The tray of cakes arrived at the Australian National Audit Office a week before Christmas last year. They were a gift from local printing firm Canprint, which had won a contract with the office earlier that year. It was a thank-you of sorts; the kind of gesture that businesses make to clients all the time.

When ANAO staff saw the cakes, they threw them immediately in the bin.

Three months later, Canprint's sales staff sent another eight cupcakes to the audit office, this time as an Easter greeting. Again, the Auditor-General's staff disposed of them.

This was nothing personal – nothing to do with Canprint or the quality of its cakes (it had paid a professional to bake them). A couple of weeks before the ANAO received that first batch, the University of NSW had sent the office some chocolates – a "gift of gratitude" for helping it run a training course for Papua New Guinean officials. The chocolates were binned, too.

More bizarre was the fate of the Japanese presents. The ANAO works occasionally with its Japanese counterpart, the Board of Audit. In March this year, a Japanese secondee gave "three assorted sweet items" to the Australian auditors. They, too, were thrown out.

But a month later, when Japanese auditors presented ANAO staff with two postcards and a "wind-up toy model of sushi", the staff kept them. Ditto for the employee who received a batik scarf from an Indonesian auditor. The lucky public servant who received a "lemongrass air spray" from Bhutan's auditor-general was also allowed to keep it.

You're probably wondering – were the cupcakes really binned? I asked the audit office what it meant when it said it "disposed" of them (that is, did it misspell "ate"?). A spokesman confirmed they were thrown out with the rubbish.

It was quite simple, he told me. "ANAO staff must report all gifts and benefits offered. In many situations, gifts are received unsolicited and in such a way that there is no opportunity to decline them at the point of offer – they could be left at reception, for example." In some cases, the office puts such presents on display. "However, edible items are typically unsuitable for storage and so they would be disposed of immediately."

Now, public servants do need to be careful about accepting gifts and hospitality; they can't be seen to open themselves to inducements, or to open themselves to bias in procurement decisions. At worst, if an official accepts a gift that is regarded as a bribe, they face up to 10 years in jail.

Nonetheless, the Public Service Commission's advice on the matter begins with an admission that the question of whether to accept a gift "is not always straightforward". In diplomatic circles, it says, "it may cause embarrassment to reject offers of minor gifts". At the same time, "it should not be assumed ... that gifts of minor value are acceptable".

The Auditor-General's staff must be particularly morally upstanding on such matters, given that they are watchdogs of government spending and probity. Earlier this year, the audit office said it was dissatisfied with other agencies' inconsistent approach to gifts, and recommended a centrally managed, government-wide gift register.

So maybe the ANAO staff did throw the cupcakes in the bin after all. But most other public servants would just eat them, right?

That simple question proved too difficult to answer, even when I asked the other workplaces that received cupcakes (there were a few).

I began with the Department of Foreign Affairs and Trade. It didn't receive cakes but it's across the road from the ANAO and, more relevantly, it has told me in the past that it allows staff to keep gifts if they are "items of little or no commercial value, including perishable items such as flowers or chocolates".

I showed the department this part of its policy and asked: "What would DFAT expect one of its employees to do if, say, during a meeting with a contractor, the contractor offered the employee a sweet or similar delicacy?"

It responded by sending me the policy I had already quoted.

I rang again, and begged for a straightforward answer: "Please, please tell me: would DFAT allow its staff to eat a cupcake?" Alas, its spokesman wouldn't answer hypothetical cases.

Which is absurd, because this is precisely how ethics has been taught for thousands of years, from Socrates on. We learn through examples, and by discussing the distinctions between them. If you refuse to do this, you're not really interested in the practice of ethics.

As the cupcake was too great a conundrum for the bright minds of DFAT, I moved on.

Yet whoever I asked gave me no joy. With the exception of the Auditor-General's office, the cakes proved an impossible moral dilemma for public servants. The Department of Home Affairs, for example, is Canprint's biggest government client; it received the cake greetings, too. I pleaded several times for an answer: were they eaten or thrown out?

The department refused to say, though a spokeswoman eventually pointed out that its employees did "not need written approval" to keep items of low value like cupcakes. So we can assume that Home Affairs staff ate them – they just don't want to say they did.

Other agencies found the question similarly unanswerable. They cited lengthy statements about the need to handle gifts and hospitality appropriately, but were unwilling to confess how they handled the cakes.

So, to eat or not to eat – what's the right answer?

Informant columnist Professor Richard Mulgan (who is, incidentally, a world-renowned scholar of Aristotle) teaches ethics to public servants here in Canberra. I asked him whether the Auditor-General's lackeys went too far; whether their snubbing of the Christmas cupcakes was too much.

Not at all, he said; he lavished praise on their stringency. "It's certainly not going overboard for an audit office. It needs to be squeaky clean." Indeed, it's very much the type of case he picks apart with his public administration students at the ANU.

The point of this Christmas story, though, isn't whether to eat the cake. It's the sad fact that discussing something so simple is rather too much for most public servants (at least, on the record). So pervasive is the fear of saying something "wrong" (even when there is no correct answer) that, these days, many bureaucrats refuse even to "like" mildly political Facebook posts, for example. No one dares make a mistake, which means few people learn. Canprint, no doubt mindful of causing a fuss for its clients, also wouldn't discuss many details of this story. After all, Canberra is full of tales of contractors who lose government work over some minor ruffle or imagined crisis.

Imagine how lively and productive, how much brighter and better, this city might be without this moral panic hanging over it.

(As we enter the yuletide season, please note that the Informant has neither a gift policy nor any qualms about accepting cake.)