Have the rules around gifts and hospitality really changed?
CIPFA examines what individuals can do to ensure compliance with rules around gift giving.
Arguably yes, as since the 2009 MPs’ expenses scandal hit the headlines government officials, their spending habits, and behaviours have been subject to both public and media scrutiny. Transparency and justification are now ‘must haves’ when it comes to government officials declaring, accepting, and declining gifts and offers of hospitality.
In February 2016, the National Audit Office (NAO) released its findings into an investigation into the acceptance of gifts and hospitality by government officials. The report examines the rules and guidance for central government officials, and published transparency data on the gifts and hospitality received by departmental board members, directors-general and senior military officers between April 2012 and March 2015. The full report can be read on the NAO website.
The NAO report highlights that officials often need to engage with a range of external contacts in order to carry out their work efficiently and effectively, and therefore accepting modest hospitality is sometimes justified. However, since the 2009 MPs’ expenses scandal, where ornamental duck houses and moat cleaning were claimed, public tolerance for what was previously acceptable has sharply declined. This extends to the acceptance of gifts and hospitality. Government officials receiving tickets to professional sports and cultural events, bottles of champagne and iPads, would most likely fall foul of public scrutiny and, according to the NAO findings "may not be consistent with cabinet office principles".
So what can individuals do to protect themselves and navigate the murky waters of gift giving and hospitality?
When assessing whether a gift or offer of hospitality is appropriate, an easy question to ask yourself is: “Would I tell my next-door-neighbour and would they respond positively?" If the answer is no then it’s time to take a step back and examine the offer on the table.
Furthermore, counter fraud professionals with internal audit responsibilities need to pay close attention to record keeping, look beyond obvious indicators, and where possible cross-check information. It’s easy to overlook contractors’ hospitality and entertainment records, for instance, when searching for indicators of fraud. At the CIPFA Counter Fraud Centre we have seen incidents of where contractors have officially declared hospitality or a gift, and the receiving government official has made no formal record or mention of it.
It’s also important to review, reference and cross-check records at regular intervals. Put simply, keeping excellent records means very little if no one looks at them. One key question to ask is: “where has the gift or hospitality been declared, and who has declared it?” Creating clarity of process including where, when and how to declare gifts and hospitality combined with a system of cross-checking references and routine examinations will help to safeguard individuals, organisations and reputations. Having in place a robust whistleblowing policy is also good for detection of excessive and irregular gifts or hospitality.
At the crux of the matter is that government officials are perceived as the ‘guardians of public funds’ and in today’s environment it is no longer acceptable for the public sector to deviate from this role. The Nolan Principles form the basis of ethical standards expected of public office holders, and sometimes one of the hardest lessons to learn is how to say "no thank you" politely or how to decline a gift or offer of hospitality without causing offence. Cultural etiquette and behaviours may also need to be taken into consideration along with the context in which the gift or offer was made. One approach to tackling this may be the segregation of duties to mitigate risk.
Mitigating risk is at the forefront of public sector fraud prevention and the Counter Fraud Centre has recently launched the Fraud Risk Wheel – an interactive, web-based tool – to help public sector organisations manage their fraud risk process. This new tool offers detailed guidance on expenses, procurement, gifts and hospitality and pension fraud. The guidance includes how the different risks arise, the steps or controls that can be put in place to mitigate them and case studies to illustrate how organisations have dealt with the issues.
In addition to supporting public sector organisations as they conduct their fraud risk assessments, the new online tool also helps them to create their fraud risk mitigation plan, understand and present fraud risks to the senior management team, train staff on identifying fraudulent activity and review fraud risks in response to major changes.
Identifying and assessing fraud risks is the first step. Public sector organisations must also evaluate factors and behaviours that create the fraud risks and develop clear mitigation plans. The new Fraud Risk Wheel is suited to counter fraud practitioners, plus governance, risk and audit managers from across the public services who want to strengthen their organisation’s fraud risk process. You can find more information on the Wheel here or contact the Centre on 020 7543 5600.
The core elements to ensuring an appropriate response to hospitality and gift giving within government organisations remain the same: transparency, declaration, and cross-referencing. What has changed is the public’s appetite for error.