Ti uk nfp guidance

ANTI-BRIBERY PRINCIPLES FOR NOT-FOR-PROFIT ORGANISATIONS GOOD PRACTICE GUIDANCE ON ANTI-BRIBERY PROGRAMMES FOR EDUCATIONAL, VOLUNTARY, CHARITABLE, ARTS & HERITAGE AND OTHER NOT-FOR-PROFIT ORGANISATIONS

Supported by:

Transparency International (TI) is the world’s leading nongovernmental anti-corruption organisation. With more than 100 chapters worldwide, TI has extensive global expertise and understanding of corruption.

Transparency International UK (TI-UK) is the UK chapter of TI. We raise awareness about corruption; advocate legal and regulatory reform at national and international levels; design practical tools for institutions, individuals and companies wishing to combat corruption; and act as a leading centre of anti-corruption expertise in the UK.

Acknowledgements We are grateful to the following for supporting this project throughout as members of the expert Advisory Committee: John Drysdale (Chair), Robert Cumming, Geoffrey Eales, Mark Lomas, Marcus McCaffrey, Gary Miller, Toby Wilkinson.

We would also like to record our thanks to the individuals and organisations that have helped us in developing the publication, including Vincenzo Raimo, the British Council, the Charity Commission and NCVO. This publication has been kindly supported by: Baker Tilly, a provider of accounting and business services to the not-for-profit sector – www.bakertilly.co.uk; and Mishcon de Reya, a law firm with offices in London and New York, offering a wide range of legal services for charities and not-for-profit organisations, businesses and individuals – www.mishcon.com

Lead author: Peter Wilkinson Editor: Robert Barrington Publisher: Transparency International UK Published: January 2014 ISBN 978-0-9573410-4-3

© 2013 Transparency International UK. All rights reserved. Reproduction in whole or in parts is permitted providing that full credit is given to Transparency International UK and provided that any such reproduction, whether in whole or in parts, is not sold or incorporated in works that are sold. Written permission must be sought from Transparency International UK if any such reproduction adapts or modifies the original content.

Disclaimer Every effort has been made to verify the accuracy of the information contained in this report. All information was believed to be correct as of October 2013. Nevertheless, Transparency International UK cannot accept responsibility for the consequences of its use for other purposes or in other contexts. Policy recommendations and best practice guidance reflect Transparency International UK’s opinion. They should not be taken to represent the views of those quoted or interviewed or of members of the editorial committee of Transparency International UK’s partners in the project. Transparency International UK assumes no liability to any third party for the information contained herein, its interpretation or for any reliance of any third party. The document should not be construed as a recommendation, endorsement, opinion or approval of any kind.

This Guidance has been produced for information only and should not be relied on for legal purposes. Legal advice should always be sought before taking action based on the information provided.

1

CONTENTS FOREWORD 3

1. SUMMARY

4

1.1 Purpose of this guidance 4 1.2 The changing environment for NFPs and bribery

4

1.3 What is bribery? 4 1.4 Why pay attention to countering bribery?

5

1.5 Organising an anti-bribery programme

6

2. PUTTING IN PLACE AN ANTI-BRIBERY PROGRAMME

7

2.1 Top-level commitment 7 2.2 Risk assessment 8 2.3 Effective anti-bribery policies and procedures

13

2.4 Due diligence and procedures for third parties

19

2.5 Communication and training 24 2.6 Monitoring and evaluation 26

3. MANAGING AND REPORTING AN INCIDENT

27

APPENDIX 1: CHECKLIST 28 APPENDIX 2: QUICK-START GUIDE 32 APPENDIX 3: RESOURCES 35

2

NOT-FOR-PROFIT ANTI-BRIBERY PRINCIPLES The following principles are derived from the Ministry of Justice Guidance to the Bribery Act 2010, the AntiBribery Principles and Guidance for NGOs, and the Business Principles for Countering Bribery.1 They are a recommended starting point for any Not-for-Profit organisation putting in place an anti-bribery programme.

1. The Not-for-Profit organisation commits to a policy of zero-tolerance of bribery in any form, recognising that bribery is contrary to fundamental values of integrity, transparency and accountability.

2. The Not-for-Profit organisation implements an anti-bribery programme comprising: 2.1 Top-level commitment The Board of Trustees or equivalent governance body commits to and oversees the zero tolerance policy and anti-bribery programme, demonstrating visible and active commitment to the implementation of the programme.

2.2 Risk assessment The organisation undertakes a regular bribery risk assessment that underpins its anti-bribery programme.

2.3 Effective anti-bribery policies and procedures The organisation designs and implements anti-bribery policies and procedures that are effective and proportionate to the organisation’s risks, circumstances and culture.

2.4 Due-diligence and procedures for third parties The organisation carries out reasonable and proportionate due diligence on potential associates before entering into contracts with them and puts in place procedures for managing the associated risks on an on-going basis.

2.5 Communication and training The organisation builds awareness and understanding of its anti-bribery programme among its Board, employees, volunteers and relevant stakeholders through communication and appropriate training. It reports publicly on its anti-bribery measures.

2.6 Monitoring & evaluation The organisation monitors the implementation and effectiveness of its anti-bribery programme. The results of monitoring are reviewed regularly by the Board and guide improvements to the programme as necessary.

1. Ministry of Justice Guidance to the UK Bribery Act 2010 (hereafter the MoJ Guidance) https://www.gov.uk/ government/publications/bribery-act-2010-guidance Anti-Bribery Principles and Guidance for NGOs, Bond, 2011 (hereafter the Bond Principles); Business Principles for Countering Bribery, Transparency International, http://www.transparency.org/whatwedo/tools/ business_principles_for_countering_bribery (hereafter the Business Principles for Countering Bribery)

3

FOREWORD

The Charity Commission welcomes this new guidance aimed at helping educational, arts and heritage organisations and other not-for-profits prevent and tackle bribery. We have been pleased to support its development and hope it will complement existing joint guidance by Transparency International, Bond, and Mango as well as the Commission’s own compliance toolkit, Protecting Charities from Harm.

All charities must be vigilant to emerging risks to good governance and probity. Bribery can happen in stable environments, including the UK. There is, sadly, some evidence that charities do not take the risks seriously enough. Of the 120 charities recently surveyed, only 1% said they think bribery might have a significant impact on their organisation.

As the case studies in this guidance highlight, bribery can happen in all types of charities and its consequences are very serious. Charities that experience problems with bribery can face criminal fines, imprisonment of individuals, regulatory action by the Charity Commission – and perhaps most important, serious damage to their reputation and the trust of donors, supporters, and beneficiaries. All charities should demonstrate a zero-tolerance approach to bribery, and put in place appropriate anti-bribery measures.

I therefore urge trustees to reflect on how well their charities are protected against the risks of association with bribery and corrupt practices and to use this guidance in putting strong controls in place.

Sam Younger Chief Executive Charity Commission

4

1.

SUMMARY 1.1 PURPOSE OF THIS GUIDANCE The aim of this Guidance is to provide practical advice for Not-for-Profit organisations (NFPs) of all sizes in the educational, voluntary, charitable, arts and heritage sectors, and other not-for-profit organisations on how to implement a good practice anti-bribery programme.

There are growing risks from bribery for many NFPs as their circumstances change, including expanding into new activities and countries

There are growing risks from bribery for many NFPs as their circumstances change, including expanding into new activities and countries. There can be severe consequences from a bribery incident, including legal sanctions for NFPs and their officers, as well as reputational and organisational damage. NFPs exposed to risks from bribery need to ensure they have in place a good practice anti-bribery programme.

There are varying degrees of bribery risk for NFPs, and some will have little risk. This document offers a ‘QuickStart’ Guidance in Annex I for those with little risk, and substantial advice for those with higher risk. Section 2 is deliberately detailed. Many NFPs will not need to follow all the procedures or guidance; but it is designed to provide a comprehensive selection of subjects for those who do need to explore the subject in depth.

1.2 THE CHANGING ENVIRONMENT FOR NFPS AND BRIBERY A recent survey of 120 charities found that 91% were aware of the Bribery Act but worryingly, only 1% of the charities thought the Bribery Act would have a significant effect on their organisation.2 NFPs might feel that they do not face a high risk of bribery. This should not be assumed. Many NFPs are substantial organisations and operating in complex areas: for example, universities, schools and museums are building large facilities; charities can employ many thousands globally. NFPs may operate in countries with high levels of corruption, be involved with complex projects and be relying on the integrity of others such as agents and joint venture partners. Even smaller NFPs may find that they are operating in parts of the world where bribery is a regular occurrence.

SIGNPOST Size of NFP is not a guide to the need to design an anti-bribery programme. Instead, consider the potential risks and their impact. The programme should reflect both the commitment of the NFP to integrity and significant risks identified from risk assessment.

Corrupt officials do not restrict their demands for bribes to businesses. They may solicit or demand bribes in all types of activity, from bids for major contracts to release of goods from customs or entry of an employee at an airport.

1.3 WHAT IS BRIBERY? In order to begin thinking about implementing effective anti-bribery measures, it is helpful to understand what bribery means. A simple working definition is: “The offering, promising, giving, accepting or soliciting of an advantage as an inducement to do something which is illegal or a breach of trust.”3 The Bribery Act also notes that the purpose of the bribe is to ‘induce a person to perform improperly a relevant function or activity’ or to ‘reward a person for the improper performance of such a function or activity.’4

2. Managing charities – Risks and opportunities: a leadership survey, Baker Tilly, Winter 2011/2012 3. Business Principles for Countering Bribery 4. 2010 Bribery Act Section 1.2

5 Bribes can be given or received, promised or expected. They can take many forms and be of any size, including both payments and in-kind benefits. Bribes that are given are known as ‘active bribery’ and bribes received are known as ‘passive bribery’. A bribe can be given before or after the breach of trust takes place - such as a kickback following the award of a contract.

Examples of bribery The following are some simple examples of bribery: • • • • • • • • • • • •

A charity’s joint venture partner is managing the construction of a major overseas facility and accepts bribes from contractors A potential supplier offers money to a charity’s buyer to win a contract Job applicants bribe a charity’s local recruitment officer to win employment in an overseas community development project A bribe is paid to an official to gain a planning license for a distribution depot for relief supplies A charity’s operations in a country depend on imports of critical supplies and small bribes are being paid to customs officials to release the supplies A promised ‘kickback’ is paid after the award of a contract by a museum An overseas heritage site bribes an official from its Culture Ministry to secure permission to loan artefacts to an exhibition organised by a UK gallery in the UK A heritage organisation’s employee visits an archaeological site in an emerging country and a small bribe (a ‘facilitation payment’) is demanded at the airport by the immigration officer An overseas recruitment agent for a school takes bribes from the families of potential students An employee of a university-owned enterprise is bribed to provide information on intellectual property Parents offer to make a substantial gift to a school with the proviso that their child is guaranteed admission An official at an overseas education ministry is given disproportionately lavish hospitality and travel expenses for a visit to the UK during negotiations by a UK university, related to setting up a campus in the official’s country

1.4 WHY PAY ATTENTION TO COUNTERING BRIBERY? The results of a bribery incident can be severe, legally, reputationally and organisationally. In legal terms, there are strict anti-bribery laws and related legislation such as anti-terrorism and anti-money laundering laws which can lead to fines and imprisonment for individuals and fines for organisations.5 These laws apply in most countries to charities and NFPs, not just to purely commercial organisations. For example, the UK Bribery Act applies to employees of UK charities, and in most cases to the charity and its board.6 Regulators may also act on incidents of bribery. If a charity is involved in bribery, the Charity Commission would consider whether this would be mismanagement and/or misconduct, depending on how the trustees managed the incident.7 Reputational damage can be a major penalty and this particularly applies to NFPs, which are expected to live by their values. An incident of bribery can lead to loss of confidence and backing of employees, students, supporters, donors, users and clients. It should be remembered that even though there may be no foundation to an allegation of bribery, a public perception of bribery having taken place can be as damaging to reputation as an actual occurrence. For this reason, a clear public policy for integrity, including zero tolerance of bribery, provides reputational protection in the event of an incident.

A bribery scandal can also lead to organisational disruption with diversion of management time, loss of key individuals, and impact on the supply chain. If the NFP’s operations have been reliant to any degree on 5. http://www.charitycommission.gov.uk/detailed-guidance/protecting-your-charity/protecting-charities-from-harmcompliance-toolkit/chapter-1-charities-and-terrorism/chapter-1-module-4-counter-terrorism-legislation-an-overview/ 6. http://www.charitycommission.gov.uk/detailed-guidance/protecting-your-charity/protecting-charities-from-harmcompliance-toolkit/chapter-3-fraud-and-financial-crime/chapter-3-fraud-and-financial-crime/#m 7. http://www.charitycommission.gov.uk/detailed-guidance/protecting-your-charity/protecting-charities-from-harmcompliance-toolkit/chapter-5-protecting-charities-from-abuse-for-extremist-purposes-and-managing-the-risks-atevents-and-in-activities/chapter-5-summary/

6 bribery, such as payments made by project partners to local officials, then the project model may be untenable.

The NFP needs to know that its activities are run with integrity and not reliant on bribes to smooth the way.

It is also important to remember that bribery does real damage, which is why anti-bribery laws exist. Each time an organisation pays a bribe it is contributing to perpetuating a system of corruption that damages society. The effects of bribery show in many ways, including undermining the rule of law, corroding political and human rights, distorting markets, stealing from relief and aid resources and environmental and infrastructural damage.

It is important to remember that bribery does real damage, which is why anti-bribery laws exist.

Each time an organis-ation pays a bribe it is contributing to perpetuating a system of corruption that damages society

Finally, any organisation must consider how an incident of bribery is incompatible with their purpose and responsibility to society. NFPs, whether universities, voluntary organisations, arts and heritage or other charitable bodies, have in common that their missions and activities are rooted in high-level values and making a positive contribution to society.

Some potential impacts of bribery on an NFP •

•

•

Reputational damage -- Loss of reputation and damage to the ‘brand’ and potential subsequent reduction in grant and donation revenue.

-- Alienation of supporters and employees Legal and regulatory sanctions -- Fines and prison for officers, employees, associates -- Civil lawsuits -- Sanctions by regulatory bodies such as the Charity Commission -- Debarment from government funding and contracts Operational -- Cost of professional fees -- Diversion of board and management time -- Loss of donors, sponsors, clients, students, associates, contracts or ventures -- Organisational activity distorted by bribery -- Damage to the supply chain -- Dysfunctional or unsustainable activities and projects -- Termination of projects before completion -- Demotivation of staff and employees

1.5 ORGANISING AN ANTI-BRIBERY PROGRAMME A systematic approach is needed to counter bribery. In this Guidance, the system is called the anti-bribery programme. All NFPs, whatever their size or risks from bribery, should conform to the two Principles set out at the front of this Guidance: • •

To commit to a policy of zero tolerance of bribery To implement an anti-bribery programme

The anti-bribery programme is the entirety of an NFP’s efforts to counter bribery starting with the commitment to a policy of zero tolerance of bribery. The detail and content of the programme should be designed proportionately to the NFP’s risk approach and assessed risks.

There is a general global acceptance on what constitutes good organisational anti-bribery practice. The underlying system for organisational anti-bribery practice is the same for all forms of organisation, whether companies, public sector bodies or NFPs. The following Section outlines the stages for implementing a programme. It is based on the six principles used in the UK Ministry of Justice’s own guidance.

SIGNPOST – The Quick-Start Approach If you are a lower risk NFP, you may want to implement a less sophisticated anti-bribery programme than a higher-risk NFP. A Quick-start Guidance is provided in Annex II to help you to assess whether your NFP is lower-risk and if so, need only implement a simplified programme. However, a good assessment of your bribery risks is fundamental to this process. Don’t forget that many NFPs do not understand or easily overlook their bribery risks.

7

2.

PUTTING IN PLACE AN ANTI-BRIBERY PROGRAMME 2.1 TOP-LEVEL COMMITMENT Principle: The Board of Trustees or equivalent governance body commits to and oversees the zero tolerance policy and anti-bribery programme, demonstrating visible and active commitment to the implementation of the programme.8 The first task of an NFP, when starting out on the road to designing an anti-bribery programme is for the Board of Trustees or equivalent body (termed ‘the Board’ in this Guidance) to commit to the principles of a policy of zero toleration of bribery and the creation of an anti-bribery programme. The Board’s commitment should also extend to establishing a culture of integrity for the NFP within which the antibribery programme will be implemented.

SIGNPOST The Board or equivalent body should formally agree a policy of zero-tolerance of bribery and to implementing an anti-bribery programme which will be proportionate in scope and depth to the assessed level of risk.

The policy should state that it extends to all the activities of the NFP, including Board members, employees and volunteers, and also associates acting on behalf of the NFP such as agents and project partners. The policy should be made public. The policy could be incorporated into existing organisational values, statements or procedures.

The Board and management should aim to create a culture in the NFP which comprises the following: • • • • • •

Integrity and zero-tolerance of bribery are fundamental and non-negotiable Employees, Board members, volunteers and associates know what is expected of them Anti-bribery policies and procedures are taken seriously Employees, volunteers and associates are given the information, skills and resources they need to comply with the policy of zero tolerance of bribery It is made clear that the NFP is prepared to forego projects and contracts rather than pay bribes and will support employees in this Sanctions are implemented for breaching the anti-bribery policies, consistently, fairly and openly

The Board’s own commitment will be shown in ways such as public statements and internal and external presentations. The Board must also oversee the anti-bribery programme including receiving reports, challenging and questioning management on the design and implementation of the programme and requiring that the anti-bribery programme is kept up-to-date to meet changes in the NFP or external environment.

8. MoJ Guidance, Principle 2, Top Level Commitment: “The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery by persons associated with it. They foster a culture within the organisation in which bribery is never acceptable.”

8 The Board should consider how the current organisational culture supports implementing the anti-bribery programme. The Board might consider questions such as: • • • • • • • •

Is there a clear ethical value statement in the organisation – for example in its founding documents or mission statement?

What could be the significant bribery risks for the organisation?

Have there been any incidents or concerns in the organisation, associates or peer organisations?

Is the current culture of the NFP compatible with the anti-bribery commitment?

What expertise lies in the organisation related to countering bribery?

What knowledge and expertise exists in the Board related to countering bribery?

What capacity does the NFP have to allocate resources and time for the anti-bribery commitment?

Do functions such as legal, Human Resources, finance and audit have the resources and expertise to support the implementation of the anti-bribery programme?

2.2 RISK ASSESSMENT Principle: The organisation undertakes a regular bribery risk assessment that underpins its antibribery programme.9 As part of the NFP’s overall risk assessment methodology, it should have a process to review and identify potential risks. The risk assessment process is the foundation for designing an effective anti-bribery programme. It will involve the whole organisation and the Board, management, employees and volunteers can all contribute by looking out for any concerns in the course of their activities. It will then describe some of the factors that can lead to bribery risk. There are five principal stages to the risk assessment process: 1.

2.

3.

4.

5.

Starting the risk assessment process Identifying the bribery risks Assessing the risks Mitigating the risks Regularly reviewing the risks

2.2.1 Starting the risk assessment process Risk assessment should be carried out when the NFP first designs its anti-bribery programme and will then be a regular exercise to monitor, improve and ensure that the anti-bribery programme is updated and remains effective as circumstances and risks change.

SIGNPOST Large and complex organisations with a high bribery risk will need to use more sophisticated risk assessment approaches. TI publishes a separate guidance document called Diagnosing Bribery Risk which will be helpful to such organisations. But risk assessment can involve a simple approach. For example, identifying risk can consist of a simple discussion by the Board and management based on the experience of the NFP, brainstorming areas that might cause risk of bribery and then deciding if they are significant.

9. MoJ Guidance, Principle 3, Risk Assessment: “The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented.”

9 The NFP will need to decide how it is practically going to carry out risk assessment. This includes: •

• • •

Appointing the person or team to carry out the review and deciding if it is to be a permanent function or to be recreated each year (an external party could be engaged by the NFP for this purpose as employees may find it easier to speak to a third party) Scoping the exercise and, if necessary, allocating or budgeting for the resources Identifying potential risks as discussed below Documenting the exercise for use in future reviews and also as an audit trail if needed, for any risks or incidents that might be discovered

2.2.2 Identifying bribery risks The next stage in the process is to identify bribery risk factors and risks.

An NFP’s risks of bribery will depend on its individual circumstances but there are some common factors that accentuate bribery risks. Risk factors are internal or external circumstances that could make it more likely that bribery will occur. The Table below lists some of the likely risk factors for NFPs.

BOX: Some significant bribery risk factors for NFPs Context

Risk factor

Description

External factors

Countries of operation

Countries with high levels of corruption

Sectors with known high risk

Construction, facilities management, logistics

Foreign Public Officials

The Bribery Act creates an offence related to Foreign Public Officials

Urgency

Overriding or circumvention of controls at times of crisis or urgency such as such as disaster relief, speed orders, critical supplies

Greater good

The need to meet the mission of the NFP overrides the bribery policy e.g., bribes to speed critical food supplies through customs

Other corruption

Corruption by an employee such as receipt of excessive hospitality, fraud or money laundering opens the door to bribery approaches by corrupt associates

Critical skills reside in one employee

The employee may be vulnerable to bribery because of his/her influential position

Influx of new staff or volunteers

The staff or volunteers may not be imbued with the NFP’s integrity culture or lack skills to deal with bribery

Dependent on partner organisation

The NFP is totally or largely reliant on its partner to run a project

Local staff

The NFP is totally or largely reliant on local staff to run a project

Internal factors

10 The challenge is to ensure that all relevant risks are identified for consideration and brainstorming will help at this point. While an NFP may approach the risk assessment process with commitment and thoroughness, the following threats could affect the review: • • • •

Overconfidence about the effectiveness of current anti-bribery controls Operating on a culture of trust or ‘family’ and assuming trust will not be breached Accepting current practices – ‘it has always been done this way’ Resistance from managers and employees – ‘implying there could be bribery is a personal affront’

There should be a thorough process of consultation, information gathering and analysis that brings into view all relevant risks. Management, employees and associates will have a good idea where the risks of bribery lie. The consultation process, in itself, is a message about the NFP’s anti-bribery commitment to anti-bribery. The conclusion of this stage will be an inventory of risks which will be used for the next stage of assessing the risks.

Ways of identifying bribery risks

There should be a thorough process of consultation, information gathering and analysis that brings into view all relevant risks.

Management, employees and associates will have a good idea where the risks of bribery lie

• • • • • • • • • •

Discussion in the Board - this will focus on strategic and organisational risks Review of whistleblowing and hotline use Past incidents and their impact Self-assessment – asking all relevant stakeholders to complete a simple online survey Web and literature searches Interviews and surveys of staff, academic faculty, employees and associates such as suppliers and intermediaries, donors, sponsors, supporters, alumni Brainstorming and facilitated group discussion workshops Interviews of peer NFPs Advice from professional advisers – accountants, auditors, legal, anti-bribery consultants Discussions in countries with the local Embassy or High Commission, Chamber of Commerce, NGOs such as Transparency International chapters or Global Compact Networks

SIGNPOST Foreign Public Officials (FPOs) present particular bribery risks. They are specifically referenced in much anti-bribery legislation. Any NFP that deals with FPOs, or their friends or relations, should exercise particular caution. FPOs may include any state employee, such as a doctor or architect, as well as ordinary civil servants. The NFP should take care not to offer benefits to FPOs such as hospitality, gifts and travel where these might be interpreted as bribes.

SCENARIO: Educational contract tied to award of honoury degree A university is negotiating with an overseas education ministry for an important contract. The minister of education for the country decides to visit the UK and his officials make known that it would be appropriate if, during his visit to the university, an Honorary Degree could be conferred on the Minister. The university declines respectfully advising that this would not accord with the process for Honorary Degrees. The university is advised in due course that it has not been granted the contract.

Comment: The university rightly assessed that giving an Honorary Degree would be a bribe. While the loss of the contract was an immediate penalty for holding to the policy, in the long term the university should be able to use its reputation for integrity to be viewed as a favoured partner and its no-bribery stance may also deter solicitation of bribes when bidding for other contracts.

11

TABLE: Bribery risks in the education sector Transaction risks will vary by sector. The education sector is particularly at risk, having many forms of transaction vulnerable to bribery owing largely to the globalisation of education and the high importance of educational qualifications. This table gives some examples of risks the sector may encounter, to illustrate how an NFP might go about understanding its risks.

Recruitment and admissions

Agents for universities accept bribes from students or families or pay bribes to assist students to get visas Sponsored students from a government or a company may have been funded with laundered money or selected through the influence of bribery Potential pupils are funded by corrupt money (an offence under Proceeds of Crime legislation) Students bribe to obtain false degrees and achievements in order to meet admission criteria Agents paid on commission do not select students on a fair basis

Award of qualifications

Students or relatives bribe to influence marking and award of qualifications

Award of honours

A title or award such as an Honorary Degree is sought in return for giving a contract to the NFP

Franchises and accreditation

Institutions obtain a franchise through bribery; relax the rules for admission and evaluation of students; accept bribes to award degrees or to tolerate plagiarism and examination fraud

Intellectual property

Information and expertise is stolen though bribery - “Academic institutions possess intellectual property that many people would give their right arm for.” Professor Eric Thomas, President of Universities UK and vice-chancellor of the University of Bristol, The Financial Times, 11 April 2013.

2.2.3 Assessing risks The next step is to assess the identified risks and decide their likelihood and the potential severity.

The assessment can be both quantitative and qualitative. Applying a ‘traffic light’ system to indicate the ranking of risks can assist management in directing its attention to significant risks, but significant bribery can occur in areas which may fall outside the higher scored risks.

For instance, countries prone to bribery risk may be identified using Transparency International’s Corruption Perceptions Index, but bribery can also take place in countries seen as good performers.

While these incidents may be infrequent, the material impact of an incident can be high.

The NFP, based on its risk assessment, will then select the risks which it will plan to counter.

SIGNPOST Use the Corruption Perceptions Index and other research published by Transparency International to find out which countries are seen as having high levels of corruption. In some countries corruption is prevalent and the risks are extremely high. Some NFPs may decide to avoid high risk countries, but for NFPs such as aid and development charities this will not be an option. Other NFPs which do have a choice where they operate may nevertheless decide to operate in high risk countries if they believe that they have an adequate anti-bribery programme to counter the risks.

12 2.2.4 Mitigating the assessed significant risks The NFP should develop detailed policies and procedures to counter the risks that have been assessed as requiring such measures. For example, an NFP may stop using agents and deal directly with client groups. One other option, less suitable in most instances, is to withdraw from the risk area. For example, a university may decide that a country has too high a level of corruption to warrant remaining in the country or that a partner in a joint venture is not meeting the required standard for anti-bribery measures and the association should be ended. These are drastic approaches but may sometimes be necessary where countering risks is unlikely to work. Thought should be given before entering a country or joint venture on how the NFP could extricate itself if bribery enters the picture and cannot be remedied.

SIGNPOST When countering bribery attention should be given to other forms of corruption, such as fraud and money-laundering, as they can generate an environment for bribery to flourish.

2.2.5 Reviewing risks regularly Risk assessments should be repeated regularly to reflect changing circumstances. The results of risk assessment should be reviewed by senior management and any concerns identified. A report should be made regularly to the audit committee and the Board on the review.

It is good practice to report publicly on the risks the NFP may face and the measures taken to mitigate the risks. Law may require the NFP to make a risk statement as is the case for larger UK charities.

SIGNPOST Internal and external environments are dynamic and risks may change accordingly. Your organisation should check its anti-bribery programme periodically to ensure it remains adequate.

CASE STUDY: University sports betting bribery Three men pleaded guilty in an alleged scheme to fix a US university basketball game. They were among ten people charged with running a sports betting business to fix West Coast Conference games. Those charged included the school’s all-time leading scorer, a former coach and a former player.

Comment: This US example illustrates that bribery can happen in all countries and can be in an activity that might easily be overlooked in a risk assessment.

SCENARIO: University negotiating a publishing agreement with a Chinese university A UK university is negotiating a major publishing contract with a Chinese university for a range of scientific and technical books and online education. It is the Chinese New Year and the university negotiators, mindful of the Chinese custom of gifts and that they are negotiating a publishing deal, give their counterparts valuable antiquarian books tailored to the status of the recipient.

Comment: Although gift giving is a custom in China, the gifts of antiquarian books seem excessive in value. The state in China controls all institutions including universities and therefore the Chinese negotiators would likely be FPOs and the gifts could be an offence under the Bribery Act.

13

CASE STUDY: Procurement kickback A former director of an international wing of a television network was jailed for 20 months by a court in an Asian country for taking bribes. Two businessmen who acted as agents for five suppliers and gave him the cash also received the same sentence. The former director had overall responsibility for the network’s global marketing and brand development, and took the bribes in exchange for placing orders for toys and bags with the agents which were already the exclusive toy-sourcing partners of the network.

Comment: Procurement can be a high risk area for NFPs. Checks and balances need to be built into the procurement process including competitive quotations, due diligence on suppliers, separation of duties, delegated sign-off levels with counter-signatures, rotation of buyers and regular audits.

2.3 EFFECTIVE ANTI-BRIBERY POLICIES AND PROCEDURES Principle: The organisation designs and implements anti-bribery policies and procedures that are effective and proportionate to the organisation’s risks, circumstances and culture.10 The next stage is to design and implement detailed policies and procedures to counter significant risks identified through the risk assessment process described above.

The policies and procedures should be proportionate to the identified risks and provide reasonable assurance that the NFP will comply with its no-bribes policy. A named individual should be appointed with responsibility for the policies and procedures and to ensure they are implemented, documented and kept up-to-date. The procedures should be communicated and issued in the main languages of employees.

There are certain activities or transactions where bribery can commonly be a risk. When faced with such risks, the NFP should: • • • • •

Analyse how bribery can occur in the transaction or activity Develop procedures to counter the risks Develop tailored communications and training covering the risks, the relevant policies and procedures and ways of countering the risks Document activities fully Regularly monitor the risks and that the procedures are working

For NFPs facing higher levels of bribery risk, detailed policies and procedures should cover in particular the areas described in detail in this section.

SIGNPOST The NFP should ensure it has in place a system of internal controls to make sure the anti-bribery programme is implemented and monitored. For larger organisations, the internal audit function will play an important role. In smaller organisations, it may be monitored by a designated senior manager or Board committee. The success of implementing the programme will also depend greatly on support from the legal, Human Resources and finance departments.

10. MoJ Guidance, Principle 1, Proportionate Procedures: “A commercial organisation’s procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities. They are also clear, practical, accessible, effectively implemented and enforced.”

14 2.3.1 Gifts, hospitality and travel expenses

SIGNPOST Make sure your NFP has policies and procedures for gifts and hospitality. These activities can occur for any NFP, and there can be risk of inappropriate activity. It is important that your employees know the policies and how to handle situations where they may occur. Undue gifts or hospitality offered at the time discussion of a contract or grant could be considered bribery.

Sometimes gifts and hospitality are intentionally used as bribes.

At other times, they might be interpreted as bribes, either by the recipient or by a prosecutor.

The challenge for NFPs is that it is often hard for employees to know where to draw the line between what is a reasonable and bona fide expenditure and what is unreasonable expenditure made to influence the recipient

Risks: Gifts and hospitality, and to a lesser amount travel expenses (to enable visits to Head Office or projects, for example), have been the subject of much discussion in regard to the Bribery Act and related legislation. Sometimes gifts and hospitality are intentionally used as bribes. At other times, they might be interpreted as bribes, either by the recipient or by a prosecutor. The challenge for NFPs is that it is often hard for employees to know where to draw the line between what is a reasonable and bona fide expenditure and what is unreasonable expenditure made to influence the recipient. Another risk is that these activities can be used to groom and draw an employee unwittingly into a situation where improper behaviour subsequently results.

Prevention: Good practice permits promotional expenditures, including gifts and hospitality where they are transparent, proportionate, reasonable and bona fide. However, NFPs must ensure they have implemented adequate policies and procedures. For example, it will probably be appropriate to: • • • •

Give clear guidance to Board and employees on giving or receiving gifts and hospitality Train employees to deal with situations where gifts are offered or expected, especially if the NFP has operations in countries where there are gift-giving cultures Train employees on the NFP’s policies on hospitality and expenses and how they can avoid being drawn inadvertently into receiving inappropriate hospitality Keep a register of gifts and/or hospitality (given and received) which exceeds a specified value

SCENARIO: Hospitality and travel given in negotiation for a museum exhibition A UK museum is negotiating to receive a major exhibition as part of a world tour of the exhibition to three countries. There are known to be several capital cities in the running for the much sought-after exhibition which is under the auspices of the originating country’s government. The museum invites the officials from the country’s Arts Ministry and the exhibition curators and managers to visit them in the UK to see their museum’s plans for accommodating and promoting the exhibition. Thanks to help from a generous supporter, the UK museum is able to pay first class travel expenses, including a stay at one of London’s best hotels, and arranges a programme of expensive entertaining events around the visit.

Comment: The museum is negotiating a contract and is giving lavish travel expense and hospitality to influence the people who will decide on the contract. The deciding parties include Foreign Public Officials. This could be an offence under the Bribery Act and also may breach the museum’s own policy. It is not unreasonable for the overseas people to visit London to make a judgement on the candidacy of the bidding museum, but the travel and hospitality is excessive, even if funded by a friend of the museum.

SIGNPOST Provide guidance and training to employees on policy and procedures for giving and receiving gifts, keep values of gifts to modest levels, design a gifts matrix to set financial values for countries, keep a register of gifts received and given and have regular oversight of the register by a senior manager.

15 2.3.2 Fundraising Risks: NFPs rely extensively on donations, gifts, grants, endowments and sponsorships. Charitable donations should be made without expectation of return but it is best practice when a donation is made [to a charity] for the recipient to acknowledge this in a public credit. However, donors may seek substantial privileges as well.

A wellknown risk for universities or schools is the prospective large donor who attaches a condition to the donation that a child or other relative is given a place at the university or school.

Similarly, arts organisations may be able to award privileges or titles and should make sure that these are awarded following established and transparent criteria

Prevention: The NFP, in negotiating donations, should take care not to offer benefits to the donor as this could not only endanger the charitable status of the payment but could be judged as a bribe. The Charity Commission publishes guidance on this area.11 A well-known risk for universities or schools is the prospective large donor who attaches a condition to the donation that a child or other relative is given a place at the university or school. Similarly, arts organisations may be able to award privileges or titles and should make sure that these are awarded following established and transparent criteria. Money laundering is a related risk and checks should also be made that the source of funds comprising the donation is legitimate. Internal checks and balances should be designed to prevent kickbacks with regard to grants and sponsorship fees.

2.3.3 Human Resources Human Resources (HR) can be a critical contributor to building the commitment of the NFP’s employees to the no-bribes policy and all aspects of implementation of the anti-bribery programme. HR policies and procedures should be designed to support the anti-bribery programme. Here are some examples of how this could be done: • • • • •

•

Recruitment: design procedures to recruit people who will meet the NFP’s standard of integrity Induction/orientation: include information on the NFP’s values and the anti-bribery programme Contracts: require employees and board members to sign periodically that they have read and understand the NFP’s code of conduct Contribute to the content of communications and training Incorporate integrity performance including anti-bribery in appraisal and recognition – this can assess employees on how they represent the NFP – ‘integrity ambassadors’ – and contribute to improvement of procedures and risk identification Sanctions: provide and communicate clearly to employees the appropriate sanctions that will be applied in the event of a bribery violation – these must be seen to be applied openly and consistently and to support the zero tolerance policy

It is also important to note that HR departments can themselves be subject to bribery risks, particularly in the recruitment of employees. Bribery can take place in recruitment such as hiring local staff for a community project in a developing country, or workers in a joint venture for construction of a campus or depot. The bribes are paid by recruits to get appointed and the corruption can become systemic. The result will be that inappropriate employees are recruited who lack both the right skills and integrity. To avoid this, the NFP should set and apply objective criteria for advertising and interviewing, build checks and balances into the recruitment process and document the entire process.

2.3.4 Bidding for contracts or projects Risk: NFPs can be involved in bids for major contracts or projects. Bribes may be solicited from the NFP for the award of contracts or projects, especially in countries where corruption is prevalent. If the bids are made through an intermediary this adds an extra dimension of risk. Bribes may be cash but could be inkind, such as educational scholarships for relatives of the official who decides a contract.

Prevention: appropriate measures could include the following: • • •

Employees should be given assurance that they will not be penalised for losing a contract or project for refusing to pay a bribe.

Where a competitor is believed to have offered a bribe to win a contract, the NFP should consult the local Embassy or High Commission to see if the matter could be taken up with the authorities.

Activities, calls and meetings related to the bid should be documented.

11. http://www.charitycommission.gov.uk/detailed-guidance/protecting-your-charity/protecting-charities-from-harmcompliance-toolkit/chapter-2-due-diligence-monitoring-and-end-use-of-funds/chapter-2-summary/#due

16

CASE STUDY: University publishing house made improper payments to win contracts A university became aware of the possibility of irregular tendering practices involving its education business in East Africa. The university acted immediately to investigate the matter, instructing independent lawyers and forensic accountants to undertake a detailed investigation. Two of these contracts were financed by the World Bank. As a result of the investigation, the university voluntarily reported to the UK authorities certain concerns in relation to contracts arising from a number of public tenders which two subsidiaries had entered into. Investigations by the SFO and the World Bank led them to believe that the subsidiaries had offered and made payments, directly and through agents, intended to induce the recipients to award competitive tenders and/or publishing contracts for schoolbooks to the subsidiaries.

The education company, a wholly owned subsidiary of the university, was ordered by the High Court to pay nearly £1.9 million in recognition of sums it had received which were generated through unlawful conduct. The Serious Fraud Office said that there was no evidence of board-level connivance in relation to the bribery, and the products supplied were of a “good standard” and provided at market values.

Comment: These contracts would be assessed as high risk in any risk assessment being located in countries where corruption is prevalent and involving government officials. The education company’s internal controls should have been designed to deal with such risks. Importantly, the SFO found that the university had conducted itself in a manner which fully met the criteria set out in SFO guidance on self-reporting matters of overseas corruption. It is important that when controls have failed that the NFP takes urgent action to strengthen its anti-bribery programme. In this case, the education company introduced enhanced compliance procedures which were subject to review by a monitor who had to report to the Director of the SFO within twelve months, with additional and separate reporting to the World Bank. The monitor had to meet strict criteria, including clear independence from the education company.

CASE STUDY: Charity paid bribes to sustain government contracts delivered with embezzlement The former CEO of a US charity employing disabled people was sentenced by a US court to ten years in prison and ordered to pay about US $70 million for bribing elected officials to secure federal contracts and for embezzling government funds. The judge also sentenced a former board member of the charity to three years in prison and ordered him to pay $1.7 million in restitution.

According to prosecutors, the former CEO made false statements to a federal agency, in order to fraudulently secure no-bid contracts and he also paid cash and other bribes to elected officials in order to secure certain vendor contracts. In total, the charity received payments of about $690 million from the U.S. Department of Defense and received millions more dollars from other federal agencies, prosecutors claimed.

Comment: In this instance, the problem was at the top with a powerful, dominant and high profile CEO. Investigative journalism was a factor in exposing the fraud. The incident shows how bribery can be part of wider corruption. Here, it appears to have been used to sustain the contracts which were at risk if the continuing frauds were exposed. Good governance by the board and oversight of senior management supported by reviews and independent audits of operations can contribute to preventing such corruption.

2.3.5 Critical licences, permits or certification Risks: This is a classic area for bribery as many organisations are dependent on receiving permits or licenses in order to operate or expand. There are a vast range of approvals and licenses that may be needed to enable the activity of an NFP and in some countries they can be associated with demands for bribes for the necessary approvals to be given. As the licences or approvals are usually official, they are likely to involve a Foreign Public Official.

17 Prevention: appropriate measures could include the following: •

• • •

Contracts involving construction have especially high bribery risks

As the range of potential approvals is large, the NFP as part of its controls should maintain a register of licences and approvals and evaluate the processes needed to obtain them and any associated risks of bribery The NFP should check that its suppliers are entitled to certificates. In the case of universities and schools, checks will need to be made on the educational qualifications and visas of applicants Training should be given to employees and partners on how to resist demands Collective action may be a way of eliminating demands

2.3.6 Purchasing and contracting Risk: Purchasing is vulnerable to the receipt of bribes (passive bribery) and risks are higher when the NFP is involved in major projects such as awarding IT contracts or building facilities. The bribes can take the form of kickbacks paid after the contract has been awarded and once the bribe-payer has generated the funds to reward the corrupt purchasing employee. Contracts involving construction have especially high bribery risks.

Prevention: Bribery risk can be countered by internal controls. Checks and balances include: •

• • • •

When setting the specifications for a contract, the NFP should have checks in the process to ensure that the specifications are not distorted to match one particular supplier’s product or services, thereby excluding or putting at a disadvantage other potential suppliers.

Rush orders are vulnerable to bribery as the urgency can circumvent normal controls. These should be documented and reviewed regularly by senior management.

Staff in vulnerable positions or countries should be rotated.

The NFP should communicate to potential suppliers its commitment to anti-bribery and to fair trading.

Contracts involving major construction should be monitored closely, especially in countries with high corruption or where reliance has to be placed on an associate for the construction project. Checks should be made during the contract implementation phase as it is often in this phase that the greater part of bribery takes place.

CASE STUDY: University procurement bribery In 2013 the Independent Commission Against Corruption (ICAC), New South Wales, Australia, stated that a university manager could face prosecution, after finding that he had solicited 225,000 Australian dollars in cash, travel and gifts from four suppliers. The manager had corruptly received the money and benefits between 2006 and 2011 while head of engineering services at the university. He allegedly solicited and received $119,000 of the money from the suppliers through his family company. The funds were disguised as payment for work carried out, or goods supplied by the manager’s family company that it did not do or supply. During the years, all four contractors invoiced the university a total of $17.8 million.

Facilitation payments and other small bribes can be a severe problem for many NFPs

Comment: Purchasing is an area of high risk even in countries not considered prone to corruption. If an NFP has significant purchasing activities then it should assess the risks and create internal controls accordingly.

2.3.6 Facilitation payments and other small bribes Risks: Facilitation payments and solicitation for other small bribes are common in countries where corruption is prevalent. Facilitation payments are ‘small unofficial payments made to secure or expedite the performance of a routine or necessary action to which the payer of the facilitation payment has legal or other entitlement.’12 They can, for example, be demanded from employees wishing to enter countries, to move goods through customs or across borders or to gain approvals such as licences. The UK Bribery Act and many other countries’ anti-bribery laws make no distinction between facilitation payments and any other type of bribe. Facilitation payments and other small bribes can be a severe problem for many NFPs,

12. The Business Principles for Countering Bribery, Transparency International

18 such as voluntary organisations working in overseas development. Facilitation payments and small bribes can also be a problem for employees and volunteers outside their work, and the NFP may need to assist them in dealing with this.

Prevention: TI recognises that organisations which decide to prohibit facilitation payments cannot eliminate them overnight. Organisations need to develop procedures and training and gain commitment from employees to deal with this difficult issue. There may be costs, delays and inconveniences as a result of implementing the process of resisting demands – for example, employees may have to miss flights to make their point with airport officials.

An NFP should ensure it has a policy to prohibit facilitation payments and to review its policy and procedures regarding facilitation payments. Procedures could include: • • • • • • • •

Making all employees and agents aware of the policy of prohibiting facilitation payments.

Researching how such payments could occur in the NFP’s activities and designing procedures to counter these circumstances.

Training employees and associates, including negotiation skills on how to resist demands.

Providing leaflets or cards in the local languages where the employees and volunteers travel, explaining that the NFP does not make such payments.

Building time into projects to allow for delays as a consequence of the refusal to pay.

Engaging in collective action and representations to governments.

Making joint representations to the authorities and asking for action. Embassies, High Commissions and chambers of commerce may be able to assist too.

Using the institutional reputation to take a clear and principled public stance against such payments, embarrassing officials into dropping demands.

SCENARIO: Facilitation payments to enter a country A manager from a charity travels frequently to an emerging market where the charity has projects.

Invariably, a facilitation payment is demanded by a passport official when the employee enters the country. The charity has a strict policy not to pay facilitation payments so rather than go to the trouble of arguing with the officials the employee has paid the bribes out of their own pocket and has never mentioned this to the charity. Other employees raise a concern that the manager never has trouble on entry and on questioning the manager reveals that bribes have been paid out of personal funds.

Comment: Employees may chose to pay the bribes themselves to avoid delay and feel that they that are not affecting their employer in doing so. Nevertheless they are acting as employees and the NFP is liable for their actions. Also, the NFP’s name will be attached to the bribery and the employee is undermining the NFP’s efforts to eliminate the payments. The payments could detract from the NFP building its reputation in the market as an organisation that implements a strict nobribes policy.

2.3.7 Collective action It can be difficult for NFPs operating in countries with high levels of corruption to carry out activities or win contracts in an environment where bribes are demanded or solicited at every turn. While large global NFPs may be able to use their reputation, resources and experience to resist attempts at bribery, smaller NFPs will find it less easy to deal with pervasive bribery.

Collective action offers a way for NFPs and others to join together to gain greater strength to counter the threats of bribery. Collective action takes many forms depending on the local context, nature of the market or projects, risks of bribery and the mix of available companies and organisations.

19 2.4 DUE DILIGENCE AND PROCEDURES FOR THIRD PARTIES Principle: The organisation carries out reasonable and proportionate due diligence on potential associates before entering into contracts with them, and puts in place procedures for managing the associated risks on an on-going basis.13

SIGNPOST Make sure potential associates are bona fide by simple checks such as references and web searches. Require payments to be made through banks. Proposals that payments or fees should be made in cash will be a red flag.

Due diligence on associates is a key part of a good anti-bribery programme. Even so, a recent survey found that only a third of charities surveyed conducted due diligence on partners, staff, agents, suppliers, beneficiaries and countries, with similarly low numbers having implemented a range of other measures.14 Many commercial organisations find this the most problematic area of an anti-bribery programme. There is no definitive guidance as to how much due diligence to do, and on which associates it should be done.

The Charity Commission has guidance available on when and how charities and NFPs should undertake due diligence.15

Many bribery scandals have involved bribery carried out by associates, particularly agents and joint ventures and the NFP needs to design policies and procedures to prevent the risk of its associates using bribery on its behalf

Some commercial organisations have realised that they have many high-risk relationships with associates and are trying to rationalise the number of relationships. Most NFPs will not have the same level of resource as a commercial organisation, and so may find anti-bribery due diligence particularly challenging. However, there are specialist companies that can help with due diligence, and there is much publicly-available information to help.

Many bribery scandals have involved bribery carried out by associates, particularly agents and joint ventures and the NFP needs to design policies and procedures to prevent the risk of its associates using bribery on its behalf. NFPs may have a variety of such associates. For example, they may be using agents for services such as recruiting overseas students. Voluntary organisations, arts and heritage bodies, universities and schools may be engaged in joint ventures for overseas projects such as delivering aid projects or mounting exhibitions. Some NFPs operate in countries where corruption is highly prevalent and there is a significant risk of involvement with terrorist networks or ‘proscribed organisations’. This reinforces both the need for, and complexity of, due diligence.16 The Bribery Act is drawn widely with respect to bribery carried out by another person associated with the organisation as it states that an associated person is one who provides services for or on behalf of the organisation.17 In such a case, an NFP may become criminally liable for the associate’s actions. Associates include subsidiaries and investments, agents, joint ventures, franchisees, suppliers and contractors.

The risk assessment process should identify potential risks from bribery for each form of associate.

The particular risks for forms of associate are described below with suggestions for countering the risks.

2.4.1 General principles in dealing with associates There are some general procedures based on the Business Principles for Countering Bribery that can be applied to countering bribery related to associates.

13. MoJ Guidance, Principle 4, Due Diligence: “The . . . organisation applies due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.”

14. Managing charities – Risks and opportunities: a leadership survey, Baker Tilly, Winter 2011/2012 15. http://www.charitycommission.gov.uk/detailed-guidance/protecting-your-charity/protecting-charities-from-harmcompliance-toolkit/ 16. http://www.charitycommission.gov.uk/detailed-guidance/protecting-your-charity/protecting-charities-from-harmcompliance-toolkit/chapter-1-charities-and-terrorism/chapter-1-module-5-proscribed-organisations/ 17. The Bribery Act 2010, section 8 (1)

20 • • •

• • • • •

• • •

The NFP should implement its anti-bribery programme in all entities over which it has effective control Where the NFP does not have effective control of an entity it should use its influence to encourage an equivalent anti-bribery programme in associates with which it has significant relationships The NFP should undertake properly documented, reasonable and proportionate anti-bribery due diligence on associates when entering into a relationship, and once the associate is appointed, repeat the due diligence periodically (due diligence is described in full in Section 2.4.2) The NFP should avoid dealing with entities known, or reasonably suspected, to be paying or receiving bribes The NFP should perform reasonable and proportionate monitoring on a continuing basis of its significant relationships – this can include the right to inspection of books and records The NFP should document relevant aspects of the implementation of its programme or equivalent by associates The associate should be supported where appropriate by providing training and advice on anti-bribery measures In the event that policies and practices of the associate are inconsistent with the NFP’s programme the NFP should take appropriate action, which can include requiring correction of deficiencies in the implementation of the associate’s programme or the application of sanctions The NFP should have a right of termination in the event that associates engage in bribery or act in a manner inconsistent with the NFP’s programme Contracts should be reviewed periodically The NFP should ensure it has identified all its associates and documents its relationships with them

2.4.2 Carrying out due diligence When carrying out due diligence, an NFP should consider checking the following: • • • •

• • • •

Prospective associates are reputable and financially sound and have the resources and expertise to be able to carry out their activities for the NFP No past or current allegations of corruption, convictions or prosecutions involving other parties, their boards, officers or employees Prospective associates have adequate anti-bribery programmes Bribery is not part of the potential associate’s activities e.g., a group of proposed students is sponsored by a company and there is suspicion they have been sponsored as bribes for parents who are the company’s customers That the funds or assets brought by an associate are not from money-laundering of the proceeds of crime or bribery Whether potential joint venture partners are government owned - distribution of payments to officials who act as directors or officers of the joint venture could be construed as improper payments Whether there are FPOs involved with the associate Whether people in relevant business sectors, embassies and business associations are aware of any potential issues or concerns

2.4.3 Agents

SIGNPOST If dealing with agents during fundraising or recruitment (for example of students), refer to the seven principles of the ‘London Statement’ - a code of ethics brokered by the British Council in March 2012, in which agents are requested both to avoid and to declare conflicts of interest, as well as to be ‘transparent in fees to be paid by students and commissions paid by providers’. If an agent is working for more than one university then the agent should provide advice which is fair and balanced and meets the student’s needs.

21 Risk: Agents can play an important role in the activities of many NFPs. However, they are also a high risk area especially if there is substantial engagement with government officials. Agents can be used in several ways, for example by: • • •

Schools and universities to recruit students Arts organisations to arrange performing arts tours or negotiate exhibitions Voluntary organisations to deliver projects

Agents acting on their own initiative in their work for the NFP may become involved in bribery and thereby implicate the NFP without its knowledge. Agents can become involved in bribery in ways such as arranging visas, obtaining licenses and obtaining release of goods from customs, as well as in the payment of large bribes to secure contracts. An NFP could be liable for an offence under the Bribery Act for bribery by an agent acting on its behalf.

Prevention: • • •

• •

• •

Ideally, full due diligence should be used when appointing an agent, especially if they operate in a high-risk area.

Once appointed, agents should be monitored regularly to check that they remain in compliance with the NFP’s anti-bribery programme.

The potential agent should be required to provide details of its shareholders, directors, other clients, any involvement with public officials and its resources and capabilities to perform the required service and this information then needs to be independently verified.

The NFP should ensure that fees paid to agents are appropriate for the services carried out and do not provide scope for the agents to pay bribes.

Existing agents should continue to be subjected to due diligence as they may not have undergone the due diligence procedure originally, or substantive changes may have occurred since due diligence was last carried out.

The process for appointing and managing an agent should be underpinned by documentation and monitoring throughout the life of the relationship.

The NFP should also periodically seek the views of local organisations and the community to check current opinion of the agent’s standing and integrity.

SCENARIO: Agency for dance company pays kickbacks to theatres A dance company is arranging an overseas tour in a country with high corruption. It appoints a local dance agency to negotiate bookings with theatres. The agency charges high fees for its services saying that the negotiations are demanding and complex. The agency is successful in arranging the tour and the fees obtained from the theatres are at a good level. During the course of the tour, the dance company administrator learns that it is common practice for the theatre managers to ask for a kickback of fees. The administrator confronts the agency, which admits the payments but says that without them the tour would not have happened.

Comment: The dance company should have taken advice before entering into the tour and would have learned that it was likely that bribes would be required to gain bookings. The options would have been either not to become involved in such a tour or to insert checks and controls into the project, including a lower fee to the agency, detailed accounts and drawing on local advice such as the British Council representative and the British Embassy or High Commission. As bribes appear to have been paid, the dance company should consult its legal advisers with a view to reporting the concern to the authorities.

22

CASE STUDY: UK universities use agents extensively to recruit overseas students It was reported in a Times Higher Education investigation in 2012 that UK universities recruited more than 50,000 international students through commission payments to overseas agents, spending close to £60 million on the practice in 2010-11. Almost all money paid to recruitment agents was on a per-student commission basis. The survey found that in certain respects, most universities had little idea how their agents were operating. Some seven in ten said they did not know how many students were charged separate fees by agents in addition to the commission payments made by the universities. A 2012 investigation by The Daily Telegraph found official agents boasting that they could secure places for overseas students with far worse A-level results than those expected of British pupils.

Comment: Due diligence needs to be carried out on agents before appointing them and then they need to be monitored closely to prevent bribes being given to agents by families of prospective students. Another risk is that agents acting on commission from a university might not reveal this to prospective students and advice is presented as being given impartially when it is not. Universities should monitor their agents closely to ensure their agents declare if they are working under commission and that they are not receiving bribes from applicant students.

SCENARIO:License for loan of artefact for an exhibition in the UK A UK museum is mounting a major exhibition about an ancient civilisation. An artefact held in the country where the civilisation was located is of highest importance to the exhibition but the country authorities are known to be reluctant to release the artefact, ostensibly on grounds that it is too delicate to travel. The UK museum has appointed at short notice a local dignitary who claims high level contacts as its representative to negotiate with the Head of Antiquities in the Culture Ministry.

The representative has asked for a substantial fee but assures the UK museum it will be money well spent as he is sure he can negotiate the license. He keeps to his word and the licence is given within a few days of the representative being appointed.

Comment: The UK museum may have associated itself with bribery as it appears to have appointed an agent without due diligence, who is not an art expert and has been given a substantial fee which allows room for a bribe to be paid. The surprisingly speedy resolution of the matter is a concern, as is the involvement of a Foreign Public Official. The museum needs to investigate how the approval was obtained and if bribery is suspected take appropriate action such as seeking legal advice and reporting the suspicion to the UK authorities.

2.4.4 Joint ventures Risk: An NFP entering into a joint venture (‘venture’) will be attaching its reputation to the venture and may also be liable criminally under the Bribery Act and in the civil courts if the venture becomes involved in bribery. Some NFPs, notably universities, are investing in or controlling joint ventures such as overseas campuses, and some museums and galleries are expanding nationally and globally. Such ventures may involve interaction with the local government and FPOs. Prevention: If the NFP has effective control of a venture it should require the venture to have policies and procedures that align to the NFP’s anti-bribery programme. As with agents, the NFP should carry out due diligence before entering into joint ventures and should have a procedure to assess the existence and scope of issues that could affect its partners or the operation of the ventures. If an NFP does not have effective control then, following due diligence, it should require the venture to have an antibribery programme that is consistent with that of the NFP. Otherwise the NFP might be associated with activities that are of a lesser standard than that it sets for itself. How this is accomplished will depend on the degree of influence that the NFP has and the willingness of its partners to accept an anti-bribery programme. If the partners fail to implement adequate anti-bribery procedures then the NFP may be faced with the difficult task of withdrawing from the venture if it believes that bribery is likely to take place.

23

SCENARIO: Joint venture in SE Asia involving construction A UK school has entered into a joint venture on a 30% minority basis with a school in a South-East Asian country known for high risk of corruption, to form a joint academy which will deliver joint courses in the country as well periods of study in the UK. Comment: There are several high-level risks. The venture is located in a country known for corruption and entails a major construction project, foreign public officials (FPOs) are involved and the school is a minority partner, relying on its partner to manage the project. According to many surveys, the construction sector has the highest risk of bribery. NFPs engaged in joint ventures should ensure: • • • •

•

Contracting and purchasing are highly vulnerable to bribery and kickbacks

Due diligence is carried out on partners before commitment to the venture The anti-bribery programme of the venture is adequate and that the venture has contractual provision for observance of the programme They do not rely entirely on partners for anti-bribery measures but oversee and monitor the projects as well Preventive measures and monitoring are carried out to ensure that any interactions with Foreign Public Officials do not involve benefits for them and risk an offence under the UK Bribery Act They report publicly on ventures, how the anti-bribery programmes are applied and the results of monitoring

2.4.5 Suppliers and contractors Risk: Contracting and purchasing are highly vulnerable to bribery and kickbacks. Some NFPs have significant purchases of supplies and services, commission construction projects which are in a sector prone to corruption and they are increasingly outsourcing critical activities such as information technology, research or teaching. Any supplier can be a risk to the NFP if it is paying or receiving bribes as part of its association with an NFP. Apart from legal risk, corrupt suppliers are a risk to the NFP’s operations – they represent an unstable supply source with possibly loss of critical supplies owing to bribery investigations, they cannot be relied on in negotiations and they may attempt to bribe employees.

Prevention: Due diligence should be applied to prospective suppliers on a systematic, reasonable and proportionate basis, recognising that there may be many suppliers in a supply chain. The NFP should communicate its anti-bribery programme to bidders and suppliers; require contractually that suppliers and contractors have adequate anti-bribery programmes and carry out appropriate monitoring to ensure their compliance.

2.4.6 Subsidiaries and investments Risk: An NFP’s reputation is also at stake and dependent on the behaviour of all aspects of its operations, including subsidiaries and any significant investments. Some universities, for example, are forming subsidiaries to carry out commercial ventures and investing in ventures. The NFP could be liable legally for the actions of a subsidiary that becomes involve in bribery.

Prevention: If an NFP has effective control of a subsidiary, regardless of the location of the subsidiary or the nationality of its decision-making management, the NFP should require the same level of implementation of its anti-bribery programme as that of its own. This requirement may be difficult to meet in some countries where anti-corruption efforts are weak and foreign investors are not allowed to hold a controlling interest in local business entities. In an extreme case of concerns that a subsidiary or investment is involved in bribery or other corrupt practices, the NFP may need to contact law enforcement agencies or disengage from the investment. Investments in ventures need attention too.

Good due diligence and monitoring form the foundation of a reasonable and proportionate approach.

This also applies to a significant investment, in which a scandal could be as damaging as if it were a subsidiary.

24 2.5 COMMUNICATION AND TRAINING Principle: The organisation builds awareness and understanding of its anti-bribery programme among its Board, employees, volunteers and relevant stakeholders through communication and appropriate training.

It reports publicly on its anti-bribery measures.18 2.5.1 Communication Communication and training are critical areas for countering bribery. Communication is the way an NFP will let its employees, volunteers, associates and other stakeholders know its stance on anti-bribery and the detailed policies and procedures for implementation of the anti-bribery programme. Messages will need to be renewed regularly to ensure employees, volunteers, and contractors working within the NFP do not forget the importance of the anti-bribery programme in their daily work. Emphasis will need to be placed on those employees who are most at risk, such as those in the purchasing department or capital assets procurement.

External communication of the antibribery programme emphasises the NFP’s commitment that it will not tolerate bribery; this allows funders, sponsors, associates and the public to understand the ways in which it is addressing the issue

External communication of the anti-bribery programme emphasises the NFP’s commitment that it will not tolerate bribery; this allows funders, sponsors, associates and the public to understand the ways in which it is addressing the issue. In this way the NFP can build the confidence of stakeholders in its antibribery measures and at the same time deter those who might wish to solicit bribes. Public reporting is a significant way of communicating externally.

2.5.2 Training All relevant employees and Board members should, as part of regular organisational training, receive information about the anti-bribery programme. They should be required to attend training courses within a short period after launch of the anti-bribery programme and then at regular intervals. This will enable the core content of the anti-bribery programme to be communicated but importantly will allow employees to understand the programme in depth and discuss any issues or concerns.

The feedback from the training will be valuable in indicating how well received it is by employees and may also help in shaping improvements to the programme. Formal training can be supplemented by informal gatherings at which employees can exchange experiences and solutions. This can overcome initial reactions to the effect that guidance material is theoretical, impractical and not relevant to the individual employee. Recruits (including appointments to the Board) should be given training in the programme following joining the NFP. Tailored training should be provided for functions which have particular needs and risks such as procurement, those who manage overseas contracts, managing projects or agents or employees who travel to or work in countries known to have corruption risks. Training should also be considered for important associates such as project partners or agents.

CASE STUDY: Good practice communication and training A charity works in education in sub-Saharan African countries. Its anti-bribery programme delivers workshops which introduce the definitions and legal implications of bribery; an anti-bribery champion is appointed from each office; and country-specific example scenarios and proven methods of resisting bribery are appended to the policy.

2.5.3 Advice and whistleblowing channels Advice lines and whistleblowing channels can have an important role in an effective anti-bribery programme and many bribery violations have been exposed through whistleblowing. While attention is largely given to whistleblowing channels, management should encourage employees to use the advice lines before considering raising a matter in the whistleblowing channel. Very often an employee’s concern may be simply getting advice on how to deal with a dilemma or interpretation of a policy. The whistleblowing line should be designed for raising concerns or allegations. Whistleblowing channels can

18. MoJ Guidance, Principle 5, Communication, including Training: “The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.”

25 also be made available for third parties such as suppliers or project partners. Advice and whistleblowing channels should be confidential or anonymous according to the laws of the particular jurisdiction. The use of whistleblowing channels is growing, fostered by legislation such as the UK Public Interest Disclosure Act (PIDA) 1998 which applies across the private and voluntary sectors as well as to public bodies.19

SIGNPOST

It should be made clear that the use of whistleblowing channels is encouraged and employees and volunteers will not be victimised or suffer for whistleblowing

If your NFP already has advice and whistleblowing channels then include provision for reporting concerns about bribery. If such channels are not in place you could consider introducing them to your NFP as they have wider value than just inquiries and concerns other than just those relating to bribery.

It should be made clear that the use of whistleblowing channels is encouraged and employees and volunteers will not be victimised or suffer for whistleblowing. If whistleblowing channels are not effective, employees lack confidence in the confidentiality or think they could be penalised, the danger is that employees will go outside the organisation to media. Such an outcome would be unsatisfactory for the NFP and also for the employee as there would not be an ordered way in which the concern could be addressed. Thus, it is in the interest of all parties that whistleblowing channels work well.

Responsibility for managing the advice and whistleblowing channels should be allocated to a staff unit, which will report on the management and performance of the channels to senior management or a Board member. It could be decided that greater confidence would be provided to employees if the whistleblowing channel were to be supplied by an independent provider appointed by the NFP. Security can be provided, for example by confidential telephone services or intranet sites through which employees and partners can address concerns or pass information. To make such services effective, genuine concerns must be listened to and acted upon in a timely manner. Reports should be given periodically to senior management and possibly the Board on the issues raised, the actions taken, the promptness with which inquires were dealt and the satisfaction levels of users of the channels. There should be a system in place for proper documentation and filing of the concerns raised; their handling and the outcomes. The experience gained from the advice lines and whistleblowing channels can be used to improve the anti-bribery programme.

2.5.4 Public reporting Public reporting is an increasingly important aspect of external communication. NFPs can report to stakeholders on their anti-bribery programme and its progress – for example, in the Annual Review.

There has been substantial growth in public reporting by organisations including NFPs. Stakeholders are expecting greater transparency of organisations on how they act responsibly and sustainably on material topics and the risks that could affect achievement of organisations’ aims. Public reporting is important to countering bribery as transparency is a defence against corruption. Reporting can give confidence to stakeholders on the NFP’s anti-bribery measures and performances, enhance the reputation of the NFP for not paying bribes and assist in deterring attempts at bribery by making known the commitment of the NFP to not paying bribes. Reporting also drives performance.

CASE STUDY: Public reporting by NGOs Stakeholders wish to be able to find easily the information they need and the Global Reporting Initiative (GRI) was formed for this purpose. Many organisations align their reporting to the GRI Sustainability Reporting Framework which includes integrity and anti-corruption indicators. The GRI has also developed sector supplements including one for NGOs. Amnesty International and WWF International report aligned to the Supplement Framework. A small number of universities report against the GRI Framework including the University of Massachusetts Dartmouth and Ball State University.

19. http://www.legislation.gov.uk/ukpga/1998/23/section/1 See also Charity Commision guidance http://www. charitycommission.gov.uk/detailed-guidance/protecting-your-charity/guidance-for-auditors-and-independent-examiners/ the-public-interest-disclosure-act/

26 Reporting by an NFP should reflect its size, nature of the organisation and the demands of its stakeholders. Consideration should be given to publishing not only the code of conduct and anti-bribery policies but the risks identified and the effectiveness of measures being taken. Large charities are already required by law to report on their risks.

2.6 MONITORING AND EVALUATION Principle: The organisation monitors the implementation and effectiveness of its anti-bribery programme.

The results of monitoring are reviewed regularly by the Board and guide improvements to the programme as necessary.20 Monitoring and evaluation is the stage where the NFP checks the degree to which its anti-bribery programme is working effectively, meeting the anti-bribery objectives of the NFP and is in compliance with the Bribery Act and other laws. NFPs operate within ever-changing environments, internally and externally, and the monitoring and evaluation process should be regular and used to generate any necessary improvements. Lessons will be learned from incidents whether allegations without basis or actual bribery incidents.

The NFP should assign responsibility for monitoring the anti-bribery programme to a senior manager.

The Board (or a Board committee) should carry out oversight of the effectiveness of the anti-bribery programme. The Board should receive reports on the results of regular monitoring, internal audits, external assurance and reviews and assessments by management and details of actions they have initiated. The reports should identify deficiencies and recommendations for actions and improvements. It is the responsibility of the Board, in discussion with management, to decide whether actions taken were appropriate to deal with the risks and to improve the effectiveness of the anti-bribery programme and what further steps are necessary.

SIGNPOST Appoint a person to be responsible for ensuring periodic reviews to check that the bribery risks remain low and that the existing anti-bribery programme is adequate. Look out for changes in circumstances such as starting activities involving overseas countries. Document all reviews and make reports periodically to the Board. Obtain an independent view if you can, or benchmark peer NFPs to check that your approach is appropriate and working.

Internal audit Internal audit is part of the monitoring process. It is usual for internal auditors to conduct operational as well as financial audits. In some organisations the internal auditor is also involved in an advisory capacity when employees have concerns about the propriety of a transaction or seek guidance.

Certification and independent assurance Certification and independent assurance are part of monitoring. An independent review can assure the Board and management about the design and working of the anti-bribery programme, contribute to the programme’s improvement and help promote the reputation of the NFP for integrity. Certification or assurance can also be valuable when seeking grants and donations as evidence of the quality of the NFP’s systems. Certification and assurance of anti-bribery programmes are in their early stages but NFP’s may wish to consider undertaking certification using emerging standards and procedures, such as the British Standards Institute’s anti-bribery certification standard.21

20. MoJ Guidance, Principle 6, Monitoring and Review: “The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.”

21. BSI 10500 Specification for an anti-bribery management system (ABMS), BSI, 2011

27

3.

A zero tolerance policy for bribery does not mean that an NFP will be free from bribery.

Incidents may occur and can range in severity from a small facilitation payment to large bribery used to win contracts.

NFPs should have in place procedures to manage and learn from incidents

MANAGING AND REPORTING AN INCIDENT A zero tolerance policy for bribery does not mean that an NFP will be free from bribery. Incidents may occur and can range in severity from a small facilitation payment to large bribery used to win contracts.

NFPs should have in place procedures to manage and learn from incidents. A recent survey of 120 charities showed that just under half of respondents had a Major Incidence Response Plan for any allegation of fraud and corruption but only 44% of these indicated that their plan was comprehensive.22 Incidents can be brought to light in many ways. These can include self-assessment, internal audits and external assurance, allegations received through the whistleblowing channel, comments made by employees and third parties such as media, fellow NFPs, associates or members of the public. The reports may vary in substance from vague allegations to charges supported by substantial documented evidence.

The NFP depending on its exposure to bribery should design procedures to respond to an incident should it occur. The procedures should cover the following aspects: • • • •

•

• • •

Notification to senior management and the Board Appointment of a manager to handle the incident response An internal and external communication plan which can be adjusted according to the severity of the incident Immediate and thorough investigation initiated as soon as the allegation or incident is found or notified – delay can result in loss of evidence, aggravation of an offence, uncertainty among employees and exposure to adverse media comment Consultation with legal advisers to decide if an allegation is of sufficient weight and credibility to merit self-reporting23 to the UK authorities and if relevant, to authorities in other jurisdictions such as the US Department of Justice – then, if judged to be required, report the incident Documentation of the investigation Application of appropriate sanctions Using the experiences to improve the anti-bribery programme and develop case histories for use in training

A critical decision for the NFP when becoming aware of an allegation of bribery is to decide whether to self-report to the authorities. Legal advice should be sought on this, and charities can also refer to the Charity Commission guidance which notes that serious incidents should always be immediately reported to the Charity Commission.24 The concern for the NFP is whether the incident has substance or is a vague allegation, and whether it involves a material bribe. In this context, the regulatory or investigating authorities may act in relation to violations of other UK laws, such as the Proceeds of Crime Act or money laundering legislation, or report the incident to overseas jurisdictions laws.

SIGNPOST If an NFP finds a credible allegation of bribery then, subject to the nature of the incident and legal advice, it should self-report to the relevant authorities. Failure to do so, with subsequent discovery by regulatory or enforcement authorities of the incident, could lead to a hostile prosecution with more severe penalties than if convicted following self-reporting.

22. Managing charities – Risks and opportunities: a leadership survey, Baker Tilly, Winter 2011/2012 23. Employees and others may also be obliged to report under money laundering regulations.

24. http://www.charitycommission.gov.uk/running-a-charity/your-charitys-work/protecting-your-charity/reporting-seriousincidents/

28

APPENDIX 1: CHECKLIST MONITORING Ind. No.

Indicator

1

There is a public policy of zero tolerance of bribery

2

The policy of zero tolerance of bribery has been formally approved by the Board of Trustees or equivalent body

3

The NFP has a definition of what it means by bribery

4

The Board commits to and oversee the implementation of the programme

5

The Board oversees implementation of the programme

6

The NFP commits to being compliant with all relevant anti-bribery laws

7

The programme is designed and maintained based on regular assessment of the NFP’s particular risks of bribery

8

The programme is designed and implemented with anti-bribery policies and procedures that are effective and proportionate to the NFP’s particular risks, circumstances and culture

9

An equivalent programme is required of associates such as agents and other intermediaries, contractors and suppliers

10

The NFP commits to anti-corruption voluntary initiatives such as the Global Compact

Commitment y/n?

Commitment in plan? y/n

Comment ref no:

Evidence ref no:

29

COUNTERING SPECIFIC RISKS Ind. No.

Indicator

11

Facilitation payments are prohibited and procedures implemented to prevent them

12

There are policies and procedures for gifts, hospitality and expenses to ensure they are not used as subterfuges for bribery

13

There are policies and procedures for managing conflicts of interest

14

If the NFP is investing in a major venture in a country prone to corruption it, it carries out due diligence on its partners and monitors the venture to ensure bribery risk is countered

15

If the NFP is engaged in activities involving a sector prone to bribery risk such as construction or logistics, it assesses the risks and implements proportionate measures to counter the risks

16

If the NFP develops and owns significant intellectual property, it assesses the risk of bribery being used to enable theft of the intellectual property and implements measures to counter the risk

17

Procurement functions are reviewed for risk and proportionate anti-bribery controls implemented

18

If the NFP is reliant on agents or joint ventures operating in countries prone to corruption it assesses the risks of bribery and implements measures to counter the risks

Policy y/n?

Procedure y/n

Policy or procedure in plan?

Comment ref no:

Evidence ref no:

30 IMPLEMENTATION Ind. No.

Indicator

19

The programme is implemented consistently throughout the NFP’s organisation

20

Reasonable and proportionate due diligence is carried out on business partners including agents and other intermediaries, suppliers and contractors

21

Associates are required contractually not to engage in bribery

22

If commercial activities involve contacts with Foreign Public Officials, the NFP implements measures to ensure compliance with the UK Bribery Act 2010

23

The NFP takes part in collective action to develop and implement anti-corruption approaches

24

Continuing appropriate training is carried out covering all trustees, managers, employees and volunteers so that they clearly understand the NFP’s programme, know the NFP’s expectations and the sanctions procedure in the event of a violation

25

Tailored training is provided to key high risk associates including agents and other intermediaries, contractors and suppliers

26

Human Resources policies and procedures for trustees and employees align to the programme

27

The programme is communicated in an accessible way to employees, volunteers and associates

28

The NFP reports publicly on the design and effectiveness of its programme

29

Guidance on the programme is provided in an accessible way to employees and volunteers

30

Channels are provided for employees and volunteers to seek advice on the programme such as access to managers and a hotline

31

Secure and accessible whistleblowing channels are implemented through which employees and others can raise concerns (‘whistleblowing”) without risk of reprisal

32

There is a system of internal controls to counter bribery

33

There is appropriate separation of duties for financial transactions

34

Accurate books and records are maintained and are available for inspection that properly and fairly document all financial transactions

35

The programme is fully documented including policies and procedures and their implementation and relationships with associates

Policy y/n?

Procedure y/n

Policy or procedure in plan?

Comment ref no:

Evidence ref no:

31 MONITORING Ind. No.

Indicator

36

The NFP monitors the implementation and effectiveness of the anti-bribery programme

37

The internal control systems, in particular the accounting and record keeping practices, are subjected to regular review and audit

38

The programme is updated and improved regularly to reflect the results of reviews and risk assessments

39

The results of monitoring are reviewed regularly by the Board of Trustees which guides improvements to the programme as necessary.

40

Certification or external independent review is undertaken as appropriate.

Policy y/n?

Procedure y/n

Policy or procedure in plan?

Comment ref no:

Evidence ref no:

32

APPENDIX 2: QUICK-START GUIDANCE STEP 1: Start here – assess your risks and decide whether to follow the ‘quick-start’ approach •

• •

• •

Many NFPs, such as those operating only in the UK with no overseas contacts, will have low risk of bribery. Even so they should make sure they are fully aware of the provisions of the UK Bribery Act and consider implementing a simple anti-bribery programme.

Use the Risk Check below to see if your NFP is likely to be low risk. This simple checklist is designed to allow your NFP to judge whether it is likely to encounter some of the main types of bribery risk.

If your NFP can answer yes to any of the risks, it will need to consider how to reflect these risks in its anti-bribery programme. If your NFP does not appear to be exposed to any of the risks listed in the Risk Check then it is likely to be lower risk.

This list is indicative only. An NFP without a ‘yes’ to any of the indicators should not conclude that it is immune from the risk of bribery.

Even if your NFP judges that it has lower risk, it should implement a basic anti-bribery programme and in all cases have a ‘zero tolerance’ policy in place.

RISK CHECK Does this apply to your organisation?

Operations in countries known to have high levels of corruption Activities based in the UK but involving overseas contacts such as recruitment of foreign students or receipt of exhibitions or artworks from abroad Using overseas intermediaries such as agents or joint ventures Dealing with Foreign Public Officials Bidding for public projects in countries known to have high levels of corruption Operations in countries where payment arrangements are difficult or the banking system does not work Depending on critical licenses in countries known to have high levels of corruption Engaging in substantial construction projects whether in the UK or overseas Overseas logistics are important to operations Substantial procurement Receiving payments originating from overseas such as student fees or donations Donations with ‘strings attached’ Board members or employees travelling to countries known to have high levels of corruption Operations in or travelling to countries where the conventional banking system is unavailable and/or organised crime or terrorist networks are a prominent threat Owning intellectual property of high commercial value Granting admissions or awarding qualifications Awarding of honours and benefits such as honorary titles or privileged access Substantial assets such as investments, a foundation or endowment Involved in the receipt or giving of hospitality and gifts

Yes/No

33

STEP 2: Commit to zero tolerance of bribery and decide whether to implement a simple anti-bribery programme Principle: Top-level commitment.

The Board of Trustees or equivalent governance body commits to and oversees the zero tolerance policy and antibribery programme, demonstrating visible and active commitment to the implementation of the programme.

•

Agreeing a zero-tolerance policy: All NFPs, irrespective of how they rate their risks, should have a policy of zero tolerance of bribery. The Board or equivalent body should formally agree this policy. It should also consider whether to implement an anti-bribery programme which will be proportionate in scope and depth to the assessed level of risk. The Board should discuss why it is important to have a policy and to implement a programme even if the risks of bribery are likely to be low. The statutory responsibilities and legal risks should be reviewed. The discussion and decisions should be documented and the commitment made public. The Board should make clear that it is firmly behind the anti-bribery commitment in its communications and statements.

STEP 3: Implementing a simple anti-bribery programme for low-risk NFPs Principle: Risk assessment The organisation undertakes a regular bribery risk assessment that underpins its anti-bribery programme.

•

Understanding your risks: Make sure you understand what bribery is and the various forms it can take. This will avoid the risk of overlooking an area of bribery risk. Many NFPs will consider that bribery risk is unlikely given the nature of their particular operations, especially if they operate only in the UK. Even so, bribery can always be a risk, for example in the purchasing function or when the organisation manages intellectual property of high commercial value.

•

Undertaking a risk assessment: Risk assessment can involve a simple approach. For example, identifying risk can consist of a simple discussion by the Board and management based on the experience of the NFP, brainstorming areas that might cause risk of bribery and then deciding if they are significant. Document the review by listing the risks, rating them with a traffic light system, and noting what mitigating procedures are or should be in place.

Principle: Effective anti-bribery policies and procedures The organisation designs and implements anti-bribery policies and procedures that are effective and proportionate to the organisation’s risks, circumstances and culture.

•

•

•

Designing your anti-bribery programme: Whatever your NFP’s size or however low its perceived risk from bribery, you can follow the process suggested in this Guidance. Quite apart from the provisions required by the Bribery Act, it is sound organisational practice to address bribery risk. This Guidance recognises that low risk NFPs will not need to invest the same effort or resources as NFPs with higher risk. Develop an anti-bribery programme that is suitable for you as a low-risk NFP. An anti-bribery programme is effectively a set of policies and procedures for each of your key risk areas, together with a top-level commitment and a process to communicate the policies and review their implementation.

Implementing your anti-bribery programme: Appoint a person to lead the design of any detailed policies and procedures your NFP has identified as necessary. Agree what to do to minimise the risks from bribery for your NFP. This will give the scope of your programme. Write any detailed procedures that are needed such as for gifts and hospitality, purchasing controls, relationships with partners including checks and due diligence, sanctions. Test these on your Board and employees.

Example - Gifts & hospitality: Make sure your NFP has policies and procedures for gifts and hospitality. These activities can occur for any NFP, and there can be risk of inappropriate activity. It is important that your employees and volunteers know the policies and how to handle situations where they may occur. Undue gifts or hospitality offered at the same time as discussion of a contract or grant could be considered bribery.

34

Principle: Due-diligence and procedures for third parties The organisation carries out reasonable and proportionate due diligence on potential associates before entering into contracts with third parties, and puts in place procedures for managing the associated risks on an on-going basis.

•

Carrying out due diligence on associates and intermediaries: Make sure potential associates are bona fide by simple checks such as references and web searches. Require payments to be made through banks. Proposals that payments or fees should be made in cash will be a red flag. Repeat due diligence periodically on associates to make sure they remain in compliance with your programme.risk NFPs will not need to invest the same effort or resources as NFPs with higher risk. Develop an anti-bribery programme that is suitable for you as a low-risk NFP. An anti-bribery programme is effectively a set of policies and procedures for each of your key risk areas, together with a top-level commitment and a process to communicate the policies and review their implementation.

Principle: Communication and training The organisation builds awareness and understanding of its anti-bribery programme among its Board, employees, volunteers and relevant stakeholders through communication and appropriate training. It reports publicly on its antibribery measures.

•

•

•

•

Internal communication: Appoint a person with responsibility for the programme. Communicate the programme to your people and include it in induction of recruits, regular training and employee terms of employment. Include a statement of your policy of zero tolerance of bribery in your employee contract. Provide Board, employees and volunteers with written details of the programme, and include reminders in relevant internal communications. Ensure procedures are implemented fully in purchasing or managing intellectual property.

Training: NFPs with low risk may not wish to invest in developing anti-bribery training but can look to sector associations to provide resources or work with other NFPs to provide joint training. TI provides a free training module.

External communication: Refer to the policy and anti-bribery programme on your website and describe how it is put into practice. Incorporate reference to the anti-bribery programme in your training. Refer to the anti-bribery policy and programme in other external communications to show that measures are in place and carry out periodic reviews. Although risks may be low, potential associates such as investors may want to know about the anti-bribery measures.

Whistleblowing: If your NFP already has advice and whistleblowing channels then include provision for reporting concerns about bribery. If such channels are not in place you could consider introducing them to your NFP as they have wider value than just inquiries and concerns other than just those relating to bribery.

Principle: Monitoring and evaluation The organisation monitors the implementation and effectiveness of its anti-bribery programme. The results of monitoring are reviewed regularly by the Board and guide improvements to the programme as necessary.

•

Conducting monitoring and evaluation: Appoint a person to be responsible for ensuring periodic reviews to check that the bribery risks remain low and that the existing anti-bribery programme is adequate. Look out for changes in circumstances such as starting activities involving overseas countries. Document all reviews and make reports periodically to the Board. Obtain an independent view if you can or benchmark peer NFPs to check that your approach is appropriate and working.

35

APPENDIX 3: RESOURCES RISK ASSESSMENT Diagnosing Bribery Risk, Transparency International UK, London, 2013 http://www.transparency.org.uk/our-work/publications Charities and risk management: a guide for trustees, Charity Commission, 2010 http://www.charity-commission.gov.uk/Publications/cc26.aspx OECD Risk Awareness Tool for Multinational Enterprises in Weak Governance Zones, OECD, 2006 http://www.oecd.org/daf/inv/mne/weakgovernancezones-riskawarenesstoolformultinationalenterpr ises-oecd.htm ANTI-BRIBERY PROGRAMMES Business Principles for Countering Bribery, Transparency International http://www.transparency.org/whatwedo/tools/business_principles_for_countering_bribery Business Principles for Countering Bribery, Small and Medium Enterprise (SME Edition), Transparency International, 2008 http://www.transparency.org/whatwedo/tools/business_principles_for_countering_bribery_sme_ edition The Bribery Act: Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing, UK Ministry of Justice, 2010 http://www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf A Resource Guide to the U.S. Foreign Corrupt Practices Act, The Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission http://www.sec.gov/spotlight/fcpa/fcpa-resource-guide.pdf Good Practice Guidance on Internal Controls, Ethics, and Compliance, OECD 2010 http://www.oecd.org/investment/anti-bribery/anti-briberyconvention/44884389.pdf Compliance Toolkit, Protecting Charities from Harm, Charity Commission, http://www.charitycommission.gov.uk/detailed-guidance/protecting-your-charity/protectingcharities-from-harm-compliance-toolkit/ DUE DILIGENCE Anti-bribery due diligence for transactions, Transparency International UK, 2012 http://www.transparency.org.uk/our-work/publications/10-publications/227-anti-bribery-duediligence-for-transactions ASSOCIATES Anti-corruption clause, International Chamber of Commerce, 2012 http://www.iccwbo.org/Advocacy-Codes-and-Rules/Document-centre/2012/ICC-Anti-corruptionClause/ Supplier workbook, Supplier Ethical Data Exchange (Sedex), 2013 http://www.sedexglobal.com/resources/supplier-workbook/ TRAINING Doing Business without Bribery, Transparency International UK, 2012 http://www.doingbusinesswithoutbribery.com/ http://www.transparency.org.uk/our-work/publications/94-ti-uk-doing-business-without-briberytrainers-handbook

36 RESIST: resisting extortion and solicitation in international transactions. A company tool for employee training, Transparency International and others, 2012 http://www.transparency.org/whatwedo/pub/resist_resisting_extortion_and_solicitation_in_ international_transactions COLLECTIVE ACTION Fighting Corruption through Collective Action: A guide for business, World Bank Institute and others, 2008 http://info.worldbank.org/etools/docs/antic/Whole_guide_Oct.pdf SELF REPORTING Compliance Toolkit, Chapter 3 – Fraud and financial crime, Section H, p43, Charity Commission http://www.charitycommission.gov.uk/our_regulatory_activity/counter_terrorism_work/compliance_ toolkit_index_3.aspx Reporting Serious Incidents – Charity Commission Guidance http://www.charitycommission.gov.uk/running-a-charity/your-charitys-work/protecting-your-charity/ reporting-serious-incidents/ FCPA Compliance Guidance 2012, Self-Reporting, Cooperation, and Remedial Efforts, p 54, US Department of Justice and Stock Exchange Commission, 2011 http://www.sec.gov/spotlight/fcpa/fcpa-resource-guide.pdf.

WHISTLEBLOWING Whistleblowing Arrangements Code of Practice, PAS1998/2008, BSI, drafted by Public Concern at Work http://www.pcaw.org.uk/bsi International Chamber of Commerce Guidelines on Whistleblowing http://www.iccwbo.org/Advocacy-Codes-and-Rules/Document-centre/2008/ICC-Guidelines-onWhistleblowing/ CERTIFICATION AND ASSURANCE BSI 10500 Specification for an anti-bribery management system (ABMS), BSI, 2011 http://shop. bsigroup.com/ProductDetail/?pid=000000000030238856 Assurance Framework for Corporate Anti-bribery Programmes, Transparency International, 2012 http://www.transparency.org/whatwedo/pub/assurance_framework_for_corporate_anti_bribery_ programmes PUBLIC REPORTING NGO Sector Supplement, Global Reporting Initiative https://www.globalreporting.org/reporting/sector-guidance/ngo/Pages/default.aspx Global Compact-Transparency International Reporting Guidance on the 10th Principle against Corruption http://www.unglobalcompact.org/docs/issues_doc/Anti-Corruption/UNGC_ AntiCorruptionReporting.pdf

Transparency International UK 32-36 Loman Street London SE1 0EH Tel: 020 7922 7906 Fax: 020 7922 7907 info@transparency.org.uk www.transparency.org.uk