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Government Resource Planning (GRP) systems and Anti-Corruption

 

September 4, 2012

GRP or Integrated Financial Management Information Systems (IFMIS) can be cornerstone to anti-corruption

We were asked last week about how FreeBalance software contributes to reduced corruption in developing countries. There can be a significant effect on reducing corruption.

What is the linkage between “anti-corruption” and GRP?

What is the linkage between “governance” and “anti-corruption”?

What is the consensus on the role of PFM for anti-corruption?

The relationship between sound and orderly PFM systems and reduced levels of corruption is also receiving increased attention. Mapping freedom from corruption (using Transparency International’s (TI) Corruption Perception Index (CPI)), against the quality of PFM (using the World Bank’s Country Policy and Institutional Assessment (CPIA)), suggests that higher quality PFM systems correlate with lower perceptions of corruption (Dorotinsky and Pradhan 2007). Heilbrunn (2004) argues that the creation of anti-corruption commissions is a token effort that lacks substance, if reforms in PFM do not take place.

GRP has a significant effect on financial institution and investor corruption and is enabler for reducing corruption by executives.  Based on the World Bank study in 2000 , GRP has a possible positive effect on more than half of attributable corruption in developing countries.

What are the corruption effects on public finances?

Where are the PFM vulnerabilities to corruption?

There are numerous corruption PFM vulnerabilities throughout the government budget cycle including:

How do GRP systems detect corruption?

GRP systems are used to detect corrupt activity through:

How do GRP systems prevent corruption?

Internal controls within institutions are considered the most effective for GRP anti-corruption:

  • Controls: through automation to ensure legal processes followed and appropriate approvals for government eliminating opportunities for corruption because of the link to the transaction cycle, preventing the circumvention of procedures and blurring of cash disbursements and reducing informal practices
  • Decentralization: of functions to impede centralized corruption
  • Payments: eliminate cash payments through secure cheque printing and electronic funds transfer making financial transactions fully traceable and reducing cash fungibility including use of the Treasury Single Account to prevent manipulation
  • Reporting: knowledge that fraud patterns can be uncovered in reporting or audit changes the behaviour of politicians and public servants
  • Segregation: of duties for processes across many people reduces the ability of any one person to commit fraud

What forms of corruption are restricted through the use of GRP?

What factors in the GRP system are necessary for anti-corruption?

Can we put corruption in perspective?

Although there has been a strong narrative about corruption in developing countries, it should be noted that under much more propitious conditions, the rampant corruption in the United States that spanned from the late nineteenth century through the early twentieth century was presided over  by the industrial robber barons and Tammany Hall leaders and took decades to overcome and some PFM reforms in these countries have taken up to two centuries to evolve.

How does transparency and e-governance reduce corruption?

The ability of the public to review the full performance and financial statements of government entities leads to confidence and trust in the public sector and roots out corruption. PFM transparency should be considered a major force to animate civil society engagement and protest by turning on the capacity of the society to interact with data:

What additional factors are needed to achieve anti-corruption potential for GRP?

What is the linkage between corruption and aid effectiveness?

Why should donors use “country systems”?

Country GRP systems can reduce aid fungibility when the whole of the state’s revenues should be accounted for in its official budget.

What are some real-life examples of GRP anti-corruption success stories?

What are some useful corruption indicators?

Many corruption indicators are based on public perception surveys. There is growing concern among anti-corruption agencies that perception-based indexes are not accurate measures. There is also some evidence that there can be gaps between informal procedures and technical PFM reforms leaving room for discretion and corrupt practices.   Good corruption and transparency indices include:

What are some of the problems with GRP-enabled anti-corruption?

How can GRP anti-corruption issues be overcome?

  • Data Integrity: in back-end databases and validation for data input and data imports identify transaction manipulation
  • Oversight ICT training: so that auditors are capable of managing  system audits in addition to financial audits
  • Patterns: through the development of fraud patterns that produce alerts and are used in exception reporting
  • Phased implementation: through approaches to FMIS implementation that reduce the risk of failure, and build capacity and to allow absorption of key government  reforms
  • Security: through encryption, controlled audit trails, integrated controls and tying user permissions to the government organizational structure and chart of accounts
  • Systems configuration: rather than customized or custom-developed GRP that can introduce poor practices

What GRP good practices aid anti-corruption efforts?

Conclusions

  1. GRP systems can be leveraged to reduce corruption through controls, audit and reporting.
  2. GRP systems can be a foundation for anti-corruption activities but must have additional factors to be of significant use.
  3. Effective country GRP systems reduce aid fungibility associated with off-budget donor funding.
  4. GRP systems can become the cornerstone for fiscal transparency to enable citizen oversight to reduce corruption.
  5. Properly designed GRP systems do not introduce significant new corruption risks.
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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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