Character Matters: Rochester Finds Lessons and Strength in Implementing an Ethics and Compliance Program

Daniel Fitzpatrick, Rochester City Manager

The information contained in this article is not intended as legal advice and may no longer be accurate due to changes in the law. Consult NHMA's legal services or your municipal attorney.

On October 18, 2013, the City of Rochester mailed a letter to every one of its vendors announcing its new ethics and compliance program. Earlier in the week, a letter went out to all department heads and employees and notices were posted on bulletin boards throughout city offices. Those letters followed a one-year-long effort by the city to establish a compliance program that outlines a clear-cut code of conduct for all city departments and city employees.

The task to create this program was one of the major administrative initiatives undertaken during the past several years. The city has been in a period of economic expansion and growth. Members of the city council felt there was a need to formalize the city’s policy regarding gifts and other considerations of value from businesses or individuals doing business with the city. The end goal was to provide clarity and context for city employees about what constitutes proper exchanges with vendors, their suppliers and affiliate colleagues. Now that it is in place, the new ethics and compliance program also affords the city protection and helps manage legal risk.

While compliance programs have become commonplace in corporate America, they are still something of a rarity in municipal government and developing one that would fit within city government culture was a chief concern.

Fortunately, the city was able to take advantage of several existing resources available in the corporate world and adapt them for use in Rochester.

Ethics vs. compliance

For Rochester, it was important to begin with definitions of “ethics” and “compliance.” The two terms are related, but in many ways completely different. Compliance is all about following the law – and it implies that an organization must actively work to follow codes and regulations. Ethics is a much more personal matter. It is about doing what a person believes is right. But at the heart of both compliance and ethics is the notion that it is the right thing to do or, as corporate psychologist Justin Schultz has stated: “Just as character matters in people, it matters in organizations.”

The concept of organizational compliance and ethics programs grew out of a movement by corporations in the early 1990s to institute ethics and compliance guidelines designed, in large part, to reduce corporate exposure to criminal liability. The idea behind compliance is that an honest business is less likely to be convicted and punished for acts committed by its disobedient peers. Formalized compliance programs were designed to make it less likely employees would do anything criminal – or unethical – on the job. If they did, federal prosecutors were willing to take into account these programs and had the option to simply target the employee rather than the firm.

A legal landmark came in 1991 when the U.S. Sentencing Commission published Chapter 8 of the federal sentencing guidelines, titled “Sentencing of Organizations.” Things moved quickly after that. For example, in 2004, New Jersey’s Division of Local Government Services (DLGS) required all certified positions (Municipal Clerks, Certified Financial Officers, Certified Public Works Managers and Tax Collectors) complete a number of continuing education units in ethics for their re-certification. Still, it was noted, a dearth of local officials and employees showed up for these training sessions.

In 2007, Chicago became the first city in the country to put into place a compliance program. The City of Chicago Compliance Program promotes “a culture of ethical conduct and a commitment to compliance with the law, and to prevent and detect misconduct.” The program was created through city ordinance so that the mayor and the city council were able to provide input. They also created the position of Office of Inspector General as an overseer. The overseer’s job is to conduct investigations and forensic audits in order to identify misconduct. The department reviews processes and procedures for non-compliances.

Mayor Richard Daley said having to comply with a growing list of federal, state and local requirements and with court actions were only some of the reasons for putting the program in place. The inspector general’s office also plays a role in training employees regarding compliance, a cornerstone of the program.

The program was considered a new concept for local governments. At the time, cities followed best practices that came out of the private sector. However, the more other cities learned about compliance programming, the more they would understand how such programs can realize greater efficiencies and cost saving for their constituents, said Daley.

Also that year, the Society of Corporate Compliance and Ethics 6th Annual Compliance & Ethics Institute meeting in New Orleans outlined the basic elements of the Federal Sentencing Guidelines for it’s growing membership. This included establishing standards and procedures and high level oversight, excluding from authority those who have engaged in illegal activities, providing ongoing communication and training, auditing and monitoring, confidential reporting creating incentives for employees to adhere to compliance and ethics and disciplining those who do and responding appropriately to any misconduct.

Models suggested were corporate style performance management systems, Sarbanes-Oxley, the Committee of Sponsoring Organizations for the Treadway Commission standards, the U.S. Government Accountability Office and the State Auditor General model.

But also that year, the society addressed compliance in the municipal context. Challenges included looking at resources, selling the value proposition, defining roles and responsibilities, coordinating departments, units and branches, getting management to own compliance, building stakeholder buy-in, “fighting fires” versus risk-based management and considering external communication in the context of what’s protected and what’s public. The City of Chicago was used as a case study.

Bringing the lessons home

While Rochester is growing, it remains very much a small city run with a lean city government staff and an emphasis on efficiency. The task of establishing and maintaining a compliance program fell under the duties of the city manager’s office. The first step in developing Rochester’s compliance program was immersion in the genre. While there are a handful of vendors that provide compliance training, few specialize in municipal compliance. Rochester chose to work with the Society of Corporate Compliance and Ethics (SCCE). A non-profit, SCCE has been around since the early 2000s and serves members in a variety of fields and industries, including government, academics, construction, financial services and manufacturing.

SCCE also offered a four-day training program – the SCCE Basic Compliance and Ethics Academy – a crash course in the complex world of compliance: the infrastructure of compliance, regulatory and personnel issues, risk assessment, as well as best practices. At the session, Rochester was the only municipality in attendance; still, from a municipal perspective, the discussions representing the viewpoints of different speakers and attendees were invaluable.

Rochester has a broad business base and hearing about the concerns and perspectives of businesses from health care and contracting to manufacturing and education was not only interesting, but instructive. The city’s employees deal every day with issues that have enormous ethical implications, whether it is protecting citizens’ privacy, creating a fair and open market for business, preventing harassment on the job or ensuring the city’s compliance with OSHA and environmental regulations.

A clear road map

SCCE taught that the most important thing one can do is to set the tone at the top and communicate through city government leaders the importance – both legally and morally – of compliance. Simply put, compliance is as important to protecting a city’s reputation as is it is to reinforcing a corporation’s brand. If Rochester wants to compete with other municipalities as a welcoming place to live and do business, its city government must be above reproach.

The SCCE Academy provided the materials and information needed to earn certification as a compliance and ethics professional. The program also provides connections with vendors and training programs that will be helpful as Rochester continues to develop and refine its ethics and compliance program.

In the months following the SCCE course, the City of Rochester’s compliance policy and procedure materials was drafted. The city established a Chief Ethics & Compliance Office (currently, those duties continue to fall to the city manager’s office), and an Ethics & Compliance Committee made up of key city staff, including several department heads. Among other duties, the committee periodically reviews city policies and procedures to “assure that legal requirements are assessed properly.” It also “determines the appropriate strategy to promote compliance and develop(s) a system to evaluate and respond to complaints and problems.” A memo outlining the City of Rochester’s Ethics & Compliance Program policies and procedures is available to city employees and the public on line at the City Manager’s web page (

An experienced trainer, Christine Fillmore helped implement the program on a citywide basis. Because this was the first formal municipal compliance program developed in New Hampshire, the city manager and staff worked with her to adapt information and materials from SCCE to reflect municipal workplace situations, issues and concerns. Our goal was to create a clear road map that succinctly defines the ethical and legal issues and gives employees recourse and confidentiality when they suspect wrongdoing on the part of a fellow city employee, municipal vendor or other entity doing business with the city. The city also established a confidential phone line (603-509-1905) and an e-mail hotline ( where city employees may report their concerns anonymously.

The city held its first compliance training session during the fall of 2013, opening it up to department heads and employees from all Rochester city departments. More than 30 city employees attended. Shortly following that training, Rochester launched the program officially in October 2013 with a presentation to the city council, an announcement in the press and the letters mailed to all city vendors.

Rochester now has an official ethics and compliance policy in place, an ethical and legal “road map” that provides guidance and recourse to city employees. The city’s Chief Ethics & Compliance Officer’s efforts have shifted to working with the city’s Ethics & Compliance Committee to find new ways to integrate ethics and compliance awareness into staff training initiatives. The committee also recently proposed outsourcing the reporting hotline as a means to further ensure confidentiality and reduce the city’s exposure to litigation. Plans are to implement that when the 2015 fiscal year budget takes effect in July.

Today, legal and compliance risks for organizations are greater than ever before, and while this is the first time Rochester has instituted an ethics and compliance program for an employer, the city’s leadership believes that it has not only been worthwhile, it should be considered mandatory for any municipality.

The City of Rochester and its employees are working hard to strengthen the city’s image as a dynamic, fast-growing community, a place where families will want to raise their children and businesses will come to build innovative products and services. The forthright character of Rochester’s people, its city government and community help to create a solid foundation for that growth and for Rochester’s continued success.

About the author: Daniel Fitzpatrick joined Rochester as city manager in 2011. With more than 30 years experience, he has held that position in Englewood, New Jersey, Poughkeepsie, Ogdensburg and Peekskill, New York, Oak Park, Michigan and Augusta, Maine.

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