Social Audits

President's Letter

Next

Dear <President>

During the past year several businesses and nonprofit organizations accepted our
invitation to participate, at no cost to them, in a breakthrough project.

We conducted prototype Social Responsibility Audits (SRA), probably the first few
such efforts in the USA, and used these test sites to validate the measurement
instruments we have been developing over the past five years. An SRA involves
interviews with management, staff, vendors and other stakeholders, and review of
internal documentation, supporting social responsibility assertions.

The results were shared with participants confidentially, although our ultimate goal
was to render a report sufficient for public exposure taking credit for corporate social
responsibilities and identifying opportunities for additional learning.

Given the landscape of philanthropy and capital formation these days, where greater
funding is available than ever before, accompanied by more accountability than in the
past, we are finding a heightened atmosphere of threats and opportunities for private
and public businesses as well as not-for-profits.

A purpose of the SRA is to serve as an early warning system for avoiding fallout from
threats, but more importantly, as a foundation for efforts to attract funding whether in
the form of venture capital, community-bank lending, planned giving, or general fund
raising from government or institutional sources.

I have enclosed an outline of our SRA and encourage your joining this adventure in
expanding our reach toward a better community. I will call you to discuss your interest
in the project.

Rolland Vasin, MS, CFE, CPA

Social Audits
What is Corporate Social Responsibility?

Previous   Next 

Corporate Social Responsibility (CSR) encompasses an organization’s commitment to

behave in an economically and environmentally sustainable manner, while honoring
the interests of direct stakeholders
The mission of the socially responsible organization (SRO) is to influence the process
of developing, and advocating by example, socially responsible business practices
which benefit not only the SRO and its employees, but also the greater community,
the economy and the world environment. SROs seek to reshape the way business is
done in both the for-profit and not-for-profit arena.

While what it is to be “socially responsible” is defined at many levels, there is an

evolving core of minimum standards for corporate social performance. These
standards represent an initial step in the full development of a socially responsible
organization. The minimum standards are intended to be specific, documented, and
measurable. They are also achievable and meaningful in terms of impacts on
communities, employees, the environment and economic systems.

These standards are not about getting a “passing” or “failing” grade but are
assessment tools for the SRO’ s current level of commitment to CSR. The standards
assist in setting measurable and achievable targets for improvement and form the
objective foundation for reporting to all direct stakeholders both the “talk” and actual
“walk” of the SRO.

The dimensions covered by the minimum standards incorporate the concepts of

community involvement, diversity, employee relations, environment, international
relationships, marketplace practices, fiscal responsibility, and accountability. These
factors have been defined in the following outline.

Social Audits 
Dimensions of Socially Responsible Performance

Previous   Next

Community Development

 Community Involvement
 Donations (Given and Received)
 Community Economic Development and Locally-Directed
 Investment

Diversity  

 Equal Opportunity: Internal

 Equal Opportunity: External
 Employee Relations
 Employment Standards
 Performance Review
 Compensation
 Employee Empowerment
  Employee Growth
 Employee Termination
 Flexible Work Hours

Environment

 Environmental Regulations  
 Environmental Policy Statement  
 Environmental Management: 
o Procedures and Programs 
o Communications  
o Structure and Human Resources

International Relationships

 Human Rights
 Employee and Environmental Standards
 Purchasing and Contracts
 Community Development

Marketplace Practices

 Consumer Protection
 Advertising and Marketing Practices
 Customer (Client) Satisfaction
 Fair and Timely Payment
 Ethics Policy
 Dispute Resolution

 Fiscal Responsibility

 Fiscal Policies, Controls and Procedures

 Accountability: Auditing, Monitoring And Reporting

 Social Responsibility Audits

 Disclosure and Reporting To Stakeholders
 Communications

Social Audits
Building the Case for Social Responsibility

Previous   Next

 Perception Reasons
 o Business partners, suppliers, and customers favor doing business with
reputable organizations.

o A good image attracts potential employees, especially in competitive hiring

modes.

o Government and public groups may be more accommodating or open on

community impact issues.

o Donors and volunteers are more willing to contribute if the not-for-profit

supports the same values they do.

 Business Reasons

o Philanthropic programs can open new markets.

o Strong employee support services help reduce absenteeism and turnover

and improves employee productivity.

o Community involvement helps a strong corporate culture, which results in

innovation, higher quality and more commitment.

o Future competitiveness and success depends upon the health of the

communities in which the business operates.

o Well-defined ethics programs can protect against legal exposure, fines

and sanctions.

o Environmental management increases efficiency in materials and energy

use, thus, lowering costs.

o Monitoring social responsibility can prevent fraud and organizational

wrong-doing.

 Altruistic Reasons

o “It is the right thing to do.”

o “We have an obligation to share our success.”

o “We have a responsibility to give something back to the community."

 Social Audits
The Social Responsibility Audit

Previous   Next

The concept of social accounting encompasses the process of attempting to measure

the value of intangible assets such as intellectual capital, customer and vendor
loyalty, employee satisfaction and creative “synergy”, and community support.

Beyond the impact of financial statements as a tool for assessing corporate

performance, the social responsibility audit report is designed to integrate the impact
of intangible assets on stakeholders by providing them with reliable social
performance achievements contrasted against generally accepted social responsibility
criteria.

The technology of assessing corporate performance, beyond the financial statements,

requires a multi-disciplinary audit team including accountants, behavioral science
practitioners, attorneys and engineers.

Within the past ten years, greater focus has been leveled at corporate performance in
“green” terms by the Generation of the Sixties whose ethical foundations hold
corporate behavior to higher standards than the “Aerospace” Generation. The so
called Baby Boomers, now wealthy and seasoned, continue to assert core ethical
values as a paradigm for daily behavior.

Consequently, unprecedented private and public funds are being devoted to projects
perceived as "”socially responsible”...all this without a clearly defined body of criteria
for what constitutes such behavior and without much accountability for those self-
interested organizations holding themselves out as “socially responsible” even for
organizations which have traditionally been viewed in such terms.

The purpose of the Social Responsibility Audit is to validate corporate performance

against generally accepted criteria and report to the stakeholders the extent to which
the auditee organization “walks its talk”.

Social Audits 
Social Responsibility Auditing Standards

Previous   Next

Competence

 The engagement shall be performed by a practitioner having adequate technical

training and proficiency in the attest function.
  The engagement shall be performed by a practitioner having adequate
knowledge in the subject matter of the assertion.

 The practitioner shall perform an engagement only if he or she has reason to

believe that the following two conditions exist:

o The assertion is capable of evaluation against reasonable criteria that

either have been established by a recognized body or are stated in the
presentation of the assertion in a sufficiently clear and comprehensive
manner for a knowledgeable reader to be able to understand them.

o The assertion is capable of reasonably consistent estimation or

measurement using such criteria.

Independence

 In all matters relating to the attest engagement, an independence in mental

attitude shall be maintained by the practitioner who shall not have participated in
the development of the assertion.

Due Care

 Due professional care shall be exercised in the performance of the engagement.

Planning

 The work shall be adequately planned and assistants, if any, shall be properly
supervised.

Control Structure

 A sufficient understanding of the communications and control structures is to be

obtained to plan the audit and to determine the nature, timing, and extent of tests
to be performed.

Evidence

 Sufficient evidence shall be obtained to provide a reasonable basis for the

conclusion that is expressed in the report.

Standards of Reporting

 The report shall identify the assertion being reported on and state the character
of the engagement.
  The report shall state the practitioner’s conclusion about whether the assertion is
presented in conformity with the established or stated criteria against which it
was measured.

 The report shall state all of the practitioner’s significant reservations about the
engagement and the presentation of the assertion.

 The report on an engagement to evaluate an assertion that has been prepared in

conformity with agreed-upon criteria or on an engagement to apply agreed-upon
procedures should contain a statement limiting its use to the parties who have
agreed upon such criteria or procedures.

Social Audits
Unqualified Letter

Previous   Next 

Board of Directors, Inc. (SRCO)

We have examined the social responsibility assertions listed in Appendix A for the
year ended June 30, 1999. These assertions are the responsibility of SRCO’s
management. Our responsibility is to express an opinion on management's social
responsibility assertions in accordance with the criteria stated in Appendix A based on
our examination.

Our examination was conducted in accordance with attestation standards established

by the American Institute of Certified Public Accountants and, accordingly, included
examining on a test basis, evidence supporting the social responsibility assertions
and performing such procedures as we considered necessary in the circumstances.
We believe that our examination provides a reasonable basis for our opinion. Our
examination does not provide a legal determination of SRCO’s compliance with
regulatory requirements.

In our opinion, the social responsibility assertions referred to above are fairly stated
for the year ended June 30, 1999, in all material respects, in conformity with the
criteria stated in Appendix A.

Vasin, Heyn & Company

Calabasas, CA

Social Audits
Qualified Letter

Previous    Next
Board of Directors, Inc. (SRCO)

These assertions are the responsibility of SRCO’s management. Our responsibility is

to express an opinion on management's social responsibility assertions in accordance
with the criteria stated in Appendix A based on our examination.

Our examination was conducted in accordance with attestation standards established

by the American Institute of Certified Public Accountants and, accordingly, included
examining on a test basis, evidence supporting the social responsibility assertions
and performing such procedures as we considered necessary in the circumstances.
We believe that our examination provides a reasonable basis for our opinion. Our
examination does not provide a legal determination of SRCO’s compliance with
regulatory requirements.

Our examination disclosed certain noncompliance with the criteria listed in Appendix
A for the year ended June 30, 1999.This noncompliance is described in Appendix B.

In our opinion, except for the noncompliance described in the third paragraph, the
social responsibility assertions referred to above are fairly stated for the year ended
June 30, 1998, in all material respects, in conformity with the criteria stated in
Appendix A.

Vasin, Heyn & Company

Social Audits
Social Responsibility Assertions and Criteria

Previous   Next

Appendix A 

A. Community Development

Assertion:

SRCO affirms the interdependence of its enterprise with the well being and self-
reliance of the community. SRCO builds enduring and mutually beneficial
partnerships with the communities in which it operates and with which it interacts.

Criteria:

Community Involvement:

1. SRCO makes explicit its commitment to a community well-being imperative.

This commitment involves forging enduring community partnerships and long-
term relationships that contribute to the quality of life in the community. As part
 of this commitment, SRCO employs a full-time project coordinator for
community development.

2. SRCO provides information on local and regional social issues to its

stakeholders through events and services, including newsletters, meetings with
employees, clients, community representatives and government officials, and
its public web page.

3. SRCO provides self-sufficiency programs in partnership with local educational

institutions, law enforcement agencies and community organizations.

Donations:

1. SRCO donated approximately $______ for the year ending June 30, 1999 to
__________, charitable organizations. In addition, SRCO provided media
services at a cost of approximately $______ to ___________.

B. Diversity

Assertion:

SRCO provides fair employment and promotion opportunities to all members of the
communities in which it operates. This commitment is reflected in policies and
practices concerning employees, clients and suppliers that remove barriers to
participation and actively encourage involvement.

Criteria:

Equal Opportunity – Internal:

1. SRCO substantially complies with all local, state and federal guidelines and
provides equal opportunity as it relates to race, gender, religion, handicap,
national origin, sexual orientation, marital or veteran status, age and any other
legally protected status.

2. SRCO provides equal access to employment and promotion opportunities

through policies and programs that commit it to the concept of equal pay for
equal work (pay equity) and fairness in hiring and promotion (employment
equity).

Equal Opportunity – External:

1. SRCO ensures that all qualified businesses have an opportunity to supply and
service contracts, with preference given to local firms.
C. Employee Relations

Assertion:

SRCO creates a work environment in which all board members, employees and
contractors interact with fairness, integrity and respect, and in which they can operate
to their full potential. SRCOs work environment encourages each person to act
responsibly, both individually and collectively, towards a common vision.

Criteria:

Employment Standards:

1. SRCO substantially complies with applicable legislation regarding employees, in

such areas as benefits, health and safety and working hours.

2. SRCO ensures that its employees are covered under Workers' Compensation
programs.

Performance Review:

1. SRCO offers each employee and contract worker a performance and contract
review at least annually. This process provides the employee and contract
worker with an opportunity to review management and/or SRCO, as well.

Compensation:

1. SRCO outlines its payment policies for all departments and levels in the
organization. The policy is distributed to all employees.

2. SRCO ensures fair and prompt payment to all employees and contractors for
their services.

Employee Empowerment:

1. SRCO creates clearly defined opportunities for management/staff

communication and feedback, in all departments and at all levels within the
organization.

2. SRCO provides an effective vehicle for employees to advance ideas and

suggestions for change. The organization has a clearly defined mechanism in
place to ensure a response. It acknowledges employee suggestions that
provide significant advantages to SRCO.
 3. SRCO provides a work environment that allows for freedom of association.

Employee Growth:

1. SRCO offers clear and documented guidelines for employee development and
advancement within the organization. The company supports professional and
personal development through internal training programs, financial-assistance
and opportunities for participation in programs outside of SRCO.

2. SRCO has a written policy explicitly defining employee benefits. These benefits
include education, training, health care and dependent care through a flexible
spending account, contributions to a tax deferred annuity program and
employee assistance programs.

Employee Termination:

1.   SRCO has a written policy regarding termination which is distributed to all

employees. The policy includes four stages of disciplinary action: warning,
reprimand, suspension and termination.
2.   SRCO follows labor laws when terminating an employee.
3.   SRCO investigates, and when appropriate, acts on alternatives to downsizing
and layoffs.

Flexible Work Hours:

1.  SRCO provides programs to help its employees balance work and family
responsibilities.  These policies include flexible working hours and
parental/family leave policies. 

D. Environment

Assertion:

 SRCO integrates environmental factors into all elements of business decision-

making, including business plans, corporate goals, program planning and strategic
planning.

Criteria:

Environmental Regulations:

 1.  SRCO strives to comply fully with all environmental laws and regulations in the
jurisdictions in which it operates.
Environmental Policy Statement:

1. SRCO has a policy statement committing it to minimizing its impact on the

environment.  This policy statement is communicated to all stakeholders and is
freely accessible in the workplace.

Environmental Management - Procedures and Programs:

1. SRCO has specific procedures and programs in place to reduce the

environmental impacts throughout its operations. Employees receive adequate
training to assist them in implementing these procedures and programs.

2. SRCO has at least one staff member whose responsibilities include overseeing
environmental initiatives.  This employee is responsible for overseeing the
development of the environmental policy statement and implementing
environmental programs and initiatives.

3. SRCO seeks, encourages and gives preference to suppliers and

subcontractors whose environmental practices meet the standards the
organization sets for it.

Environmental Management - Communications

 1.     SRCO communicates its environmental activities and accomplishments through

employee newsletters and reports to all concerned stakeholders.

E. International Relationships

Assertion:

 SRCO strives to adhere to the same social and environmental standards in host
countries as it does in its home country.

Criteria:

Purchasing and Contracts:

 1.     SRCO will not knowingly enter into business relationships with firms that use any
form of compulsory labor or allow sub-standard working conditions.

Human Rights, Environmental Standards and Community Development:

 For the year ended June 30, 1999, SRCO had neither employees working in foreign
countries nor any SRCO-administered programs abroad.  Thus, no appropriate
criteria exist for SRCO on human rights standards, environmental standards and
community development in host countries.

F. Marketplace Practices

Assertion:

SRCO consistently interacts with its clients in a fair and honest way. They also treat
competitors, contractors, suppliers and stakeholders with integrity and respect.

Criteria:

Consumer Protection:

1. SRCO substantially complies with all relevant consumer protection laws and
regulations.

Advertising and Marketing Practices:

1. SRCO markets its services in a truthful way, avoiding false claims.  SRCO

advertises and markets without discriminating against, or stereotyping, any
person or group.

Customer Satisfaction:

1. SRCO informs its clients of its customer satisfaction policies. SRCO has
developed procedures to respond to client inquiries in a timely and effective
manner.

Suppliers:

1. SRCO makes fair and prompt payment to all contractors and suppliers.

Ethics Policy:

1. SRCO has developed a policy of ethical conduct which is distributed to all

employees.

Dispute Resolution:

1. SRCO resolves client or supplier disputes quickly and fairly.

 G. Fiscal Responsibility

Assertion:

SRCO conducts its operations in a fiscally responsible manner, acknowledging its

responsibilities to all stakeholders.

Criteria:

Fiscal Policy:

1. SRCO has implemented fiscal policies, financial management systems and

accounting controls that help to ensure fiscal responsibility and long-term
viability.

Financial Reporting:

1. SRCO makes a commitment to accurate, clear and timely financial reporting.

SRCO makes available its financial position to employees and other
stakeholders annually. 

H. Accountability - Auditing, Monitoring, and Reporting

Assertion:

SRCO audits, monitors and publicly reports its social and environmental performance,
to ensure accountability to all of its stakeholders.

Criteria:

Social Responsibility Audits:

1. SRCO undertakes a regular review of its social and environmental policies and
initiatives. This review helps to ensure that the organization meets or exceeds
its own standards of performance and measures progress towards stated
goals. This review also assists in defining measures of success and upgrading
SRCO’s strategic goals over time.

Disclosure and Reporting:

1. SRCO has a written and public policy that commits it to full public disclosure and
the protection of internal critics (whistle blowers).
Communications:

1. SRCO discloses all relevant information so that stakeholders can make rational
and informed decisions and protect themselves from any negative
consequences resulting from SRCO’s actions. Disclosure is complete,
accurate, objective, understandable and public.

Social Audits
Noncompliance With Social Responsibility Criteria

Previous   Next

Appendix B

Diversity

SRCO has no supplier diversity program that would actively encourage the
involvement of underutilized businesses. SRCO seeks to use minority-owned and
women-owned vendors only when required by a grant. Nothing came to our attention
to indicate that SRCO specifically chooses not to conduct business with any minority-
owned or women-owned businesses. Moreover, SRCO has no purchasing policies
which indicate a commitment to enabling all people in the community to share in
economic growth.

SRCO has well-defined and implemented practices regarding employees and clients
that encourage the involvement of a variety of members of the community. In order to
“walk the talk” of social responsibility, these practices can not be in place for legal or
perceptual reasons. For SRCO and the community to truly benefit, a consciousness
about the advantages of diversity must be conveyed to all employees. SRCO can not
just wear “color blinders”; it must recognize and empower the creative energy of a
multicultural workplace.

Performance Evaluations

SRCO’s personnel manual requires annual evaluations for every employee. All
employees do sign contracts at least annually. However, during testwork on employee
files and employee interviews, we noted that not all SRCO personnel are participating
in annual evaluations. In addition, SRCO has no formal program for employees and
contractors to provide upward reviews of management on a periodic basis.

Accountability

Since the inception of SRCO, management has held certain socially responsible
values which were evident in workplace practices. However, until this year, SRCO has
never consciously considered measuring and reporting its social performance. Thus,
SRCO has no established mechanisms in place to develop or refine social
responsibility objectives, measure progress towards these objectives and report to all
concerned stakeholders. SRCO has not developed a Statement of Values which
addresses social and environmental performance.

In addition, SRCO does not have a written policy which protects internal critics from
discrimination or retaliation and provides assurance that SRCO will make full-
disclosure of all information that may impact stakeholders.

Social Audits
Community Development Audit

Previous   Next

Assertion:  

The organization affirms the interdependence of its enterprise with the well being and
self-reliance of the community. The organization builds enduring and mutually
beneficial partnerships with the communities in which it operates and with which it
interacts. 

Community Involvement: 

 The organization's community partnership policy is in written form and is publicly

available. The policy commits the organization to forging enduring community
partnerships and long-term relationships that contribute to the quality of life in
the community. 

o Obtain a copy of the policy and review with BOD member. Determine if
the organization has made a formal commitment to community
involvement at the top. 

o Discuss community involvement with management (or individual in the

organization responsible for community development), including
objectives, policies and procedures and review mechanisms. 

 The organization provides information on local and regional social issues to its
stakeholders through events and services, including Company newsletters,
"brown bag" sessions and public bulletin boards. 

o Review newsletters, bulletin boards, publications, etc. 

o Discuss with management procedures in place to obtain and provide

information. 
 o Gauge stakeholders' knowledge of availability of information through
inquiry of employees, customers, vendors and BOD members. Conduct
written survey, if considered necessary. 

 The organization provides opportunities for work placements, internships or

similar in-house training opportunities in partnership with local educational
institutions or community organizations, when appropriate. 

o Discuss with management procedures to identify and implement

partnership opportunities. 

o If partnerships do exist, interview personnel at community organizations

to determine effectiveness. 

Donations: 

 1. The organization donates at least __% of pre-tax profits to charitable

organizations (averaged over the previous three fiscal years), of which up to
___ may be contributed in volunteer time and/or donations in-kind. (While it
may not be appropriate for not-for-profit organizations to make monetary
contributions, they should consider contributing volunteer time.) 

o Discuss with management the organization's donation procedures,

including the process used to determine how much is given, to whom,
when and using what type of donation (i.e. cash, volunteer time,
product). Does the organization have any type of employee matching
contribution program? 

o Determine the amount donated in the last year through discussion with
management and review of accounting records and receipts, as
considered necessary. 

o Discuss with management how contribution of volunteer hours is

encouraged within the organization and how the organization tracks
such hours. 

Community Economic Development and Locally-Directed Investment: 

 The organization gives priority to local employment and local suppliers. 

o Obtain a copy of the purchasing policy and discuss procedures for using
local suppliers with procurement personnel. 

o Discuss hiring practices with human resources personnel. 

 o Review list of most frequently used vendors to determine the extent to
which local suppliers are used. 

 The organization allocates __% of its annual donations budget to local

community and economic development projects that address job skills training,
job creation and self-sufficiency training. 

o Discuss with management contribution procedures for local community

development projects. 

o Review a list of donations to determine the amount that is given to

community development projects and vouch to supporting
documentation, as considered necessary.

Social Audits
Diversity Audit 

Previous   Next

Assertion: 

The organization provides fair employment and promotion opportunities to all

members of the communities in which it operates. This commitment is reflected in
policies and practices concerning employees, customers and suppliers that remove
barriers to participation and actively encourage involvement. 

Equal Opportunity - Internal: 

 The organization substantially complies with all local, state and federal
guidelines (Title VII, ADA, ADEA, FEHA, etc.) and provides equal opportunity
regardless of race, gender, religion, handicap, national origin, sexual
orientation, marital status or age. 

o Discuss with human resources personnel how the organization ensures

civil rights compliance and determine whether the organization has
announced a formal policy of nondiscrimination. Does the organization
have any programs to encourage minority development (break the
"glass ceiling")? 

o Tour facilities, noting if an EEO posting is available for all employees to

inspect (if required by law or federal grant). 

o Determine the number of complaints filed with federal, state or local

agencies responsible for ensuring nondiscrimination, the status of
unresolved complaints or investigations, and the actions taken on
resolved complaints or completed investigations. 
 o Obtain management representation and attorney's letter concerning
whether any civil rights suits have been adjudicated or are pending. 

 The organization provides equal access to employment and promotion

opportunities through policies and programs that commit it to the concept of
equal pay for equal work (pay equity) and fairness in hiring and promotion
(employment equity). 

o Review job postings for appropriate nondiscrimination language. 

o Review payroll register/employment contracts to ensure that material

discrepancies in compensation do not exist at equivalent responsibility
levels. 

o What criteria are used to measure progress towards pay and

employment equity? Determine if the organization tracks the number of
minorities in management positions. If yes, compare to prior years to
determine trend. 

o Gauge perception of pay and employment equity in the organization

through interviews with employees. Conduct written survey, if
considered necessary. 

Equal Opportunity - External: 

 1. The organization ensures that all qualified businesses have an opportunity to

supply and service contracts, with preference given to local firms. Equal
opportunity can be achieved through mechanisms such as a fair bidding policy,
social purchasing policy and "fair" purchasing day at least once each quarter. 

o Obtain a copy of the purchasing policy and discuss purchasing

procedures with procurement personnel. Does the organization have an
explicit supplier diversity program? 

o Review list of most frequently used vendors to determine the extent to

which minority business enterprises, women business enterprises and
disabled business enterprises are used.

Social Audits
Employee Relations Audit

Previous   Next

Assertion:  
The organization creates a work environment in which all board members,
employees, shareholders and contractors interact with fairness, integrity and respect,
and in which they can operate to their full potential. The organization's work
environment encourages each person to act responsibly, both individually and
collectively, toward a common vision. 

Employment Standards: 

 The organization substantially complies with applicable legislation regarding

employees, in such areas as benefits, health and safety and working hours. 

o Discuss with management and human resources personnel how the

organization determines compensation packages and ensures
compliance with all applicable labor laws. 

o Obtain management representation and attorney's letter concerning the

nature of any employee suits that have been adjudicated or are
pending. 

o Review any communications with OSHA or other regulatory agencies to

determine the number of safety violations/accidents that have occurred
within the last year. Compare this number to prior years and to the
average number for the industry. Gain an understanding of how the
organization reports such incidents. Determine if the organization has
taken necessary procedures to rectify any potentially hazardous
situation. 

o Ensure that organization communicates benefit packages and all health

and safety risks through review of policy and procedures manual and
discussion with employees. 

 The organization ensures that its employees are covered under Workers'
Compensation programs in its particular jurisdictions. 

o Review Workers' Compensation policy and vouch premium payments, as

considered necessary. 

Performance Review: 

 The organization offers each employee and contract worker a performance and
contract review at least annually. This process should provide the employee
and contract worker with an opportunity to review management and/or the
company, as well. 

 Discuss evaluation procedures with human resources personnel and

employees, including an understanding of how evaluations are considered in
 promotions and compensation and the procedures for upward feedback/360°
management. 

Compensation: 

 The organization outlines its payment and bonus policies for all departments
and levels in the organization. The policy is available for all employees to
review. 

o Obtain policy and discuss with human resources personnel. Does the
organization regularly review compensation levels to ensure they are in-
line with the industry and geographic location? Does compensation
include social recognition as well as financial rewards? 

o Interview employees to gauge their understanding of policy. 

 The organization provides opportunities to share in the growth and profitability of

the firm through initiatives such as bonus packages, profit sharing, share
ownership plans and/or stock option arrangements (if applicable). 

o Discuss current or potential employee incentive compensation plans with

management, human resources and BOD members. 

 The organization ensures fair and prompt payment to all employees and
contractors for its services. 

o Document understanding of disbursement cycle, specifically controls in

place which ensure proper payment. 

o Review accounts payable aging and compare the dates and amounts on
issued checks with respective invoices, as considered necessary. 

o Interview employees and vendors to determine if fair and prompt

payments are made and how disputes are settled. 

Employee Empowerment: 

 The organization creates clearly defined opportunities for management/staff

communication and feedback, in all departments and at all levels within the
organization. 

o Discuss communication channels with management, human resources

personnel and employees. 
 o Discuss with management and employees procedures in place to keep
employees informed of the organization's activities. Determine the
extent to which future plans are shared with employees. 

o Determine if the organization has a formal grievance policy which is

communicated to all employees. What is the process for conflict
resolution? 

 The organization provides an effective vehicle for employees to advance ideas

and suggestions for change. The company has a clearly defined mechanism in
place to ensure a response. It rewards employee suggestions that provide
significant advantages to the business. 

o Discuss with management, human resources personnel and employees

the organization's methods to encourage employee creativity. Review
procedures for employees to provide input. Determine how employees
are rewarded for valuable ideas and outstanding work. 

o If employee input has been provided, review management's response. 

 The organization provides a work environment that allows for freedom of

association. 

o Review employee policies and procedures manual and discuss with

management and employees. 

Employee Growth: 

 The organization offers clear and documented guidelines for employee

development and advancement within the organization. The incentives for
advancement are explicit and non-discriminatory. The company supports
professional and personal development through internal training programs,
financial-assistance and/or flexible work hours for programs outside of the
organization. 

o Review development and advancement guidelines and discuss with

human resources personnel and employees. Are development
opportunities available at all levels? Are employees informed about the
impact of technology on their jobs and what actions they can take to
prepare? Does a peer counseling or mentor program exist? 

o Determine the number of promotions from within versus external hires,

compare to prior years and note trend. 
  The organization has a written policy explicitly defining employee benefits.
These benefits may include education, training, health care, childcare and
elder care, among others. 

o Review policy and document benefits included in compensation (i.e. life

insurance, tuition reimbursement, benefits to same sex partners, etc.). 

Employee Termination: 

 The organization has a written policy regarding termination, which is available to

all employees for review. 

o Obtain termination policy and discuss procedures with management. 

o Review turnover statistics, compare to prior years and note trend. 

o Review the payroll tax return to determine the unemployment

compensation rating and record. 

 The organization follows applicable labor laws when terminating an employee. 

o Determine if the organization has a policy of giving employees a

reasonable time to improve before being terminated. 

o Review procedures to determine how severance packages are

calculated. 

 The organization investigates, and when appropriate, acts on alternatives to

downsizing and layoffs. 

o If the organization has closed facilities or has experienced downsizing,

review the process used to inform employees and the community of the
layoffs. Was disclosure made completely and within a reasonable time
period in accordance with the Worker Adjustment and Retraining
Notification Act (WARN)? Did the organization attempt to relocate the
employees to other positions within the organization or help find new
employment? 

Flexible Work Hours: 

 1. The organization provides a variety of programs to help its employees

balance work and family responsibilities. These policies may include flexible
working hours, job sharing, parental/family leave policies and telecommuting
options. 
 o Document availability of such programs through discussion with human
resources personnel and employees.

Social Audits
Environmental Audit

Previous   Next
Assertion:  

The organization minimizes its environmental impact, emphasizing pollution

prevention over remediation processes. It integrates environmental factors into all
elements of business decision-making, including business plans, corporate goal,
program planning and strategic planning. 

Environmental Regulations: 

 The organization strives to comply fully with all environmental laws and
regulations in the jurisdictions in which it operates. 

o Discuss applicable laws with management and the individual responsible

for compliance. What procedures does the organization follow to ensure
compliance? 

o Review any communication with EPA or other regulatory agencies

concerning environmental laws. Perform public records search, as
considered necessary. 

o Obtain management representation and attorney's letter concerning

whether any suits have been adjudicated or are pending related to
environmental laws. 
Environmental Policy Statement: 

 The organization has a policy statement committing it to minimizing its impact

on the environment. This policy statement is communicated to all stakeholders
and is freely accessible in the workplace. 

o Obtain written policy statement and discuss with management and BOD
member to determine if a demonstrated commitment to the environment
exists at the top of the organization. 

o Tour facilities and discuss policy statement with employees. 

Environmental Management - Procedures and Programs: 

 The organization has specific procedures and programs in place to reduce the
environmental impacts throughout its operations. These initiatives may include
air quality control, energy conservation, land management, waste reduction
and water conservation. Employees receive adequate training to assist them in
implementing these procedures and programs. 

o Review documentation of specific procedures and discuss with

employees. Determine the amount of training employees receive in
regards to environmental procedures and programs. 

o Interview management to determine if the organization updates practices

regularly as new technology and a better understanding of
environmental impacts become available. 

o Determine if the organization has specific environmental objectives. How

are these objectives monitored and updated? 
Environmental Management - Communications:

 The organization communicates its environmental activities and

accomplishments through employee newsletters and corporate reports. In
addition, the organization communicates environmental activities and
accomplishments to external stakeholders through corporate environmental
assessments. 

o Obtain copies of communication and discuss with employees, vendors,

customers and BOD members. 

o What procedures are in place to inform in a timely manner all individuals

who may be affected by conditions caused by the organization that may
endanger their health, safety or environment? 

 The organization seeks, encourages and gives preference to suppliers and

subcontractors whose environmental practices meet the standards the
company sets for it. 

o Discuss procedures for purchasing from environmental-friendly vendors

with procurement personnel. 

o Interview key vendors to determine if they have established

environmental policies. 
Environmental Management - Structure and Human Resources: 

 The organization has at least one staff member whose responsibilities include
overseeing corporate environmental initiatives. This employee is responsible
for overseeing the development of the environmental policy statement and
implementing environmental programs and initiatives. The organization also
encourages broad employee participation through the establishment of
environmental committees. 

o Discuss with management and document understanding of the structure

of the organization's environmental programs. Is the structure
appropriate for the size and nature of the organization?

Social Audits
International Relationships Audit

Previous   Next

Assertion: 

The organization strives to adhere to the same social and environmental standards in
host countries as it does in its home countries. The well being of a socially
responsible company and its host country are interdependent, and their relationship is
non-exploitative. 

Human Rights:

 The organization complies with human rights standards as outlined in the United
Nations Universal Declaration of Human Rights. 

o Discuss with management how the organization ensures compliance with

human rights standards abroad. Obtain written policy regarding
conducting business abroad. 

o The organization has procedures to gain an understanding of the

political, social, economic and cultural background of each country in
which it operates so that it may transact all business with respect to the
host country. Has the organization developed a long-term strategy to
operate productively by considering the needs of the host country? 

o Determine the amount of trade, if any, with nations that is officially

discouraged. 
Employee and Environmental Standards: 

 The organization follows clear written guidelines for ensuring fair employment in
accordance with the International Labor Organization's Conventions. The
organization also has guidelines for meeting environmental standards in
international operations. These guidelines are available for review by all
employees, suppliers and contractors. 

o Review guidelines and discuss with management. Are productive

employment opportunities available? Do the guidelines have provisions
for such concerns as reasonable wages, health and safety, freedom of
association and minimum age? 

o Does the organization meet the highest level of environmental standards

to which it is held? Are the organization's environmental policies and
procedures abroad similar to those in the home country [as documented
in Section D of this audit program]? 
Purchasing and Contracts: 

 The organization gives preference to local suppliers. The organization will not
knowingly enter into business relationships with firms that use any form of
compulsory labor (child labor or prison labor) and allow sub-standard working
conditions. 

o Discuss purchasing policy with procurement agent. Does the organization

perform or commission any audits to ensure vendors comply with labor
and human rights standards. 

o  Interview key vendors to determine if they have written international

standards for conducting business. 

Community Development: 

 The organization strives to ensure that its international operations will not lead
to the displacement of existing communities. 

o Discuss with management the organization's policies for community

development abroad. Does the organization contribute to social
advancement though human rights, education programs, welfare, etc?

Social Audits
Marketplace Practices Audit

Previous   Next 
Assertion:

The organization consistently interacts with its customers in a fair and honest way.
They also treat competitors, contractors, suppliers and stakeholders with integrity and
respect.

Consumer Protection

 The organization will comply with all relevant consumer protection laws and
regulations.
o Discuss with management the organization’s procedures for complying
with all consumer protection laws. How does the organization ensure
product quality, fair price and meeting customer needs?

o Obtain management’s representation and attorney letter concerning

any  consumer protection lawsuits that have been adjudicated or that
are pending.  Perform a public record search, as considered necessary.

o For not-for-profit organizations, discuss with management,

operations personnel and accounting personnel how the organization
ensures contributions/grants are used in accordance with donor/grantor
restrictions.

Advertising and Marketing Practices:

The organization markets its products and services in a truthful way, avoiding false
claims. The organization advertises and markets without discriminating against, or
stereotyping, any person or group.

 Obtain marketing policy and interview marketing personnel to understand

marketing procedures. Review how the organization establishes its target
market, what price it sets and how products will be promoted.

 Interview customers/donors to gauge perception of marketing practices.

 Discuss with management, marketing personnel and manufacturing/research

personnel whether the organization has disclosed information about product
content and identifiable risks appropriately.

 For not-for-organizations, discuss with management how internal operations

reflect the publicly stated mission and objectives.
Customer Satisfaction:

The organization publicly declares its customer satisfaction policies, including return
policies, exchange policies, product guarantees, and a customer service telephone
number. These policies are displayed prominently at the point of purchase and/or are
made available to clients.

 Interview marketing manager and customers to determine the extent of the

organization’s customer satisfaction policies.

 Determine if the organization engages the customer in conversations about

products and social goals through interviews with management and customers.

Suppliers:

The organization makes fair and prompt payment to all contractors and suppliers.

 Understand controls over disbursement cycle and vouch payments, as

considered necessary, to ensure proper payment.

 Discuss with the procurement agent and vendors whether the organization
attempts to foster long-term stability in supplier relationships. Does the
organization attempt to share information with suppliers and integrate them into
the planning process?

 Interview vendors to determine if the vendors have any formal social

responsibility programs in practice.

Ethics Policy:

 The organization has developed a policy of ethical conduct in the marketplace.

o Review the code of ethics and discuss it with management, employees,

human resources personnel, marketing personnel, accounting manager,
procurement personnel and BOD members. Discussion should include
awareness of Federal Sentencing guidelines and Foreign Corrupt
Practices Act. Is the code specific, comprehensive, clear and
unambiguous, realistic and enforceable?

o Gain an understanding of the extent of the organization’s ethics program

(i.e. ethics hot line, training, ethics officer, awareness of ethical climate)
through discuss with management and Board members.

Dispute Resolution:

 The organization resolves customer or supplier disputes quickly and fairly.

 o Discuss with management the organization’s procedures for resolving
disputes. Review compliant files to determine the type of complaints
filed and how long they were outstanding.

o Interview customers and suppliers to determine if disputes have been

handled satisfactorily.

o Determine the number of complaints filed against the organization at the

Better Business Bureau, Society of Consumer Rights or similar
watchdog organization.

Social Audits
Fiscal Responsibility Audit

Previous   Next

Assertion:

The organization conducts its operations in a fiscally responsible manner,

acknowledging its responsibilities to all stakeholders.

Fiscal Policy:

 The organization has implemented fiscal policies, financial management

systems, and accounting controls that help to ensure fiscal responsibility and
long-term viability.
o Obtain and review the financial policies and procedures manual.
Document understanding of accounting controls in place.

o Review the most recently audited financial statements and related

management letter.

o Obtain investment policy and determine if provisions are made for

socially responsible investing. Is the composition of the portfolio
communicated to all concerned stakeholders?

o Obtain management’s representation and attorney letter concerning

whether any lawsuits have been adjudicated or are pending related to
financial management and anti-trust law.

Financial Reporting:

The organization makes a commitment to accurate, clear and timely financial

reporting. Responsible companies report its financial position in plain language to
employees at least annually (and to other stakeholders if required by law).
  Interview management to determine if any form of open book management is
practiced. Discuss with BOD member the BOD’s involvement in financial
reporting.

 Determine whether the organization reports on pension or other benefit

programs to employees in plain language periodically.

 For not-for-profit organizations, determine if the amount of program versus

administrative expense is reported to donors and grantors.

Social Audits
Accountability Audit

Previous   Next

Assertion:

The organization audits, monitors and publicly reports its social and environmental
performance, to ensure accountability to all of its stakeholders.

Social Responsibility Audits:

The organization undertakes a regular review of its social and environmental policies
and initiatives. This review helps to ensure that the company meets or exceeds its
own standards of performance and measures progress towards stated goals. This
social and environmental review also assists a socially responsible company in
defining measures of success and upgrading its strategic goals over time.

Review the organization’s mission and statement of values. Are these aligned with
program of social responsibility? Discuss with BOD member, management and
employees to determine if the mission and values guide the company’s actions and
are integrated into the organization’s business processes.

Obtain the organization’s written social responsibility policy and discuss with
management, including provisions for regular review of implementation and methods
for revisions? Has the organization committed the time, personnel and other
resources to execute this policy?

The social and environmental audits can be conducted at one of three levels. These
include self-audits, peer reviews and comprehensive audits undertaken by an
independent consultant.

Discuss with management and BOD member the organization’s strategy for
conducting social responsibility audits.
Discuss potential findings and management letter comments with management.
Obtain an understanding of any corrective action plan that will be put into effect. Has
the organization acted normal in a way that demonstrates that its social responsibility
program is a process of constant improvement rather than strict compliance to
specific standards?

Reporting:

The organization has a written and public policy that commits it to full public
disclosure and the protection of internal critics (whistle blowers).

Obtain policy and discuss with management and employees.

Communications:

The organization anticipates and responds to stakeholder concerns about the

potential social and environmental hazards and impacts of its products, services and
operations, including those of interstate or global significance.

Read Board Minutes Through Audit Completion Date.

Discuss with management the methods that the organization communicates

information with stakeholders. Examples of relevant information may include, but are
not limited to, ownership information, relevant corporate history, legal/regulatory
claims, product information, employment data, lobbying and political activities, major
government contracts, social responsibility characteristics (i.e. sell tobacco) fines
levied against organization, school impact data or contributions to nonprofit
organizations.

Determine if the organization will publicly communicate the results (report, any
findings and measures taken to correct) of this social responsibility audit

Social Audits
Planning Agenda

Previous   Next 

 Introduction 
o Engagement Team 
o Social Responsibility Audit 
 Where it came from 
 What it can do for your organization 
 Final product - opinion and management letter 
o Client background
 Audit Guide
 o 8 Audit areas - what is the appropriate scope?
o Procedures

 Client Participation
o Timing
o Contact People
 Other

Social Audits
Participation Checklist

Previous   Next

People We Would Want to Interview 

 Board members Management 

 Accounting personnel 

 Human resources personnel 

 Marketing personnel 

 Vendors 

 Customers 

 Purchasing personnel 

 Individual responsible for community development 

 Individual responsible for environmental programs 

 Randomly selected other employees 

General Information We Would Request 

 Board minutes 

 List of related parties (BOD members, owners, etc.) and nature of any related
party transactions 

 Signed representation letter 

 Request for attorney letter 

  Background information (brochures, articles, newsletters, marketing material,
etc.) 

 Mission and values statement 

 Copy of most recent financial statements (internal or external) 

Written Policies We Would Review 

 Employee policies and procedures manual 

 Community partnership policy 

 Purchasing policy 

 Employment compensation & benefits and promotion policy 

 Environmental Policy 

 International Relationships policy 

 Marketing/customer satisfaction/return policy 

 Ethics code Whistle Blowers policy 

Items We Would Need for Testwork 

 List of charitable contributions, including volunteer time 

 List of most frequently used vendors 

 Access to employee grievance file 

 Access to job postings 

 Access to payroll register 

 Communications from EPA, EEOC, OSHA, Better Business Bureau or any other
regulatory agency concerning noncompliance 

 Copy of workers' compensation policy and premium payments 

 Copy of employee evaluation form and access to employee files to ensure

evaluations are completed 

 Accounts payable aging 

  Access to payroll tax returns 

 Employment statistics for current and prior years (if available) including number
of women and minorities in management positions, number of promotions from
within versus external hires, and number of employees leaving organization
 Social Audits
Representation Letter - Examination
 Previous
  
 [Client Letterhead]
  [Report Date]
  Vasin, Heyn & Company 
5000 N. Parkway Calabasas, Suite 301 
Calabasas, CA 91302
 In connection with your examination of the Social Responsibility Assertions
listed in Appendix A (the “Assertions”) for the year ended June 30, 1998 for the
purpose of expressing an opinion that the Assertions are fairly stated in
conformity with the criteria stated in Appendix A, we confirm, to the best of our
knowledge and belief, the following representations made to you during the
course of your examination.
 1.    We are responsible for the presentation of the Assertions in conformity with
the criteria stated in Appendix A
 2.    For the year ended June 30, 1998 the Assertions are fairly stated in
conformity with the criteria stated in Appendix A.
 3.    There has been no fraud or other illegal acts that would have a material
effect on the Assertions.
 4.    There have been no lawsuits that have been adjudicated or are pending as
of and for the year ending June 30, 1998. {or except as disclosed…..}
 5.    No events have occurred subsequent to June 30, 1998 that would require
adjustment to the Assertions.
 6.    We have advised you of all actions taken at meetings of, the board of
directors, and committees of the board of directors that may affect the
Assertions.
 7.    We have advised you of all information of which we are aware that may
affect the Assertions and we have advised you of all deficiencies of which we
are aware in the presentation or underlying data.
 8.    We have responded fully to all inquiries made to us by you during the
examination.
 9.    We intend to distribute your report only to [Describe limitations, if any].
 Signature
 Title
 Att: Appendix A Social Responsibility Criteria