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Reducing Corruption in Aid Delivery: 3 Key Lessons Learned

Donor agency officials often perceive measures to detect and prevent corruption in aid projects as costly and distracting. However, left unchecked, corruption can undermine the political legitimacy of overseas aid activities.

September 26, 2012

Fighting aid-related corruption is no simple task. Donor agency officials often perceive measures to detect and prevent corruption in aid projects as costly and distracting. However, left unchecked, corruption can undermine the political legitimacy of overseas aid activities. In this post, I summarize several of the key lessons I have learned as a staff member of (and later as anti-corruption consultant to) bilateral and multilateral aid agencies.


Lesson #1: Educate Senior Management and Change the Way Success is Measured


Much has been written about the shortcomings of detection approaches, such as financial audits and forensic accounting methodologies. The same can be said about prevention approaches that seek to enhance financial management practices and strengthen the capacities of counterpart country institutions.


A relatively new trend among development aid agencies is the adoption of corruption risk management approaches. For example, Norwegian law requires that those responsible for managing public funds also effectively manage the associated risks. Corruption is a major risk to sound financial management. However, new attempts to introduce corruption risk management approaches and  'mainstreaming' of anti-corruption considerations are surprisingly difficult to implement due to institutional interests (e.g. limiting administrative costs, domestic political reporting requirements), organizational incentives to push money out the door, and pre-existing donor agency staff beliefs and values.


When the success of a donor agency's senior management team is measured according to the speed at which it can spend approved budgets, corruption risk management is often perceived as an obstacle to achieving results. However, when senior management is assessed vis-a-vis independent indicators of how corruption risk management practices are applied, this obstacle can disappear very quickly.


Lesson #2: Tailor Your Approach to the Local Context


Given the many steps required for efficient aid delivery, making the prevention of corruption a priority is bound to cause frustration. This is not to say that donor agency staff are ignorant of the risks posed by corruption in general. Rather, there is little understanding of why corruption must be understood in the particular historical and cultural context of a given recipient country.


To date, there is relatively little empirical evidence identifying the specific anti-corruption interventions that most effectively reduce or control corruption. It is equally difficult to empirically compare the effectiveness of anti-corruption interventions across cultural and political contexts. Consequently, anti-corruption professionals are not able to offer donor agency staff many 'hard and fast' solutions. This need to understand local context often generates resistance to anti-corruption measures among donor agency staff who must juggle a variety of competing demands.


Consider an example from my own attempt to interest a particular donor agency department in the WHO’s program for good governance of health systems and medicines. Without understanding the broader governance context and the potential for long-term negative consequences, one staff member indicated that petty corruption in the form of doctors seeking a ‘top up’ of their salaries was justified given low salaries. If this type of petty corruption were eliminated, he reasoned, the agency would risk losing the cooperation of pivotal actors (doctors) who are needed to bring about urgent improvements to national health systems. Another staff member indicated that focusing on corruption risk management or mainstreaming approaches would detract from the more pressing issues of strengthening health systems and providing access to medicines.


Lesson #3: Accepting Corruption in the Short Term Reduces Aid Benefits in the Long Term


What these staff expressed was the problem of opportunity costs. In order to address urgent issues in the short- and medium-term, certain unwanted costs—like corruption—may be unavoidable. In their view, while it may be possible to reduce corruption in a certain project or program, corruption will still be the societal norm rather than the exception. Thus, corruption ought to be addressed as a long-term issue to achieve a sustainable solution. It should not be adding costs to aid while yielding no tangible results, when there are more pressing and immediately measurable issues such as vaccinations and surgical operations.


The problem with this reasoning is that it ignores two key problems. First, research and experience demonstrate that corruption disproportionately impacts the poorest and most vulnerable members of society. Therefore, when corruption is left unaddressed in a particular aid project or program, serious questions about long-term impact and sustainability often arise. One can use aid to pay for critical medicines and health supplies, but if poor patients cannot afford to visit the doctor because of the cost of "informal payments" (tacitly endorsed by donor agencies), serious questions must be asked about the real impact of aid.


Second, aid-related corruption directly impinges upon domestic political support for overseas aid expenditure, especially in donor countries where aid is already perceived to be ineffective or over-budgeted.


Unfortunately, there is not much donor governments can do to “punish” flagrant corruption and fraud in recipient countries. In 2009, officials within the Zambian government embezzled nearly $2 million of donor support to the Ministry of Health. But since bilateral donors requested separate accounts for their earmarked funds, the fraud was concealed by shifting the funds between various accounts. The lack of coordination between donors, mixed with the inherent fungibility of budget support, enabled the conditions for such a scheme, and diminished the impact of collective anti-corruption sanctions.


To maximize aid effectiveness, corruption prevention and sanctioning strategies must be conceived for the particular context of each country; international donors must also coordinate their anti-corruption strategies more effectively. But this will not happen unless rooting out corruption is a priority for all donors.

The following is a guest post from Fredrik Eriksson, an independent anti-corruption expert. From 2009-2011, he served as Senior Advisor in Anticorruption and Illicit Financial Flows at the Norwegian Agency for Development Cooperation (NORAD).

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