Ethics and compliance programs: how to access public contracts

November 2013
Ethics and compliance programs:
how to access public contracts
Does your company need to obtain certification in order to compete
for public contracts? This article provides a step-by-step approach for
large and mid-size companies to evaluate their corruption risks and
put a program in place to address them responsibly.
Over the last year, numerous testimonials have been made with respect to bribery of
government officials, illegal political contributions, money laundering, under-the-table
payments, and other forms of corruption. Governments, particularly in Québec, sent
a clear message to companies that wish to have access to public contracts: corrupt
behaviour won’t be tolerated. That is why anticorruption compliance has become top of
mind for boards of directors, audit committees and senior management.
Globally, and locally, companies are looking to enhance ethics and compliance
programs to prevent and detect corruption violations unless immediate changes are
made. Québec companies with compliance failures may be denied access to public
contracts under the provincial legislation, Integrity in Public Contracts Act, (“Bill 11”),
or other Canadian regulations.
1
ill 1 applies in Québec to public-sector
B
contracts worth $40 million and over.
Before they bid, companies must submit
an “application for authorization” with
the Autorité des marches financiers.
This fall, the contract threshold for
Bill 1’s integrity process will be lowered
to $10 million and in three years, all
public contracts worth $100,000 and
more will be vetted.
There have also been augmented enforcement efforts on a federal level, as well as
internationally, on anti-corruption regulations, such as the Corruption of Foreign
Public Officials in Canada, the Foreign Corrupt Practices Act in the United States, and
the Bribery Act of 2010 in the UK. With the weakened global economy increasing
competition in emerging economies, the risk of corruption in companies continues
to grow.
There are ways of mitigating the temptation to choose corrupt profits. Ethics and
compliance programs like any other program require full and complete commitment
by all members of the organization.
Practical considerations for implementing or
updating an anticorruption compliance program
We have developed recommendations as to what companies
should be doing to detect and deter corruption.
There is no one-size-fits-all program, when it comes to
ethics and compliance. Companies should consider a
variety of factors specific to their facts and circumstances
when deciding what is appropriate for their specific
business needs.
The ethics and compliance program may be influenced by
several organizational risk factors such as the company’s:
• size and complexity;
• industry in which it operates;
• the countries in which it operates;
• its business model, specifically if it should call upon agents;
• nature and seriousness of potential offenses;
• collateral consequences (risk of harm to shareholders,
pension holders, employees, or others);
• business culture “tone from the top”; and
• cost of remedial actions.
An effective anticorruption compliance program will
positively affect a company’s culture and deter wrongdoing,
making non-compliance less likely and reducing the severity
of any consequences. Corruption is a serious risk that should
be treated as a priority and actively managed to avoid legal
action. If you have not yet carried out a thorough assessment
of the corruption risks facing your business, now is the
time to act.
• history of misconduct;
Characteristics of an effective anticorruption compliance program
Effective ethics and compliance programs are:
• critical to a company’s good governance;
• essential in detecting and preventing corruption violations;
• tailored to the specific risks associated with the business; and
• dynamic and able to evolve with changes in the business place.
Ethics and compliance programs promote ethical organizational culture and commitment to legal
compliance. They protect the company’s reputation and instill trust and confidence. They help prevent,
detect, remediate, and report misconduct, including corruption violations.
Companies that are committed to seriously combatting corrupt activities should take reasonable steps
in order to respond appropriately to criminal conduct and prevent corrupt activities, including by assessing
their ethics and compliance program.
2 | Ethics and compliance programs: how to access public contracts
A checklist for considering your
compliance program
Companies wanting to access public contracts can consider the following checklist when deciding whether to introduce
a new and comprehensive compliance program, or to update and enhance an existing one:
1.
2.
3.
4.
5.
ave you reviewed your anticorruption compliance standards and procedures, during the last year,
H
taking into account relevant developments in the environment?
Is a senior corporate executive assigned the responsibilities for the implementation and oversight of the
Company’s anticorruption policies, standards, and procedures?
oes senior management provide strong, explicit, and visible support and commitment to its corporate policy
D
against violations of the anti-corruption laws?
o you have a clearly articulated, documented and visible corporate policy against violations of
D
the anti‑corruption laws?
Have you identified the areas in which is your company is most exposed through a risk assessment?
Are there specific policies and procedures in high-risk areas?
For example, policies with respect to: gifts; hospitality, entertainment, and expenses; customer travel; political
contributions; charitable donations and sponsorships and facilitation payments.
6.
Is there a system of financial and accounting procedures, including a system of internal controls, reasonably
designed to ensure the maintenance of fair and accurate books, records, and accounts to ensure that they
cannot be used for the purpose of bribery or concealing such bribery?
7.
re there adequate mechanisms to effectively communicate anticorruption policies, standards, and
A
procedures to targeted directors, officers, employees, such as periodic training and monitoring of compliance
with training requirements?
8.
9.
10.
Is there an effective system for providing guidance and advice, confidential reporting of issues, protection
of whistleblowers, and responding to such reports?
Has your company enforced compliance through appropriate disciplinary procedures?
Is there appropriate due diligence and compliance requirements over agents and business partners,
including a documented risk based due diligence, informing them of the company’s commitment to
compliance with laws on corruption and seeking a reciprocal commitment from them?
11.
12.
A
re there standard provisions in contracts with all agents and business partners such as anticorruption
representations, rights to audit and rights to terminate?
Is there periodic review and testing of anticorruption compliance code, standards, and procedures designed
to evaluate and improve effectiveness in preventing and detecting violations?
Ethics and compliance programs: how to access public contracts | 3
How EY can help
As you interpret the guidance issued by Québec
authorities in order to assess what, if any, further
steps your company will need to take to establish
leading anticorruption practices, the recommendations
outlined here provide a solid starting point for thinking
about updating or establishing your organization’s
anticorruption compliance program.
EY’s professionals have extensive experience with
anticorruption compliance, regulatory matters and
investigations, and we leverage our deep knowledge
to support your business goals. We tailor our overall
approach to your organization and industry. We consult
with you and pay attention to any unique circumstances.
As with other companies we have served, we will work
closely with you to develop a personalized work plan,
geared to meet your needs and your specific situation.
About the author
This paper was written by Denis Chalifour, leader of
EY’s Fraud Investigation & Dispute Services practice
in Québec.
Denis holds a diploma in investigative and forensic
accounting from the Rotman School of Management
of the University of Toronto and the professional
designation of Chartered Public Accountant. Denis is
also a Certified Fraud Examiner. With over 25 years of
professional experience, Denis provides investigative
and forensic accounting services, specializing in
fraud detection and litigation support services.
He has assisted clients in investigating matters
involving financial statement fraud investigations and
restatements, management fraud, employee fraud,
asset misappropriation and various dispute-related
engagements including shareholder disputes.
Denis can be reached at [email protected]
or +1 514 874 4627.
EY | Assurance | Tax | Transactions | Advisory
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