Results of a 2005 Worldwide Survey
ICGFM 2005 Annual Conference
Marriott Biscayne Hotel – Miami Florida
Monday 2 May, 2005
Presented by: Dick Willett – Grant Thornton LLP
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
3
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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Fraud and Corruption – Definition, Types and
Consequences (Cont'd)
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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Fraud and Corruption – Definition, Types and
Consequences (Cont'd)
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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Fraud and Corruption – Definition, Types and
Consequences (Cont'd)
• 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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Fraud and Corruption – Definition, Types and
Consequences (Cont'd)
• Contradictions - people are
against it but they accept it
“In my country, we have to
destroy corruption definitively
because it is destroying us.”
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Causes of Corruption
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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Causes of Corruption (Cont'd)
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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Causes of Corruption (Cont'd)
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
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Recommendations For Combating
Corruption - Overall
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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Recommendations for Combating Corruption
(Cont'd)
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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Recommendations for Combating Corruption
(Cont'd)
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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Recommendations for Combating Corruption
(Cont'd)
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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Recommendations for Combating Corruption
(Cont'd)
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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Recommendations for Combating Corruption
(Cont'd)
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
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Selected Specific Corruption-Resistant
Recommendations
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
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Revenue Collection that Works
Revenue Collection That Works
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Revenue Collection That Works (Cont'd)
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Revenue Collection That Works (Cont'd)
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Procurement That Resists Corruption
Procurement That Resists Corruption
• Migrate manual to
electronic process
– Takes unneeded
discretion out of
process
– Provided transactionby-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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Procurement That Resists Corruption (Cont'd)
• 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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Procurement That Resists Corruption (Cont'd)
• 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”
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Characteristics of Effective Anti-Corruption
Boards/Commissions
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 "witchhunts"
35
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
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Little Things Mean a Lot
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
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Closing Thoughts
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
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Additional Information
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
International Consortium of
Government Financial Managers
Grant Thornton LLP
333 John Carlyle Street, Suite 500
Alexandria, VA 22314
Telephone: (703) 837-4400
Web: www.grantthornton.com/public sector
444 North Capital Street, Suite 234
Washington, D.C. 20001
Telephone: (202) 624-8461
Fax: (202) 624-5473
Email: ICGFM@yahoo.com
Dick Willett
Grant Thornton LLP
333 John Carlyle Street, Suite 500
Alexandria, VA 22314
Telephone: (703) 837-4444
Email: Dick.Willett@gt.com
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