National auditors and anti-corruption authorities should use their unique insight in the COVID-19 fiscal response


By Khalid Hamid, CIPFA Director of International

Governments around the world have responded to the COVID-19 pandemic with huge fiscal stimuluses and emergency rescue packages, designed to prevent economic catastrophe. But this presents new opportunities for corruption, and is enough preventive work being done?

Discussions like those held at the December 2019 Eighth Conference of State Parties on enhancing collaboration between Supreme Audit Institutions (SAIs) and Anti-Corruption Authorities (ACAs) to better prevent and fight corruption are increasingly important in the context of COVID-19. These oversight bodies are unique: they have prior knowledge of the state organisations that deliver economic support and have the ability to identify areas where additional attention may be required.

Through past audits and investigations, oversight bodies should have highlighted opportunities to strengthen systems and controls, as well as those high-risk areas that are vulnerable to corruption. If these areas are at risk in 'normal' economic times, then the pandemic only adds strain. Organisations need to deliver resources quickly while contending with staffing issues related to sickness and remote working.

The skills required in audits and investigations are typically engaged after the fact, to provide assurance over what has already happened or to determine what went wrong. However, applying these same skills to provide assurance in advance, instead of afterwards, can be invaluable in an emergency situation. Put simply, it means using existing skills and capacity to imagine what might go wrong before it does.

Oversight bodies' understanding of potential risks can and should be used to identify organisations that might need extra support to mitigate corruption risks before they take on additional pandemic-related responsibilities – whether that's purchasing medical supplies at scale, building a new hospital or distributing grants to businesses in need of support. By making the best use of existing and available knowledge, public sector institutions and private sector organisations can work collaboratively, and in real-time, to limit state exposure to corruption and address existing weaknesses before scaling up their response.

Inevitably, in a crisis situation where emergency medical supplies and equipment are urgently needed and where hospitals to treat and care for the sick are being commissioned within tight deadlines, there is an increased risk that abuses will happen and quality will be sacrificed in exchange for quick action. But, emergency or not, states must remain accountable for how resources are spent. It is essential to continue to verify suppliers, specify technical requirements for goods, works and services robustly, and determine competitive prices to ensure that public money is used effectively. Product substitution – where goods are replaced with substandard products (sometimes accompanied by fake certification documents) can also occur in the context of emergency procurement. Additionally, when suppliers are paid in advance for future work, the ability of contract managers to verify the complete delivery of goods, works and services according to the necessary specifications becomes even more critical.

To protect against these risks, organisations can verify suppliers through online portals, check beneficial ownership and set procurement conditions in framework agreements. Organisations can also publicise maximum prices that will be paid for essential supplies and lists of approved medical kits, to protect against product substitution. By requiring procuring institutions to report on whether deliverables have been met in a timely manner to the central procurement authority, suppliers can be better held to account for their performance.

With many countries adopting a 'pay now, check later' approach to providing support grants to businesses impacted by COVID-19, countries should establish, implement and communicate the transparency measures taken to verify the origin, use and impact of funds, together with a clear plan for future scrutiny and assurance. One approach is to establish a specialised task force to prevent and investigate fraud and corruption in the implementation of COVID-19 emergency support and another to launch a public campaign to raise awareness of the risks and consequences of corruption in the implementation of stimulus funding. Emergency business grants may be abused by established companies that are not legally entitled to them, fake companies set up to take advantage of the current situation or criminals impersonating companies in need.

Many of the 'typical' corruption risks seen in the public sector may be elevated during emergency circumstances but can still be mitigated by applying traditional strategies. Robust due diligence, transparent processes and accountability mechanisms, such as real-time audits and the publication of audit findings on a monthly basis, are just a few examples of strategies that can limit exposure to pandemic-related risks and keep emergency funds secure. SAIs and ACAs could verify processes, procedures and systems in real time and provide advice on how to limit exposure to risks that arise from the compromise between urgent delivery and robust verification. Oversight bodies should work to provide assurance that processes in place for decision-making are sound before any funds leave public coffers.

Now more than ever, oversight bodies have a critical role to play in providing feedback through transparency and accountability mechanisms. By fulfilling this institutional responsibility, those responsible for spending public money will be held to account, and the public can trust that emergency response and stimulus funds will be used as intended. The importance of oversight institutions maintaining their independence remains crucial and safeguarding this must be built into any interventions made by these institutions. Stimulus spending should include a specific amount to support the compliant distribution of funds, supporting activities such as internal audit and assurance functions within institutions responsible for disbursement.

It will be some time before we know the real impact of COVID-19, the extent of the damage done, and whether it gave rise to new corruption activities. However, it is already clear that a strong, co-ordinated approach to anti-corruption is needed at the global level to help ensure that emergency economic relief and stimulus packages reach intended beneficiaries in a transparent, inclusive and effective manner. Furthermore, these actions also work to ensure that we are better equipped to tackle similar challenges in the future. SAIs and ACAs are integral to the success of this approach.

CIPFA and UNODC recognise that the elimination of corruption is key to facilitating the delivery of the Sustainable Development Goals (SDGs) – Anti-Corruption is specifically recognised in SDG 16.5. Furthermore, the United Nations Convention against Corruption requires state parties to have "effective and efficient systems of risk management and internal control" as a means for promoting "transparency and accountability in the management of public finances."

This article was developed in close collaboration with the United Nations Office on Drugs and Crime (UNODC).

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