr. Feldman was an active member of the National Procurement Fraud Task Force at the Department of Justice and chaired the Private Sector Outreach Committee. In this role, he was a driving force behind the amendments to the Federal Acquisition Regulations requiring the mandatory disclosure of contractor fraud and the implementation of business ethics and conduct programs for federal contractors.
Mr. Feldman is a frequently sought-after speaker and author on the topics of procurement fraud detection and prevention, corporate business ethics and compliance, and managing an Inspector General function. During the last year, he has given presentations at national conferences of the Association of Certified Fraud Examiners, the Society of Corporate Compliance and Ethics, and the Association of Inspectors General.
Eric Feldman, CFE, CIG
Affiliated Monitors, Inc.
The Federal Sentencing Guidelines