Friday, March 30, 2012

What Should We Know About Corruption in the Public Sector?



Corruption is a form of fraud. It is a misuse of public office for private gains. The process of corruption usually has three parties involved: the public official who is entrusted by the public to carry our specific duties, the public who entrusted the public official, and citizen or a firm. Each of us knows for a fact that corruption has significant negative impacts on growth: all kinds of growth. Empirical studies have shown that corruption reduces incentives to invest, worsens the public infrastructures and services, decreases tax revenues and distorts the composition of government spending.

Corruption usually leads to bribery or extortion. Bribery is a situation when a person or entity gets something illegally that (s)he / it is not entitled to. Extortion is a situation when a person or entity pays to get what  (s)he / it  is entitled to. This distinction is very important especially for government officials who are responsible to set up strategies to fight corruption. 

What a government should do to fight corruption? What public should do to fight corruption? 

Among what a government can do are the following:

  1. Establish and maintain effective anti fraud commission (AFC). The legal system should enable the AFC maintains its independence. Otherwise, the effectiveness of the AFC would be impaired.

  1. Establish and maintain internal control systems that are designed specifically to deter, prevent, and detect corruption.

  1. Establish a whistle blow system in each governmental entity. This is one of the most effective tools to discover corruption.

  1. Promote fraud and corruption educational programs at the national level.

  1. Engage universities and academia in fighting corruption.

  1. Provide a healthy environment to enable the civil society play its normal monitoring role regarding the performance of the public sector.

  1. Enhance the legal system to provide a strong framework for all stakeholders.

  1. Establish code of ethics in each governmental entity that promotes anti corruption practices.

  1. Instill accountability for each post in the government. Transparency is a prerequisite to have accountability functions as intended.

  1. Promote good governance

  1. Obtain a financial position of the public official at the time (s)he starts business in the government and when  (s)he  leaves  (s)he  post.

  1. Fight the conflicts of interest that  prevails in too many corrupted governments worldwide

Fighting corruption is not a program that will start at a point and ends at another. It is a national strategy that should start soon and does not stop at any time in the future. Corruption will never be eliminated. It will stay as there are societies alive. A government should not manage corruption, it should minimize it.

Corrupted people are not corrupted by nature. They were not born corrupted. There were motives and opportunities that helped them to pursue their corrupt acts. However, what motivates a fraudster in Mexico may not motivate a fraudster in Cameron. Therefore, Corruption should first be diagnosed professionally and properly, then policies should be established based on strategies to minimize this phenomenon.

The answer to the question I raised regarding what you should know about corruption in the public sector is it depends on where you stand in the process: public official, public, citizen or a firm. It is evident that if there is no citizen or a firm in the process, there will never be corruption. That is why the public (the government) should ensure that they listen to its citizens and its firms.

If you are a government official, do not say it is complex and cannot be solved; you should say why we have corruption and how we should fight it. Unless you face it seriously, you may end with a situation like Egypt or at the best like Greece.

Mohammed J. Masoud, CPA, CFE, CICA, MBA
Managing Director
Birzeit Consulting ME
Tempe, Arizona
USA

Published on June 9, 2011 in the Financial Gazette newspaper-Harare as a part of the 3rd Forensic Conference for Africa “Fighting Fraud/Corruption and Money Laundering in Africa Using Investigative Skills". The title of the paper we presented was “Preventing and Detecting Fraud/Corruption in the Public Sector."