Corruption in aid

Blog by Absolom Wanjala, July 11, 2018

Fuels of corruption within the development sector

Kenyans have in recent weeks been waking up to revelations of multi-billion-shilling corruption scandals, some of which relate to the safety of consumable products illegally being sold in the local markets.

The reports have mainly centered on government ministries and public funded institutions. Truth is that the development sector that largely comprises of Non-Governmental Organisations (NGOs) has also had it fair share of corruption reported in the same period. Corruption both in government and the NGO sector has taken the form of misuse of funds, especially in the twin areas of accounting and procurement.

In most cases, corruption occurs with manipulation of accounting policies. This is mostly through inaccurate recording of the real cost of acquired goods and services whose ripple effect is inflated expenditure.

Maneuvering of procurement policy standards, on the other hand, often leads to payment for goods and services that may have not been delivered to intended users or obtained at inflated prices.

Corruption ‘immunity’ is not guaranteed

The development sector is crucial for stability, prosperity and justice in the world. Besides, the sector receives billions of dollars in grants funding and investment from governments and the private sector globally.

However, for years, corruption in the sector has been downplayed and treated as a non-issue. Use of most donor funds has become ever more non-transparent.

Inevitably with the majority of donors requiring transparency and legitimate use of their funds, most development agencies have reacted by establishing counter fraud units.

But this has sadly not ended the vice. Coupled with working in challenging environments and high-risk projects’ implementation, fraud remains rife in the sector. While foreign aid is not immune to corruption, there are concrete solutions to help fight graft in the development sector.

Some practical solutions that can wade off corruption

First, there must be a shift in culture. NGOs need to hold themselves accountable and internally reflect on what must be done to rid the sector of corruption.

Corrupt staff keep moving from one agency to another, making it necessary to share information on such individuals. Such an initiative would prevent corrupt staff from spreading the vice. Additionally, donor aid fund managers need to perform detailed capacity assessment on governance structures of local partner organisations.

Some have appalling track records of defrauding one donor agency after another without paying any price for it.

Secondly, development agencies need to set up robust financial reporting and monitoring and evaluation (M&E) systems that link programme finances to outcomes.

Such systems ensure that programme finances incurred on donor funded programmes are directed to measurable results of the programme at a pre-determined cost. The results from project implementation can in turn be tested, verified and demonstrated through transparent monitoring and evaluation processes.

Besides, donors need to allocate adequate financial resources in budgets to adequately report on and monitor project finances and outcomes. Such a process ensures that donors achieve value for their money.

Moreover, any forms of corruption through manipulation of accounting or procurement processes can be highlighted and investigated as a consequence of monitoring and evaluation.

Thirdly, the NGO sector needs to invest in open and transparent processes of managing donor funds, including establishing whistle blower channels in their programmes.

Such processes ensure that any malpractices are reported anonymously to fund managers or directly to the donor.

Open and clear whistle-blower mechanisms are quick ways of information sharing by all actors in project delivery. Furthermore, this is crucial in triggering scrutiny of projects that could limit financial losses at the earliest opportunity.

Lastly, all players need to internalise the message that corruption in the sector is inexcusable and ensure that all its forms are eradicated.

Only then can NGOs claim their role of supporting the government to alleviate social problems. This can be attained by the sector investing in strong financial, M&E and governance systems and processes that can deter and detect corruption at the earliest occurrence. The NGO sector should be proactive and have effective programme management systems and processes in its spending of donor aid.

As Kenyans seek solutions to widespread corruption scourge that is killing the public sector and society as a whole, the time is right for the NGO sector to offer solutions on how public funds can be spent in an effective way.

Only then would the NGO sector act as a good and practical example to public funded and government institutions on how public funds can be used in an effective, efficient and accountable manner that achieves value for money and meets its intended purpose for Kenyans.

Doing this differently at Hivos East Africa

As a grants-maker, Hivos East Africa has integrated financial accountability with monitoring and evaluation procedures to wade off instances of financial impropriety and achieve value for money in use of donor funds. This is in line with our zero tolerance policy on fraud and corruption and also to ensure we are building a stable foundation for social change- notably among partners- and also beyond.

Article has also been published in the Business Daily

"This article was originally published on Hivos Eastafrica Click here to view the original article"