Sponsorship is a business arrangement in which the sponsor agrees to have their name, products or services associated with the sponsored organisation’s activities for a negotiated benefit in cash or kind, or a combination of both. The opportunities for public sector agencies using sponsorships to develop corporate partnerships are extensive. When properly considered and implemented they can provide all parties with positive and tangible returns.
However, they do present risks to public sector organisations which must strive at all times to obtain the best value for money, act transparently, encourage open and effective competition and make efficient use of public funds. Achieving this under sponsorship conditions calls for an awareness of the associated ethical and misconduct risks and the high-level management skills required. One of the most important aspects is managing the public perception of the arrangement.
Any sponsorship you accept or provide should be compatible with your objectives, and must comply with the:
- Queensland Government Sponsorship Policy 2012
- Queensland Government Sponsorship guidelines (GovNet - Qld Govt employees only)
- Public Sector Ethics Act 1994 (especially the principles of promoting the public good, and accountability and transparency)
- Queensland Government State Procurement Policy 2010.
Before carrying out any sponsorship activities, you should review your operational readiness and conduct regular appraisals to ensure continuing best practice. Similarly, you should regularly review your sponsorship arrangements, and consider changes of circumstances, public opinion and the law.
The typical risks that accompany any business activity are present under sponsorship conditions; however, fraud and corruption risks are increased by:
- the short term nature of many sponsored projects
- individual and organisational conflicts of interest
- the potential for diffuse or unclear responsibility and ill-defined accountabilities
- the difficulty of evaluating the benefits of the sponsorship to the sponsoring organisation
- the potential for gifts and benefits to be offered to influence decisions
- clashes between different organisational systems and cultures
- the likelihood of unsolicited offers
- the potential for sole-supplier situations
- the use of goods and services in-kind.
To minimise the likelihood of fraud and corruption, public agencies must identify and control the risks associated with sponsorship arrangements within the practical framework of their code of conduct, policies, procedures and best practice standards.
The Queensland Government Sponsorship Policy (the policy) outlines the mandatory principles and processes for managing sponsorships, and underpins a fraud-resistant sponsorship arrangement. It directs all public sector organisations to align their sponsorship activities with these principles and processes. The policy recommends that the following strategies be used when developing specific guidelines and internal controls to meet departmental objectives.
- Seek sponsorship through widely canvassed expressions of interest where appropriate.
- Ensure there is no real or apparent conflict between the objectives of the organisation and those of the sponsor, and between those making decisions about the arrangement within each party.
- Evaluate and select sponsorship proposals using predetermined criteria that fairly evaluate all potential sponsors.
- Execute a suitable form of contract or written arrangement.
- Fully document sponsorship proposals and negotiations, and ensure approvals and commitments are transparent and made under appropriate delegation levels.
- Permit sponsorship only if there are sufficient resources to fulfil the resulting obligations, including adequate reporting to ensure all parties are kept informed.
- Evaluate the performance of sponsorship products or services against an agreed set of performance criteria both during and at the conclusion of the arrangement.
The policy also outlines some pitfalls of sponsorship management, and recommends that agencies:
- avoid any sponsorship arrangements that might impede their ability to function impartially
- avoid seeking or accepting sponsorship from any body that they regulate, license or inspect
- avoid explicitly endorsing a sponsoring organisation or its products
- prohibit staff from seeking or receiving personal benefits from a sponsorship relationship.
Managing conflicts of interest
Sponsorship may give rise to actual or perceived conflicts of interest involving both the agency and/or an individual employee. For an individual, this includes any conflict between official duty and private interest. To effectively manage any such conflict, everyone involved in a sponsorship activity must clearly identify and declare any actual or perceived conflict of interest that arises during development and negotiation of the arrangement, regardless of whether they have previously declared and registered this.
At the agency level, there is a risk that its activities will be compromised by the influence of a sponsor. To manage this risk, agencies should carefully consider:
- the probity of the sponsorship partner, and the compatibility of its objectives and business practices with agency and community standards
- the likelihood of any future regulatory role in relation to the sponsorship partner or its associates.
Developing the process
Sponsorship is a business arrangement subject to various obligations and ethical principles. When presenting the business case for the contract, it is therefore of paramount importance to have an appropriate process which clearly sets out and evaluates the arrangement.
A similar process should be used for developing each sponsorship. The following table shows the key steps to be undertaken.
Establish the sponsorship program
Develop a sponsorship policy that includes procedures for risk assessment and project management.
Examine and generate opportunities
Explore opportunities to fulfil your objectives and provide the intended benefits.
Assess the risks
Consider the opportunities to determine what, when, where and how things could go wrong. In the process,
Develop, cost and properly document proposals to ensure effective selection and good administrative practices.
Develop and execute agreement(s)
Prepare written sponsorship agreements that reflect the value and significance of the project. Letters of agreement may suffice for projects under the value of $10 000, but for a more complex undertaking you may need a formal contract supported by legal and financial opinions.
Ensure you have a well prepared, well organised and accountable team that can operate with integrity and realise a successful outcome for all parties.
Managing the arrangement
Sponsorship can be complex, especially if a dispersed organisation or multiple business units are conducting independent activities. In managing these arrangements, robust procedures and operating practices that enhance open and objective decision making will minimise opportunities for fraud and corruption. Factors determining how much supervision is required include the organisational culture and effective established controls. Particular areas to review are:
- the clarity and relevance of delegations
- definitions of roles and responsibilities
- staff training in the various work processes, and correct application of benefits
- practical use of supervisory controls
- coordination and compliance measures
- random operational or internal audits
- strong communication channels, and formal accountability and reporting requirements
- consistent reporting standards
- the likelihood that more senior management may bypass or improperly override established controls.
Successful sponsorship management must therefore incorporate:
- appropriate authorisation of sponsorship at both the planning and agreement stages
- documented risk analysis
- documented costs and benefits analysis
- formal documentation of sponsorship agreements
- post-sponsorship evaluation, and ongoing evaluation for long-duration arrangements
- a reporting framework that meets ‘right to information’ and other accountability requirements.
To ensure you gain the most from this advisory, the CMC advises that you read your organisation’s policies and procedures on this topic. For further information see the legislation and documents listed above.