Good Governance & Anti-Corruption. April 2012

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1 Good Governance & Anti-Corruption April 2012

2 Good Governance The issue of good governance and capacity-building is what we believe lies at the core of all Africa s problems Commission for Africa,

3 Good Governance Transparency Pillars of Good Governance Accountability Participation Good governance is integral to economic growth, the eradication of poverty and hunger, and sustainable development. The views of all oppressed groups, including women, youth and poor, must be heard & considered by governing bodies because they will be most negatively affected if good governance is not achieved 2

4 Corruption Corruption is a drawback to any government's effort in saving the people from the pangs of poverty and will be fought in deeds and words because it is right, because it is good, and because it is Government policy * *President Banda of Zambia: September

5 Corruption Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a government s ability to provide basic services, feeding inequality and injustice, and discouraging foreign investment and aid. Secretary-General of the United Nations UN Convention Against Corruption (2003) 4

6 Impact of Corruption The problem Delays in implementation Selection of unqualified contractors Inflation of costs Failure to complete works Deters investment Prevents development Adds to unproductive debt 5

7 Good Governance and Corruption Broad definition of Good Governance Good governance is, in short, anti-corruption whereby authority and its institutions are accountable, effective & efficient, participatory, transparent, responsive & equitable Good governance is integral to economic growth, the eradication of poverty and hunger, and sustainable development. The views of all oppressed groups, including women, youth and poor, must be heard & considered by governing bodies because they will be most negatively affected if good governance is not achieved 6

8 Good Governance and Corruption Leading causes of corruption: abundant natural resources autocratic & unaccountable government unevenly provided & poor quality public services low salary of civil servants under-resourced/lack of independence for institutions/structures intended to provide checks and balances Ways of combating corruption and improving governance: establishment of economic/ administrative/ market reforms update of mandatory accounting, audit, procurement & other financial regulations involvement of civil society groups strengthening capacities for decision-making & delivery of basic services implementing developmental initiatives 7

9 Governance & Corruption Assessments Transparency International (TI) global civil society organization dedicated to curbing corruption publishes annually a series of corruption indices which ranks countries world-wide from zero (highly corrupted) to 10 (highly clean) based mainly on surveys from: IFI country teams/regional banks/local managers Mo Ibrahim Foundation aims to improve the quality of governance specifically in Africa publishes annual governance statistics comparing African countries over time and against each other in 5 major areas, being safety & security, rule of law, participation, sustainable economic opportunity and human development based mainly on surveys/national data including in-country researchers/institutes Doing Business World Bank initiative published annually which ranks economies based on the regulatory environment s conduciveness/ ease of doing business index averages 10 topics including starting and closing a business, getting credit, paying taxes, enforcing contracts and employing workers 8

10 Governance & Corruption Assessments TI 2011 rankings Mo Ibrahim rankings Least corrupt New Zealand 9.5 Denmark 9.4 Finland Most corrupt Somalia 1 Korea (North) 1 Myanmar 1.5 Afghanistan 1.5 Doing business These statistics in the above assessments are to be considered as relative ratings and are contested by certain countries, also as based on limited research in-country. However, they may be considered useful in so far as they indicate progress made by individual countries over time. The sets of statistics are broadly aligned in terms of providing an indicative rating. Not coincidentally, many of the countries that score poorly on Ease of Doing Business also score poorly on perception of corruption. 9

11 IFAD s Operational Approach on Anti-Corruption Focus IN-COUNTRY on Risks, Outcomes & Sustainability Credible sanctions Suspensions & Cancellations. Mis-procurement. Audit plan Ineligible expenses Project design Risk assessment. Quality review Internal controls & checks Legal framework Corruption policy Contract clauses Zero-Tolerance Setting the bar Start up and training Govt buy-in. Qualified staff Procurement, FM, audit capacity Contracts clauses Proactive Prevention Participatory mechanisms to strengthen accountability & transparency In-build capacity, thresholds Publicise award of contracts Supervision support On-site verification. FM advisers Communications plan Project oversight 10

12 Financial Management & Good Governance Good financial management means that funds are used: solely for purpose intended & results-orientated in accordance with AWPB in conformity with administrative, technical, financial, environmental, agricultural & rural development practices & good governance ensuring value for money following best practice with considerations of efficiency & effectiveness 11

13 Financial Management & Good Governance FM work involves 2 approaches a) assurance that IFAD funds are being used for intended purposes (thro reliable internal systems & direct supervision) b) assistance to governments/ projects to improve FM capacities FM is an integral part of the development process to achieve the Millennium Development Goals One of the goals of the Paris Declaration is to ensure greater reliance on public financial management systems IFAD works with borrowers to use national systems where possible (e.g. reporting/ procurement/ budget/ accounting/ audit) 12

14 Good Governance Framework Elements 1. PROCUREMENT 2. FINANCIAL MANAGEMENT 3. DISCLOSURE Issues Ensure transparent and efficient procurement at national, provincial & commune levels Ensure strong internal controls at central, provincial, district & commune levels External/ internal audit capacity Minimize cash transactions Adoption of Merit-Based Performance Incentive by project. Minimize possible conflicts of interest among project staff; Enhance transparency through public disclosure of project information 4. CIVIL SOCIETY ROLE Provide for greater involvement by Civil Society Organizations 5. COMPLAINTS & REMEDIES MECHANISM Provide overall complaints and grievances mechanism covering all aspects of project 6. CODE OF ETHICAL CONDUCT Require all staff to adhere to Code of Ethical Conduct 7. SANCTIONS Reinforce Code of Ethical Conduct with sanctions for fraudulent/ corrupt activity by project staff, contractors, suppliers & consultants. 13

15 IFAD s Policy on Corruption IFAD has a zero tolerance against fraud, corruption & misconduct Most countries in which IFAD operates have poor governance/ corruption records Responsibility for use of funds rests with Government IFAD now requires additional checks/ controls in design documents for countries which have a score of less than 3.0 per TI Systematic checks/ controls may be built in at design +/or implementation stage of a project (e.g., low procurement thresholds/ FM advisors) in addition to normal IFAD procedures 14

16 IFAD s Policy on Corruption Government is responsible for following up in the first instance IFAD may declare mis-procurement/ineligible expenditures as a result of fiduciary responsibilities, also if in doubt Specific cases of suspected fraudulent/ corrupt practices are referred to IFAD s Office of Audit and Oversight, which may collaborate if required* Contact may be made anonymously providing adequate supporting documentation via: * (rare cases) 15

17 IFAD s Policy on Corruption IFAD Anti-Corruption Policy: IFAD s policy to ensure observation of highest standards of ethics in IFAD-funded contracts Zero-tolerance policy Appropriate sanctions will be applied where allegations are substantiated Range of sanctions enforced in accordance with the provisions of applicable IFAD rules and regulations and legal instruments Applies to IFAD-funded activities whether supervised directly by IFAD or by a cooperating institution IFAD will continue to improve its internal controls, including controls inherent in or pertaining to its project activities, so as to ensure that it is effective in preventing, detecting & investigating fraudulent, corrupt, collusive and coercive practices IFAD shall take all possible actions to protect individuals from reprisals who help reveal corrupt practices & individuals or entities subject to unfair or malicious allegations This policy is in line with policies adopted by the other IFIs 16

18 IFAD s Policy on Corruption Red Flags of fraud / corruption Persistent high prices Poor quality works Unnecessary agents ( middlemen, local partners ) Inadequate/incomplete documentation Lack of or inadequate inspections Project official micro managing Lack of transparency in selection / evaluation processes In case of fraud and corruption, IFAD will: Reject award recommendations Cancel relevant portion of loan if borrower fails to take action Sanction firms or individuals involved and declare ineligible for stated or indefinite period of time IFAD has the right to require a provision in bidding documents/ RFP enabling IFAD s inspection & audit of accounts related to contract 17

19 What can you do? 18

20 What can you do? Prevent: Perform best practice FM practices regularly and consistently (e.g. bank/ SA reconciliations, filing of documents/backups) Transparency: Ensure all FM procedures & processes are diligently & fully followed Encourage & facilitate reports of concerns: Challenge suggestions/requests to carry out tasks/practices which do not seem in line with (standard) procedures Contact IFAD (CPM/ Office of Oversight): If you feel that your superior(s) has not taken your complaints seriously (need to present evidence) and/or need advice 19