Corruption understood as an institutional risk (summary description)

Civis Mundi Digitaal #58

door Daniel Blais & Fred Schenkelaars

A.     Executive summary

The authors draw upon their over 20 years of multi-country and multi-donor experiences with national executive, legislature and supreme audit institution entities all for the most part involved in financial oversight either internal or external. This compendium documents applied and tested approaches, procedures and capacity development methods which support national anti-corruption endeavors mostly of a preventive nature. These were all developed and formulated with and within national entities.


The processes and approaches described therein are applicable within the three levels of government whose involved entities are part of its national integrity system (as defined by Transparency International) and are viewed as key players in the effective and sustainable enhancement of national accountability and transparency. This approach with its implementation methodology is aimed at government areas and entities that are particularly prone to deficient and/or corrupt practices as identified by governments, supreme audit institutions, inspectorate generals, the international donor community, non-governmental organizations (NGOs), civil society organizations (CSOs) as well as the authors.


Accordingly, this publication sets out recurrent Institutional Risk Assessment (IRA) findings as well as the ensuing recommendations and/or strategies to address and correct these flaws. As the ability of national governments to cater to the needs of its constituents depend to a great extent on using resources effectively and efficiently, the importance of financial oversight bodies and their respective roles in safeguarding public monies from misuse and waste are crucial. Institutional systems based on good governance, transparency, accountability, integrity and impartiality are pivotal in preparing Institutional Risk Assessment/Anti-Corruption procedures, manual and training programs to assess the impact of corrupt, ineffective and inefficient practices, report findings and recommend solutions to the relevant national authorities as well as supporting the formulation of follow up steps and procedures to help ensure that corrective measures are implemented.


The publication thereby focuses on corruption, malfeasance and the incompetency of administrative, technical and financial nature within all government administrative units and institutions and thus seeks to redress by revealing areas and systems conducive to corruption, fraud, inefficiencies and wastage. Thus, it hopefully will result in enhancing the protection of public resources from wastage and misuse, upgrading the effectiveness and efficiency of operations as well as enhancing staff/employee commitment to prescribed procedures, laws, regulations, instructions and government policies.


The authors readily recognize that certain works, publications and approaches proceed to,

•             Rate the probability of corruption occurrence;

•             Rate the potential impact of corruption practices;

•             Formulate rating methods;

•             Determine inherent risk ratings;

•             Classify mitigating actions, controls, and processes into entity level, scheme control and               preventive controls;

•             Prepare control mapping frameworks to be consigned in a risk register;

•             Calculate residual risks;

•             Compare observed risk to risk tolerance describe those that exceed risk tolerance and

•             Prepare corruption risk response plans with specific detailed contents.

and thus, an entity/government review report may be perceived as more comprehensive as inclusive of all theoretical facets. Nevertheless, they have proceeded, in all of their realized field mandates/assignments, without most of the above as the mandate funders and/or contractors, while recognizing that the supplementary information would be of great interest and relevance, did not deem the added work as being cost beneficial to each of these complete or partial IRA reviews described in chapters 5 through 10 of the Compendium.


The authors have produced this compendium with the intention of offering a summary view of the theoretical foundations used to develop and apply a methodology with its relevant documentation that was and can be used in different national contexts with divergent donor requirements. While complete working papers such as comprehensive checklists developed and used are not included in their entirety in the annexes, they have been completed and are available. All-encompassing and detailed institutional risk assessment reviews, anti-corruption audit findings, recommendations and dispositions of these are also not integrated in detail into the compendium but have all been produced.


For the purposes of this publication, the definition of “integrity” includes honesty, commitment to the organization’s aims and values, principles of loyalty, legality, reliability, objectivity, political neutrality, responsibility and accountability. In addition, the terms ‘anti-corruption audit (ACA)’ and ‘institutional risk assessment review (IRA)’ are used interchangeably. A ministry / department or a government entity within the executive arm of government conducting such a process, mostly identifies it as an ‘institutional risk assessment review’ (hot spot detection/red flagging) whereas a National Supreme Audit Institution (SAI) conducting the review, will often refer to it as an ‘anti-corruption audit’ (including hot spot detection / red flagging). The processes detailed in this compendium should not be confused with forensic auditing/accounting as the work carried-out the authors is of a preventive nature and not meant to target the uncovering of fraud, malfeasance nor deficient management.


The authors wish to emphasize that this compendium is not to be perceived nor used totally or partially as a procedural manual. Several works, each with its own particular focus, have been produced by national and/or international stakeholders. The PART D annexes contain solely an extract of a comprehensive master check-list included in documents, procedures and manuals developed for each mandate described in PART C, with these being based upon and elaborated from prepared standard manual templates applicable to national internal or external reviewing entities. Furthermore the authors have produced it to offer a summary view of the theoretical foundations used to develop and apply a methodology with its relevant documentation that has been and can be further used in different national contexts with specific donor requirements. All detailed institutional risk assessment reviews, anti-corruption audit findings, recommendations and findings with disposition of these are documented.

B.         Introduction

B.1         Origins and background

In 1992-93 a group of “like-minded” donors which originally included Denmark, The Netherlands, Sweden, Canada and at a later stage Germany, concluded that measures should be taken to address “deficient” national financial management practices as observed in many developing and transitional economies. These “deficient” practices included the term corruption which word did not then have the favor of the international donor community. This donor group proceeded to fund an “Accountability and Transparency” program which would be embedded within the United Nations system specifically within its Development Program (UNDP). From its origin, this “Program for Accountability and Transparency (PACT)” was set up to support United Nations member countries in their quest to strengthen financial management within their national institutions. The original thrust of this initiative was the development of a self-assessment tool of which the participating beneficiaries would take ownership of the process to promote sustainable financial improvement including preventing and combating corruption.  It is to be underlined that this initial multilateral support approach was to assist countries in their own endeavors and not to develop an assessment/evaluation tool and/or procedures to be administered by outside stakeholders in their direct financial support to governments. Thus, began the “pioneering” work in the prevention and combatting of corruption. The use of the word itself began to be openly and widely referred to as such in 1996-97 when the then head of the World Bank publically used it as until this time its use raised eyebrows in addition to being perceived as a patronizing and condescending attitude of the donor community towards recipient/beneficiary countries.


Thus, UNDP, through its Governance Division, opted to play a leadership role in combating corruption by using its own limited resources in assisting willing governments in formulating procedures, documentation and training of national staff. To this end UNDP initiated the development of a Country Assessment in Accountability and Transparency (CONTACT) manual which was essentially a self-assessment tool. This novel undertaking was led by the appointed PACT manager who solicited substantive input from several sources including renowned academic expertise, existing publications, working groups and participation in international conferences on the subject of corruption and sound financial management. Simultaneously working contacts were also established with other involved international players such as the World Bank, OECD, Transparency International, bilateral donor agencies and several other expertise groups then involved in anti-corruption initiatives. Thus, the focus of the program was that corruption and its effects should be turned from a low risk and highly profitable activity into a high risk and low profit venture and that the upstream intervention modality would be favored through the prevention aspect.


After some ten (10) years of funding the UNDP led initiative, these original “like minded” funders felt that their initial objectives and mandate had been achieved as other multilateral and bilateral players had become actively involved under the banner of anti-corruption activities. Thus, their sought after goals of initiating, creating awareness, developing diagnostic tools, training national staff in a supporting and leadership capacity as well as creating a core of expertise within the UN system had been realized. In summary: what had originally been temporary support activities and initiatives in the enhancement of accountability and transparency evolved into more elaborate and sustainable comprehensive support measures in addressing corrupt practices, malfeasance, incompetent management, inadequate laws and regulations as well as lack of procedural documentation within national governments. The authors then redirected their efforts and expertise outside of the UN institutional context so as to make available the acquired skills and knowledge to beneficiary countries and their national entities. (cf. section B.4. About the authors)


B.2         Objectives

This compendium documents administrative and financial corruption corrective endeavors that several national governments have undertaken under the direct mentorship, guidance and involvement of the authors with all these actions having been carried out either through national executive entities or through their legislature oversight institution i.e. Supreme Audit Institution (SAI).


Generally, the responsibilities of a national executive and its counterpart legislature SAI are to promote/enhance good governance, transparency, accountability, integrity and impartiality by carrying out the following,

  • financial/performance audits of public accounts, entities and projects to ensure compliance with quality standards;
  • report the review/audit findings to relevant authorities on a timely basis and disseminate them to the public;
  • ensure that all stakeholders at national and local levels acknowledge the independence, integrity and impartiality of all national oversight entities;
  • apply most up-to-date review/auditing techniques, procuring the most effectiveness at the lowest cost;
  • develop professional relationships with reviewed entities/auditees and issue timely and implementable recommendations with realistic corrective measures;
  • ensure best value for money from resources provided by public monies;
  • establish collaborative complementary efforts amongst governmental partners, audit sections in ministries as well as anti-corruption authorities in holding each and every spending unit of government accountable in their use of public resources.

Specifically, this publication describes the steps/stages/phases necessary in acquiring and developing the required skills for effective anti-corruption actions within governmental internal or external monitoring and oversight entities,

  • develop a country specific anticorruption policy with an enabling methodology;
  • develop institutional anti-corruption manuals and written procedures;
  • develop reviewee/auditee-specific programs;
  • set up and train national expertise teams;
  • conduct pilot anti-corruption reviews and audits;
  • formulate reports of findings and recommendations;
  • prepare and explain follow up action-plans on the relevant findings and recommendations and
  • support reviewed entities in implementing these follow up procedures ensuing from the action plans together with the required benchmarking mechanism.


B.3         Intended institutional beneficiaries

This compendium was produced to be of interest and, hopefully, of benefit to firstly integrity and transparency partners and stakeholders of the development/donor community (bilateral and multilateral) whose main focus of support  is on anti-corruption, fraud, embezzlement,  malfeasance, mismanagement   and wastage. Secondly, and most importantly, it is meant to be a helpful and useful guide for beneficiary countries at their national, sub-national and local levels through training and awareness raising of their officials and staff within all categories and levels of ,

  • public sector oversight bodies such as the national Supreme Audit Institution (SAI),
  • inspectorate general (IG);
  • ministerial internal audit department;
  • ministerial internal control department;
  • anti-corruption agencies;
  • training institutions and
  • legislatures including their standing and ad hoc committees and subcommittees.

It is also to be considered as a guide for donor bilateral agencies wishing to inform/train their technical staff and/or consultants in the methodology and use of assessment tools in their evaluation of a beneficiary country’s state of its financial management, corruption issues, anti-corruption measures in place as well as an overview of the existing political will to address and shore up corrective measures for the observed deficiencies. 


B.4         About the authors

At the outset of the initial transparency and accountability program (PACT), as an original precursor to anti-corruption programs, the pioneering “like-minded” donors, as a group, proceeded to identify and recruit an able program/project director to anchor this nascent program within the designated multilateral agency, UNDP. Thus, Fred Schenkelaars was recruited to head this novel worldwide program. His professional auditing and accounting background together with his many years of experience within internal audit, financial management and corporate management within both the private and public sectors, of both the bilateral and multilateral sectors, made his candidacy uniquely appealing to the funders.  His previous several international postings in Latin America, the Caribbean as well as the United Nations Organization in New York reassured the partners as to the sustainable achievement of the objectives of this new endeavor in holding national entities accountable for the management of public funds entrusted to them. Henceforth, as the UNDP Program Director, he proceeded to recruit and train competent immediate collaborators who in turn formulated initial actions, documentation, procedures and training activities for several national governments throughout the five geographical areas of the UN. In addition to this new Directorate being based at UNDP New York HQ, two regional offices were set up with one in Harare, Zimbabwe to cover all of Africa and the other in Bratislava, Slovakia to cover all the newly independent ex–Soviet republics in Europe and Central Asia as well as the South-Eastern Europe ex-Yugoslavia states and to a standby collaborating unit for HQ jurisdiction mandates. Under his leadership close working relationships were established with all the other significant players in the field of accountability, transparency and what was to eventually evolve into full-fledged anti-corruption programs. Assessment tools which would subsequently evolve into complete anti-corruption working tools were firstly developed within this program.  


As for Daniel Blais, he was recruited directly by the PACT Directorate after its start up. Concurrently to the startup he was employed in a UN technical cooperation sister organization as Interregional Adviser in Government Auditing. In that capacity, he was primarily tasked with assessing, evaluating, formulating support and action plans, mobilizing human and financial resources and executing and monitoring support projects for strengthening national Supreme Audit Institutions (SAI) as well as enhancing financial management within, mostly, finance ministries. This relevant expertise with oversight institutions of all five global geographical areas of UNO was deemed to be an extremely compatible background for involvement in the PACT activities that were to later evolve into more articulated corruption abatement programs. His auditing, accounting, legal, training and multilateral institutional knowledge were all directly relevant to this startup program as were his previous professional experiences in academia and private practice. He was tasked with setting up and managing the program sub regional office in Bratislava, Slovakia and thus directly involved in support activities to national entities involved in promoting accountability and transparency. This eventually led to his outright involvement in anti- corruption activities, not only in all countries within the jurisdiction of the Bratislava, Slovakia Regional Office but also to several Francophone countries of Africa. Close and constant exchanges and collaboration with the HQ program activities, assured hands-on involvement in the evolution of the ways and means of more refined and involved anti-corruption endeavors.          


The end of the original “likeminded” funder involvement did not create a practical institutional expertise void as the authors had become quite skilled and experienced in matters now referred to as anti-corruption. They then sought, as experienced international experts, to apply and adapt their acquired skills and knowledge by subsequently working with other donors and countries in further developing tailored methodologies to particular anti-corruption settings in close collaboration with involved national players and stakeholders. Thus, began the long and involved process described in chapters 5 to 12 of the Compendium, namely their numerous years of thematically related work within several United Nations Organization development and assistance units and programs which had allowed them to develop an initial methodology which was further refined and streamlined with newly obtained mandates. The initial assessment tool was also refined and adapted to each particular institutional risk assessment (“hot spots” detection) mandate. All of these experiences were later integrated into national anti-corruption policy formulation, methodologies, and strategies, training activities and document formulation as well as the formulation of necessary empowering legal framework.


In addition to the authors’ particular expertise and detailed IRA unique experiences in the subject matter described in this compendium, they had been involved in other ancillary AC support activities such as the Bratislava office formulating United Nations support policies to national governments and UNO Country Offices such as Armenia, Azerbaijan and Georgia and other former USSR-republics under its thematic jurisdiction. In addition, both authors were involved in several programs and/or projects funded by either UNDP or bilateral donors such as training members of the Parliament of Tajikistan in integrity and oversight, training of audit staff of the National Audit Office of Guyana and the formulation of a Good Practice paper on Diagnostic Tools to assess the financial architecture and integrity systems for the OECD-DAC. They also developed three generic SAI models for countries in transition with these models based on 140 SAI’s members of INTOSAI. They were also avid participants and attendees in various conferences on corruption (i.e. IACC-Durban, Erasmus University Rotterdam, Financial Crime Europe, Amsterdam) often being called upon to prepare and deliver presentations.

C.         Corruption

C.1         Introduction

Corruption or the abuse of entrusted power for personal gain is present everywhere and it is widely accepted that corruption damages economies, the environment and stunts, even reverses, the growth of both developing and transitional countries by diverting resources. It also often discourages international aid as well as hampers foreign and domestic investment. At its worst law and order can fall apart as rules and regulations fail to be enforced with crime, violence and social unrest ensuing. It costs donors and beneficiaries billions of dollars each year as it siphons off scarce resources while diminishing a country’s prospects for sustainable development and, in a country where it is endemic, the consequences are disproportionately and cruelly borne by the poor who do not have the means to compete with those able and willing to, for example, pay bribes or “facilitating payments”. Ultimately corruption tightens the shackles of poverty in those countries that can least afford it and fails to provide for important social and economic programs. Apart from lowering public spending and investment, illegitimate transactions, bribes, wastefulness, malfeasance quickly undermines the performance, integrity and effectiveness of government institutions. It also undermines the private sector and when it is associated with organized crime legitimate business development is discouraged with the further consequence a government’s political legitimacy being compromised. While corruption is present to some degree in all societies, political scientists and other experts have aggressively sought to understand why some nations and societies are clearly more vulnerable to abusive political and economic opportunism than others. It has been observed that the world’s tolerance for corruption and its involved and related practices, whatever the name, is fading fast by constituency demands for more transparency and accountability as well as by increasing budgetary pressure due to increasingly limited resources available from the donor community.


C.2       Definition(sense used for this compendium}

One of the most common of the several widely accepted definitions of corruption is the misuse of entrusted power for private gain with the more comprehensive version being the misuse of entrusted power, including peddling influence, for private gain and entails in its essence, non-compliance with the relevant rules of good governance, accountability, integrity, ethics, propriety and legislation usually adhered to by the majority of citizens of any given society. Like any exchange, corruption requires at least two actors-a buyer and a seller. For example the buyer in the private sector pays an “enabling fee” to the seller in the public sector to obtain something of value benefitting  himself/herself. These payments/bribes can be used to allocate perfectly legal but scarce and/or restricted benefits such as foreign exchange, import licenses and public contracts or they may provide something the buyer is not entitled to such as an exemption from a valid regulation, an illicit tax break or permission to carry on a legal or illegal business. Bribery is not limited to public officials but others such as private sector purchasing agents and bank loan officers. Oftentimes neither of the actors in corrupt practices has an incentive to end the relationship while both have a  vested interest in keeping silent about it. A well-known academia corruption expert has developed a formula: C = M + D – A: “If one has a Monopoly and has Discretion in applying the rules with nobody holding one Accountable, then one is far likelier to become Corrupt”.


C.3         Types and characteristics

Corruption is not a stand-alone/one time occurrence but part of the generic and more comprehensive and systematic “economic crime” which usually encompasses one or more of the following elements;


C.3.1      Types

The most common nomenclatures are,

  • bribery via a payment from an individual (physical or moral) actively seeking a non-entitled benefit from public officials;
  • extortion occurs when the public official seeks to extract money from an individual in return for not imposing a penalty or granting a benefit;
  • influence peddling;
  • nepotism and cronyism is the impeding of free competition via favouritism or patronage within a family, personal  and professional group, acquaintances or ethnic group;
  • outright fraud;
  • “speed money”;
  • embezzlement;
  • “kleptocracy” which is the sale of state assets at below market prices to favoured customers/friends a practice particularly prevalent in former communist countries, new democracies  and developing economies;
  • “narcocracy” which is subverting the economic and political system with the huge profits from illicit drug trade, via organized crime and terrorism, as in some drug producing countries;
  • “governments for hire” which seeks to influence policy and legal decisions by bribing public officials through illicit campaign contributions, illegal lobbying or through sanctioned bribery and intimidation;
  • collusion and
  • outright theft of state assets.


C.3.2      Perceptions within various cultures/social settings

Depending on a particular society’s economic and political institutions, incentives and opportunities for corruption are oftentimes presumed to differ to some extent thereby seeking to explain why it manifests itself differently in different areas of the world and why its pervasiveness varies. There are significant differences in perceptions and practices amongst cultures and social settings and even among individuals and groups with what being reasonable and appropriate differing widely. The authors have observed this many times within their field training workshops with an exercise entitled “dilemma training” in which each participant can have a different perception of the degree or lack of corruption of a particular action or practice. This revealing training exercise was developed specifically to highlight these differences of perception. For example, there can be a clear distinction between reciprocity of exchanges and a bribe and sometimes the distinction between gifts and bribes is blurred. This becomes of crucial importance when formulating national anti-corruption policies and tools at the time of carrying out of consultancy mandates. It has even been brought forward by noted experts that some industrialized countries resist efforts to control corruption in international business dealings since they observe that the system of making payoffs to officials in the developing world works to their benefit. It is to be noted that in some countries these payoffs are still tax-deductible as they are considered legitimate expenses in doing business in spite of the fact that several organizations, most notably Transparency International have been very militant about changing these practices and creating a more level “playing field”. Many industrialized “first world” countries have enacted laws to govern their own nationals in their dealings with other countries where the context is more conducive to corrupt practices.


C.3.3      Levels

It is generally agreed that political and institutional systems are characterized as having high and low levels of corruption with variations within these poles;

  • low levels are generally found in systems where institutional checks and balances between the three main branches of government (executive, legislative and judiciary) establish effective mechanisms to prevent, detect and penalize wrongdoing, thus providing  limited opportunities for corruption. This exists mostly in a society which holds it in contempt and which provides for more economic opportunity for all and having more elaborate social welfare mechanisms to protect the more needy;
  • high levels are generally found in settings where institutional mechanisms for combating corruption are weak and/or ineffective with extensive government control and regulation of economic resources providing ample opportunity for malfeasance. Corruption is often so predominant that it is an accepted and tolerated way of life with, oftentimes, the political and administrative elite often dominating and exploiting economic opportunities in return for personal and political gains with few existing safeguards for ordinary honest people. These officials most often act with impunity and are not accountable.


C.3.4      Modus operandi

Ways and means are often classified as;

  • incidental corruption, also sometimes called petty corruption, in which the main actors are petty/minor, opportunistic individuals and is comprised of small-scale embezzlement, misappropriation, bribes, favoritism, influence peddling  and discrimination,
  • systematic corruption, also referred to as grand corruption, in which the actors are public officials, politicians, representatives of donor and recipient countries, bureaucratic elites, businessmen and middlemen whose practices consist of bribery, “kickbacks”, large scale embezzlement through public tenders, disposal of public property and political donations amongst others,
  • systemic corruption in which the actors are bureaucratic elites, politicians, businessmen, white-collar workers and is usually manifests itself in the form of large-scale embezzlement schemes through “ghost workers/zombies” on the government’s payroll, false procurement, payment for non-existent goods and sectorial/group favoritism and
  • Cross-border corruption oftentimes occurring in a context in which capital, people, information and enterprises move freely and rapidly from jurisdiction to jurisdiction making accountability and transparency difficult. It is often facilitated and sustained by trafficking in money, drugs, technology, arms, human beings and even foreign source donations to national political campaigns and is manifested by bank secrecy, offshore banking, loose custom controls and the setting up of tax havens, all practices inviting extensive transfers of funds and goods of dubious origins with those countries considered vulnerable standing to lose the most.


C.4         Observed predominant causes


C.4.1.    Institutional causes

In this context corruption is regarded as principally a governance issue i.e. the failure of institutions incapable of supplying its society with a framework for competitive processes and systematically obstructing legitimate procedures regulating the political and economic spheres. Empirical evidence suggests that when this setting exists, there is more chance for corruption instead of sustainable development. Institutional characteristics such as government low wages with tardy payment of these, pervasive government regulations, excessive discretionary powers of officials in applying regulations and tax codes are all characteristics observed in the institutional setting prone to corruption and malfeasance.


C.4.2. Socio-economical causes

Ethnic minorities submitted to discriminatory perceptions and treatments in exercising rights with difficult or non-existing access to resource and/or service allocations.


C.4.3. Political causes

The lack of or faulty existence of political will of crucial actors such as politicians, civil society “watchdog” organizations, stakeholder groups including international organizations and the private sector to address  corruption. This sets the foundation for the abuse of power by politicians including their ability to shield themselves by, for example, pleading parliamentary immunity or exercising control over the judiciary. Successful efforts to reform corrupt administrations depend on leadership that is attentive to the rule of law and is willing to undertake and attempt reform by mobilizing its constituency and garner public opinion and assume possible risks to their physical and economic integrity.


C.4.4. Legal causes 

Laws and their empowering regulations are often non-existent, inadequately formulated and nor enforced.


C.4.5. Ethical causes

Societal values, peer and family behavior, widespread observed practices and the lack of accessible government services and benefits are all causes for the lack of public outcry/demands for implementing measures to combat and contain corruption. The lack of governmental codes of ethics dictating the behavior of civil servants is also a contributing factor to the continuance and spread of bad practices and behavior.                      


C.5         Areas, contexts and processes most prone (“hot beds of corruption”)

Generally, these are identified by most observers as[1];

  • In the private sector within countries with a history of corruption;
  • Excessive reliance on third-party agents;
  • Unusual payments for agents;
  • Large or numerous cash payments;
  • Upfront or advance payments;
  • Requests for payments by other than an agent or vendor;
  • Payments to numbered accounts or to “haven” or other offshore banks;
  • Large charitable contributions in foreign countries;
  • Close tie between agent and foreign government;
  • Gifts, lavish treatment, secrecy, inaccurate records and
  • Payments to countries or vendors with whom the entity has had no previous dealings.

Specific processes;

  • Procurement including bid-rigging and price-fixing,
  • Offering bribes and “kickbacks” to individual staff,
  • Approval of overbilling by individual staff,
  • Use of agents in new markets (“the mystery middleman”),
  • Excessive gifts and lavish entertainment  to certain individuals,
  • Payments for customs clearance or transporting goods,
  • Government officials facilitating the procurement  of  visas, permits, licenses,
  • “Voluntary” contributions to a political party,
  • “Voluntary” support to social programs often  affiliated to political parties and/or individuals and
  • Illicit charitable contributions and sponsorships.

C.6         Combating and preventing

Governments which focus on improving systems rather than seek out and punish wrongdoers develop more effective enduring reforms that have an impact on minimizing corruption while creating sustainable improvement in public accountability and transparency. By adopting a systemic approach rather than focusing on wrongdoings of individuals people feel less threatened with sanctions and humiliation. In the long term enforcement alone is not sufficient to deter corruptive practices. Measures need to be institutionalized by adopting long term sustainable strategies of legal, institutional, economic and social reforms with national reform efforts needing to address the national integrity system in a holistic manner.  However the key element against corruption still remains having a firm political will to promulgate effective legislative and administrative change. In addition it is essential to have the following important societal actors working in harmony i.e. the public and private sectors, civil society together with the international community as the latter plays an essential role in the introduction and the enforcement of codes and procedures such as procurement guidelines (World Bank, OECD) or the introduction and development of initiatives promoting greater monitoring, transparency and accountability in countries where donor agencies are actively supportive.


Examples of sectorial measures that often need implementation can be grouped as follows,


C.6.1      Institutional

•setting up of a “watchdog” institution such as an anti-corruption body (example the Hong Kong   

  Independent Commission Against Corruption-HKICAC);

•promulgation of economic and institutional reforms in replacing corrupt cronies by well trained

  staff so as to allow civil service to play a  positive role;

•create and strengthen other “watch dog” agencies such as inspectorates’ general, supreme audit

   institutions and legislatures and their committees;

•implement modern staff incentive and performance/assessment systems;

•put in place financial sector supervision;

•adopt transparent harmonized accounting standards;

•modernize budget practices at the policy and implementation levels;

•simplify and clarify administrative procedures;

•eliminate overlapping ministries and agencies;

•privatization of some government units and

•adopt new tax regimes.


C.6.2      Socio-economical

  • address high inflation and
  • improve education and literacy.


C.6.3      Political

  • promote honest leadership;
  • limit length of leadership tenures;
  • undertake military reforms to reduce influences in the economic and political sectors;
  • strengthen democratic institutions;


C.6.4      Legal

  • institute rule of law via legal reform;
  • encourage protection of property;
  • deregulate and
  • nurture competition.


C.6.5      Ethical

  • formulate and adopt codes of ethics.


C.6.6      Awareness raising measures

•conduct surveys on perception of corruption and bribery;

•conduct surveys on services delivery by government entities;

•conduct citizen polls;

•develop national indices such as the Corruption Perception Index (CPI) of Transparency

  International and

•publish procurement prices of essential goods.


C.7         National entities and parties most appropriate for combating

Some of the entities and or parties that have been observed as having been the most effective in addressing malfeasance are;

  • Elected lawmakers within their legislatures,
  • Heads of executive branches,
  • Members of the judiciary,
  • Political parties (in power and in opposition),
  • Voters/citizens,
  • Civil servants,
  • Law enforcement officials,
  • Regulatory bodies,
  • The private Sector,
  • Civil society organizations,
  • Nongovernmental organizations (NGO’s) national and international,             
  • Corporate shareholders,
  • Workers/employees,
  • Consumers,
  • The press and media,
  • Watchdog agencies,
  • Whistleblowing mechanisms,
  • Owners,
  • Schools and higher learning institutions,
  • Community groups,  and
  • International  funding organizations such as  the World Bank, United Nations, IMF, OECD, OAS, WTO and bilateral donors.       


C.8         The National Integrity System (NIS)

Transparency International (TI)initially set forth the notion and definition of a National Integrity System as the combination of laws, regulations, practices and institutions that are the interacting pillars in a society’s integrity and thus viewed as the comprehensive mechanism for fighting corruption where these players all interact. It is comprised of several pillars of integrity independent from each other but are mutually supportive and interactive. To be effective a NIS requires these pillars to have a strong political will, a professional and accountable civil service, an effective legislature, a strong and independent judiciary as well as independent watchdog agencies, an informed and pro-active civil society, a free and competent media-sector with an honest responsible private sector. The NIS is often visually represented by the following figure as developed by TI;

From the outset, the authors have emphatically subscribed to this approach based on the analysis and strengthening of a country’s NIS in a manner that the pillars will support each other in an interactive manner as opposed to strengthening one or more while neglecting others as it was originally observed that this uncoordinated approach is not sustainable and thereby not effective in preventing and eradicating corruptive practices. 


C.9         Oversight and its “watchdog” mechanisms

Oversight means “keeping an eye on” in a watchful, responsible and constructive manner and is carried out through a broad spectrum of institutions whose main objectives are ensuring that;

  • the Executive complies with the will of the legislature,
  • ethical behavior in the civil service is promoted and maintained,
  • efficiency and cost-effectiveness in the use of public funds is a foremost preoccupation  at all levels of government,
  • sound internal financial controls are operational at all levels of government and that
  • reduction of the opportunities for corrupt and faulty practices and procedures are addressed in a timely manner.


These mechanisms are either internal or external to the government (executive) unit that is being held accountable;

  • Internal oversight includes internal audit units, inspectorates general, before the fact financial approvals by management, finance ministries and commissions and boards,
  • External oversight is usually exercised by bodies such as the judiciary, Supreme Audit Institutions, legislature committees and commissions, ombudsman, anti-corruption bodies, media, civil society organizations as well as international community stakeholders such as donors and lenders either multilateral or bilateral.

D.        Institutional Risk Assessment (IRA)

D.1         Preventive Approach

The crux of the methodology herein described is the upstream identification of flaws and anomalies conducive to malfeasance of all kinds and within all the governmental operational processes. This unique preventive approach methodology seeks to identify these vulnerable areas called “hot spots” or “red flags”. The authors have developed and perfected this approach, together with the relevant tools, over the years through pilot-testing it with these formulated and documented enabling tools in countries of Africa, the Middle East, Asia and Eastern Europe. These hands-on experiences have allowed, by building upon previous experiences, ongoing improvements the methodology, the supporting tools and the training dispensed. On many occasions prevention has proven to be more cost-effective than identifying potentially corrupt suspects for reprimand and sanctions. This approach has also favored a more collaborative effort from the staff of the reviewed entities who many times have perceived this process as a constructive exercise in improving systems and procedures while identifying the training needs of the operational staff. The authors are also aware that the “downstream “deterrents and punitive measures are sometimes necessary in sanctioning malfeasance and corruption where criminal intent is quite evident. The IRA methodology/approach developed should therefore be viewed and used as a complement to other measures including other important aspect such as education or creating awareness as to what is corruption, wastage and the dire consequences on a government’s delivery of services to its population.    


D.2         Definition

For the authors, Institutional Risk Assessment (IRA) encompasses the variety of mechanisms, procedures and resources that entities use to identify the areas particularly prone to corruption and its related anomalies, to estimate the likelihood of particular forms of corruption within an entity describing the tangible and intangible consequences of such weak areas. Effective risk assessment means understanding the entity, asking relevant questions, understanding
the environments in which it operates and knowing whom the entity is dealing with albeit in either the public or private sector. It also means fully understanding how various anticorruption programs and controls are working in the entity with their mitigating effects on risks. 


D.3         Institutional risk mapping methodology

This approach targets the rules, procedures, processes and systems while taking into account other integrity-related instruments such as codes of conduct, on-going/planned training activities and official function/organization regulations and employee manuals. It is a step-by-step guide in assessing and identifying potentially vulnerable areas (“hot spots”) within an executive entity and is based on the following three premises;

  • Prevention focused review whose principal aim is not to detect/identify corruptible persons nor does it test employee personal integrity. It rather focuses on identifying potentially vulnerable areas or procedures within a government entity with the ensuing description of measures to reduce their negative impact while optimizing an organization’s defenses against violations, fraud or corrupt actions;
  • Promotion of internal voluntary review/examination as it is often an entity’s own decision and responsibility to carry out such an undertaking. Management can and should initiate the process while committing itself to implementing its findings and recommendations in accordance to national and international standards and best practices.  Experience has shown that the greater the involvement of an entity in implementing  the methodology, the more management feels responsible for addressing corrective measures the better  the chance that integrity awareness will be embedded within the organization and there will be broader-based support and acceptance for the review conclusions enabling sustainable implementation of findings and recommendations and
    • Focusing on improving the organizational structure in four interlinked stages:
      • Preparation of the review resources and personnel;
      • identification of vulnerable activities/areas;
      • understanding of these vulnerable activities, and
      • proceeding with the clear and timely formulation of recommendations to management.

This process implies using tools that are specially developed by it and made familiar to all reviewers by, for example, conducting training/orientation workshops for the entity’s involved staff. Topics and means for these workshops can be the identification and assessment beforehand of potentially vulnerable areas, processes and activities, using a survey approach-questionnaire.


D.4         Pre-identification of risk areas

Oftentimes, operational personnel are aware of some of the weak areas and risks that need evaluation and can immediately point in the direction to be further delved into. Such risks can be regrouped into,

  • management risks as management is the lead component of any entity as it determines the lines of authority and the responsibilities for the division of labor that enable the formation of weak areas;
  • financial and accounting risks as any misapplication in procedures can result in a lack of control over assets, liabilities and cash and thus open to the possibilities of embezzlement, theft and wastages resulting in serious performance inefficiencies of the entity;
  • contracting risks as in procurement activities and
  • risks in production activities.

One of the benefits of holding an introductory workshop is the advance identification and description of certain vulnerable areas, why they have not been addressed if known and ways to apply corrective measures. This oftentimes is brought to light during the course of session 7 a onwards in the workshop model in annex 2.


D.5         Use of checklists and questionnaires

The authors have developed a comprehensive checklist of over 700 questions with it becoming an integral part of the methodology as described in the compendium. These questions are classified and clustered into the usual 12 key functional areas of any public entity and form the basis for the preparation of entity designed review programmes. These areas are usually as follows,

  1. 1.       Accounting infrastructure;
  2. 2.       Information management;
  3. 3.       Expenditure planning and budgeting;
  4. 4.       Internal control and internal auditing;
  5. 5.       Financial reporting;
  6. 6.       External auditing;
  7. 7.       Revenue administration;
  8. 8.       Debt management;
  9. 9.       Project and foreign aid management;
  10. 10.   Procurement and assets management;
  11. 11.   Integrity enhancement for prevention and control of corruption, malfeasance, wastage and mismanagement and
  12. 12.   Public sector cash management.

Each of the above functional areas is the subject of a review programme chapter (where applicable) with the relevant chapter introduced by a descriptive outline of the particular and unique institutional risks. Management, as the main empowering component of any governmental unit, sets out the lines of authority of the organizational structure from top to bottom as well as enumerating responsibilities for the division of labor, according to specialties and functions. Flaws in these relationships may lead to negative practices such as delaying reports, taking bad and/or uniformed decisions, increasing bureaucracy and creating gaps that allow for corruption and related actions.

Some observed common recurrent risks in the organization’s management are,

  • inappropriate administrative structures for the entity’s or departmental activities;
  • unnecessary administrative structures leading to appointing unqualified or superfluous employees oftentimes on the basis of nepotism;
  • unnecessary structures that may allow for the blackmailing of citizens;
  • appointing employees not identified as regular personnel;
  • weak central supervision and decision making centers encouraging abuse of authority ;
  • delegating authority and assigning tasks to unqualified or incompetent staff  thus possibly leading to misconduct and/or gain;
  • lack of division of tasks and responsibilities allowing a single employee to undertake non-authorized transactions ;
  • no clearly identified steps and procedures to complete required tasks and transactions thus leading to such practices as delayed work and the misuse of discretionary powers;
  • the hiring staff not having the required academic qualifications nor experience;
  • lack of  a disclosure system of officials’ financial interests;
  • contradictory and inconsistent orders creating confusion ;
  • no formal system to replace employees in case of sudden vacancies and
  • improper authorization and controls for granting to certain employees particular benefits or emoluments.

Questionnaires may include sample queries of the following nature:

  • does the department have an organizational chart?;
  • are the administrative structures suitable for the activities of the department/unit?;
  • does the department/unit need more organizational structures?;
  • does the organizational structure enable a smooth flow of work and improve the performance of the organization?;
  • is there a valid need for the sub-entities associated with it?;
  • do the items mentioned above affect the performance?;
  • is there an approved department budget with its necessary controls?;
  • is there a smooth flow of work in the department?

E.         Realized fieldwork IRA mandates

E.1          Summary description

The authors have accumulated some 20 years of accountability, transparency and anti-corruption experience in most of the globe’s geographical areas. All of these mostly encompassed specific IRA training and pilot testing activities in the several countries as detailed in the Compendium itself: Sierra Leone, Iraq, Bulgaria, Bangladesh and Indonesia. In addition, the authors were requested to execute abridged IRA-applications in Liberia, the Republic of China, Iraq, Moldova and Serbia. These hands-on missions/mandates have allowed the authors to constantly fine tune their approach, methodology, document formulation, training methods and especially to adapt the “tools” to each country’s social, economic, political, cultural and institutional settings in order to help ensure that these newly acquired skills and national expertise become an integral part of anticorruption actions, i.e. the sustainability of the preventive approach is enhanced. While the specific terms of reference (TOR’s) and the time frame for each of the mandates were varied, the sought-after goals/objectives of incorporating the approach with the necessary empowering skills into the national “tool kit” were deemed of foremost importance for each field intervention. This approach was deemed not only simple and effective but above all a constructive corrective manner in improving systems to highlight weak (“hot-spots”) areas to be strengthened to help minimize malfeasance, fraud, wastage, incompetence and outright fraud. It was, for the most part, perceived by beneficiaries as a logical and relatively simple methodology that is a complement to the other conventional actions such as education/awareness, investigation and prosecution. Both authors have worked continuously as a team over this period of years in order to perfect the introduction of the transfers of these new skills and knowledge and as such a dual “skills set” has been constantly and readily available to interested funders, contractors and beneficiary governments.


E.2          Evolution of the methodology and underlying strategy

As initially set forth in B.1 - Origin and Background of the Compendium, the “philosophy” underlying the authors’ involvement has always been that actions, methods and tools are, as stated by other authors and organizations, to “ turn corruption  from a low risk and highly profitable activity into a high risk and low profitable activity”. The authors’ early (1995-2005) assignments and published works generally related to capacity development and building in accountability and transparency such as improving financial systems, audit, oversight and the related/relevant training. Recent (2006-2017) experiences and activities have been mostly in developing and implementing a prevention-oriented methodology to combat and prevent corruption as  described in Chapter 3..i.e.  a preventive search for potentially vulnerable spots called “hot spots of corruption” within an entity Over the years it has been perfected through pilot-testing  with continuous enhancements resulting from subsequent experiences and feedback from all the mandate players and stakeholders. Even if the upstream approach of prevention is favored, the more “downstream“ facets such as investigation and punitive action are sometimes not only necessary but essential. While supporting, mentoring and conducting IRA review/audits, flagrant cases of malfeasance and corruption were observed and “unearthed” with these always turned over to the proper prosecuting and/or judicial authorities for further actions within the national legal structures and mechanisms.  


F.         National Field Mandates

In executing national field mandates the authors followed a structure as detailed below:

F.1          Background and objectives

F.2          Supported national entity

F.3          Reviewed entities

F.4          Methodology and scope of mandate

F.5          Training-workshops

F.6          Pilot testing

F.7          Mandate outputs

                F.7.1      Report on findings

                F.7.2      Action plan

                F.7.3      Post mission follow up

F.8         Funder and Executing Agency

                F.8.1      Funder: e.g. United Kingdom through its Dept. for Intern. Dev.-DfID;

                F.8.2      Contractor:  e.g. Rambøll SA-Denmark


As already mentioned in E.1, these specific IRA training and pilot testing activities have been carried out in the several countries as detailed in the Compendium itself:

  • Sierra Leone;
  • Iraq;
  • Bulgaria;
  • Bangladesh; and
  • Indonesia;


In addition, the authors were requested to execute abridged IRA-applications in

  • Liberia;
  • the Republic of China;
  • Iraq;
  • Moldova; and
  • Serbia.

G.        Program of an IRA Training Workshop (model)


The authors have designed, formulated and dispensed various formats of workshops “tailored” to varying organizational/institutional objectives of the government entity from which the trainees/participants are selected or recruited from. For example if the participants  need more of an awareness raising exercise, as in the case of the managerial level, then the emphasis on a  theoretical “classroom” oriented format is deemed more appropriate. Managerial awareness is often important where this level is to be involved in the implementation and follow up of findings and recommendations contained in the review reports of the technical staff responsible for conducting the review. In other, for the most, cases the initial workshop is more “hands-on” oriented with the pilot testing being carried out in selected executive branch entities. The below (breaks and lunch pauses are omitted from the outline-these built in in the final adapted version) sample training workshop has its more theoretical component included in days 1 to 3 and the practical “hands-on” component included in the sessions of day 4 thru day 7. The exact content, format, duration and pedagogical methods are all formulated at the planning stage of each mandate. 


Day 1

09:30 - 11:00      Workshop Opening and Introduction

11:30 - 13:00      Session 1 – Structure and Function of the Beneficiary Supported Entity

14:30 - 16:00      Session 2 – Oversight Mechanisms

Day 2

09:30 - 11:00      Session 3 – Dilemma Training in Corruption Identification

11:30 - 13:00      Session 4 – Governance, Accountability, Transparency, Integrity and Ethics

14:30 - 16:00      Session 5 – Corruption as the Multi-headed Hydra

Day 3

09:30 - 11:00      Session 6 – the National Integrity System (NIS)

11:30 - 13:30      Session 7a– Compendium Manual and Case Study of Best Practices in Ministerial                             Anti-Corruption Process

14:30 - 16:00      No session, free afternoon


Day 4

09:30 - 11:00      Session 7b – Checklist Review, adaptation and preparation

11:30 - 13:00      Session 7c – Continuation of 7b

14:30 - 16:00      Session 8a – Final vetting of amended adapted check list and Identification of IRA                            review                entity (ies)

Day 5

09:30 - 11:00      Session 8b – Preparation of Pilot Testing Program(s)

11:30 - 16:00      Session 9 – Execution/carrying out of on-site Pilot Testing

Day 6

9:00 - 16:00        Session 10 – Continuation -Execution/carrying out of on-site Pilot Testing

Day 7

09:30 - 11:00      Session 11– Conclusions of pilot-testing Program(s)

11:30 - 15:00      Session 12– Report writing of Findings and Recommendations

15:00 - 16:00      Closing

                               -summary, assessment and evaluation;

                               -action plan formulation for implementation of findings and recommendations                                                within reviewed entity (ies);

                               -post mission actions;

                               -lessons derived & concluding remarks.