Part 5: Entertainment and hospitality expenditure

Controlling sensitive expenditure: Guidelines for public entities.

5.1
Entertainment and hospitality can cover a range of items from tea, coffee, and biscuits to catering, such as meals and alcohol. It also includes non-catering-related items, such as entity-funded entry to a sporting or cultural event.

Issues and principles

5.2
Expenditure on entertainment and hospitality is sensitive because of the range of purposes it can serve, the opportunities for private benefit, and the wide range of opinions as to what is appropriate.

5.3
In its 1996 publication A Management Guide to Discretionary Expenditure1, the Institute of Internal Auditors New Zealand Incorporated identified five business purposes for expenditure on entertainment and hospitality:

  • 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.

5.4
Supporting internal organisational development may, in occasional circumstances, also be a legitimate business purpose for moderate expenditure.

5.5
It is important to recognise that, given the non-commercial functions of most public entities, there is likely to be only limited justification for some of the purposes outlined in paragraph 5.3 being legitimate reasons for expenditure on entertainment. For example, building revenue is unlikely to be a legitimate purpose for most public entities, given that their revenue is obtained directly from the Government.

5.6
The principles of a justified business purpose, and moderate and conservative expenditure, are particularly relevant. We expect expenditure to be subject to controls for monitoring and reporting.

Guidance

5.7
We expect entertainment and hospitality paid for by an entity to be:

  • subject to policies that include clear guidance on whether alcohol will be paid for by the entity, and, if so, the circumstances and limits that apply;
  • subject to policies that provide clear guidance about what is an acceptable level of expenditure, if any, on seasonal occasions such as a Christmas event;
  • provided only when it is cost-effective and appropriate for the occasion; and
  • pre-approved, with clear and appropriate limits on quantities and use of alcohol, if any, and is substantiated by appropriate documentation that includes receipts, names of parties entertained, and the reasons for the entertainment and hospitality.

1: ISBN 0-9583507-0-1

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