Grey matters ethical dilemma: Creative accounting?
Edward at Ignitius discovers that he has been paying invoices from his regular subcontract partner firm that do not represent the actual services provided. What should Ignitius do?
Edward is the head of training at Ignitius, a large national business that sometimes employs subcontract training companies and individuals to deliver training on its behalf throughout the country. This training includes preparing students for work by making ‘educational visits’ to potential employers, during which the students are accompanied by the trainer, thus giving rise to additional costs.
Linda Parkinson, trading as Liberate, is one of their frequently used partner firms and has been delivering an ongoing programme to employees from a part of the country classified as a developing area, where government grants are available to firms providing skills-related training.
Liberate submits monthly invoices to Ignitius that are generally paid in a timely manner, normally having been approved by Francis, who holds the necessary authority. When Francis is not available, invoices are referred upwards to Edward for authorisation.
The system has been working satisfactorily for over a year until an occasion when both Francis and Edward are unavailable and Liberate’s monthly invoice is handled by Lee. Lee has not been involved before and so is unsure how to react when, on returning from lunch, he finds a note on his desk indicating that a telephone call has been received from Liberate advising that they have made a mistake in the wording of their most recent invoice and that they will be submitting a replacement.
The first invoice had included a reference to educational visits, which are a bit of a grey areaA few days later, Lee receives the replacement invoice from Liberate and, as he is looking at it, his telephone rings. The caller announces herself as Linda from Liberate. She thanks Lee for agreeing to help with the resubmission of the invoice and explains to him that the first invoice had included a reference to educational visits, which, she explains, are a bit of a grey area. Lee says he doesn’t understand what she means, so Linda explains that there has been some debate over whether the school visits should be classified as work-related training. Her partner had discussed this with the government agency responsible for the training grants, and was told that it “probably would be acceptable”, but this hadn’t been confirmed in writing.
Accordingly, Liberate wants the invoice to make no mention of the visits, in case that causes a delay in them obtaining the grant monies. Linda goes on to say that Liberate’s fees for undertaking this work are based on the assumption that they will be able to claim the grant monies and that if they cannot do so, it will make the work uneconomical for them and they might have to reconsider whether they can continue the training on behalf of Ignitius. Lee is concerned at being told this, principally because it relates to matters in which he has had no involvement and he decides that he will raise the matter with Edward.
On hearing what Lee tells him, Edward’s initial reaction is that it is a problem
only for Liberate, which will have to live with the consequences, but, on thinking about it a bit more, he realises that there are, in fact, a number of reasons why the position of Ignitius is not quite so simple. For example, now that Ignitius knows about the problem, if indeed it is a problem, should they try to resolve it, and if so, how?
What should they do?A. Accept what they have been told without comment and amend the invoice as requested.
B. Tell Liberate that they cannot be a party to any form of sharp practice and terminate their contract immediately.
C. Accept that it is in their interests to try to resolve the situation with Liberate and encourage them to discuss the situation with the grant-awarding body.
D. Report the matter directly to the grant-awarding body, including a calculation of the amount of money that they believe Liberate may have wrongly claimed.
This dilemma appears in the January print edition of The Review. The results of the survey and the opinion of the CISI will be published in the April 2017 print edition of The Review.