“But I consider the client a friend, and I’ve been giving him gifts paid for by the company for ten years now. I have to, or we might lose his business. The whole industry gives these kinds of gifts. This limit for reimbursement is ridiculous!” The foregoing conversation is a real one that I had with a sales manager. Details have been changed to protect the clueless.
We all know that we need a good gifts and charitable donations policy. Many of the highest profile bribery prosecutions, in the U.S. and abroad have dealt with gifts, hospitality, third-party travel, and charitable contributions violations. Excessive gifts or charitable contributions meant to influence a decision-maker for an unfair business advantage can cause havoc, as well as violations of the FCPA, UK Bribery Act, and local law.
Many compliance officers struggle when putting together a gifts and charitable donations policy. What are best practices? What is normal? What is excessive? And most importantly, what is defensible to a prosecutor?
We at Spark Compliance have researched this issue often. We constantly give advice and write such policies for our clients. To help you with this task, we’ve compiled benchmarking and best practices for gifts and charitable donations. Previously we wrote about best practices relating to entertainment and third-party travel policies. You can read that post HERE.
Benchmarking Your Gifts Policy
Many companies set the threshold amount for gifts at $50.00. A survey of Fortune 500 companies showed that more than 90 percent of the respondents set gift limits at $250 or less, with more than 65 percent reporting gift limits of $100 or less.
Additionally, in most companies with which we have consulted, pre-approval by compliance or legal is required for all gifts to government officials.
In many companies, Internal Audit performs spot-checks of gifts receipts to ensure the process was properly followed.
Best Practices for Gifts Policies
A gift policy should:
Include specific examples describing the type of acceptable gifts.
Specify a maximum threshold amount. Anything above that amount must be pre-approved.
Require that all gifts to government officials be pre-approved and more closely scrutinized and receive higher levels of due diligence prior to deployment.
Encourage the use of gifts with company logos or that reflects the company’s products and services.
Encourage “group” gifts to a specific department or team as opposed to a specific person.
Prohibit the giving of cash, gift cards, or other cash equivalents.
Limit the number of gifts to the same individual or group in a given time period.
Require that all gift transactions be documented with all receipts and supporting documentation included.
Gifts above a certain threshold should require pre-approval (see benchmarking above). The pre-approval process should require that the following information be disclosed:
Description of the gift
Amount of the gift (with supporting documentation, if available)
Recipient(s) of the gift (include full name, position, and company)
Recipient’s current relationship with the company (e.g., client, vendor, prospective client, former client, etc.)
Whether the recipient is a government official
The business purpose for providing the gift
Benchmarking you Charitable Contribution Policy
Most major companies require compliance or legal department approval for contributions over $1000 to charitable contributions.
Many companies also divide the world into regions based on risk. For example, one of our clients allows charitable donations under $2500 to be given with little scrutiny throughout Europe, Australia, New Zealand, the United States, and Canada. For the rest of the world, similar due diligence is required for charitable donations under $1000. Charitable contributions above these amounts require higher due diligence regardless of location.
Nearly all companies Spark Compliance has consulted for have tracking policies for charitable contributions.
Best Practices for Charitable Donations
Establish a due diligence process to confirm that:
The charity is legitimate and established in accordance with applicable law.
Officers and directors of the charity are not affiliated with any governmental entity or client with whom the company has a business relationship.
Payments are not at the request of a governmental entity or client or conditioned on the promise of some benefit to the company.
Payment is consistent with the company’s charitable giving standards.
Ensure that your policy:
Requires certifications by the recipient that the charity is in full compliance with applicable anti-bribery laws and standards.
Requires that the charity provide audited financial statements if the contribution is beyond a certain threshold or is in other ways high-risk.
Requires a written agreement with the charity confirming the purpose of the payment and limiting the use of funds to that stated purpose.
Ensures that the funds are transferred to a valid bank account.
Requires confirmation or requests confirmation that the funds were used for the purpose intended.
Requires that all charitable contributions be documented with all receipts and supporting documentation included.
Should you wish for a review of your gifts and charitable donations policy, please contact firstname.lastname@example.org. This post is co-written by Spark Compliance’s CEO Kristy Grant-Hart and East Coast Vice President Ramsey Kazem.