Results of a 2005 Worldwide Survey ICGFM 2005 Annual Conference Marriott Biscayne Hotel – Miami Florida Monday 2 May, 2005 Presented by: Dick Willett –

Results of a 2005 Worldwide Survey

ICGFM 2005 Annual ConferenceMarriott Biscayne Hotel – Miami Florida

Monday 2 May, 2005

Presented by: Dick Willett – Grant Thornton LLP

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Table of Contents

• About the Survey• Fraud and Corruption – Definition, Types and

Consequences• Causes of Corruption• Recommendations for Combating Corruption -

Overall• Selected Specific Corruption-Resistant

Recommendations• Closing Thoughts

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About the Survey

• Why we did it• What were we looking for

– Not evidence of corruption – know it's there– Rather, ways to resist corruption in Public Sector– Particularly in financial management

• Methodology– Anecdotal – reporting what we have heard from respondents– No statistically-based findings/conclusions

• Scope– WB, TI work– Gathered info from respondents– Anonymity

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Fraud and Corruption – Definition, Types and Consequences

• UNDP Definition

Corruption is the misuse of public power, office or authority for private benefit-through bribery, extortion, influence peddling, nepotism, fraud, speed money or embezzlement.

• Some interviewees wanted to add "benefit of certain groups or a political party"

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Fraud and Corruption – Definition, Types and Consequences (Cont'd)

High Level – Generally causes more impact and to larger segment of citizens per respondents

• Collusion• Misuse of public power • Irregularities • Bribery • Forged papers

• Ignoring and undervaluing

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Retail – Less impact and causes isolated effects• Small-scale everyday graft, extortion and bribery

involving low-level public sector employees• Examples of bribery

– Police overlooking traffic violations– School officials enrolling students– Bureaucrats speeding-up the processing of

permits

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Consequences of corruption as defined by respondents

• Negative culture - public indifference to corruption is greatest barrier

• General public lives with the contradictions – against it, but accept it

• Slows economic development which inflicts more impact on poor

• Widens the income gap between rich and poor• Lax collection results in lower revenues which affects

public services

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• Ineffective administrations because officials are appointed based on their agreeing to engage in corrupt activities

• Unfair competition and bribery prevents entrepreneurship and foreign investment

• Public health is endangered because of poor protection (food, water)

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• Contradictions - people are against it but they accept it

“In my country, we have to destroy corruption definitively because it is destroying us.”

Causes of Corruption

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Causes of Corruption

• Cultural and social• Political• Institutional

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Causes of Corruption (Cont'd)

Cultural and Social Causes• Major cause – indifference or acceptance by public

sector officials • People know justice system will not punish

corruptors

Corruption is in all levels of society, politics and institutions

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Political Causes • Politicians and senior government officials say they

are against corruption, but accept it • Political leaders lose power if they speak against

corruption• Complete politicization of anti-corruption bodies

and public prosecutors has made them ineffective

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Institutional Causes – respondents said• Minor problems with corruption among lower

employees• Pay below poverty level leads some to corruption• Even if salaries rise, corruption continues• Lax enforcement of laws is a cause• Negligence attributed to entire justice system

Recommendations For Combating Corruption - Overall

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Recommendations for Combating Corruption

• Cultural and social • Political• Institutional

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Recommendations for Combating Corruption (Cont'd)

• Survey respondents made dozens of recommendations about what governments can do to reduce corruption and its impact on citizens, society and institutions

• Our experience is that most countries with severe, endemic corruption will need to develop a comprehensive anti-corruption initiative that takes into account nearly all of these recommendations

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Cultural and Social Solutions • Fight against corruption has to happen openly and

with people involved • It is important to educate citizens on the value of a

corruption-free society


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Political Solutions • Political reform is absolutely essential to combat

corruption• Reviewing and strengthening existing laws and

monitoring their enforcement are key• Laws protecting people who report corruption,

especially public servants (e.g., “whistleblower” laws), are particularly important

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Institutional Solutions • Large number of respondents said establishing/

strengthening an anti-corruption board is an important step

• Personnel rotation will help prevent concealing of illegal transactions

• Regular evaluations of anti-corruption policies and procedures will help keep them effective


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Institutional Solutions • Effective laws to protect whistleblowers and

improve reporting should be in place• This reporting is better, as one respondent said,

“We should be hearing about corruption that way, rather than at the dinner table”

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Institutional Solutions• Strengthening internal controls at public entities -

with particular emphasis on those that prevent fraud and abuse - is important

• Internal controls is a priority involving revenue collections, procurement and financial transactions

Selected Specific Corruption-Resistant Recommendations

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Selected Specific Corruption–Resistant Recommendations

Respondents prioritized intervention areas • Strengthen anti-corruption boards• Introduce effective revenue collections• Adopt transparent procurement process• Reducing corruption on little things means a lot

Revenue Collection that Works

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Revenue Collection That Works

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Revenue Collection That Works (Cont'd)

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Revenue Collection That Works (Cont'd)

Procurement That Resists Corruption

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Procurement That Resists Corruption

• Migrate manual to electronic process – Takes unneeded

discretion out of process

– Provided transaction-by-transaction audit trail

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Procurement That Resists Corruption (Cont'd)

• Centralize procurement– Facilitate bulk pricing, gain the benefits of specialized

procurement employees– Reduce the opportunities for kickbacks and other

corruption• Develop results-oriented specifications instead of spelling

out the process of producing and delivering products and services

• Broadly publish bid solicitations and awards, including on the Internet, to make the procurement process more transparent and trustworthy to vendors

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• Ensure that all vendors have full access to information they need to prepare bids, including special conditions and requirements, the procurement process to be used, and the government’s estimated budget range for each procurement

• For frequently purchased items, use pre-approved vendors with negotiated catalog rates

• Prepare and use clear, well-understood signoff procedures for bid evaluations and purchase transactions

• For complex acquisitions, engage objective experts to determine specifications and expected pricing, and also participate in approving deliverables

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• Use this information to draft pre-proposal specifications and invite comments from potential bidders

• Provide for prompt and objective bid protests, perhaps by a government-wide procurement board, especially when losing bidders allege arbitrary decisions

• Have a person or organization not directly associated with a specific purchase monitor its delivery for meeting timeliness, quality and quantity requirements

• Routinely evaluate vendors’ performance and establish and update a database of their performance “grades”

Characteristics of Effective Anti-Corruption Boards/Commissions

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Characteristics of Effective Anti-Corruption Boards/Commissions

• Independence/Management– Truly independent – not part of other

organization– "Virtual fourth brand of government"– Freedom to follow any leads worthy of use of its

resources– Single strong leader with assured lengthy tenure– Controls to avoid political or bureaucratic "witch-

hunts"

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Characteristics of Effective Anti-Corruption Boards/Commissions (Cont'd)

Resources• Ample staff and budget –

pursue leads without delay• Fair wages• Well-educated staff• Good working relationship

with public media• Appropriate physical safety

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Characteristics of Effective Anti-Corruption Boards/Commissions (Cont'd)

Supporting Laws/Regulations• Needed to establish board• Needed to show country's willingness to support

board activities• Governance reforms may be needed to create

framework for defining corruption and protecting those practicing it

Little Things Mean a Lot

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Little Things Mean a Lot

• Daily encounters between the general public and public employees are the most frequent opportunities for corruption - and for reducing a country’s “culture of corruption”

• Here are six areas respondents mentioned frequently

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Little Things Mean a Lot (Cont'd)

• Traffic and parking• Electronic payments• Outsourcing• Tax payments• Queues• Courtesy

Closing Thoughts

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Closing Thoughts

• Respondents affirmed corruption is rampant

• Corruption is now a topic being openly addressed – by government officials, media and general public

• Respondents provided significant illustrations of ways to reduce corruption

Additional Information

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Additional Information

If you would like more copies of this survey or an opportunity to hear more about its content and about reducing public sector corruption, please contact ICGFM or Grant Thornton. We will be pleased to discuss providing your organization with a briefing or to present survey results at a conference or seminar.

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To Contact Us

Dick WillettGrant Thornton LLP333 John Carlyle Street, Suite 500Alexandria, VA 22314Telephone: (703) 837-4444Email: [email protected]

Grant Thornton LLP333 John Carlyle Street, Suite 500Alexandria, VA 22314Telephone: (703) 837-4400Web: www.grantthornton.com/public sector

International Consortium ofGovernment Financial Managers444 North Capital Street, Suite 234Washington, D.C. 20001Telephone: (202) 624-8461Fax: (202) 624-5473Email: [email protected]

Documents

Results of a 2005 Worldwide Survey ICGFM 2005 Annual Conference Marriott Biscayne Hotel – Miami Florida Monday 2 May, 2005 Presented by: Dick Willett –