As a minimum, every charity must assess the risks it faces as a result of the Bribery Act 2010.
As has been well reported in the national press, the Bribery Act 2010 was finally enacted on 1 July this year. The Bribery Act 2010:
- codifies existing common law
- consolidates existing statutes
- creates new offences.
The most onerous new offence created is that of the failure by commercial organisations (including charities) to prevent bribery. This offence is committed if a person associated with the organisation proffers a bribe so as to retain or obtain a commercial advantage.
This offence is onerous for a number of reasons.
- The offence applies to acts undertaken by associates – which could relate to a large number of people, some of whom you may have little control over.
- An offence is committed if an associate just offers a bribe – no money need actually change hands.
- The associate need not have been convicted under the Act.
- It is a strict liability offence – that is, no element of negligence needs to be proved for an offence to have been committed.
- There is no limit to the fines which can be levied. Assuming that a bribe has been offered/ made, the main defence for a commercial organisation is to demonstrate that it had adequate procedures in place to prevent acts of bribery.
Adequate procedures
Like a lot of modern law, the Bribery Act 2010 is rather unsatisfactory in providing definite answers; the Act basically delegates the assessment of what adequate procedures are to the courts. Until a number of cases have been brought before the courts, there is no guidance carrying the force of law for charities to follow.
However, the Ministry of Justice has issued guidance together with a Quick start guide to the Act. The Charity Commission has also updated its Compliance Toolkit to cover the Act and guidance for NGOs has been published by Bond (the UK membership body for NGOs working in international development). Taking into account the guidance, we suggest some practical actions which you might wish to take.
Do you actually need to do anything?
The Bribery Act does not compel you to do anything and it would be easy to ignore it, but is that an acceptable response? For a small owner-managed business it may be that the risks are small and that the owner/manager would be the only person in a position to proffer bribes and to suffer any loss arising (from the possible unlimited fines).
However, for charities we don't think that doing nothing is acceptable, for a number of reasons.
- Charities exist to help their beneficiaries – any loss to the charity would represent a loss to those beneficiaries, rather than to those who were at fault.
- Trustees are volunteers with limited day-to-day involvement – but they bear overall responsibility for the charity.
- There is a presumption that trustees will undertake reviews to identify the risks to which the charity is exposed. While the risk of bribery might be considered small, the impact of any breach could be significant.
What is the potential impact?
As well as unlimited fines, there are a range of other possible consequences. Probably the most serious would be the reputational loss for the charity which could adversely impact future funding. Since bribery is a crime, the Proceeds of Crime Act could apply if the charity has received money (for example a grant) as a result of paying a bribe and the courts could confiscate the entire grant.
For trustees the position could be more serious. Under charity law if a charity suffers loss from trustees' negligence, then the trustees could be obliged to make good that loss. If the charity had not put in place procedures to prevent bribery and suffered losses as a result, the trustees could be held to be negligent.
Risk assessment
As a minimum, every charity must assess the risks it faces as a result of the Bribery Act 2010.
Without such a risk assessment, trustees have no basis for either taking further action or to justify why no action is required.
How to assess risks?
So far as bribery is concerned, there are two areas of risk.
1. The receipt of a bribe by staff which influences their decisions.
2. The payment of bribes to procure a commercial advantage for the charity (it is this area which the new offence covers).
For most charities considering these questions and their implications is unlikely to be an onerous exercise. We would assume that for most small UK-based charities few, if any, risks would be identified.
Factors charities operating in the UK should consider
Past history
Have there been instances of bribes being paid or requested in the past?
Activities
What activities are undertaken? What scope is there for bribery?
For example:
- If a charity incurs significant external expenditure (e.g. in constructing properties) is there scope for contractors to proffer bribes?
- Where a charity is tendering to provide services, is there a possibility that bribes might be requested or proffered by staff?
Business relationships
What entities does the charity have relationships with? Do they have appropriate policies and procedures in place to prevent bribery? For example:
- public sector tendering processes are usually designed to prevent bribery
- most grant giving charities have written policies as to how grants are allocated and decisions are made by committee, rather than any one individual
- grant funders usually have formal processes setting out how such income is allocated.
Third-party reliance
What third parties provide services for the charity? Is there scope for them to proffer bribes on behalf of the charity? For example, could an external fundraiser use funds raised to proffer bribes?
Responding to the risks
The Ministry of Justice's Quick start guide states that "if there is very little risk of bribery... you may not feel the need for any procedures to prevent bribery". While this might be attractive, given the risks of non-compliance with this legislation, to do nothing is probably unwise. This does not mean that substantial additional procedures are needed. All charities should already have systems in place to cover the control of expenditure which should protect against the payment of any bribe by charity staff and the proffering of bribes by third parties in return for favourable treatment of contractors. On this basis, our suggested actions are given in the table to the right.
There has been a lot of press comment relating to the Bribery Act and its potential impact. However, we believe that for most UK-based charities, the Act is unlikely to pose a significant burden. As people become used to the requirements, it will become just one part of the annual risk assessment and management process.
Suggested activities charities should undertake
Update policies
Your policies should be updated to cover bribery and should state that you have a zero tolerance approach. You might like to make this available on your website – for an example, visit www.smith.williamson.co.uk/ anti-bribery-corruption-policy
Staff handbook
Your staff handbook should refer to bribery and include a specific statement that acts of bribery may constitute gross misconduct. The handbook should also give guidance to staff as to what to do if they are offered a bribe or a bribe is solicited from them.
Education
Trustees and key staff should be made aware of the Act and all staff should be made aware of any changes to the staff handbook.
Recording
A system for recording any bribes offered or solicited should be implemented. This should simply be added to existing systems for whistleblowing and reporting of frauds. (If these do not exist, a requirement in the staff handbook that acts of bribery should be reported to the chief executive or the chairman would probably suffice).
Reliance on third parties
If you have any significant reliance on third parties (perhaps a fundraising company), as a minimum you should satisfy yourselves that the third party has adequate procedures in place. This might be as simple as asking the third party to confirm this in writing.
In addition, if your risk assessment highlights any specific risks then you should implement appropriate procedures in respect of those risks.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.