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Treasury revises gift-taking policy after report from Deloitte gives 26 recommendations; Treasury says why it accepts gifts and hospitality
Treasury is revising its gift and hospitality policy, agreeing to 26 recommendations in an independent review by Deloitte, following criticism from the Green Party earlier this year when documents released under the Official Information Act showed staff, mainly from the Debt Management Office, had received 230 gifts worth NZ$50 or more in the past year.
The report said Treasury's gift policy was "generally consistent" with State Services Commission guidance, although, it gave a number of recommendations for improvements, in the four broad areas of: Clarity of expectations supported by definitions and guidance, documentation of gifts and hospitality, approvals and review, and oversight and monitoring.
The report noted that total gift register entries for gifts or hospitality worth over an estimated NZ$50 since 2007 totaled 646, comprising of: 7 entries from 2007, 120 in 2008, 110 in 2009, 179 in 2010, and 230 in 2011.
Key points highlighted in the report were:
- Six employees had 50 or more hospitality entries (valued at $50 or more) and in 2011 they each had between 15 and 36 entries. The same six employees had less entries for hospitality of $100 or more, with two having 14 hospitality entries in 2011
- Five banks provided approximately 58% of all gifts and hospitality recorded within the register, these being ANZ (97), Westpac (112), BNZ (82), Deutsche Bank (48), Barclays (36)
- A staff member had 107 entries ($50 or more) within the register from 2007, with 36 being for FY2011. 30 of the 107 entries within the register were associated with one bank
- A staff member had 79 entries ($50 or more) within the register from 2007, with 31 being for FY2011. 22 of the 79 entries within the register were associated with one bank
- The majority of hospitality entries since 2007 related to entries recorded as “lunches” and “dinners” (74%) and the majority of entries in FY 2011 also related to “lunches” and “dinners” (72%)
- Other hospitality accepted included a mix of networking business or conference events and entertainment related events, for example, Rugby Sevens, theatre shows, Wellington Cup, golf, and Toast Martinborough. Entertainment related events account for approximately 19% of all register entries since 2007.
Treasury named Deutsche Bank and its 49.9% owned Craigs Investment Partners as advisers in July on preparatory work it's doing ahead of the potential state owned enterprise sell-downs. See our article here.
Deloitte said it interviewed Treasury staff for reasonons for accepting hospitality, which included:
- The NZDMO needing to maintain effective market and counterparty connectivity and relationships that enable and support the Treasury‟s ongoing marketing of the Crown’s debt programme. Relationship development and management with counterparties through hospitality and networking is seen as part of the norm in the financial sector. We understand this has become increasingly important as borrowing has increased substantially over the period from $2 billion to $20 billion
- The Treasury’s role in developing and maintaining its international reputation. This includes being hosted overseas with New Zealand officials and participating in overseas marketing / development trips to promote investment in New Zealand where hospitality from counterparties can occur across different countries many times over a short period of time
- Networking with key New Zealand businesses (including major exporters), which enable better understanding of these key businesses, their role and impact within the New Zealand economy and the role banks play in their funding of these businesses
- To enable market intelligence to be gathered to inform Treasury operations and enable the Treasury to provide advice to Ministers.
"Three of the major banks indicated to us that their reasons for providing hospitality were primarily to share and obtain market updates and to gather information," Deloitte said in its report.
"They also noted that the NZDMO is one of the major players in the New Zealand financial market and that frequent contact is very important. Banks stated that hospitality provided is not specifically offered to secure new business. One bank commented on their need to comply with various bribery and anti-corruption legislation and the requirement for the bank to record when a public servant is hosted by the bank," Deloitte said.
"Treasury (including NZDMO) staff asserted that for each instance of hospitality offered and accepted, there was clear business rationale for acceptance, although the reasons were not documented in the registers at the time (as this was not a requirement within Treasury policy and guidance)," Deloitte said.
"Due to the passing of time, and the lack of an audit trail for each event recorded, we cannot confirm or challenge this. We do note, however, that a process exists within the NZDMO of regular management review of the register, although, formal explicit one up approval is not expected or performed."
The Treasury’s Code of Conduct expects hospitality:“Must not be accepted if it might place the employee under an obligation or a perceived influence” and Public Service Standards of Integrity and Conduct states: “The requirement to decline gifts or benefits that place us under any obligation or perceived influence”.
We understand and accept there is a need for Treasury personnel to develop and maintain business networks and relationships to carry out its functions, and enhance its market intelligence and influence. However, as the Treasury is a public sector organisation, any public perception test applied to “appropriateness” of hospitality would be a higher one. Acceptance of hospitality and gifts should accordingly be assessed in light of relevant public sector principles and guidance, having regard to the nature, extent and timing of such hospitality.
As noted above, there were several instances where hospitality was accepted with a level of frequency and nature that could be perceived as frequent, excessive or misconstrued. The nature of some of the hospitality (such as entertainment-related events) and frequency leaves the Treasury open to public and/or media perception that there have been shortfalls in the Treasury’scompliance with its policy and guidance. This has arisen because of the subjective nature of the policy and guidance, and the lack of regular review of judgements and practices by people independent of the areas in question.
Releasing the report, Treasury Secretary Gabriel Makhlouf said Treasury accepted and would adopt all 26 recommendations outlined in the report. See the release from Treasury below:
The Treasury is to strengthen its gifts and hospitality policy following a review by an independent auditor.
Secretary Gabriel Makhlouf announced in July that as part of a review of policy, the organisation would periodically publish a register of the gifts and hospitality received by its staff. In conjunction with this, Deloitte was asked to review the Treasury’s gifts and hospitality policy.
That review has now been completed, said Mr Makhlouf.
“The Treasury accepts and will adopt all recommendations made in the report by Deloitte, which concluded that our gifts and hospitality policy was generally consistent with State Services Commission and Office of the Auditor-General guidance and principles.
“The recommendations have informed our new Gifts and Hospitality Policy, and we will use them to strengthen our policy and practices.”
The two guiding principles remain that:
· Treasury staff should not accept gifts or hospitality unless there is a clear business benefit to the Treasury that exceeds any private benefit.
· Treasury staff must refuse all gifts or hospitality that could reasonably be seen or perceived as undermining the integrity of individual Treasury staff, the Treasury or the wider state sector.
Other points to note are that:
· Gifts will not be accepted except where they have a value of less than $50, or where refusing them might cause embarrassment or offence.
· All offers of gifts or hospitality with a value of $50 or more will be recorded on the gift and hospitality register, irrespective of whether or not they are accepted.
· There will be a requirement to record the business rationale for gifts and hospitality received.
· The Policy applies to all Treasury staff.
“The Treasury takes seriously its role as leader of best practice across the public service,” Mr Makhlouf said. “I have initiated the periodic publication of our register to promote greater accountability.”
Deloitte, as the independent internal auditor of the Treasury’s internal policies, will continue to monitor adherence to the Policy.