Overview Central Maine State University (CMSU) hires Contract Food Services Corporation (CFSC) to provide food in two of their main on-campus cafeterias. CFSC hired Pam Worth as the Manager of Education Food Services at CMSU and has her accounting degree from Northern University. Pam currently operates a profit center, which services around 12,000 students and 2,000 faculty and staff. In addition, Pam is responsible for handling the vending machines, and they are also known to cater campus events. CFSC hires 59 regular employees and between 150 and 180 students on a part-time basis. CFSC typically generates an excess of $3 million dollars a year. “CFSC earns 100% of the profits from the food operation, up to a limit of 10% profit on sales”
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Performance measures are set to ensure the employee is putting forth 110% of their effort in their job duties and bonuses are given when those job duties are met or over exceeded. Pam is basically cheating the system, as she is performing her job duties, but only doing it at the bare minimum to ensure she meets her yearly goals. Not only is Pam hurting herself by not performing at her top capabilities, she is hurting CMSU by costing them more money for inflated costs. In addition, Pam is creating issues among managers who do not put slack in their budget and who are honest when setting their yearly budgets. Managers who are honest may have some repercussions if they do not meet their budgets, for instance if they do not receive their bonus, it could cost them their job. While Pam is creating slack in her budgets to ensure she receives her bonus along with meeting yearly budgets, honest managers are being punished. CFSC is not innocent in this matter, as Pam discloses to her supervisors the slack she has created within her budget and they are okay with it. CFSC encourage Pam to keep the slack within her budget, as it allows them to earn more profits from CMSU. This creates another ethical issue, as CFSC knowingly allows their manager to cheat the system. According to the Sarbanes-Oxley Act of 2002, all managers, controllers, and CFOs are responsible for confirming that the financial processes, including budgeting and financial reporting, are thorough and that the information is reliable (Fleischman & Walker,
Performance measures are set to ensure the employee is putting forth 110% of their effort in their job duties and bonuses are given when those job duties are met or over exceeded. Pam is basically cheating the system, as she is performing her job duties, but only doing it at the bare minimum to ensure she meets her yearly goals. Not only is Pam hurting herself by not performing at her top capabilities, she is hurting CMSU by costing them more money for inflated costs. In addition, Pam is creating issues among managers who do not put slack in their budget and who are honest when setting their yearly budgets. Managers who are honest may have some repercussions if they do not meet their budgets, for instance if they do not receive their bonus, it could cost them their job. While Pam is creating slack in her budgets to ensure she receives her bonus along with meeting yearly budgets, honest managers are being punished. CFSC is not innocent in this matter, as Pam discloses to her supervisors the slack she has created within her budget and they are okay with it. CFSC encourage Pam to keep the slack within her budget, as it allows them to earn more profits from CMSU. This creates another ethical issue, as CFSC knowingly allows their manager to cheat the system. According to the Sarbanes-Oxley Act of 2002, all managers, controllers, and CFOs are responsible for confirming that the financial processes, including budgeting and financial reporting, are thorough and that the information is reliable (Fleischman & Walker,