Beware suppliers bearing gifts: a Grinchy warning

By David Donaldson

Friday December 11, 2015

It could be free tickets to a sporting event, flowers or a celebration paid for by someone else.

Although they can form a legitimate part of business, gifts, benefits and hospitality need to be adequately managed and declared to avoid conflicts of interest, real or perceived, that may damage public confidence in the public service.

Victoria’s agencies are being urged to review their management of the receipt of gifts following a report by the Auditor General’s Office that found the agencies it reviewed could not show:

“… how they are effectively managing GB&H [gifts, benefits and hospitality] activities or applying the minimum requirements and accountabilities of the current framework.”

For managing gifts, benefits and hospitality agencies are currently guided by a framework issued by the Victorian Public Sector Commission in conjunction with a Premier’s circular. These include minimum requirements and accountabilities. Compliance requires their inclusion in policies, but stops short of mandating their achievement.

According to the VPSC framework, individuals:

  1. Do not solicit gifts, benefits or hospitality;
  2. Refuse all offers of gifts, benefits or hospitality that could be reasonably perceived as undermining the integrity and impartiality of their organisation or themselves;
  3. Refuse all offers of gifts, benefits or hospitality from people or organisations about whom they are likely to make decisions involving: tender processes procurement enforcement licensing regulation;
  4. Refuse all offers of money or items easily converted to money such as shares;
  5. Refuse bribes and report bribery attempts to the head of the public sector organisation or their delegate and to Victoria Police; and
  6. If unsure about how to respond to an offer of a gift, benefit or hospitality of more than nominal value, seek advice from a manager or other appropriate organisational delegate.

The framework adds that heads of public sector agencies should ensure policies on gifts, benefits and hospitality are regularly reviewed and promulgated to staff. The agency must “ensure that records are kept of accepted gifts, benefits and hospitality of more than nominal value and that such records are subject to regular scrutiny, including review by the organisation’s audit committee”. Agencies should also reinforce that breaches of the policy could lead to disciplinary action.

While the agencies in question in the audit — Creative Victoria, Museum Victoria, Arts Centre Melbourne and the National Gallery of Victoria — have documented policies that include the minimum requirements set out in the government’s framework, “this approach is not sufficient to manage the significant risks to their impartiality and integrity”, says acting auditor-general Peter Frost.

Corruption and reputational risk

While the dollar amounts involved in GB&H may be small in relation to an agency’s overall expenditure, the reputational and corruption risks are significant. Anti-corruption agencies in Victoria, New South Wales and Queensland have identified the inappropriate acceptance of GB&H as a major misconduct and corruption risk. Victoria’s Independent Broad-based Anti-corruption Commission listed the acceptance of GB&H as a potential “red flag of corruption” for the procurement bidding process.

One IBAC case study, based on an Independent Commission Against Corruption investigation, illustrates the clear link between accepting gifts and benefits and the corruption of procurement processes across 14 local councils in NSW:

“The investigation found suppliers would usually start with gifts worth modest amounts, increasing with the value of the orders placed by the public officials. The gifts included DVD players, mobile phones and tablets, video cameras, TVs and even holidays. Salespeople would usually suggest sending the gifts to the buyer’s home rather than to their workplace, to conceal the arrangement from the employer.”

Queensland’s Crime and Misconduct Commission has characterised accepting even small gifts, especially for those involved in procurement, as giving rise to potentially major misconduct risks.

The report recommends that to be effective agencies need to do a better job of identifying, assessing and treating the risks, and must improve how they monitor and report on GB&H activities. Frost said:

“A revised framework that focuses on the effective management of [gifts, benefits & hospitality] risks will be essential in supporting agencies to make these changes. In addition to other target areas, I have recommended the need for the VPSC and the Department of Premier and Cabinet to update the framework to require agencies to effectively manage these risks.”

When developing organisational policies, the VPSC recommends consideration of the following questions:

  • In what circumstances might a gift be offered to an employee and when if at all can it be accepted?
  • Are there particular roles or work units that are at greater risk of being compromised than others?
  • Will different risk management strategies be necessary for different parts of the organisation?
  • Is there legislation, or government policy, prohibiting or impacting upon the giving or acceptance of gifts and/or hospitality in certain situations?
  • Do complaints or disciplinary cases involving the offer or acceptance of gifts identify risks for the organisation to manage?
  • Are there ways of mitigating the risk without causing offence or embarrassment?
  • In what circumstances might the organisation provide a gift? Under what circumstances would this be appropriate? When would it be inappropriate?
  • In what circumstances might hospitality be provided? Under what circumstances should hospitality not be provided?
  • To what extent are business relationships contingent on the provision of appropriate hospitality? Would the non-provision of hospitality be detrimental to business relationships?
  • How would you explain your decision in relation to the provision of hospitality publicly, or to those to whom you are accountable?
  • Would case studies and scenarios help explain the type of situations employees may face at work?

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