Part 6: Entertainment and hospitality expenditure

Controlling sensitive expenditure: Guide for public organisations.

6.1
Entertainment and hospitality can range from tea, coffee, and biscuits to organisation-funded hosting at a sporting or cultural event.

Issues and principles

6.2
Expenditure on entertainment and hospitality is sensitive because of the range of purposes it can serve, the opportunities for private benefit, and the uncertainty as to what is appropriate.

6.3
The Institute of Internal Auditors New Zealand identified the following five business purposes for entertainment and hospitality expenditure for private and public organisations:11

  • building relationships;
  • representing the organisation;
  • reciprocity of hospitality where this has a clear business purpose and is within normal bounds – acceptance of hospitality is expected to be consistent with the principles and guidance for provision of hospitality;
  • recognising significant business achievement; and
  • building revenue.

6.4
The principles of a justifiable business purpose and moderate and conservative expenditure are particularly relevant here. Some public organisations might pay for hospitality to raise funds. We expect expenditure to be subject to controls for monitoring and reporting.

Guidance

6.5
We expect entertainment and hospitality expenditure to be:

  • subject to policies that provide clear guidance about what is an acceptable level and type of expenditure and appropriate venues (for example, on seasonal occasions, such as a Christmas function);
  • provided only when it is cost-effective and appropriate for the occasion;
  • subject to policies that include a general prohibition on organisations paying for alcohol, except in specific circumstances and within prescribed limits;12 and
  • supported by appropriate documentation that includes receipts, names of parties entertained, and the reasons for the entertainment and hospitality.

Recognising achievements

6.6
Organisations often spend money on events to recognise milestones, such as farewells, retirements, and staff achievements. This can include spending on functions, gifts, and other items.

6.7
Expenditure on farewells and retirements should not be extravagant or inappropriate. The principle of moderate and conservative expenditure is particularly relevant.

6.8
We expect any expenditure on recognising achievements or other milestones to be pre-approved at an appropriate level of management, and to be moderate, conservative, and appropriate for the number of years of service in the case of service milestones.

Receiving hospitality

6.9
We recognise that receiving hospitality is not strictly sensitive expenditure. This is because it does not involve expenditure on the part of the organisation. However, it is still a sensitive issue that organisations need to manage carefully. It is important that receiving hospitality does not affect an organisation's or an individual's decision-making because this could be perceived as acting without impartiality or integrity.13

11: Institute of Internal Auditors New Zealand Incorporated (1996), A Management Guide to Discretionary Expenditure, Auckland.

12: As noted earlier, there is increasingly an expectation that public organisations not allow the use of public money to purchase alcohol. Where public organisations are still meeting the cost of alcohol, they will need to have a clear justification.

13: Office of the Auditor-General (2020), Managing conflicts of interest: A guide for the public sector, Wellington, oag.parliament.nz.