Joint Africa Institute

Seminar on the Role of Parliamentarians in Promoting Good Public Financial

Management and Accountability in Africa
Tunis, Noember !"#$%, $&&'
Public Financial Management and (orru)tion
!
Public Financial Management (PFM) ordinarily covers the management of government
revenue, expenditure and cash. Corruption defined as the diversion of public resources for
private use can affect any of these operations, at the level of the national and sub-national
administrations. his paper focuses on circumstances that are prone to corruptive practices in
managing expenditure and cash at the national level. !t does not discuss revenue.
he outline of the paper is as follo"s# $ections ! and !! provide an overvie" of PFM and
corruption, respectively. hey are follo"ed in $ection !!! by a brief analysis of the
relationship bet"een corruption and the budget process and the re%uirements for reducing
this malfeasance.
I* An oerie+ of PFM
,hat is PFM&
PFM can be defined as frame"or' of la"s, regulations, traditions and practices for managing
government finances in order to achieve macro-fiscal stability (real gro"th "ith lo"
inflation, no payment arrears, sustainable debt, etc.), an optimal allocation of resources
(increased social "elfare), efficiency of public spending (more public goods and services at
lo"est mar'et prices), and good governance (transparency and accountability). PFM
regulates procedures that apply in four broad areas# budget, treasury, accounting, and control.
The budget is prepared by the executive branch "hich, in turn, sends it to the legislature for
debate and adoption. ( good budget is timely, comprehensive and presented using a simple
and easily understandable terminology. (fter approval, it is implemented by the government
"hich is responsible for providing timely budget execution reports. he budget is executed at
four 'ey stages# commitment, verification, payment order, and payment.
Treasury )rocedures and o)erations involve the management of government cash to meet
its payment needs. he conduct of treasury operations can be facilitated by the existence of a
$(, a frame"or' for managing the government financial assets in order to minimi)e
borro"ing re%uirements and interest charges, the regular reconciliation of government
*
he author, +ubin ,oe, is very grateful to -ill ,orotins'y and ,uncan +ast for their very helpful and
constructive comments on earlier drafts.
./0.12343.doc 5une *2, .4*0 (*2#46 a27p2)
.
accounts, and the existence of transparent disbursement rules and procedures of money to
enable the trac'ing, compilation and analysis of the government financial transactions.
The accounting system is organi)ed to store and compile transactions information for the
purpose of producing accounting documents, notably annual and semi-annual ledgers that are
needed to report on the execution of government financial operations. Modern accounting
uses double as opposed to single entry accounting rules. 8hile most countries operate on a
cash accounting basis, some are adopting accrual accounting that better reflects the
government9s assets and liabilities, and financial position.
"o types of control are exercised in connection "ith the budget and more generally
government financial operations# an internal and an external control. he internal control
office, tas'ed mainly "ith management control and audit reports to the executive branch
"hereas the external control office (audit and oversight) reports to parliament. Management
control (the first and main line of preventive abuse of public trust) is in effect, a set of ex
ante verifications underta'en during budget execution to ensure that# (i) public resources are
committed and expended in accordance "ith the budget la", other financial la"s and
regulations, and government priorities: and (ii) the principles of fair mar'et pricing of
government purchases and uniform application of rules are observed in the use of public
resources. he external oversight is an ex post control.
-o+ then does one measure the .uality of the PFM system&
!n an effort to promote reforms in the PFM, the 8orld -an' and the Fund developed in the
early .444s, a set of *2 indicators to measure the %uality of PFM systems of ;!PC relief
recipients. hese indicators, denoted ;!PC-((P, covering budget preparation, execution
reporting and procurement, "ere used to assess the initial state of PFM of .. countries in
.44*-4.. <overnments "ere expected to ta'e measures to address the "ea'nesses identified
by the assessment. ( reassessment of the PFM systems in .44/-40 indicates that overall,
progress has been achieved# total benchmar's met increased by some *4=. -udget reporting
sho"ed the largest improvement "ith 0.= of benchmar's met in .440 compared to //= in
.44.. -udget formulation remained virtually flat at 00= in .440 against 03= earlier "hereas
budget execution deteriorated from />= in .44. to /3=. !n terms of countries, t"o countries
improved very significantly and five countries made noticeable progress. he *3 remaining
countries needed substantial upgrading of their PFM. hough the ;!PC-((P frame"or'
provided useful signals about the PFM performance of countries, it nevertheless harbored
"ea'nesses# (i) narro" coverage : (ii) no involvement of donors, the ;!PC-((P being
mainly a ?oint !MF-8orld -an' underta'ing: (iii) persistence of several PFM diagnostic
tools: and (iv) application of the ;!PC-((P frame"or' only to ;!PC relief recipients.
Conse%uently, donors agreed to propose a ne" frame"or' to assess PFM systems, namely
P@F(. he ne" instrument has .1 indicators to measure the %uality of the PFM and three
/
indicators to assess the performance of donors. !n principle, the evaluation is to be carried out
by the P@F( countries themselves "ith a vetting by donors. ;o"ever, in practice, "ith a fe"
exceptions, the P@F( diagnostics have been led by donors. 8hile the ;!PC-((P contains a
bare-bone action plan of reforms, the P@F( does not propose a reform program. he
completed P@F( diagnostic is expected to serve as a basis for a multi-donor dialogue "ith
the government in order to craft such a program.
,hat are the basic features of a good PFM system for deelo)ing countries&
he management of public finance in developing countries is generally hampered by deep-
seated deficiencies in several areas, including budget, treasury and accounting. he focus on
budget is important because fiscal policy, a 'ey component of macroeconomic policy, is cast
in annual frame"or's of revenue and expenses. he treasury manages government cash in
order to meet its disbursement needs, "hereas accountants report on the actual use of
government financial and real assets. a'en together, activities in these three areas enable to
assess the impact of government decisions on economic activity and social "elfare. 8ell-
managed public financial systems have some good features in common (-ox*).
/udget. !n "ell-functioning PFM systems, government financial operations are classified
according to logical and simple criteria that are consistent "ith international standards.
Clarity
and simplicity are essential to facilitate understanding of government policy, legislative
debate, implementation of the budget and fiscal reporting.

-udget proposals ought to be realistic, reflecting a convergent iteration bet"een aggregate
amounts derived from an M@F and the sums of actual dis-aggregated outturns of execution
from previous years. o ensure coherence and comprehensiveness, government budget
should cover all government operations (current and capital, %uasi-fiscal operations, extra-
budgetary operations, all receipts, etc.). (ll contingent liabilities should be described in the
budget. he budget should be prepared and enacted in a timely fashion before the start of the
fiscal year, and published in order to provide visibility to the private sector and the general
public.
Treasury. <overnment cash is to be managed to provide short-term li%uidity and enable the
ac%uisition of long-term assets. ypical "ea'nesses in cash management in several
developing countries are lac' of control of the accountant general or treasurer on all
government accounts, illegal disbursement practices of cash, failure to reconcile government
accounts, and failure to lin' prospective li%uidity "ith commitment plans, leading to payment
arrears.
!n a "ell-functioning treasury system, the treasurer has complete 'no"ledge and authority to
manage all government monies. hese funds are deposited in a $( or in a small number of
0
ban' accounts, all of "hich are under the control of the treasurer. his enables the
government to 'no" its li%uidity position at all times and manage funds to meet payment
needs in order to avoid costly borro"ings. <overnments that are prone to corruption and
"aste often introduce a variety of exceptional expenditure execution procedures that
circumvent financial control and blur the trail of cash disbursement. !n good PFM systems,
government expenditure is underta'en using transparent standard expenditure procedures that
ensure accountability through ex-ante control and facilitate the monitoring of government
spending. Moreover, cash is disbursed only to pay for expenditure approved in the budget.
@xtra budgetary and off-budget operations cannot be underta'en "ithout legislative approval.
he treasury 'eeps trac' of its inflo"s and outflo"s and reconciles these operations regularly
internally (i.e. in its o"n boo's) and externally (i.e. "ith ban' statements).
!n general, the ability of governments to pay their bills "hen due is a strong indicator of their
level of fiscal discipline and the credibility of their policies.
Accounting. (ccounting, li'e budget classification, is based on rules and practices. ,ouble
entry accounting facilitates the reconciliation of government operations and prepares the
ground for trac'ing of government assets and liabilities. (ccounts that are based on this rule
are more reliable and accurate. o enable macroeconomic policy-ma'ers to ma'e timely
decisions, it is essential to trac' through proper accounting, the flo" of expenditure at each
stage of the spending chain, including payments. Aote boo's, account ledgers, administrative
and operating accounts are to be maintained regularly and routinely.
(nother common feature of "ell-managed public finances is availability of manuals that
contain the rules and practices for underta'ing different government operations. Manuals are
important because they eliminate guess-"or' and instill consistency in managing government
finance in time and space. he rules and procedures are to be applied in the same uniform
manner over the "hole country, thereby enhancing the confidence of the private sector in
transacting "ith the government.
II An oerie+ of the notion of corru)tion
0efinition
he legal and operational definition of corruption varies "ith countries. ransparency
!nternational (!) defines corruption as Ban abuse of entrusted po"er for private gains.C
;ence, this definition could also cover corruption in the private sector. !n this note,
corruption in PFM is defined as the use of public office for private gains.
.

.
he Many Faces of Corruption, rac'ing Aulnerability at the $ector +evel, @dited by 5. @dgardo Campos and
$an?ay Pradhan, he 8orld -an', .446, p. 2.
3
/o1 !* PFM Fundamentals in 0eelo)ing (ountries
he PFM systems of developing countries have several "ea'nesses to be eliminated. hree areas stand out for
improvement# budget, treasury and accounting.
/udget
Classification (administrative, economic and functional)
Preparation
Comprehensive coverage "ith no extra-budgetary or off-budget operations:
-ased on medium term expenditure frame"or':
$ingle up-to-date list of government personnel for payroll:
!ntegrated (i.e. single ) recurrent and capital expenditure:
<overnment-approved price list for preparing budget estimates:
Dpheld universality principle:
imely enactment of the budget (i.e. ready to start at beginning of the fiscal year): and
-asic la" and of manuals of procedures.
Treasury
@xistence of treasury single account ($():
Dse of timely and updated commitment plan:
Dse of timely and updated cash flo" plan lin'ed "ith the commitment plan:
@xistence of an effective ex-ante commitment control:
Monthly reconciliation of government accounts:
Eo unregulated expenditure procedures: and
-asic la" and of manuals of procedures.
Accounting
-ased on double entry accounting:
Preparation of monthly reliable budget execution reports (treasury general ledgers, flash reports, etc.):
Publication of budget execution information on the same basis as the original budget:
Eo significant deviations of budget outturns from the original budget:
Eo significant amount of payment arrears:
Publication of administrative accounts 2 months after end-FF:
Publication of operating accounts 2 months after end-FF:
ransmission of audited accounts to the legislators 2 months from the end of FF: and
-asic la" and of manuals of procedures.
he PFM rules and regulations enacted by the executive branch of government for the conduct of government
operations in these three areas should be based on la"s. he problem of insufficient human and physical
capacity also needs to be addressed.

2
0ifferent ty)es of corru)tie )ractices
Corruption can be distinguished by the amount involved (petty or grand), the function or
responsibilities of the persons involved (politicians, civil servants), or the institutions
(executive, parliament, ?udiciary). he negotiation and implementation of large scale
investment pro?ects provide a fertile ground for political corruption "hereas administrative
corruption ta'es the form of petty corruption (small bribery, theft of cash, goods and
services, etc.): direct abuse of public office (misuse of public financial and real assets, illegal
fines, taxes, contract-steering, t"isting of rules, cronyism and nepotism, etc.): and indirect
abuse of public office (bribe for favorable treatment or ruling). (dministrative corruption
generally ta'es place at the tail end of politics "here public officials come in contact "ith the
public at large.
,hy is it im)ortant to see2 to eliminate corru)tion in PFM&
Corruption affects adversely the efficiency and effectiveness of delivering public goods and
services. !t diverts resources, "ea'ens planning of public goods and services and undermines
the confidence in the public sector. !t leads to a sub-optimal allocation of resources and a
lo"er level of social "elfare.
Misallocation of resources. -y diverting resources a"ay from public coffers, it forces the
delivery of fe"er goods and services, of lo"er %uality and in some cases, "ith delays. Gften,
resources are allocated a"ay from priority social sectors in favor of sectors that benefit fe"
people.
Ineffectie )lanning. he preemption of public goods for private gains causes actual
spending to differ significantly from the initial expenditure plans. he planning ob?ectives
are therefore not achieved, ma'ing budgeting of public goods and services ineffective.
Public confidence. Corruption decreases the trust of private sector operators in transacting
"ith the government. !n addition, it diminishes people9s confidence in the government9s
ability to deliver %uality goods and services, at fair mar'et prices, in sufficient %uantity,
%uality on time. Corruption # (i) leads suppliers to overprice their goods and services: (ii)
provo'es distortions in PFM procedures, for instance by prompting suppliers to obtain
payments before delivering the goods: (iii) discourages private investment and donors
assistance, thereby retarding economic gro"th, the capacity to reduce poverty and to increase
social "elfare, and (iv) de-motivates taxpayers.
3ulnerability for corru)tion in PFM systems
6
here appears to be a negative correlation bet"een the %uality of PFM systems and
perceptions of corruption. Heporting on "or' done by ! and the 8orld -an', ,orotins'y
and Pradhan (.446) consider that Bcountries "ith better-performing PFM systems have lo"er
corruption perception indexes (Figure *).C his is because robust PFM systems raise the ris'
of detection and the cost for bad behavior.
III (orru)tion in the budget )rocess
(orru)tion in the PFM system
Legal framework for PFM
Modern budget processes straddle bet"een t"o endpoints# a detailed codification of these
processes into la"s of budgetary procedures and practices (France and continental @urope),
and the enactment in the form of la" of general principles for managing public funds "ith
the details left to be set by executive rules (DI). <enerally, the constitution defines the roles
and responsibilities of each state po"er in the budgetary process. More specific aspects of the
Figure 1. Correlation Between Corruption and PFM
(orru)tion and 4ual ity of Publ ic Financi al Management
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Jualit y of PFM (CP!( indicator on -udget and Financial
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$ource# ,orotins'y, 8illiam and $hilpa Pradhan, .446, B@xploring Corruption in Public Financial
ManagementC in Bhe Many Faces of Corruption, rac'ing Aulnerabilities at the $ector +evel,C @dited by 5.
@dgardo Campos and $an?ay Pradhan, he 8orld -an', .446, p. .2>.
budget process are spelled out in budget la"s, public finance acts and code of ethics modeled
on the !MF ransparency Code (-ox .). !ncomplete and fragmented legal frame"or's
provide opportunities for malfeasance.
1
Budget
Core budget stages are planning, preparation, adoption and execution. Aulnerability for
corruption is considered to be lo" at the stages of planning and preparation and high at the
adoption and execution stages.
Budget planning. !deally, annual budget should be cast from a multi-year budgetary
frame"or' for supplying public goods and services that reflect policies and strategies of the
authorities. his plan, prepared by the government, could incorporate inputs from the
legislature. !n the process, politicians and bureaucrats could tilt the pro?ections of public
goods and services to"ard their geographical constituencies or areas, and7or ethnic groups.
he changes to the government9s proposed budget could aim at correcting imbalances in
order to ensure e%uity, enhance efficiency or preserve social peace or national unity.
;o"ever, in neopatrimonial systems of government (see belo"), po"erful politicians could
disregard these ob?ectives and ma'e significant a sub-optimal allocation of resources in favor
of their constituencies.
Budget preparation. !n some countries, it has three components# a macroeconomic
frame"or', a policy outline and expenditure ceilings.
he macroeconomic frame"or' lays out, inter alia, the revenue and financing expectations
from "hich the aggregate current and capital expenditure targets are derived. he ris' of
corruption is not significant at this stage because money exchange is not involved. ;o"ever,
favorable conditions could be created for embe))lement, for instance by understating
significantly tax revenue or sho"ing favoritism to certain taxpayers in pro?ecting budgetary
revenue.
he policy outline articulates policies and strategies underlining the multi-year plan of public
activities. !t serves as a bridge bet"een the aggregate expenditure targets contained in the
multi-year plan and those generated by the macroeconomic frame"or'. ( lac' of consistency
bet"een the t"o sets of aggregates "ould normally call for the ad?ustment of the targets
and7or policies to achieve them. he ris' of corruption is moderate because only the ministry
of finance can influence budget preparation at this stage.
@xpenditure ceilings are assigned to spending units at this stage. he total amount of these
limits should be e%ual to the aggregate levels set in the multi-year plan and the macro
frame"or', both of "hich should be bac'ed by the policy outline. his textboo' approach is
far from reality. !n practice, allocations are increased or decreased or left unchanged, not
only on the basis of policies, but of influences from politicians and bureaucrats in all
branches of state po"er. he initial budget allocations could be altered at any stage of the
>
clearance process of the expenditure ceilings (budget conference, minister of finance,
cabinet, parliament). he deal mentality that prevails at this stage ma'es setting expenditure
ceilings an excellent ground for political corruption.
/o1 $5 Reducing ulnerability to corru)tion in PFM
he !MF ransparency Code identifies some factors that "ould minimi)e the ris's of corruption in public
finance. hese include#
he transparent definition of the role and responsibilities of public sector institutions involved in the
budget process, the relationships bet"een them, their accounting and reporting systems, etc. Gverlaps
and omissions in these definitions could open the "ay for corruptive practices:
he regular release of budgetary information to the public (original budget and final outturns, annual
and semi annual accounts sho"ing also government indebtedness and assets, etc.). !n the absence of
this information, it "ould be difficult for the public to hold government accountable:
he budget should be comprehensive and based on a macroeconomic frame"or'. !t should sho" all
revenue, expenditure and financing operations, "ith spending classified according to international
standards to facilitate understanding and comparison. @xtra budgetary operations should be reported on
the same basis and classified according to the same criteria (administrative, economic and functional).
he accounting system should enable to report comprehensively, accurately and in a timely fashion
both budgetary and extra budgetary operations. Mid-year reports on budgetary and extra budgetary
activities should be published. <overnment should be re%uired by la" to send the final accounts to the
$upreme (udit !nstitutions ($(!) for revie" and onto parliament "ithin one year from end-of-FF.
,eviations from these principles, particularly on comprehensiveness, clarity, timeliness and reporting
could mas' corruptive practices.
Ee" PFM tools such as performance budgeting are also being experimented to promote, inter alia, good
governance. his instrument lin's budgetary resources to budget outcomes. -udgets are presented in terms of
programs to "hich are attached outcomes that are measured by performance indicators. !f the trac'ing of the
output-focus budget sho"s drops in outputs, ceteris paribus, notably for the same level of inputs, then an
investigation can be underta'en to determine if malfeasance has occurred.
Adoption of the budget* he ris' of corruption during this process depends on several factors#
the constitutional regime of the country, the budget schedule, the po"er of the legislature to
amend or veto the budget, etc. !n strongly presidential regimes, parliament has limited
budgetary po"er and opportunity to engage in corruption during the adoption process. Gn the
other hand, in countries "here legislative authority is strong, parliament can modify the
aggregate or individual spending limits , "ith a high ris' of engaging in corruption. !t can
change the tax rates or regimes "ith a vie" to raising revenue and increasing expenditure
commensurately, including its o"n spending (higher salaries and benefits or travel
allo"ances).
*4
<iven the complexity of budget documents, the government can hide corruptive items in the
budget or submit it late to parliament, thereby shortening the time for legislative scrutiny and
creating conditions for private gains at the public expense.
Budget execution* !n PFM systems that uphold fiscal discipline, budget execution focuses on
the implementation of government expenditure as appropriated in the annual budget
approved by parliament. he expenditure chain comprises four stages# commitment,
verification, payment order and payments. his chain constitutes a fertile ground for
corruption because it provides opportunities to underta'e transactions and for money to
exchange hands. !n several countries, the commitment stage is preceded by a "arrant stage.
he minister of finance releases +arrants (i.e. budget allocations) to spending units, based
on needs and the li%uidity situation of the treasury. Dncertainties about resources inflo"s
gives room for some discretion in ma'ing the allocations that can favor ultimately special
private interests. For instance, large "arrants could be granted to defense, security or public
"or's in return for 'ic'bac' to facilitate the signature of procurement contracts.
(t the commitment stage, spending units can place orders for the delivery of goods and
services in amounts not exceeding the budgetary ceilings. Gnce the expenditure commitment
is approved, funds are reserved for the payment of the items ordered and are no longer
available for any other payments. Corruption activities can ta'e several forms here# violation
of procurement la"s and regulations, ordering of unauthori)ed goods and services, exceeding
budget ceilings, bid-riggings, orders addressed to fictitious companies, acceptance of inflated
prices, etc. he diversion of public funds can be facilitated by a "ea' internal control system,
manual commitment procedures, and de-motivated and untrained staff. he monetary gains
can ta'e the form of cash transfers, free interest loans and7or grants, transferts of ob?ects such
as vehicles, household appliances, and free service or travel tic'ets.
(t the erification stage, the financial comptroller is to# (i) ascertain that the delivery of the
goods and services is effective and conforms to the terms of the contract (%uantity, %uality,
schedule, location, etc.): and (ii) determine that the prices charged to government reflect fair
mar'et costs. ;e also chec's for proper respect of rules and regulations at the commitment
level. herefore, in the absence of collusion, the verificator "ill uncover corruption at the
commitment level if it exists (lac' of budget cover, excessive cost estimates, lac' of proper
clearances, fraudulent invoices, etc.). ;o"ever, the comptroller could be in collusion "ith
the commitment officer, not only by overloo'ing acts of corruption, at the previous stage of
the expenditure chain, but by compounding them "ith his o"n, for instance by
recommending payments at inflated prices for substandard products in amounts smaller than
ordered or payments for fictitious goods.
**
Corruption is also common here particularly in the presence of collusion along the
expenditure chain. Payments orders could be issued 'no"ing that there "ere serious
irregularities during the processing at preceding stages. @ven in the absence of such
irregularities, the authori)ing officer may "ithhold the issuance of a payment order on
account of cash flo" shortage "hile in effect, his real reason is expectation of a bribe.
(t the )ayment stage, in addition to chec'ing that la"s and regulations have been observed
at previous levels, the accountant is to ensure that the claim presented for payment has not
been already paid. his stage provides significant ris's for corruption because money
changes hands. he corruption can ta'e the form of payments to ghost companies or "or'ers,
for the delivery of no goods or services, %ueue ?umping, retention of payment in return for
%uic' bac's, transfer of less than the stated amounts and poc'eting the balance, and
favoritism in approving eligibility. he failure to establish clear, transparent and effective
rules for setting payment priorities give discretion to payment managers and provide
opportunity for corruption. Failure to apply sanctions also encourages the diversion of public
money for private use.
Treasury
he management of government cash is the prime responsibility of the treasury. Cash
management see's to ensure that the treasury has enough money to ma'e payments "hen
they are due. his involves ensuring that government resources are deposited in treasury-
controlled accounts and managed efficiently. !n particular, loans are contracted on the best
possible terms. Gne of the main "ea'nesses for many treasury systems is the proliferation of
government ban' accounts, many of "hich are managed outside of treasury control and
disbursed according to nontransparent rules and "ith no accountability. !n some cases,
deposits in government ban' accounts serve as basis for ma'ing interest free loans to the
managers of these accounts. Gther fraudulent schemes include the outright transfers of
money from government accounts into private ban' accounts belonging to the President, the
Prime minister and7or cabinet ministers and7or senior government officials. his is often the
case in countries "here the treasury system is "ea' and the central ban' acts as the cashier
and accountant for the state "ith virtually no frame"or' for cross control.
Accounting and reporting
-udget accounting and reporting do not provide direct opportunities for corruption because
they do not involve cash transactions. ;o"ever, they can obscure the ability to trac'
corruption. !n effect, Baccurate, timely and transparent record 'eeping, accounting and
reporting of revenue, expenditure and financial information is essential for enforcing
accountability in the budget process (,orotins'y and Pradhan, in @dgardo and Pradhan,
.446, p. .63).C Ma?or "ea'nesses that raise the ris' of corruption at this stage include the
decentrali)ation of expenditure responsibilities "ithout ade%uate safeguards for record
*.
'eeping, lac' of communication of information to a central office for consolidation, poor
accounting regulation and practices, absence of a modern chart of accounts, unclear
institutional definitions of accounting and reporting responsibilities: absence of !FM!$ and
insufficient human capacity. !naccurate, incomplete and untimely recording of transactions,
complex and fragmented accounting systems, a failure to reconcile regularly government
accounts and clearing of suspense accounts can mas' fraud and impede audit.
Budget control
-udget control offers a good opportunity to uncover corruption. ;o"ever, its effectiveness
could be limited by a fla"ed legal and regulatory frame"or', and insufficiently competent
staff and scarce financial resources. -udget control has t"o components# internal and
external controls.
Internal control. Dnderta'en by the executive branch, it focuses on the enforcement of la"s
and regulations at the spending stage. 8ith respect to procurement, three types of failures are
commonly noted# (i) failure to comply "ith basic rules and regulations governing
commitments (i.e. ceilings, choice of companies, bidding documents, deadlines, delivery
periods and payment terms): (ii) poor contract management (i.e. payments for goods not
delivered or contrary to specifications, absence of delivery receipts, fraud): and (iii)
inaccurate and incomplete supporting documents.
61ternal audit. his control is external to the executive branch. Dnderta'en by an
independent ?udicial or legislative body, it see's to establish an overall accountability in the
use of public money or the effectiveness of government policies. (ccording to !EG$(!, the
'ey hindrances to the effectiveness of $upreme (udit !nstitutions ($(!s) in uncovering
corruption include#
+ong delays in preparing annual reports:
Failure to audit extra-budgetary funds and donor-financed expenditure and publish
the audit reports:
+ac' of independence of the heads of $(!s "hom are appointed and dismissed by the
President:
$canty budgetary allocations and lac' of autonomy in their use:
+imited cooperation "ith the control offices of the executive branch:
!nability to underta'e in-depth verifications or follo" up:
Poor physical capacity and e%uipments : and
Failure to publish audit repots.
he external audit system is not prone to direct corruption. ;o"ever, it can impede
transparency and accountability by under-reporting corruptive practices or hindering further
investigation of misuse of public authority.
*/
Parliament may exercise oversight on government financial policies in the course of the
revie" of $(! audit reports or hearings. ;o"ever, legislative oversight is often handicapped
by # the failure to prepare timely budget execution reports, untrained legislative staff,
unsatisfactory legal frame"or', resistance of the executive to underta'e follo" up
investigations or appear in hearings, partisan collusion bet"een the government and several
legislators to frustrate parliamentary investigations, and failure to apply sanctions.
Triggers of corru)tion in the budget )rocess
$ince corruption benefits public officials, it is appropriate to identify the institutions and
officials that are the most vulnerable in order to better target the remedies. !sa'sen (.443)
reports that in response to the %uestion of B"hat are the most vulnerable institutions to
corruption in your countryC participants in a conference on the rule of la" organi)ed by the
8orld -an' in .444 considered that# /1= of corruption is attributable the executive
(President, Prime minister, ministers, senior officials): /4= to the police: *.= to financial
institutions (customs, inland revenue, budget office, treasury, etc.): 1= to the legislature: 2=
to foreign and domestic investors: 3= to the ?udiciary: and *= to foreign donors (Figure .).
More recent data are not li'ely to change significantly this picture. hat is the use of public
financial and real assets for private purposes is largely underta'en by the government
officials (14=). @fforts to reduce corruption should therefore focus on the executive branch.
( 'ey official target is the President "ho engages in grand corruption (Marcos in the
Philippines, Mobutu in ,HC (former Kaire), -abaginda and (bacha in Eigeria, Pinochet in
Chile, and -ongo in <abon). ( fe" examples are given in -ox/. he police thrives in petty
corruption and is considered as the most corrupt of all government institutions in several
countries (!ndia, Mo)ambi%ue, etc.). Petty corruption is hard to combat because of the large
number of persons involved, the difficult "or'ing conditions of most government "or'ers in
developing countries and their generally lo" salaries.
-esides the demand side, the supply side also plays a role in corruption. Public and private
companies of industrial and emerging countries engage in corruptive practices in order to
secure access to ra" materials, and more generally gain advantage over competitors as in the
case of <abon or ac%uire favors that are detrimental to national or public interests in
developing countries.
Corruption is li'ely to be concentrated "here# (i) it is hard to establish (police) and7or
punishment is minimal if detected: (ii) officials have great discretionary authority (President,
*0
Figure $* Institutional 0istribution of (orru)tion
*=
3=
2=
1=
*.=
/4=
/1=
Foreign L domestic investors
Financial
agencies
+egislature
5udiciary
Police
President, cabinet L senior officials
Foreign donors L multilateral institutions
$ource# -ased on a survey participants at a conference organi)ed by the 8orld -an' in .444.
*3
/o1 %* Illustratie 61am)les of Grand (orru)tion
(hile* Pinochet is reported to have hidden M.6 million in secret ban' accounts, including at Higgs ban' in
8ashington ,C. Higgs resisted the investigation of the allegation by the D$ Gffice of the Comptroller of the
Currency. $ubse%uently, Higgs pleaded guilty, paid M*2 million in criminal fine and M1 million to a foundation
created to assist victims of the Pinochet regime.
Gabon. @lf paid M.4 million annually to President Gmar -ongo to obtain guaranteed access to oil and political
allegiance to France.
Georgia* Dnder President $hevardnad)e, <eorgia "as considered a failed state, ran'ing alongside -angladesh
and Eigeria as the most corrupt countries in the "orld. 8ith the election of President $aa'ashvili in .44/,
<eorgia became a case study for the impact of anti-malfeasance-minded President on the socio political life of a
country, so much so that the 8orld -an' considered that corruption has been reduced in <eorgia more than in
any country in @urope or (sia. he reform "as comprehensive and affected several institutions. Ministries "ere
cleared of corrupt staff. he police no longer invented driving offenses but rode in ne" cars and treated drivers
"ith respect and courtesy. (ccess to universities "as merit-based. Companies "ere paying their taxes.
Indonesia* Pertamina is state conglomerate "ith activities in oil production, tan'er fleet, gas station operations,
petrochemical, steel, tourism and stadiums. !t violated several la"s, used six different accounting systems to
conceal malfeasance (tax evasion, inflated prices, etc.). !ts main beneficiaries "ere President $uharto, his family
members, company executives, friends and political opponents of $uharto (pay offs). (fter $uharto left po"er,
an investigation revealed that Pertamina paid M *.6 billion in bribes to these recipients.
Romania* he privati)ation of huge state industrial companies created opportunities for large scale corruption.
!n .44*, the government a"arded H(FG, the national oil refinery company to Corneliu !acobov, one of H(FG
executive managers. For three years, the company did not pay taxes estimated at M244 million. $ubse%uently,
H(FG "as sold to a -ritish company o"ned by associates of !acobov "ho "ere very close to the Homanian
President !on !liescu and other government officials and legislators, all of "hom "ere on the bribing list of
H(FG. he same unscrupulous public officials contributed to the demise of -ancorex, a large state ban' that
collapsed under the extremely heavy "eight of bad loans estimated at about M0.. billion granted to politically-
connected customers. he government assumed this debt. he former Prime Minister (drian Eastase is under
investigation for buying land from the H(FG--ancorex group in the center of -ucharest for less than the
mar'et value.
Prime Minister, ministers, heads of parliament and ?udiciary): (iii) only one person has
decision-ma'ing po"er: (iv) lines of responsibilities and accountability are blurred: (v) PFM
is "ea', particularly at the audit level, li'e in Pun?ab (!ndia) "here 32. employees "ere
responsible for auditing *6,/1. institutions: (vi) social traditions for sharing "ealth "ith the
least fortunate members of extended families are strong as in (frican countries: and (vii)
government staff are dissatisfied about their "or'ing conditions, remunerations and
promotions as in most developing countries. Peer pressure and the sentiment that every body
else is doing it can also trigger corruptive acts.
*2
Corruption spread through formal and informal channels. Corruption through informal
channels prevails in neopatrimonial countries "here there is a large scale transfert of public
financial and real assets to private interests based on traditions. !n such countries, the
President or Iing controls the economic and political life and "ealth is amassed through
allegiance to him. Modern budget process is only a faNade. (ccording to !sa'sen (.443),
there is a broad vie" that most (frican countries are neopatrimonial.
To+ard reducing corru)tion in e1)enditure management
Heforms in the legal frame"or' and its enforcement, as "ell as in PFM are essential for
promoting transparency and accountability in managing public resources. he international
community can also contribute in enhancing governance in the management of government
resources in developing countries.
Laws and their enforcement
Legal setting. Certain features of the legal system can ma'e it easier to prevent, uncover or
prosecute corruptive practices. hey include la"s that# (i) define clearly the fiscal
responsibilities of state institutions and officials: (ii) ma'e it a crime to engage in (i.e. offer
or accept) corruption: (iii) promote the disclosure of corruptive activities: and (iv) protect
persons and organi)ations (particularly the media) that provide information on corruption.
$uch la"s "ould re%uire politicians and high-ran'ing government officials to disclose their
personal assets or "ould call on the government to provide information on all financial
operations, including extra budgetary and earmar'ed funds, special accounts, sale and lease
of assets, and %uasi-fiscal operations.
Legislature. Parliament (notably the public account committee) should be empo"ered to
probe the government9s management of state funds. $ince corruption affects the legislature
also, the la" should enable parliament to investigate its o"n members, including voting
patters and geographical distribution of budgetary allocations. (lso, the sources, amounts and
control of the funding of political parties should be ade%uately defined and enforced to
reduce the ris' of corruptive behavior in the legislature.
Judiciary. !n general, the main problem in fighting corruption is not a "ea'ness in the legal
frame"or', but the lac' of enforcement, starting "ith the court system. (n effective and
efficient ?udiciary transparently applies the la" irrespective of the status of the perpetrator.
o achieve this ob?ective, there must be a clear separation of authority bet"een the executive
and ?udiciary branches, "ell-trained magistrates, a fair and efficient management of the
?udiciary personnel, an appropriate budget, and a police force that upholds high ethical
principles, notably integrity.
*6
Budgetary systems and their management
(s mentioned earlier, a strong and robust PFM system reduces the ris' of vulnerability to the
use of public resources for private gain. he PFM systems of most developing countries have
been revie"ed by several institutions, using a variety of frame"or's in order to identify
deficiencies and propose remedies. he effective implementation of the recommendations
"ill contribute to ma'ing the PFM rules, procedures and functioning more transparent and
predictable, thereby reducing ris's of corruption. he success of the reforms re%uire domestic
o"nership and strong political commitment that are generally absent, particularly in
corruption-prone countries. he inverse relationship bet"een the %uality of PFM and
perceptions of corruption calls for improvements in PFM in order to lessen corruption. he
PFM reforms should aim at eliminating the deficiencies identified by the P@F( and other
diagnostics in order to put in place the fundamentals of robust and sound PFM systems.
hese reforms are to be coupled "ith determined efforts to#
!dentify public activities that are most susceptible to corruption:
Gffer "or'ers compensations (salaries, benefits, etc.) in the public sector that are
comparable to those provided in the private sector for the same level of competence
and responsibilities (()erbai?an in (ppendix !):
Dnderta'e regular value-for-money audits of government operations:
Maintain an up-to-date registry of government assets:
Create a basis for introducing a program budgeting: and
Create a culture of professionalism and ethical values.
Role of the civil society
(ctive and diversified media and E<Gs can play a role in raising a"areness of budgetary
corruption and promoting accountability and transparency in managing government finance.
he frame"or' for achieving this ob?ective could ta'e the form of participatory budgetary
discussions as in some -ra)ilian cities, vigilance committees in -olivia, citi)en9s "atch-dogs
against corruption of tax officials in the Philippines and citi)ens groups for monitoring oil
revenue funds in Chad.
Role of donors
,onors have developed several tools to detect corruption and encourage accountability and
transparency in assisted countries. he direct instruments of the 8orld -an' include Country
Financial (ccountability (ssessment (CF(() and a Country Procurement (ssessment
Hevie" (CP(H). he CF(( see's to enhance a"areness and accountability of the PFM
system. he CP(H is aimed at the same ob?ective in regard to procurement. he !MF fiscal
HG$Cs revie" the effectiveness of countries in their efforts in meeting the !MF Code of
<ood Practices on Fiscal ransparency. he Country (ssessment of (ccountability and
*1
ransparency of the DE,P is designed to help governments and consultants in assessing the
budget management system in respect to these t"o criteria. (ll these tools are useful
instruments to instill transparency and accountability in the management of public finance in
developing countries.
Dsing various other diagnostic tools to uncover the structural "ea'nesses in PFM of
developing countries, multilateral institutions and donors are providing assistance to create
conditions not only for ameliorating the delivery of public goods and services but for doing
so in a more open and efficient "ay.
(onclusion
Corruption has severe disadvantages. !t# (i) undermines public financial management through
veils of nontransparent budget execution procedures "ith no accountability: (ii) reduces the
planning capacity of both government and private investors: and (iii) decreases confidence in
government9s ability to supply %uality public goods and services at reasonable price, in the
appropriate %uantity and in a timely fashion. 8hile it may be difficult to uproot completely,
it can be brought under control. o achieve this goal re%uire a strong commitment from the
highest level of government as sho"n by the cases of <eorgia and ()erbai?an.
*>
References
he Corruption Eoteboo's .442, $tories From the 8orld"ide $truggle (gainst (buse of
Po"er, @dited by 5onathan 8erve and <lobal !ntegrity, <lobal !ntegrity, .446.
,orotins'y 8illiam and Pradhan $an?ay in he Many Faces of Corruption, rac'ing
Aulnerability at the $ector +evel, @dited by 5. @dgardo Campos and $an?ay Pradhan, he
8orld -an', .446.
!sa'sen, 5an (.443), he budget Process and Corruption, Chr. Michelsen !nstitute, D0!ssue
/#.443.
he Many Faces of Corruption, rac'ing Aulnerability at the $ector +evel, @dited by 5.
@dgardo Campos and $an?ay Pradhan, he 8orld -an', .446.
Manual on Fiscal ransparency, Fiscal (ffairs department, !MF, Hevised edition, .446.
.4
(ppendix !.
Selected (ases of PFM Malfeasance
-elo" are a fe" cases of nexus bet"een politics, money, influence and private gains. hey
are intended for illustration purposes. hey are all dra"n from BCorruption Eoteboo's
.442,C except for the cases of $ani (bacha, Pinochet, Pertamina and <iffen "hose source is
Bhe Many faces of Corruption, .446.C (s indicated above, malfeasance in PFM ta'es
various forms. !t can involve very large sums of money as in Homania, very small amount as
one dollar to the policeman in Aietnam or cover up of murder in Eicaragua. !t is also clear
from the experience of <eorgia that corruption can be significantly reduced only if the
initiative and the commitment come for the highest level of government.
Armenia
( "oman named $irush had *0 surgical operations and half of her intestine "as removed. o
go on disability, the health official told her to "ait for the remaining intestine to gro" bac'
because she "as to poor to pay the bribe. For the same reason, the parents of the six-year old
(rmine "ho "as blind in one eye "ere told to "ait until the boy could not see "ith the other
eye before he is granted disability benefits. he head of the medical social commission set
his bribe rate at M044 "hile his counterpart in charge of radiology "as "illing to sign the
disability papers for M.44.
A7erbai8an
Public health is free but to deliver a baby costs bet"een M/44 and M344. Gther illustrative
rates "ere M.3-M.44 to change the grades of university students, M.444 to shorten a prison
sentence, M.,344-M0,444 to dismiss a criminal case, and M34,444 to override ma?or evidence
in court. Gnly four of the 64 universities in the country did not accept bribes. 8hen students
threatened to publish the names of the corrupt professors, the latter retaliated by raising the
bribe rates. his situation prevailed until a ne" President too' office. Dsing the large oil
revenue of the country, he sharply increased salaries. Conse%uently, the police stopped
demanding bribes after its salary "as tripled. +i'e"ise, there "as no more bribe at the
passeport office or at the customs.
/enin
.*
Hogatien -iaou sold a piece of land o"ned by the government of -enin in 8ashington ,C
"ithout government approval. (lain (dihou "as paid by the treasury to computeri)e the
electoral roll but did not finish the "or'. Cosme $ehlin "as found "ith M04 million dollars
and illegal products stashed in his house. (ll three, former ministers, are no" on trial after a
ne" President assumed office.
(ambodia
he un"ritten rule is Bno bribes, no official documents, no business.C !t is estimated that# (i)
63= of the income tax "as lost in .443 due to corruption: (ii) companies paid M//4 million
in bribe in .443, representing half of total government revenue: and (iii) "ithout bribes, the
average salary could be multiplied by six to M*34 per month. (bout M*. million "ere
siphoned off from 8orld -an'-financed pro?ects. 8hen the -an' demanded the money bac',
the government challenged the -an' to produce evidence. Dnder strong pressure, the
government arrested a fe" lo" level officials.
6gy)t
!n .443, during the legislative elections, voters sold their votes for M3 in rural areas
(e%uivalent to one 'ilogram of beef) and M*63 in "ealthy neighborhoods. he bribe for
inheritance declaration papers could be as lo" as M4.11 "hile that of lo"-ran'ing policemen
hovered bet"een M*.63-M/.34 for traffic arrests. ;o"ever, it can be steep for other activities.
For instance, it can exceed M*6,444 for a permit to build higher than the legal limit.
6thio)ia
his country is 'no"n in the business community as the land of *4=, representing the rate of
'ic'bac's. his rate applies not only to the corruption bet"een the private sector and state
institutions but bet"een businessmen themselves (i.e. private to private).
France
@lf is an oil company created in *>23 to secure French oil independence by maintaining
French influence on oil-producing countries. ,uring the trial of the company9s executives, it
"as found that @lf bribed officials in almost all the countries in "hich it operated. !t paid
over M0/3 million bet"een *>1>->/ to secure business in (frica, $outh (merica, Hussia,
$pain and <ermany. !n (frica, @lf bribed leaders in (ngola, Cameroon, <abon and the
Hepublic of Congo as "ell. he company paid over M6 million annually to political parties in
France, notably the <aullist party.
India
..
Malfeasance is part and parcel life in !ndia. Cases are countless. For illustration, in a land
dispute "ith the ,elhi ,evelopment (uthority (,,(), the litigator paid M*3,444 to the
district court ?udge "ho settled the dispute in his favor, only to be faced "ith the prospects pf
having to pay a larger bribe because the ,,( filed an appeal to the ;igh Court. Concerning
petit corruption, a driver hit a cyclist "ho sustained head in?uries and "as detained. ;e "as
freed after his brother negotiated do"n the bribe for his release from the as'ing price of M.44
to M12. !n .443, ** legislators "ere expelled for as'ing %uestions in return for bribes. (
corruption survey revealed that more than M0.3 billion of bribes "ere paid to have access to
public services. he most corrupt institutions "ere the police, the lo"er ?udiciary, land
administration, government hospitals and schools.
Israel
he last five prime ministers "ere investigated for unethical behavior# $himon Peres, @hud
-ara' and (riel $haron for illegal donations to their election campaigns: -en?amin
Eetanyahu for accepting expensive gifts and abusing state property: and @hud Glmert for
bribes in real estate deals, and for giving government ?obs to cronies. $everal former
ministers, at least *4 mayors, senior government officials, and members of parliament are
under various investigations.
Eir <ilad, a former director general of the reasury, oversa" a massive privati)ation of
public enterprises, including the sale of the national refinery to Gfer brothers (one the five
"ealthiest families in !srael). he state lost M*.4 million in the course of this transaction. Eir
<ilad later became deputy ,irector <eneral of Gfer brothers and after"ards, ,irector
<eneral.
Petty corruption is re%uired for driver9s license, building permits, hearing "ith tax offices,
courts, etc.
9enya
!n .442, three ministers "ere forced to resign in connection "ith investigation by the
government of payment of several million dollars to a fictitious company. "o policemen
manning the <ilgal "eighbridge "ere caught "ith M.4,344 in local and foreign currencies.
he Maria'ani -ridge handles about .444 vehicles per day, each paying on average M34. he
daily receipt "ould amount to M*>4,444, an attractive source of bribe and embe))lement. he
land of game reserves are fre%uently shaved off "hile game tourism fees are siphoned off. (
.442 in%uiry revealed that the staff of the ourism Ministry looted over M..1 million every
year.
:ebanon
./
he former Prime Minster Hafi' ;ariri created a private company called $olidere to "hich
he a"arded government construction contracts. ;e dismissed any criticism of conflict of
interest. he current Prime Minister Fouad $iniora dismissed criticism for a"arding duty-free
)one of the -eyrouth airport to one of his close friends almost free of charge. ( .44* DE
report revealed that of M2 billion of pro?ects, only M*0/ million "orth "ere a"arded through
competitive bidding. he remainder "as a"arded to those "ho "ere "illing to pay the
largest bribe.
Me1ico
o "in t"o contracts "orth M3.6 million, (lstom paid M23/,444 to t"o top executives of the
Mexican +ight and Po"er. -ut influence peddling is also a significant source of corruption.
For instance, Frederico +omeli, the son of a prominent official, 'illed Maro ;ernande) "ith
his -M8 and left the scene. (pprehended, he "as %uestioned briefly, released and never
charged. Heportedly, the son of former President Fox, collected millions of dollars peddling
family connections.
Mo7ambi.ue
,uring the ill-managed privati)ation process of state enterprises, M044 million disappeared
from ban's, money that the government had to pay bac'. !n *>>., the government lent M*6
million to a businessman ((ntonio $imoes) to moderni)e the Mo)ambican $teel Company.
he "or' "as not done. he money "as not recovered and the government has remained
silent. ( .443 survey ran'ed police as the most corrupt institution in the country, follo"ed
by hospital "or'ers, teachers (sexual extortion) ?udges and prosecutors.
Ne)al
he former three-time prime minister, Mr. ,euba, "as found guilty for ta'ing bribes in
return for a"arding government contracts, and buying votes in parliament but escaped
sanctions on the basis of technicalities. he Iing and his family also abused government
money. For instance, the Iing spent M/.3 million on (frican safaris "hereas his son
disbursed M324,444 to offer t"o rhinoceros to the (ustrian )oo. he Iing sharply increased
his annual salary from M*.2 million to M*4 million. ;e spent M/.. million holding municipal
elections that "ere boycotted by opposition parties. !n .442, he "as forced to relin%uish
po"er in favor of an elected parliament.
Nicaragua
Gn ,ecember **, .443, an $DA sped at *44 miles per hour crashing into a car that ?ust made
a right turn. he t"o passengers of the car "ere 'illed instantly. he driver of the $DA and
his companion got out sha'en but unscathed. -y the time the ambulance and police arrived,
.0
the driver and passenger of the $DA have disappeared. he treasurer of the ruling $andinista
party had the t"o vehicles removed. (nother man "as arrested and ta'en to the police station
and presented as the driver of the $DA. 8itnesses said that he "as not the driver. (ll the
same, he "as tried and convicted. 8ho "as the real driver& ;is name "as Hafael Grtega, the
son of ,aniel Grtega, former and current President of Eicaragua.
Nigeria
o induce Parliament to change the constitution to enable him to remain in po"er, the former
President Gbasan?o is alleged to have offered 34 million naira (about M/>4,444) to each
legislator. he Presidency denied the allegation. Political corruption is rampant at the level of
sub-national governments as "ell. For example, the governor of -ayelsa state "as arrested
and detained in +ondon for money laundering. ;e escaped and returned to Eigeria "here he
is on trial. Malfeasance permeates the entire Eigerian society. he current $pea'er of the
federal ;ouse of Hepresentatives is been as'ed to resign for spending M3 million on the
renovation of the official residence. !n academia, students "ho buy boo's or handout "ritten
by lecturers are guaranteed as much a .4-point bonus on their final exams.
Phili))ines
Pineda is the biggest operator of an illegal game called ?uetend. he annual receipts from this
activity is estimated at about M244 million, of "hich about M*.4 million are paid as bribe to
mayors, governors, police chiefs, legislators and ?ournalists and the Catholic Church.
President 5oseph @strada "as driven out of office by protesters for receiving monthly payoffs
from ?ueteng operators. he current government also is plagued by corruption scandals. For
instance, in 5anuary .440, after a dinner given to .6 elections supervisors in President
(rroyo9s house, a close friend of the presidential family distributed envelops containing M344
to the supervisors.
Russia
Corruption has different faces in Hussia. !n .44*, a young man could avoid the military draft
for a fee of about M M.,244 in $t Petersburg and M2,344 in Mosco". he rate is .4 times
higher in .446. he bribe for registration of a child in 'indergarten is M*,444 and for a
student at the university, it varies bet"een M.,444 and M.4,444. ;alf of all bribes are paid to
doctors. !t is estimated that the average bribe has risen sharply from about M./,444 to
M.00,444. he annual cost of corruption in Hussia is estimated at M04 billion.
Tan7ania
Malfeasance is "idespread. !t is entrenched in the land sector (notably building permits
office). !n the health sector, counterfeit drugs abound as their suppliers bribe their "ay into
.3
pharmacies and hospitals. Permits to import and distribute ;!A (!,$ 'its "ere a"arded on
non competitive basis to t"o companies controlled by the same business group. Corruption
has penetrated the court system as "ell. he failure to pay bribes "ill translate into misplaced
or lost documents, delays in filing case briefs, delays in setting hearings, vague and
contradictory court orders, omission to record court proceedings, dismissal of cases on
technical grounds, delays in issuing ?udgments, etc. ,uring elections, votes are bought "ith
cash, cell phones and other enticements. !t is estimated that about .4= of the government
annual budget is lost to corruption.
;ganda
,uring his inaugural speech in 5anuary *>12, Fo"eri Museveni declared# Bhe problems of
(frica and Dganda in particular, are caused by leaders "ho overstay in po"er, "hich breeds
impunity, corruption and promotes patronage.C $ome .* years later, he is till in po"er and
corruption is rampant. !n .443, legislators "ere openly bribed "ith M.,144 each to ma'e
them change the constitution to enable him to stay in po"er "ithout term limitation. !n .442,
three ministers "ere dismissed for mismanaging foreign grants to combat ;!A-(!,$.
(lthough his brother "as dogged by many corruption scandals, President Museveni
appointed him minister. ransparency !nternational estimates that about M>34 million are lost
annually to corruption.
;SA
<iffen, a D$( national merchant ban'er and consultant to the Ia)a'h government oversa" a
tangled "eb of bribery net"or' created to buy access to Ia)a'h President and senior
officials for @xxon, Mobil, -P, (moco and Conoco. ;is la"yers contended that his activities
"ere blessed by senior D$ government officials. !t is believed that this allegation could be
correct because the Federal <overnment refused to release documents that could establish
this lin' for national security reasons.
-esides, the <iffen case, there are numerous instances of bad governance in the D$. !n 5une
.446, the ;ouse Ma?ority +eader, om ,elay, "as indicted for money laundering and
resigned from Congress. !n March of the same year, Congressman Handy Cunningham "as
sentenced to prison for 1 years plus for receiving M..0 million bribe from defense contractors
in exchange for government business. Aernon 5ac'son, a businessman "as sentenced to
seven years plus for paying M044,444 in bribe to D$ Hepresentative 8illiam 5efferson in
exchange for help in securing business deals in (frica. he F-! found M>4,444 hidden in a
free)er in 5efferson9s home in 8ashington. ;e is a"aiting trial. <eorge Hyan, <overnor of
!llinois, "as sentenced to six years plus for receiving money, gifts and free travel tic'ets in
exchange for government contracts.
3ietnam
.2
Petit corruption is "idespread. ( motorcyclist can pay M/ dollars and pursue his trip if
arrested instead of the legal fees of M.1 plus M* per day for storage. 8ith M.4, one can have a
driver9s license "ithout having ever holding a steering "heel. Flo"ers are not offered on
eachers9 appreciation day, but envelops of M3-M.4 per student. !t ta'es# (i) about M344 to
register a child in a good public primary school and M*/ per exam to ensure a good grade: (ii)
M*-M. to see a nurse, M/ to see a doctor, and M34-M.44 to perform a surgery. Dpon graduation
from medical school, a doctor may have to pay M*4,444 or more in order to obtain
employment in a public hospital.
<emen
-udget managers regularly pay salaries to made-up "or'ers and order goods and services for
fictitious government institutions. ypically, cars are ordered for imaginary soldiers,
collected and resold to private individuals and companies and the money is poc'eted by
government officials. ( tax office collects monthly about M22,444 but only declare M*3,444
to the treasury. !mports can be removed from customs after paying a small fee, no %uestions
as'ed. (n appointment to the -id and tender -oard can propel the nominee from poverty to
"ealth in fe" months, including a house "orth M./4,444. $ome M*4 million could not be
accounted for in the Ministry of !nformation. +i'e"ise, M* billion could not be traced in the
parliament budget.
=imbab+e
!n Gctober .443, +eo Mugabe, the nephe" of President Mugabe "as arrested for smuggling
truc'loads of four and fertili)er "orth M2..,444 to Mo)ambi%ue. ;e "as briefly detained and
released for lac' of evidence even though the truc's and goods "ere impounded.