From the Chair
TINZ new banner outside Auckland February event with Mark Sainsbury, Master of Ceremonies for the event
An engaged audience at TINZ’s first Auckland panel discussion of the year, How New Zealand Can Prevent Corruption and Why it Matters (25 February), highlighted the range of areas where the wider public believes that corruption exists in New Zealand.
Corruption is the abuse of entrusted power for private gain.
A challenge is that limited resources for investigation and few forums for discussion have fermented uncertainty about whether these beliefs are based on anecdote or could be supported with independent evidence.
In a recent public corruption case, a new immigrant, who pleaded guilty, was let off on the basis of lack of knowledge of the appropriate behaviour when dealing with the Auckland Council. This means that until there are cases before the Courts, there will continue to be little case law surrounding corrupt behaviours of this nature.
A new report published by PwC last month reveals that 55% of New Zealand firms have no incident response plan for cybercrime, or have one that is not yet operational. Yet there was very little public response from businesses regarding the PwC report.
Similarly, there was only limited response from the around 90,000 New Zealand independent sporting organisations to the voluminous Global Corruption Report: Sport published by the Secretariat of Transparency International on 23 February (see next story for further discussion).
Instead of leading to constructive responses from businesses and sporting bodies, the published reports have instead aroused angry feedback from individuals who regard themselves as long-standing victims of other forms of corruption. Their seething anger is tying up processes designed to provide resolution.
At the Auckland event, there was considerable discussion about the potential to channel some of this anger by setting up effective whistle-blowing channels backed up by a strong protective disclosure regime.
TINZ’s view remains that the best antidote for corruption is prevention. While preventing corruption is an objective of any modern democracy, the positive reputational and branding impact, resulting from low levels of corruption and trusted systems, creates opportunity for everyone. This means a greater tax base to support the public sector. It also means more organisations with the sustainability to provide careers, better wages and engaging work.
TINZ effort and priority is directed towards the prevention of corruption, as well as activities to harvest and share the benefits of strong integrity systems. This is the way to move from a spiral of anger to one of hope.
Suzanne Snively, Chair
Transparency International New Zealand Inc.
In This Issue
Global Corruption Report: Sport
Transparency International released its Global Corruption Report: Sport in late February.
The report provides a comprehensive overview of the root causes of corruption across sport, presenting key participants' perspectives side by side, as well as the work of TI national chapters on the ground. This report offers recommendations of what can be done to fix corruption within sport, covering areas such as governance, match-fixing and big events, and the role of athletes.
Transparency International aims to mobilise wider audiences in the fight against corruption by connecting the sports community to the wider movement against corruption. This “Corruption in Sport Initiative” includes partnerships with experts, supporters and sponsors through new research, analysis, dialogue and key recommendations. The release announcement and report are available on the Transparency International website.
Netball New Zealand praised for its governance structure
Ensuring corruption-free sport starts at the very top of the organisation. Netball New Zealand earned international recognition in the Global Corruption Report: Sport for the outcome of its comprehensive governance modernisation undertaken in 1999. Of note was the organisation’s decision to build the foundation for good and effective decision-making by creating a skills-based, eight-person-strong board with no or few conflicts of interest and with transparent financial compensation to board members.
New Zealand reactions
TINZ Chair Suzanne Snively says, "The report is a reminder that eliminating corruption is vital to all forms of life, from business to government and sport. And it’s reassuring to see that New Zealand can lead the way internationally."
Sport NZ Chief Executive Peter Miskimmin stated that maintaining the integrity of sport is “particularly important for New Zealand because sport is such a big part of our national identity. We have to continue to do our best to ensure nothing undermines that.”
He welcomes the report especially as his organisation “works across the sport system and government to ensure we have appropriate measures in place to protect the integrity of sport including guidance, policies and education programmes in areas including good governance and match fixing. It’s great to see to the work that New Zealand is doing in these areas being recognised.”
FIFA trust survey
Concurrently, the anti-corruption group is also announcing the results of a poll showing how little fans trust FIFA, football’s governing body with 69% of fans indicating that they have no confidence in FIFA, and 43% saying the scandals are affecting how they enjoy football.
Global Corruption Report: Sport is available online at transparency.org/news/feature/sport_integrity.
Judge Peter Boshier
Introduction to our new Chief Ombudsman- Judge Peter Boshier
TINZ Deputy Chair
I first met Peter at the UN HeForShe Campaign launch on 27 November last year, before he had started in his new role as Chief Ombudsman. HeForShe is a solidarity campaign for gender equality initiated by UN Women. Its goal is to engage men as agents of change for the achievement of gender equality and women’s rights, by encouraging them to take action against inequalities faced by women. Peter was there as one of the HeForShe Champions. I remember thinking, this bodes well! So an excellent start. Peter began his five-year appointment as Ombudsman on 10 December 2015.
I could go into Peter’s background, but that is available on the Office of the Ombudsman website for those who enjoy history.
I am far more interested in what our Chief Ombudsman does than who they are, and so far I have to say I am impressed.
One of his first acts in the role was to take up where Dame Beverly Wakem had left off, on the complaints laid with the Chief Ombudsman about the Prime Minister’s refusal of Official Information Act requests for communications that he or his Office had with a journalist for the New Zealand Herald, Ms Rachel Glucina. This was regarding the pulling of a waitress’ hair by the Prime Minister at Rosie Cafe, a cafe in Parnell. At issue in this case was a single text message that was sent by Ms Glucina to the Prime Minister on 22 April.
After a thorough investigation into the complaints, his decision was that good reason did not exist to withhold the text message. The Chief Ombudsman recommended that the Prime Minister release the content, timing and circumstances of the text. The Prime Minister accepted the Chief Ombudsman’s final opinion and agreed to release the information.
This is exactly the type of action required to rebuild the public’s faith in the Official Information Act, a cornerstone of our democracy and essential to transparency of governance. I look forward to getting to know Peter in my role as TINZ Director, Public Sector, and supporting him in his no doubt often difficult work as our Chief Ombudsman – so in this instance perhaps a case of She for He?
Independent assessment of New Zealand's Open Government Partnership Action Plan progress
A draft of the independent review of New Zealand's Open Government Partnership National Action Plan is now available for public comment.
This report is part of the Independent Review Mechanism (IRM) established by the Open Government Partnership.
The draft report is critical of the progress made. It states that at midterm, New Zealand has made some progress in achieving its commitments. In general, however, the goals could have been more clearly focused and ambitious with regard to key challenges in open government. Government will find its action plan more coherent and easier to implement if it is not as multi-faceted and relates directly to partnership values.
The report is available for public comment on the Open Government Partnership website until Thursday, 3 March. Readers are encouraged leave comments on the report either on the report page (above link) or by emailing comments to:email@example.com.
The IRM report provides a good basis to start conversations around the development of the next action plan.
Chartered Accountants Australia New Zealand Corruption survey involving 1000 New Zealand businesses
A recent survey released by Chartered Accountants Australia and New Zealand (CAANZ) looking at corruption faced by Kiwi businesses shows that bribery and corruption rates have risen significantly, both nationally and regionally.
According to the survey, "Only half of New Zealand businesses would report an illegal demand from customers or suppliers."
TINZ Contributors Daniel King, Brendon Wilson and Fredinand Balfoort each offer their perspective in the following articles.
Daniel King’s perspective on the CAANZ transparency and corruption poll
In my opinion, one of the biggest strengths of the chartered accountants poll is that it is based on a national survey, rather than a regional one. Now we know for a fact that bribery is a real issue for businesses here in this country — there is irrefutable evidence. And although I was not surprised that 6% of the respondents reported having had an illegal demand made of them, I did find it disconcerting that only 51% of businesses say they would definitely report an illegal demand.
The survey also shows that bribery is not just an issue for large companies, but also SMEs. The results show that smaller businesses are more likely to have had an illegal demand made than companies with 11 or more staff.
It seemed logical that Auckland businesses had the highest level of illegal demands. As it is the commercial hub of New Zealand, it was concerning that it was also where businesses were less likely to have an anti-bribery policy in place. Only 11.6% of the businesses surveyed from there had a formal anti-bribery policy, compared to 21.8% in Wellington and 13.9% in Christchurch.
The survey shows that it is necessary for the government to take the lead in both raising awareness of the new anti-corruption legislation, as well as the systems and policies that businesses should have in place. Furthermore, a strong signal should be sent to the business community that illegal demands will not be tolerated and perpetrators will be punished.
Pervasive corruption has serious results
TINZ Board Member
Chartered Accountants Australia and New Zealand’s recent survey into New Zealand business’ experience of corruption is comprehensive and a good starting point for understanding the pervasive nature of corruption and its effects on NZ businesses – and its serious results.
Among a lot of valuable lessons from this study, two important points may be drawn:
The low level of New Zealand businesses adopting formal anti-bribery/corruption policies and processes indicates an easy-going attitude to these possibilities. Within this unethical and fraudulent practices can only prosper, likely undetected and it is not just an organisation’s trading and brand reputation which is at risk – it can be their very ability to stay in business which is endangered by a serious internal or external attack.
It is entirely appropriate that CAANZ is the body which commissioned this survey: Their trained, principled approach to ethical administration and risk is emphasised in their qualification training and throughout their members’ professional careers. Their members (whether internal company managers, or externally contracted) should be doing more for businesses than just accurately reporting financial activity and results to the board – they should be expected to recommend on risks and the processes and structures to prevent risk, especially in financial terms. Financial risk comes no more serious than bribery and corruption. Without measures being adopted to prevent these risks – this report makes it clear they largely aren’t – the culture and expectation in a company will likely be lax and vulnerable to small and large risks; staff are just not going to react in a trained way to “suggestions” which start them down the slippery slope of bribery and corruption.
The takeaway – use internal and external accountants and other skilled individuals in an ethical culture, to actively seek out, monitor and report on risk areas in which corrupt practice could develop. Without this, the risks are high and uncontrolled.
Then don’t tell the accountant or others to stick to his/her knitting when they raise uncomfortable matters – they are your best friend.
Absence of a proper anti-corruption policy covers a wide spectrum of culture ranging from lax attitudes to preparedness in order to flout legal and regulatory requirements. Lessons which will rebound seriously against a company are easily learnt by staff who are not managed and trained to be more vigilant.
In a climate where only 51% of companies will report illegal demands, the likelihood is that the other numbers reported on in this survey for, say, suffering from fraud, are themselves under-reported – this is borne out by daily evidence in the New Zealand courts and media with widespread serious cases of hitherto undetected fraud, which will have often brought the company to its knees – fostered in a climate of lax unmonitored absence of corruption policy and process. Many more serious cases must remain undetected.
This absence of focus is risk-taking on a breath-taking scale compared to the planning, sign-off and risk-mitigation observed in most companies for their marketing plans, or product development, or asset acquisition – why the difference?
The takeaway – focus and set expectation where the risks demand.
What kind of accountant are you?
By Ferdinand Balfoort
Accountants don't star in movies; they are portrayed as fairly boring number crunchers. A rare exception was the movie Untouchables (1987) based on real-life events. It featured two accountants who were absolutely not boring. Oscar Wallace worked with US government agent Elliott Ness' team to gather evidence to convict Al Capone on tax evasion. The other, Capone's accountant George, was responsible for processing Capone’s dirty laundry. Paradoxically, both accountants meet their sticky ends in the same lift.
The duality of the critical accounting roles portrayed in the movie parallels what we may well experience during our professional career. On the one hand, some of us may, consciously or not, engage in the hiding of accounting transactions to protect those who commit illegal or unethical acts. On the other hand, we may use our position to interpret accounting information to identify and bring such perpetrators to justice.
Charles Martin Smith as Agent Oscar Wallace
Movie "The Untouchables" Copyright © Paramount Pictures Corporation (MCMLXXXVII)
Brad Sullivan as George
Movie "The Untouchables" Copyright © Paramount Pictures Corporation (MCMLXXXVII)
The Chartered Accountants Australia and New Zealand (CAANZ) recently published important survey results in a report titled “Are Australia and New Zealand Corrupt?” The authors of the survey conclude there is major under-reporting of fraud and corruption in Australia and New Zealand. As if to confirm the duality noted earlier, only 51% of respondents indicated they would report a request for a bribe or an illegal demand.
The actors playing the accountants in the Untouchables portray the ethical and physical hazards they face accurately, especially Capone's accountant George. As with 49% of CAANZ respondents, he is unwilling to divulge information that is badly needed for a solid legal case of tax evasion and bribery of the Chicago Police Department.
Accounting is a powerful language that reflects and interprets the operations of an organisation. Numbers simply do not lie, as long as there is no creative accounting involved. Even when there is, one number leads to another if you diligently follow the trail, which is why forensic accounting is so stimulating. Our moral courage, integrity and professionalism are a prerequisite for ensuring the numbers in the financial statements are supported by transparent, appropriate transactions, and relevant documentation. If they don't, we are required to ask questions without fear or favour; there is no one else we can defer to. The buck stops with us, or rather the bullets, as both Oscar and George would confirm were they still around.
Our codes of ethics require us to act with integrity and to inquire with professional scepticism if transactions don’t look right. We should consider all stakeholders, including the public, and what impact our actions or inactions have in the eyes of the world. Yet, corruption and illicit trafficking of any nature would not be possible without the acquiescence of a large proportion of our profession globally.
The next time an operational department submits an unusual invoice for agency fees or consulting, or a surprising financial claim for a trip to Macao with "business partners", clarify the purpose and detail of such expenditures, ensuring that they are accounted for correctly. Ask pertinent questions about unusual variances to identify whether there is anything untoward going on. Will you be Oscar or George when it comes to that critical decision to report your conclusions?
Boring number cruncher Ferdinand Balfoort promoting Russian beer
Our next TI newsletter issue will consider the different aspects of corruption one may encounter, using common definitions and current examples.
About the author: Ferdinand C Balfoort (MCA,CA,CIA) is an international governance expert with academic and professional expertise and interests in cross cultural impacts on corruption, fraud and financial reporting. He has managed numerous forensic investigations, including corruption and fraud reporting.
TINZ Contributor Ferdinand Balfoort also submitted the following article to the Chartered Accountants of Australia and New Zealand's Newsletter.
New Zealand public service tops global Quality of Government survey
The survey measures the structure and behaviour of the public service across 159 countries through the assessment of 1,294 unpaid experts from a pool of 7,096, typically PhD-level academics, across 71 substantive topics. There was an additional new focus on corruption and transparency in this round.
Quality of Government aggregate their data into three key performance indicators: Impartiality, Professionalism and Closedness.
The New Zealand public service was ranked the most professional, the second most impartial after Sweden, and the least closed of all nations.
The report is very detailed, and has introduced new measures to more closely determine quantitative measures for differences in governance among nations. They examine, for instance, whether public sector employees risk severe negative consequences for passing on information about abuses of public power to the media.
This is a proud achievement for New Zealand public servants, and is a testament to our nation's ongoing commitment to high standards, for the benefit of all New Zealanders and the nations we interact with.
2015 Corruption Perceptions Index a wake-up call for New Zealand
The reaction in New Zealand to the release of the 2015 Corruption Perceptions Index (CPI) and the country's drop in rank is broader and stronger than ever. We are encouraged by the media coverage. More than ever, senior political officials expressed awareness and contributed to the dialog thereby becoming engaged New Zealand anti-corruption efforts, including:
- increasing global pressure to fight and prevent corruption
- organisations increasingly measured by their behaviors; reputations are critical
- recognition that New Zealand can no longer be complacent and will have to take action to repair its reputation.
Online Media Coverage
Some of the coverage we have seen:
- Tess Nichol (Herald): Stonewalling and strange deals: Has NZ become more corrupt? http://bit.ly/NZmoreCorrupt
- Hamish Rutherford (Stuff): After years ranked as the least corrupt country, New Zealand drops to fourth. http://bit.ly/NzFourth
- RNZ: NZ slips again in anti-corruption rankings. http://bit.ly/NZslips
- Christina Campbell (Newstalk ZB): Transparency survey finds corruption on the rise in NZ. http://bit.ly/TransparencyNzSurvey
- Simon Wong (TV3): NZ drops in corruption perception index. http://bit.ly/23sfzRF
- Bryce Edwards (Herald): New Zealand tumbles down the political corruption table. http://bit.ly/NZcorruptionTumble
- Labour Party: NZ loses squeaky clean corruption-free reputation.
- Aaron Dahman Show: Is the New Zealand Government really clean? An exclusive report of corruption within the organisation.
- Transparency survey finds corruption on the rise in NZ.
- Has New Zealand turn[sic] into extra corrupt?
The general consensus of the media is the fall in ranking reflects the complacent behaviour of Government.
Getting back to #1
TINZ is focused on working with the public sector to restore our number one position.
- Politicians and senior public officials need to commit corruption awareness and prevention, making it a resourced strategic objective.
- The recommendations of the Integrity Plus 2013 New Zealand National Integrity System Assessment (NIS) need to be broadly and more aggressively addressed. Current initiatives lack executive support and proper funding.
- We call on The State Services Commission and other affected agencies to embrace the Open Government Partnership Grand Challenge with new and innovative ways to foster open government rather than repackaging existing programs and offering lip service to the process.
- TINZ continues to analyze CPI data sources to determine where we perform at less than best in world levels. As we better understand the data we will recommend viable actions using the NIS, Open Government Partnership and global best practices as guidelines.
- We call on Business and non-government organization leaders to not only demand action from the public sector but to look inside their organizations and ensure that proper training and controls are in place to prevent corrupt practices and protect their reputation.
What’s New Zealand’s reputation worth?
By Daniel King and Brendon Wilson
Having a strong international reputation is critical to the New Zealand Inc. brand and our ability to drive terms of trade. We like, and need, to be perceived by the outside world as honest, trustworthy people living in a country where bribery and corruption are virtually non-existent.
In our last article, we hoped that our ratings wouldn’t slip, but unfortunately the recent Transparency International Corruption Perceptions Index (CPI) now out, indicates that things aren’t as rosy as we think. The CPI, a composite index based on international studies and surveys, scores countries on how corrupt they are seen to be. New Zealand fell in the ranking from number two spot as the second least corrupt public sector in the world in 2014, to the number four spot in the now-calculated 2015 rankings. This may not seem like a drastic fall, but the trend is very worrying: we are sliding while others are improving. In 2013, New Zealand was considered to be the least corrupt, along with Denmark.
Corruption and bribery certainly do exist in New Zealand, made clear in a survey recently conducted by Chartered Accountants in Australia and New Zealand (CAANZ), which looked at corruption faced by Kiwi businesses. The survey, involving 1,000 New Zealand businesses of different sizes across industries countrywide, reported that overall, 6% of respondents reported having had illegal demands or bribes made by customers or suppliers – in some sectors as high as 11%. In addition, only 51% of businesses stated they would definitely report an illegal demand.
Even more worrying from Transparency International’s perspective, is that by “not getting around to it”, companies are living in denial, and don’t have robust systems in place to detect and combat bribery and corruption risks. Only 16% of businesses in the CAANZ survey had a formal anti-bribery/corruption policy in place, with Wellington businesses most likely to at 21.8%, and Auckland least likely at 11.6%. A 2015 survey conducted by Deloitte of New Zealand and Australian companies showed that 40% of respondents with offshore operations did not have a formal compliance programme to manage corruption risks.
This comes at a time when New Zealand has tightened its anti-corruption and bribery legislation to ratify the UN Convention Against Corruption – a legally binding global agreement to address corruption in the private and public spheres. Penalties for bribery offences have increased in New Zealand, courts can impose extremely hefty fines and imprisonment for up to seven years. Companies can be held culpable for the actions of employees or agents acting on their behalf.
How can companies avoid ending up in court and facing fines and/or imprisonment? It’s important to note that under the new legislation, taking “reasonable steps” (such as having a compliance system in place and functioning) to prevent incidents can be a defence in court. So feigning ignorance or “burying your head in the sand” is not a viable option if your company is investigated by New Zealand or overseas authorities.
Developing a system
There is an overwhelming business case to be made for taking measures to reduce your company’s bribery risks. There are also a number of tools available to assist you in this process: The Ministry of Justice has developed guidance material for companies to meet the new legislative requirements, and Transparency International has developed best practice tools with its international business partners.
The essentials of a robust compliance programme include:
- adopting a policy addressing bribery/corruption, fraud, gift-giving, entertainment, conflict of interest, etc
- board commitment and responsibility for the programme and its ongoing measures
- due diligence of agents, distributors, and others and their inclusion in monitoring and reporting
- a thorough risk assessment of your company’s operations – including relevant agents and business partners
- engaging with and communicating this commitment to relevant staff and business partners
- training of key functions (for example sales, procurement staff)
- accountability – knowing who is responsible for ensuring compliance, and responsible at all levels
- risk reporting – a mechanism so staff or business partners can report any concerns without fear of derision or retribution
- measurement and reporting – requirement for regular measurement and reporting in all areas of possible risk.
We highly recommend establishing these commitments as a central part of a committed Integrity Culture – make it your Point of Difference.
Establishing ethical reporting mechanisms (in our last article) within all areas of your operations, and making these visible in your internal and external reporting, will mean intending trading partners or investors in your business can build reassurance in future trade commitment.
It is sensible then to widen this Integrity Culture and process to include your trading partners and supply chain, so you have a mutual tangible basis for trusted business together, with benchmarks of expectation – so binding your partners more closely to your business future, giving you the same reassurance in their operations that you are showing them in yours. We all believe in “no surprises” – here is a way of building this principle into workable daily practice and making it a reputational advantage.
Establishing any of these measures when a crisis occurs will be far too late.
To improve our country’s reputation in the same way, you should expect these same standards from the agencies and non-business structures you deal with, and those which govern your activities. In some cases they have let us all down.
In case you missed it
Overreaction? Editorial in stuff.co.nz
Chartered Accountants research shows "massive under reporting" of business corruption
The survey, involving 1000 New Zealand businesses of different sizes across industries countrywide, shows that only 51% of businesses would definitely report an illegal demand with larger firms more likely to do so than smaller ones.
Interest.co.nz: Survey, involving 1000 New Zealand businesses shows that bribery and corruption rates have risen significantly.
Countries Sign The TPP... Whatever Happened To The 'Debate' We Were Promised Before Signing?
TPP Press Release: Association of Salaried Medical Specialists: TPPA Impact on Health a Significant Concern
Unmask the Corrupt: Transparency International to pursue social sanctions on 9 grand corruption cases.
Organised Crime and Anti-Corruption Legislation
Organised Crime and Anti-Corruption Legislation ADLSI article by Daniel King and Sara Mead.
More Questions Re Saudi Sheep: Press Release: New Zealand Taxpayers' Union
From the opposition: Government accused of 'corruption' over the Saudi sheep deal
TI fears Malaysia moving towards autocracy over 1MDB
TI fears Malaysia moving towards autocracy over 1MDB.Malaysia is at risk of going down the drain. It is a situation I have experienced in several countries around the world these past 30 years. Hard won gains along the road to transparency are reversed through a few stupid developments, and the lack of foresight and personal greed / powerhunger of political leaders. Good source for another article on a topic around corruption and country governance.
Corruption in Sport
New Zealand Herald: Corrupt migrants few and far between
Open Government Partnership
Radio New Zealand: Govt pays lip-service to transparency, says report
Privacy and Open Data information requests
'Surprising' number of requests - Privacy Commissioner on new survey findings
Why Denmark is least corrupt
Bryce Edwards Commentary
Transparency International New Zealand
P.O.Box 5548, Lambton Quay
Ensure New Zealand Remains as Good as it's Perceived
Renew Your Membership or Join TI-NZ NOW!
It is Easier than Ever to Join
Tell your friends and colleagues