It’s that time of year when gifts among friends are common. If those friends are in private firms or public agencies, however, those gifts can cost both parties their careers. Even the appearance of impropriety can create a public relations nightmare. As federal money flows through state and local agencies, there is an increased danger that federal contacts could misinterpret the generosity of firms as an attempt to influence the procurement process. Firms must act in compliance with applicable gift-giving laws, which vary depending on the branch of government or particular agency.
Often, holiday parties and gifts are seen as tokens of friendship rather than attempts at influencing decisions. However, some firms try to evade spending restrictions by taking full advantage of “friendship exemptions” and dividing bills for gifts among several people to stay under spending caps. With increased scrutiny of government expenditures, previously acceptable gifts could lead to criticism, contracting constraints, or criminal charges.
While most professional service firms do not try to get around gift limits, many are unaware of gift-giving rules or how the rules are changing. Few companies have well-established compliance mechanisms. Here are some tips for establishing in-house policies:
- Learn the laws and monitor changes. Firms may not be able to pay an official an honorarium, but it may be acceptable to invite a public official to speak and donate the honorarium to the official’s charity of choice. The Department of Justice has information on what is and is not acceptable for government employees to accept.
- Recognize the difference in rules for executive, legislative, and administrative agencies. Misapplying limits may jeopardize a firm’s credibility and the official’s reputation.
- Communicate limits to those performing public relations for the firm, including consultants.
- Develop a compliance mentality. Implement audit systems and make sure internal groups are not in charge of policing themselves.
- Design an internal compliance coding system for government relations expenditures to track everything sent over the holidays, ensuring that annual spending limits are not exceeded.
As we see more federal money being spent directly or through state agencies and local governments for infrastructure rehabilitation and expansion, we will also see increased vigilance in the federal monitoring of the state and local disbursement of that money. There is an administrative emphasis on eliminating corruption in the process and that emphasis is likely to focus on the relationships between government officials and private sector contractors. So celebrate the holiday season responsibly.
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